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February 25, 2010

Follow the Money – Re: Healthcare Reform

Approximately 47 million Americans are uninsured.

 The average individual health insurance premium is between $300-$400 per month, or $3600 – $4800 per year.

(Multiplying)  Today it would cost $188-$225 billion to provide health insurance to all of the uninsured.

 This cost is currently rising between 8-10% per year.

Generally tax revenue growth is proportional to GDP growth.

How can our government finance an additional $200 billion per year growing at 8+% per year when historically GDP growth has been well below 8+%. 

Can they keep raising taxes?

Most reasonable people would say no, we cannot raise tax rates year after year (or perhaps even now for that matter).

To accomplish universal coverage we need to discover enough healthcare initiatives that together result in reducing healthcare inflation to the level of inflation of the economy in general (about 0-4% over the last 10 years or so).

If we can achieve this goal, then we can realistically and responsibly begin to create proposals for getting everyone insured.

The two biggest areas of potential cost savings are: (1) waste and redundancy (estimated at a total cost of $700 billion/year) and (2) the expansion of the prevalence and cost of chronic illness (about 70% of the $2.4 trillion healthcare economy, or $1.7 trillion per year).

Initial approaches to healthcare reform should focus on measuring these costs and implementing initiatives to reduce them over time.  Many of the technologies and proven approaches  to tackling these issues are currently available, but are going largely ignored by lawmakers as they craft reform.  Many more are in development and will appear over the next 5-10 years.  Many of them cross my desk as potential investment opportunities everyday.

Look for insights on modern and novel approaches to improving healthcare quality and reducing costs as this blog develops.

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February 24, 2010

Email from Senator Patty Murray – Re: Healthcare Reform

Filed under: Healthcare — Steve Krupa @ 8:53 pm
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Today I received the following email (see below, abridged ever so slightly) from Patty Murray, incumbent Senator from Washington State, serving her third term:

 “Dear Stephen (note:  she calls me Stephen, since that’s the name I use on the credit card I used to contribute to President Obama’s presidential campaign):

 Tomorrow, I’ll be attending the White House bipartisan summit on health care reform hosted by President Obama.

This forum, bringing together congressional leaders from both parties, will provide an opportunity to have an open and honest dialogue about what we must do to reform our health care system — this year….

As families continue to face double-digit premium increases, lost or reduced care due to unemployment, and decreased access to care, I will continue to fight to ensure that health care reform addresses these priorities.

I’m committed to protecting health insurance where it’s good, improving it where it’s not, and ensuring quality care for the millions who don’t have it at all — while preserving your choice of doctor, treatments, and insurance plans throughout it all.

Getting health care reform passed this year is not just about compassion — it’s about economic common sense.

But I want to hear from you, too. What do you think we should do about health care reform?

Some critics say we can’t afford to tackle health care reform. I say we can’t afford not to.

That’s going to be my main message in tomorrow’s summit — but I want to make sure I take your views with me, too.

Thanks in advance for letting me know what you think.

 Sincerely,

Patty Murray
U.S. Senator

She’s sounds very committed to healthcare reform, and genuinely sincere about wanting to help.  I also noted that she is running for re-election this year, so I thought I would take her up on her offer to let her know what I think, and wrote back the following: 

 “I believe both of the bills (from the house and the senate) are too extreme and loaded with expensive and unproven ideas.  While I support the idea of universal health insurance in the long-run, I am opposed to such a sudden, massive overhaul.  I would encourage a rewrite of the current bill that started off focused on measuring and reducing cost and improving quality in the current healthcare system.  After these concepts are proven then I would support using ongoing savings in the system to subsidize expansion of health insurance.  This is the logical, pragmatic approach, particularly given the size of our national debt and budget shortfall.  We should learn how to save money now to finance expanded coverage in the years to come.”

(Btw, you too can click on this or the above link (for the time being) and let Sen. Murray know what you think too – if you do, copy me too, please.)

I wonder whether she, or any other politician for that matter, believes that it’s possible to save costs in the healthcare system.  If they do, why don’t they prove it to us first, before making such a massive financial committment?

February 23, 2010

Talkin’ Atul Gawande Checklist Blues

This post introduces a great book, essentially about checklists, that contains a compelling set of ideas for improving the performance of the US healthcare system…

 Contractors, architects and engineers use checklists to guide them through the complex process of building a skyscraper.  When I was in college working as a  laborer on a construction site these lists were referenced from a larger project schedule, or Gantt chart.  Back then (the ’80’s), the architects, engineers and contractors would get together and update the Gantt and its subsidiary checklists as the project progressed, usually through project meetings.  At the conclusion of the meeting the draftsperson would issue an updated set of governing project documents.  This system was designed to keep the job on schedule, avoid catastrophic mistakes and adjust the project plan, in real time, to changing site conditions.  After spending time as a laborer I went on to become a project engineer for Johnson Controls, where I took on the responsibility of developing and managing the checklists for large mechanical installations.  By the time I left the construction business in 1991, Gantts (checklists) were developed on site through a computer and printed out on green and white lined dot matrix paper.  Today, a large construction site contains arrays of computer terminals, simulating everything in accordance with the project plans and shop drawings, searching for conflicts and errors and updating the Gantts on demand.  Yet the printed checklists and in-person project meetings remain, and the buildings go up, finished with structures and electrical and mechanical systems in synch.  

 Consider the task of flying modern day aircraft.  As most of us know, airplanes have extremely powerful computers and back-up systems, and the safety record of commercial air travel is extraordinary.  It turns out that checklists are used extensively in the commercial airline business.  Before pilots, like, for example, First Officer Jeffery Skiles and Captain Chelsey B. Sullenberger (“Sully”), fire up the engines on a commercial flight, like, for example, US Airways Flight 1549, leaving New York’s LaGuardia airport and headed for Charlotte, North Carolina on January 14, 2009, they introduce themselves to one another, run through a standard checklist designed to verify the safety of the plane, and they discuss the weather forecast and other potential issues they may have to deal with during the flight.  In the case of Flight 1549, shortly after take-off the plane flew into a flock of Canadian geese, very big birds, about 10 pounds each, three of which were ingested through the two Airbus A320‘s engines, causing a trip in an engine safety control that cut power to the engines (otherwise the engines would have had a high probability of exploding).  Not surprisingly this event was hardly anticipated, yet on board were checklists for restoring power to the engines and for activating the proper control functions to allow Pilot Scully to manually glide the plane.  It turns out that power could not be restored to the engines in time, but Scully successfully landed the plane in New York’s Hudson River.  While the Pilots found the proper landing site, flight attendants ran through their own checklists for a water landing, coaching the passengers on landing posture, life vest operation and orderly exit from the fuselage.  The result, the pilots and crew of Flight 1549 saved all 155 persons on board, as simulated during training.

Large construction projects and flying commercial aircraft are highly complex functions.  Their interconnectivity and details are simply too immense for one or a group of human beings to handle.  The checklists serve as a reminder of the minimum requirements for safety and success and provide the foundation for the improvisation that is inherently necessary to deal with unexpected difficulty.  We nod our head and think, “of course they use checklists” in these trades.  It must be essential.

 Query:  is the use of checklists SOP in the field of medicine?

 Answer:  No.

 Atul Gawande, MD, along with other proselytizers like Peter Pronovost, MD at John Hopkins, is attempting to inculcate doctors to develop and use checklists in the practice of medicine in the name of sharply reducing medical errors.

 Gawande makes his case in his latest book, The Checklist Manifesto, which is, oddly, quite a page turner, particularly given the perceived straight forwardness of its subject matter.  It (the book) will, I think, evolve into one of the more important books of this new decade with respect to our nation’s pursuit of improved performance of the US healthcare system.

 The examples of the modern-day construction site and Flight 1549 sit among a broad collection of stories (many of medical origin) that  Gawande uses to demonstrate what happens in complex circumstances when checklists are used, or not.  Kudos to Gawande, the book is a wonderful read for the stories alone.  But what struck me, and apparently comedian Jon Stewart, among others, also (see Dr. Gawande’s brief interview with Jon Stewart here, it’s pretty funny), is that doctors seem to require a lot of convincing  to implement team-oriented checklist procedures, even though they are faced with many more true life-and-death emergencies than pilots, who apparently recognized the complexity of their jobs decades ago when the development and implementation of checklists became status quo.

 In fact there is such a politeness to Gawande’s book it’s startling.  You cannot help but note that he seems to be taking great pains to convince us of the premise that checklists can be useful in medicine, when, frankly, I was convinced of the notion before I even started to read the book.  It turns out that I am not the one who needs the convincing, doctors are.

 Last week I had the opportunity to hear Dr. Gawande speak and read from his book at an event in New York City sponsored by a local bookstore, 192books.  During the talk he pointed out that he and his surgical staff developed a checklist and procedure that resulted in reducing the number of surgical deaths by 50%, yet 20% of the doctors that used the checklist stated that they thought it wasn’t easy to use and that they did not think it actually improved safety.  However, when that same group was asked if they would want the checklist implemented if they were the patient, 93 percent said yes.

During the book reading session, a member of the audience jokingly mentioned to Gawande that he had recently survived open heart surgery and the “free” staph infection he obtained after surgery.  In fact, hospital contracted infections are one of the biggest targets of this nascent checklist movement.  Doctors and hospital staff simply do not follow the letter of the law in infection prevention, and its become a very big deal.  So much so that in some cases Medicare will cap hospital compensation for the treatment of a preventable infection. 

Clearly there are many ramifications to what I see as a new movement in medical safety.  For balance, I also point out that there is a lot to developing checklists, and as Sandeep Jauhar points out in his New York Times review of the book, there is an anti-checklist case to be made.  I will turn to these issues, which are not trivial, in future posts.

 I like Gawande and his research, I think he adds a lot of value.  For now, take his latest book, the Checklist Manifesto as one entry point into the ongoing dialogue on how to improve the efficiency of the healthcare system.

February 12, 2010

Clinton’s Stent(s) and True Comparative Effectiveness

Filed under: Healthcare — Steve Krupa @ 8:51 pm
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It’s ironic to me that on the same day (11-Feb-2010) Bill Clinton underwent surgery to place two stents in one of his coronary arteries Keith Winstein published an article in the Wall Street Journal titled A Simple Health-Care Fix Fizzles Out which explores, among other things, the idea of Comparative Effectiveness, and whether it is or ever will be effective at reducing health care costs.  His article discusses the COURAGE study which concluded (an abstract of the study is available here) that stenting patients with stable coronary artery disease (CAD) did not reduce the risk of: (1) death, (2) myocardial infarction (heart tissue dies because it is starved for blood, similar to a heart attack), or (3) other major cardiovascular events (like a stroke) when used as an addition to optimal medical therapy (drugs); or, in other words, if your medical objective is to manage (1), (2) and (3) above, drugs alone work as well as and maybe better than drugs plus stents (and, by the way, no one gets just stents, they always get the drugs too).

The Wall Street Journal article’s point, however, is the stent procedure, which costs about $15,000, continues despite its apparently dubious medical efficacy for this class of patient.

So, let’s start with some math (I am using Winstein’s numbers here).  The 1 million stent implant procedures done in the US per year cost $15 billion (about $15,000 each).  About 1/3 of those are performed on patients with stable CAD, so adherence to the study’s findings could yield an annual savings of $5 billion.  Compare this to the $200 billion or so it will cost to insure the uninsured in the US and you would be about 2.5% there.  Hey, it’s a start.

Let’s now take the case of Bill Clinton, or anyone else for that matter, who showed up at the doctor with chest pain and got his stents right away.   It has not been reported whether Clinton is a stable CAD patient or not, but his symptom, i.e., his chest pain, is the same symptom demonstrated by stable CAD patients.  According to the output from COURAGE, the protocol for treatment should be drugs for 12 weeks and then a follow-up set of stress tests to determine if the stents are needed.

Winstein goes on to express some perfectly valid reasons why the results of the COURAGE study are largely ignored in practice.  Here’s a short list, containing the usual suspects:

1.  Doctors:  Cardiologists make more money putting in stents.

2.  Payers:  Health insurers don’t monitor stent usage because they pass the cost on to their customers anyway

3.  Patients:  they have no incentive to decline costly care

These reasons point to one of the many problems with the healthcare system, namely the lack of financial accountability, similar to lessons on moral hazard we all learned during last year’s banking crisis.  When we talk about healthcare on this blog, we’re going to come to this moral hazard issue often, it’s imbedded in all that is wrong with the healthcare system.  But I believe the problem with the COURAGE study lies in its inadequate endpoints.  They are primarily clinical and they are economically incomplete and therefore they are not sufficient for a Comparative Effectiveness study.

I would argue that Bill Clinton did not get his stent to avoid a heart attack in the FUTURE.  He got it to reduce his chest pain today.

For Comparative Effectiveness to be a useful economic tool the studies have to measure true economic variables.  One of those variables is patient demand, and I believe if a patient believes his chest pain will diminish from a stent procedure he will see that as the optimum treatment versus drugs alone even if the odds of having a heart attack in the future are not changed.

So, I am a believer in Comparative Effectiveness in theory, but a skeptic that medical trials alone will guide the way.  As a result, I believe innovation requires the deployment of science that brings together clinical realities and market economics to determine the most cost effective approaches to meeting the needs of the patient.  If we couple this with a financial system that includes true consumer financial accountability we will move toward having one of the key components to a value-based purchasing market for healthcare.

Stay tuned…

February 10, 2010

Personalized Medicine I

Filed under: Healthcare — Steve Krupa @ 7:05 pm
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As an entry point to the subject of personalized medicine, the attached video presentation from  David Asch (Wharton Healthcare Professor) is quite brilliant.  David packs a lot of important issues into his 6 minute presentation (from IdeasLab in Davos this year, 2010).  Please take a look.  A few brief comments to follow.

Ok, I am going to come back to this topic in future posts.  In the last 30 seconds of this video Dr. Asch presents a couple of issues relevant to healthcare in the United States and other wealthier nations.

First, personalization will create many more niche markets for therapies.  Historically, large pharma has directed its research and development efforts toward very large markets.  The issue in front of us is to develop economic models that support innovation within smaller, more targeted classes of therapies.

Second, how do we manage the low risk members of the population in an era of personalized medicine?

What interests me is how the personalization of risk can evolve our health insurance models towards incentivizing lower cost and higher quality care.

Stay tuned…

February 4, 2010

Hello world!

Filed under: General — Steve Krupa @ 11:13 pm
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“Hello world!” a default “wordpress” title which I accept as a welcoming to all first timers.  It is 5-Feb-2010 and I am staring directly into infinity, an empty blog. 

This is the new home base of my evolving digital existence, my second realm.  What I have to offer here are ideas and perspectives on subjects near and dear to me.  What I am in search of is comment and intrigue that will give those subjects added meaning to me and to all who choose to come here.  I hope to create a place for learning, teaching and deepening relationships.

My professional time is spent thinking about healthcare, helping entrepreneurs build businesses and managing a portfolio of venture-stage healthcare investments with my business partners (check on us at www.Psilos.com).  New ideas on all three of these subjects are constantly being tested.  I have many, which will eventually make there way onto these pages.  I also come across many new ideas which I intend to share, with full attribution of course.

 The process of building a great business changes constantly.  Ideas on how to finance, govern, market, hire, communicate, motivate, lead and evolve new enterprises interest me greatly, particularly in the context of our nascent digital age.  I also know that for every investor out there, there is an investment model.  As a professional investor I am always on the hunt for new perspectives on choosing and managing investments and building portfolios, and I hope to introduce these perspectives over time.

My life is definitely not all about work, but I do think it is all about digging deeper and pursuing aficionado status in as much as I can handle.  So while I have you here, I hope to explore some of the subjects that inform my free time, hopefully not just as an indulgence, but also as a way of going a little deeper and having a little more fun.

Thanks for joining me, and I look forward to the discussion.

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