Tuesday, May 12, 2015
Wednesday, September 10, 2014
Case study: "Minimum Effective Dose" applied to world of physician-led entrepreneurship
Tim Ferriss describes the concept of Minimum Effective Dose (MED) as the smallest input needed to produce a desired outcome. For example, if you want to boil water, the MED is 100 C. Increasing the temperature above 100 C will not produce a better result, it will just waste resources.
Many physician entrepeneurs that I know (especially those still in training) often employ this concept to balance their clinical responsibilities with their innovation work (and families) but do so without much rigor or science behind its application.
I recently had a month that really strained my bandwidth and I applied this principle to manage supervising a teaching clinical inpatient service, a busy month for my company, and a Medical Licensing exam (USMLE step 3).
As always, patient care came first. There's very little control of the time demands of patient care. 80 hrs/week is 80 hrs per week (or more). Outside of that, I had to balance my two other priorities of preparing for the medical licensing exam (2 days, 8 hours each) and leading a startup.
MED concept applied to month as ward supervisor, USMLE, and CEO
1) Prioritize what is most importantly personally: family. I sent my wife and child away to stay with grandparents in Baltimore to avoid the unfulfillable promise of ever arriving home on time for dinner. Although it was sad and facetime is not as good as shooting hoops with little man, its set the right low expectations which and no one was disappointed.
2) Prioritize what is most important professionally: my direct patients. I serve patients with my software company as well as clinically. But clinical time is direct patient care so that takes priority.
3) Apply heuristic of important-urgent (IU), important-nonurgent (IN), less important-urgent (LU), and less important-non-urgent (LN). Patient care through my software company was important but not urgent. I had teams managing enterprise customer relationships and staff could put out fires as needed. The usual quality assurance measures were in place. And the company could go into our usual contingency plan in the event of any patient or technological urgency or emergency.
4) Applying the same heuristic, I prioritized my board licensing exam as less important-urgent. Although failing the exam would be a royal annoyance, no patients would be harmed in the process. And that is a key consideration for clinician entrepreneurs. If we take a step back and think about some of the artificial stresses we put on ourselves: remember, you can't violate the Triple Aim for a patient by under-performing on an exam. Certainly, clinical competency is crucial. But acing exams is not a good proxy of good patient care. So, with caution and application of MED, I judiciously prioritized studying for the USMLE 3 below my other work.
Results
Patients of course received gold standard of care. That would never be a compromise. And if any clinician-entrepreneurs think otherwise, you should not be practicing. Just imagine if your child, sibling, spouse or parent were the patient of a clincian that was only half-thinking about their needs. Big no-no.
The company, with the help of very productive and self-directed colleagues who are great communicators, did well during October. We closed a large deal. And we prevented 13 patients from being readmitted to the hospital.
USMLE: passed.
My family returned to Boston from Baltimore, they were forgiving of my commitment to patients, and no one was upset because the right (low) expectations of my availability were set.
Take aways
1) Family and patients first
2) Know your limits
3) Within your limits, apply the MED principle and designate early what is IU, IN, LU, and LN
4) Do your best and be a nice person
Thanks to Tim Ferriss for his writing and approaches to lifehacking!
Friday, September 5, 2014
The Future will see you now: HITs impact on health and healing
Join the discussion at the IHI Forum
Crowdsourcing, comprehensive online self-diagnosis, embedded chips, wearable devices, an Internet-connected community—all spell the end of the traditional health care system as revolutionary technology brings permanent changes to the ecology of health and healing. This session will explore the pros and cons of this emerging future, what we can shape and what we can’t, and how to not just prepare for the inevitable but lever it for the benefit of our organizations and communities.
Wednesday, August 13, 2014
Vote for our SXSW Panel: Big Data breaks down Doctor monopoly over sickcare
Patient care is provided by the entire care team. And that team includes first and foremost the patient and their family, followed by all of the providers and supports around them. Among those providers are physicians. And to date physicians have been driving the boat because they had access to data and were the only ones that could interpret it (lab values, imaging, research studies, etc). Now we live in a world where everyone is consuming, interpreting and acting on data: patients have wearables, nurses have care coordination apps, physical therapists have movement software, payers have population health management platforms. Despite all the buzz about patient-centered medical homes, patients need much more than that; they need a patient-centered wellness community. And everyone in that community has an app to track data.
Panelists:
Laura Wood Boston Children's Hospital
Walter Rosenberg Rush University Medical Center
Rachel Davis Center for Health Care Strategies
Andrey Ostrovsky Care at Hand
Please vote for our panel here so we can move this dialogue into the public sphere!
Tuesday, December 17, 2013
Patient Satisfaction : Patient Experience :: Consumerism : Clinical practice ?
I am frequently corrected by my colleagues and mentors when I allude to patient satisfaction in the context of the Triple Aim. [Berwick] They promptly remind me that the Triple Aim refers to patient experience, which is an appropriate correction. Although precision is important in referencing literature, I purposely allude to patient satisfaction because it underscores a fundamental difference between consumerism and clinical practice.
Patient experience questions attempt to objectively assess the patient’s interaction with the healthcare setting. These types of assessments try to avoid value judgments and the effects of existing expectations. [www.NHFCA.org] An example of an experience question includes “In the past year, how times you have to wait for an doctor’s appointment?”
Conversely, patient satisfaction surveys focus on the patient’s subjective interpretation of the value they derive from their healthcare experience. These questions are similar to the type of data collected in market or customer research. An example of a satisfaction question includes “How do you rate your doctor’s office on their timeliness of getting you an appointment?”
Although it is important to have the objectivity of experience surveys for comparison purposes, I think the subjectivity of patient satisfaction is essential for testing whether a healthcare product or service is solving a subjective problem for the patient. If healthcare is considered a product or service that a patient has a choice to purchase by exchanging a scarce resource like money, time or attention, then patient satisfaction may be a better measure of that exchange of value. Using patient satisfaction rather than patient experience opens the door for consumer-centric approaches to improve healthcare delivery and make it more patient-centric.
Although I am cautious to misquote the Triple Aim and its relationship with patient satisfaction, I do so purposely to try to pickle our overly academic culture of patient care with patient-centeredness.
Patient experience questions attempt to objectively assess the patient’s interaction with the healthcare setting. These types of assessments try to avoid value judgments and the effects of existing expectations. [www.NHFCA.org] An example of an experience question includes “In the past year, how times you have to wait for an doctor’s appointment?”
Conversely, patient satisfaction surveys focus on the patient’s subjective interpretation of the value they derive from their healthcare experience. These questions are similar to the type of data collected in market or customer research. An example of a satisfaction question includes “How do you rate your doctor’s office on their timeliness of getting you an appointment?”
Although it is important to have the objectivity of experience surveys for comparison purposes, I think the subjectivity of patient satisfaction is essential for testing whether a healthcare product or service is solving a subjective problem for the patient. If healthcare is considered a product or service that a patient has a choice to purchase by exchanging a scarce resource like money, time or attention, then patient satisfaction may be a better measure of that exchange of value. Using patient satisfaction rather than patient experience opens the door for consumer-centric approaches to improve healthcare delivery and make it more patient-centric.
Although I am cautious to misquote the Triple Aim and its relationship with patient satisfaction, I do so purposely to try to pickle our overly academic culture of patient care with patient-centeredness.
Thursday, December 5, 2013
The Dollars and Sense of Medicaid Expansion and the Opportunity for Entrepreneurial Innovation
Medically vulnerable populations, such as dually eligible patients, are predisposed to income disparities and have a relatively limited purchasing power. [Jacobson et al] The lack of purchasing power poses a challenge for expanding entrepreneurial innovations to vulnerable populations through business-to-consumer (B2C) sales models. There are ways to overcome the limited consumer purchasing power through business-to-business (B2B) sales models. And value can be indirectly distributed to vulnerable populations by selling to payers or provider organizations serving those patients. [Ostrovsky et al] The expansion of Medicaid eligibility criteria through the Affordable Care Act (ACA) may offer a rare opportunity for B2C sales models to thrive with vulnerable populations.
Previously, patients had to be profoundly poor to be eligible for the Medicaid program including an income for jobless parents of less than 37% of the federal poverty level (FPL) and an income for elderly and individuals with disabilities of less than 79% of the FPL. [Kaiser]
[Source: Kaiser Family Foundation]
The poor that did not quite meet eligibility criteria for Medicaid had to find other ways to cover medical expenses so they typically did not have the dispensable income to purchase a health app or a wearable device.
Starting in 2014, the federal government will cover 100% of the costs of expanding the Medicaid program to residents with incomes at or below 138 % of the FPL ($15,856 for an individual and $32,499 for a family of four). [Glied et al] These people are still not economically well off, but they may have a little more cash for necessities and perhaps the occasional digital health technology purchase.
If it were adopted by all states, the Medicaid expansion could provide health insurance to as many as 21.3 million Americans by 2022. [Glied et al] Furthermore, the Medicaid expansion will help to reduce the current variation in eligibility levels across the states. [Kaiser]
What’s really exciting from the perspective of mitigating investment risk is that this is a sustainable change; the federal government will fund 100% of Medicaid expansion through 2016, and then 90% of costs through 2020. [Glied et al] So entrepreneurs and investors entering the space can feel comfortable that this will be a systemic change with sustained market opportunity.
Although this patient population may have the opportunity for some dispensible income, they are still generally economically poor, so there is still a large need for entrepreneurs to provide value through innovative B2B models.
One important consideration for entrepreneurs focusing sales on hospitals serving the newly-Medicaid eligible population is that these hospitals stand to benefit from a net increase in revenue.[Dorn et al] Medicaid expansion increases the number of patients for whom hospitals are paid, but some patients will shift from private to more poorly reimbursed public coverage. [Dorn et al] More specifically, for each dollar in private revenue that Medicaid expansion eliminates, hospitals’ Medicaid revenue rises by $2.59. [Dorn et al]
Despite the fiscal common sense expanding Medicaid, some states may choose not to adopt this reform. States that expand Medicaid stand to get a substantial influx of Medicaid dollars from the federal government while nonparticipating states still pay but don't get any of the funding back.[Glied et al] To put into perspective the magnitude of the funding, consider that by the end of this decade federal dollars toward Medicaid flowing into states will be 2.35 times the funding for building highways and 1.25 times the funding for defense procurement contracts. [Glied et al] State spending toward Medicaid will be the same regardless of whether they accept Medicaid dollars. [Glied et al] Entrepreneurs should be aware that hospitals and patients in non-participating states may present be a real challenge to early adoption given the perpetuation of limited purchasing power. Unfortunately, failure to expand Medicaid may predispose populations in those states to exacerbating digital health disparities.
Medicaid expansion, along with several other provisions of the ACA [Ostrovsky], offers an opportunity for social impact through commercial growth. It will be interesting to see the impact on achievement of the triple aim and investment in this space in the years to come.
Previously, patients had to be profoundly poor to be eligible for the Medicaid program including an income for jobless parents of less than 37% of the federal poverty level (FPL) and an income for elderly and individuals with disabilities of less than 79% of the FPL. [Kaiser]
The poor that did not quite meet eligibility criteria for Medicaid had to find other ways to cover medical expenses so they typically did not have the dispensable income to purchase a health app or a wearable device.
Starting in 2014, the federal government will cover 100% of the costs of expanding the Medicaid program to residents with incomes at or below 138 % of the FPL ($15,856 for an individual and $32,499 for a family of four). [Glied et al] These people are still not economically well off, but they may have a little more cash for necessities and perhaps the occasional digital health technology purchase.
If it were adopted by all states, the Medicaid expansion could provide health insurance to as many as 21.3 million Americans by 2022. [Glied et al] Furthermore, the Medicaid expansion will help to reduce the current variation in eligibility levels across the states. [Kaiser]
What’s really exciting from the perspective of mitigating investment risk is that this is a sustainable change; the federal government will fund 100% of Medicaid expansion through 2016, and then 90% of costs through 2020. [Glied et al] So entrepreneurs and investors entering the space can feel comfortable that this will be a systemic change with sustained market opportunity.
Although this patient population may have the opportunity for some dispensible income, they are still generally economically poor, so there is still a large need for entrepreneurs to provide value through innovative B2B models.
One important consideration for entrepreneurs focusing sales on hospitals serving the newly-Medicaid eligible population is that these hospitals stand to benefit from a net increase in revenue.[Dorn et al] Medicaid expansion increases the number of patients for whom hospitals are paid, but some patients will shift from private to more poorly reimbursed public coverage. [Dorn et al] More specifically, for each dollar in private revenue that Medicaid expansion eliminates, hospitals’ Medicaid revenue rises by $2.59. [Dorn et al]
Despite the fiscal common sense expanding Medicaid, some states may choose not to adopt this reform. States that expand Medicaid stand to get a substantial influx of Medicaid dollars from the federal government while nonparticipating states still pay but don't get any of the funding back.[Glied et al] To put into perspective the magnitude of the funding, consider that by the end of this decade federal dollars toward Medicaid flowing into states will be 2.35 times the funding for building highways and 1.25 times the funding for defense procurement contracts. [Glied et al] State spending toward Medicaid will be the same regardless of whether they accept Medicaid dollars. [Glied et al] Entrepreneurs should be aware that hospitals and patients in non-participating states may present be a real challenge to early adoption given the perpetuation of limited purchasing power. Unfortunately, failure to expand Medicaid may predispose populations in those states to exacerbating digital health disparities.
Medicaid expansion, along with several other provisions of the ACA [Ostrovsky], offers an opportunity for social impact through commercial growth. It will be interesting to see the impact on achievement of the triple aim and investment in this space in the years to come.
Friday, November 29, 2013
Simple Math with Scary Implications for Hospitals: What Value-Based Purchasing means for hospitals’ bottom lines
I spend a lot of my time exploring the drivers of top and bottom-line growth for payers. As a physician, I had a nagging curiosity to learn about what the economics look like for my (part-time) workplace. So I explored one of the biggest changes in hospital reimbursement reform, value-based purchasing (VBP).
Value-based purchasing is a reimbursement structure that is intended to reward improved clinical processes, outcomes, and patient satisfaction. In many cases, it is perceived as the inverse: a financial penalty for below average hospital performance. The following is some overly-simplified math than demonstrates how VBP works and more frighteningly, the implications of VBP for hospitals. This rudimentary analysis may serve as a useful backdrop for entrepreneurs trying to sell their software into hospitals, doctors considering how they can add value to their hospital, or patients who want to get empowered about the role of their opinion.
First, let’s start with how hospitals were paid before VBP was put in place. Medicare paid hospitals per discharge based on a diagnosis-related group (DRG) specific for a disease state. More elaborate admissions like heart surgery were reimbursed more than more benign admissions like a cellulitis.
With the introduction of VBP, hospitals will have their reimbursement go up or down depending on their performance in clinical processes, clinical outcomes, and patient satisfaction. The performance in each of these domains gets incorporated into a total performance score (TPS) for each hospital each year by Medicare. Depending on a hospital’s TPS compared to that of the national median TPS, a given hospital will have the reimbursement for each discharge systematically increased or decreased by some multiple (VBP Incentive Multiplier).
To incentivize better performance, Medicare is reducing the baseline reimbursement for each DRG by 1% starting in 2013. That reduction will worsen to 2% by 2017.
The combination of reimbursement based on the VBP Incentive Multiplier and the DRG Percent Reduction over the next few years results in the following overly-simplified formula:
VBP Incentive MultiplierHospital A =
1 + [Percent Reduction in DRG x (TPSHospital A/TPSNational Avg) - Percent Reduction in DRG]
This is where the scary part begins. Let’s fast forward to 2017 when the reduction in reimbursement for each discharge is at the full 2%. Let’s also assume that a given Hospital A is performing at an annual TPS of 25 while the national average is 50. Plugging our numbers into the above formula, the VBP Incentive Multiplier = 1 + [2% x 25/50 - 2%] = 1 + [0.02 x 0.5 - 0.02] = 1 + [0.01 - 0.02] = 1 - 0.01 = 0.99.
So in 2018, Hospital A will have each of its discharged diagnoses reimbursed at 99% of what the DRG reimbursement rate is for that year. If, for example, Hospital A has an operating budget of $100 mil, and if all of the revenue comes from clinical care (vs research funding), then Hospital A’s below-average performance would have just resulted in $100 mil x 0.99 = $99 mil actual operating budget, or a $1,000,000 penalty. With profit margins for highly profitable hospitals in the 2-3% range, a 1% hit on operating budget can be as much as a 50% decrease in the profit margin. The board of a hospital would not be happy with such numbers, the CEO may be out of a job, and more importantly, there may be less money to reinvest in expanding the hospital’s ability to serve vulnerable populations.
Let’s take a look at a slightly less gloomy scenario. I’ll return to 2013 for this example where the DRG reduction is just at 1%. Let’s assume that in 2013, Hospital A was performing above average with a TPS of 75 while the national average was 50. Plugging our numbers into the above formula again would yield a VBP Incentive Multiplier = 1 + [1% x 75/50 - 1%] = 1 + [.01x 1.50 - .01] = 1 + [.015-.01] = 1 + .005 = 1.005.
So, for 2014, Hospital A will have each of its discharges reimbursed at 1.005 times the baseline DRG reimbursement rate for that year. Assuming the same operating budget of $100 mil for Hospital A and assuming that all of its revenue comes from clinical care (vs research funding), then Hospital A’s above average performance would have turned its $100mil x 1.005 into $100,500,000 or $500,000 increase in operating budget. The resultant potential for a 25% increase in profit margin would make for a happy board, an employed CEO, and potentially reinvestment into interesting programming for needy patients.
But there’s a catch! I didn’t take into account the cost of what it would take to improve a hospital’s performance. If the hospital starts and remains above the median at the same level, it will continue to enjoy higher margins. But what about hospitals that need to improve? With improvement, in theory, the goal of VBP, underperforming hospitals have a very steep uphill battle.
For example, investments in improving clinical processes, outcomes, and patient satisfaction could include software, training, and evaluation costs, among others. Using EMR costs as a proxy for the range of cost for software, the cheaper EMRs cost about $4k per provider per year. If hospital A employes 100 providers, that's $400k per year, not to mention set up fees. My calculations are obviously over-simplified. But the point is that hospitals will have a difficult time achieving a positive ROI in the newly emerging reimbursement landscape. Even for hospitals that outperform the rest, their net gain from improving outcomes may be minimal at best.
There are many limitations to this analysis. I didn’t include the additional burden for hospitals due to the impact of efficiency metric that is due to roll out in 2015 and 30-day readmission penalties, among others.
Although well intended, VBP has many unforeseen consequences that may disproportionally and negatively impact hospitals that serve disadvantaged patients. These unforeseen consequences and my rudimentary math exercise above are examples of why hospitals and the healthcare system as a whole may need to focus (even faster) on what happens before and after the admission.
Value-based purchasing is a reimbursement structure that is intended to reward improved clinical processes, outcomes, and patient satisfaction. In many cases, it is perceived as the inverse: a financial penalty for below average hospital performance. The following is some overly-simplified math than demonstrates how VBP works and more frighteningly, the implications of VBP for hospitals. This rudimentary analysis may serve as a useful backdrop for entrepreneurs trying to sell their software into hospitals, doctors considering how they can add value to their hospital, or patients who want to get empowered about the role of their opinion.
First, let’s start with how hospitals were paid before VBP was put in place. Medicare paid hospitals per discharge based on a diagnosis-related group (DRG) specific for a disease state. More elaborate admissions like heart surgery were reimbursed more than more benign admissions like a cellulitis.
With the introduction of VBP, hospitals will have their reimbursement go up or down depending on their performance in clinical processes, clinical outcomes, and patient satisfaction. The performance in each of these domains gets incorporated into a total performance score (TPS) for each hospital each year by Medicare. Depending on a hospital’s TPS compared to that of the national median TPS, a given hospital will have the reimbursement for each discharge systematically increased or decreased by some multiple (VBP Incentive Multiplier).
To incentivize better performance, Medicare is reducing the baseline reimbursement for each DRG by 1% starting in 2013. That reduction will worsen to 2% by 2017.
The combination of reimbursement based on the VBP Incentive Multiplier and the DRG Percent Reduction over the next few years results in the following overly-simplified formula:
VBP Incentive MultiplierHospital A =
1 + [Percent Reduction in DRG x (TPSHospital A/TPSNational Avg) - Percent Reduction in DRG]
This is where the scary part begins. Let’s fast forward to 2017 when the reduction in reimbursement for each discharge is at the full 2%. Let’s also assume that a given Hospital A is performing at an annual TPS of 25 while the national average is 50. Plugging our numbers into the above formula, the VBP Incentive Multiplier = 1 + [2% x 25/50 - 2%] = 1 + [0.02 x 0.5 - 0.02] = 1 + [0.01 - 0.02] = 1 - 0.01 = 0.99.
So in 2018, Hospital A will have each of its discharged diagnoses reimbursed at 99% of what the DRG reimbursement rate is for that year. If, for example, Hospital A has an operating budget of $100 mil, and if all of the revenue comes from clinical care (vs research funding), then Hospital A’s below-average performance would have just resulted in $100 mil x 0.99 = $99 mil actual operating budget, or a $1,000,000 penalty. With profit margins for highly profitable hospitals in the 2-3% range, a 1% hit on operating budget can be as much as a 50% decrease in the profit margin. The board of a hospital would not be happy with such numbers, the CEO may be out of a job, and more importantly, there may be less money to reinvest in expanding the hospital’s ability to serve vulnerable populations.
Let’s take a look at a slightly less gloomy scenario. I’ll return to 2013 for this example where the DRG reduction is just at 1%. Let’s assume that in 2013, Hospital A was performing above average with a TPS of 75 while the national average was 50. Plugging our numbers into the above formula again would yield a VBP Incentive Multiplier = 1 + [1% x 75/50 - 1%] = 1 + [.01x 1.50 - .01] = 1 + [.015-.01] = 1 + .005 = 1.005.
So, for 2014, Hospital A will have each of its discharges reimbursed at 1.005 times the baseline DRG reimbursement rate for that year. Assuming the same operating budget of $100 mil for Hospital A and assuming that all of its revenue comes from clinical care (vs research funding), then Hospital A’s above average performance would have turned its $100mil x 1.005 into $100,500,000 or $500,000 increase in operating budget. The resultant potential for a 25% increase in profit margin would make for a happy board, an employed CEO, and potentially reinvestment into interesting programming for needy patients.
But there’s a catch! I didn’t take into account the cost of what it would take to improve a hospital’s performance. If the hospital starts and remains above the median at the same level, it will continue to enjoy higher margins. But what about hospitals that need to improve? With improvement, in theory, the goal of VBP, underperforming hospitals have a very steep uphill battle.
For example, investments in improving clinical processes, outcomes, and patient satisfaction could include software, training, and evaluation costs, among others. Using EMR costs as a proxy for the range of cost for software, the cheaper EMRs cost about $4k per provider per year. If hospital A employes 100 providers, that's $400k per year, not to mention set up fees. My calculations are obviously over-simplified. But the point is that hospitals will have a difficult time achieving a positive ROI in the newly emerging reimbursement landscape. Even for hospitals that outperform the rest, their net gain from improving outcomes may be minimal at best.
There are many limitations to this analysis. I didn’t include the additional burden for hospitals due to the impact of efficiency metric that is due to roll out in 2015 and 30-day readmission penalties, among others.
Although well intended, VBP has many unforeseen consequences that may disproportionally and negatively impact hospitals that serve disadvantaged patients. These unforeseen consequences and my rudimentary math exercise above are examples of why hospitals and the healthcare system as a whole may need to focus (even faster) on what happens before and after the admission.
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