Unagidon here.
[I now have access and I deeply appreciate it.
I have not written for Commonweal for some time. When they changed their format, they started paying me for my articles. But while they paid me for a group of four or five that I sent them in June, they have not published any of them. I know that this entirely depends on what's happening in the current edition and is not a reflection on the articles themselves. Unfortunately, this happened while I was having a crisis of confidence about my writing.
What I would like to do here is to post as I did on the blog, but to also post things that I would probably not submit to Commonweal. I hope you will bear with me.]
Those who follow the religion called Libertarianism love to talk about the Libertarian version of the Holy Spirit that they call Innovation. They claim that higher profits, deregulation, lower wages for workers, and tax cuts as things that will release the Forces of their Holy Spirit, as though there are people out there with revolutionary ideas who are holding back waiting for profit margins to go up 100 basis points before they unleash their creativity.
I would like to talk about how innovation actually works in large corporations, based on my own observations and experience. Corporations love the idea of innovation, including the misty eyed dreams of greater profit. And corporations do innovate from time to time. But the picture is not like the one painted by the Libertarians (which is after all, as I have said countless times on Commonweal, an Infantile Disorder).
How can we not love the idea of innovation? It's so modern. So progressive. So creative. Someone, working only with their own noggin, comes up with something new and remarkable. For all of this hard work going on in the space behind their eyes, they are rewarded by a just and happy God.
The first time I ran into Innovation (may I capitalize it since it is so wonderful and important?) at my old massive phat insurance company I was awed. The Innovation was simple, like all great new ideas, and now one wondered why no one had thought of it before.
Insurers contract with hospitals. In the negotiation, the hospital will either get an increase in what it is paid or a decrease (usually the former). A large city like Chicago will do negotiations with fifty or more hospitals a year in the metropolitan area. It's all well and good to tell the negotiators to try to keep the increases down. But what if someone invented a tool, a spreadsheet, that would tell us what each negotiation did for the sum total of all negotiations? And what if in that spreadsheet, one could input rate changes so that one could see what would happen to prices in the future? And what if one was then able to use that spreadsheet to then target future negotiations; not only targeting future price increases but target the timing of the negotiations themselves and perhaps postponing or accelerating negotiations in order to affect the overall price trend?
Sorry if that was too wonky. It seems obvious now that one should combine data to create accurate forecasts to assist planning. But 15 years ago it was radical (and there are some large insurers now who still don't do this). A guy at the company did this and managed to lower overall costs. However, what happens with innovations in a corporation is that they severely disrupt it. An innovation is an admission that the old way of doing things was wrong. The people who are associated with the old way then see their positions as vulnerable. So at the beginning, they oppose the innovation, claiming that it's stupid or that it won't work as promised.
This opposition is not necessarily a bad thing in itself, since innovations should be looked at carefully. A radical innovation will require resources, especially if it requires a retooling of the organization itself. But in my experience, interests within the organization will initially oppose the innovation as hard as they can for political reasons. If the innovation nonetheless gets traction, they they will try to attach themselves to it and then try to take it over for themselves. The innovator becomes a political target. He or she is usually attacked and attacked outside of the merits of innovation. I will call this the neutron bomb affect, where the innovator is attacked in such a way that it destroys him but leaves the innovation standing.
The person who invented the innovation I outlined was briefly celebrated, and was then forced out of the company within a year. This happened particularly quickly, because unfortunately for him, he continued to innovate. He discovered a flaw in his tool The tool only went out 12 months (because American corporations only go out 12 months in their concrete planning). He discovered that people were gaming the tool by promising hospitals massive increases to get the deals done (since getting a deal done, no matter how rotten it was, was counted as a "win") and then booking these increases into the time period beyond that covered by the tool so they would not show up in the current period.
If it sounds like I am bitter, I am. Because later in my career, when I was powerful enough to push an innovation of my own, the same thing happened to me. The innovation I came up with was strongly opposed at first and it took me three full years to even get in considered. It was opposed the whole way and when the company agreed to try it on a purely experimental basis, I was told that if it failed, I would be fired. But it turned out to be wildly successful and very profitable. Of course, then that happened the company embraced it in all of its branches and it was then embraced by the other insurers. I myself never got any recognition for it.
My point here is not to cry for myself, but to point out that our Libertarian economic ideas are rolled out now as though they are self evident. Economics itself claims to be a science. It would seem to make sense that innovation = profits = rewards for the innovator. This is similar to another metaphysical concept that goes lower taxes = more capital to invest = more investment = job growth. But that's not how the world works, and for these concepts to work, the world has to be stripped from them.
Libertarianism is a theory of everything that puts humanity in a Procrustean bed, as do all such theories. From the physical technology side, I'd say there's another disconnect. In the 19th century, James Clerk Maxwell developed four coupled differential equations that described the relationships between current, electric fields, magnetic fields, and matter. Doodle around a bit with the equations and out pops the wave equation. What follows is radio, radar, television, microwaves, not to mention the revolution in the understanding of light as an electromagnetic wave and all the technologies that flowed from that. I'd say that's a big innovation. But why aren't the descendants of Maxwell worth trillions? Innovators and explorers LIKE to innovate and explore. They don't do it just or mainly for the bucks.
ReplyDeleteAnd there it is. There are other values than money. One of the most evil people I ever met (and I have met a few) was the late economist Gary Becker, Nobel Prize winner. He found a way to convert all goals and values into "human capital" and all decisions into transactions that could be quantified by money. I believe that it wasn't von Mises or Friedman who made the neo-liberal heresy popular. It was people like Becker, who created the argument that the monetarization of all values and the commodification of human life created some kind of ultimate freedom in the market.
DeleteThe problem with innovation is that it changes the way things work. Big innovation means big change. I think most people don't like change, big or small. So even if the innovation has some pluses, the person who innovates runs the risk of other people coming to dislike them. Perhaps they can't rid their town or job of the innovation, but they can rid themselves of the innovator.
ReplyDeleteFor example, Mayor DeBlasio of NYC has filed a proposal inviting Amazon to build it headquarters2 in the city with four possible sites. Lots of money, lot of jobs, etc. But as the mayor knows the transportation system, streets, buses, subways are already buckling under too many people and cars.
Amazon comes. That is an innovation. But straphangers (NYC subway riders) will be appalled, unhappy, fuming at the ever increasing crowding and slowdowns. If we're lucky Amazon will go to Cleveland or maybe Detroit where they need more jobs and more people. If they come to NYC, Deblasio will never hold office again, and no one will propose a statue in City Hall Park. Ecrasez the innovators!!
One of the causes of traffic grid is the innovation of Uber trolling the streets waiting for a call to pick up a disgruntled subway rider.
DeleteAnd Yes, I should have said at the top...U, so glad to see you back.
Enter the downsides of innovation. Rarely looked at in terms of the real costs of innovation because we celebrate the "innovator". (I would be the first to say that although I pushed my little idea against strong opposition, it was a very large team that executed it in the end and deserves most of the credit).
DeletePatrick, You don't know how good it feels to have you back.
ReplyDeleteThe spreadsheet you describe would not have been possible, I suspect, before computers. At least, not without arenas full of women -- it was always women (see Bletchley Park; see "Hidden Figures" -- pushing numbers around. Before that, projections would have been based on the seat of someone's pants. And that someone, probably a nice guy, was made superfluous by the spreadsheet.
Politics underwent similar innovation when computers took command of redistricting maps. Once upon a time, the legislators drawing the maps would have to take a break every few hours while each side ran down the block and told its poobah how things stood. And the poobah would say, "Are your crazy? Happy Village is wall-to-wall Republicans. Don't draw a line through that or you'll put two Democrats in trouble instead of one. And back the legislators would run to resume negotiations.
One of the poobahs watched how a computer could show how a proposed district voted in the past three election, and how moving a mouse a couple of streets in one direction or another can change the past (and potential future) vote totals to the nearest tenth of a point. And the poobah said, "Now I am going to have to specialize in being quotable since my expertise has been algorhythmed." Which wasn't a bad start of being quotable. Innovation always threatens someone. And even if they aren't personally threatened, every employee of a large corporation knows innovation is not accepted to make their jobs easier but to make profits bigger. If their job happens to get easier as a result of innovation, there will be less pay for it. If the job happens to get harder, there won't be more pay. Either way, there will be greater profits or else more innovation.
I might be able to understand the odd faith in the Holy Spirit of Innovation if we had not just come through the Great Recession built by the Spirit of Democratic Capitalism (to capitalize on a book title) and if the American guru of napkin economics were not still alive and talking.
Not just gerrymandering.
DeleteAnalytics, the computerized demographic read out of voters (an innovation, as I recall in 2008 by Obama) was a major reason Clinton lost. According to "Shattered," the delusion of control provided by Analytics led campaign manager Robby Mook to down shift on door-to-door and campaign stops in Wisconsin and Michigan. Stan Greenberg, old-fashioned Dem pollster agrees and has written a long piece about the delusion.
Another thing that goes on in American corporations is "innovation" as opposed to innovation. Management fads sweep corporations and if one is around long enough one will see the pendulum swing back and forth, back and forth. In my large corporation, I saw it swing back and forth between centralization and decentralization twice. Each time demanded massive retooling and, of course, layoffs. My corporation tended to be slow in taking up fads (although it always did) and this may have had to do with the way the bureaucracy was structured. We used to say that the real reason the company was slow was that the business section of the local airport bookstore was poor and didn't turn its stock over very often and the executives waiting for their planes to take off tended to be reading last year's cutting edge books.
DeleteBut higher executives need to show that they are doing SOMETHING. Otherwise it looks like they are doing nothing and then next step will be to wonder why we need them at all.
"However, what happens with innovations in a corporation is that they severely disrupt it. An innovation is an admission that the old way of doing things was wrong."
ReplyDeleteThis is what happens in the Catholic church as well where teachings are concerned. If the innovation in teaching seems to grow in popularity, the organization tries to co-opt it - think JPII's "new feminism".
It's good to see a post from you, Patrick.
There is a line in the movie Aguirre the Wrath of God that goes:
Delete" for the good of our Lord the Church was always on the side of the strong."
I think it holds here. A new wave has to prove it is strong before it is adopted.
Heh - you're the only other person I know besides my sister who's seen Aguirre :)
DeleteIt is unfortunate that Commonweal has not published Patrick's articles. They are always very informative because he has the gift of explaining the complex in terms that non-professionals in the field can grasp easily.
ReplyDeleteI also wonder how Commonweal's innovation (eliminating online discussions) has worked out. I almost never look at the site anymore. For me, the best part of the website was the dotcommonweal blog and the discussions that the blog posts prompted. I did not participate in most of the discussions, but I read many of them. It was one of the only Catholic websites that had decent discussions - very few trolls. I have had to stop reading the comments on most websites these days - Catholic and newspaper sites especially.
I forgot to add that it was reading dotcommonweal that prompted me to take out a paid subscription. I have let it lapse.
ReplyDeleteGlad to have you back, Patrick. I look forward to further discussions.
ReplyDeleteWouldn't it be nice if someone could come up with an algorithm which could factor out the (more or less) deliberate obfuscation and smoke blowing which all the players in the healthcare industry engage in to keep the actual costs as a byzantine and arcane quantity.
I have tried on Commonweal at least twice to capture the whole thing and I always seemed to end up writing at least three separate articles on it. It's very complicated and it always depends on where one is sitting.
DeleteI have to confess that for the last four or five months I have been in despair about it. For a while I was a constant poster on a Facebook group talking about healthcare reform. And I belonged to a group that was trying to promote Medicare for All (which I think is an excellent idea, but far more complicated to execute than people think). What drove me to despair was that people wouldn't look at how things worked on a technical basis because they had strong ideas about how things worked on a moral basis. The problem had to be the insurers, or the doctors, or the businesses, or the political parties or whatever. Any new system should and could just brush aside the enemy. Each specific proposal was all too obvious in its merits, even though each new proposal contradicted all the others. And my own purely technical explanations were too often dismissed because I had an insurance background and was therefore morally tainted by that. I had to give it up out of frustration. I felt like I kept having the same conversations over and over again. I feel bad about this, because I have the time now to be engaged and by God I think that we need radical reform in the US. But there it is. Call me weak.
What we need are technically astute people who are also moral. You, Patrick, fit the profile. Though out of the loop in the industry, it would be good to get you on the staff of an organization promoting reform of the medical system. But I understand the frustration. I have a lot of emotion on this subject, but I recognize expertise when I hear it and try to shutup and listen.
DeleteI think we will get radical healthcare reform in the United States because there will be no other choice. The powers that be are taking a wrecking ball to the present system, because they can. Because it will erase Obama's fingerprints. They think. The choice will be what form the reform takes. Worst case scenario; a libertarian system where it's everyone for themselves and the devil take the hindmost. I think this won't happen, at least in a pure form, for a lot of reasons. And as far as Obama's fingerprint being obliterated, people are going to remember that he was the president who tried to do something to ensure healthcare for all, even if the effort had its flaws. They're going to remember that we can do better than everyone for themselves, because for a brief while we did.
DeleteThe big danger to healthcare reform as I see it is not that we will stop trying things. It's that we will try to execute a partial reform, leaving enough of the dysfunctional parts intact to screw up the system again.
DeleteMy sense of it is that almost everyone (including the insurers who are now making moves to deal with single payer) thinks that a major reform is necessary. It's just that each player wants everyone else to be reformed while keeping their position intact. I recently saw a well regarded article from a physician organization promoting the need for single payer. A big problem with providers and single payer is figuring out what they would be paid. Medicare for All, if it paid according to the current Medicare fee schedule, would basically pay at cost. The physicians proposed that a new Medicare for All fee schedule should pay them at 150 percent of the current schedule. All the doctor lovers thought that this was equitable and reasonable. But I think that a permanent fifty percent profit is not. And this is how it goes.
I know almost nothing so questions:
Delete1. If doctors were salaried like nurses, pharmacists and technicians would that make the pricing and payment system more rational?
2. If insurers are foreseeing a single payer system, what are they building in as their recompense? Costs of administering the system? If they are profit-making do they build in dividends? Or do they need to become "non-profit," and simply accept what's on offer for doing the job?
There are already doctors who are salaried. Two of my nephews are hospitalists (or hospitalers, not sure which is correct, they take care of people who are patients in a hospital). They like it. They work 12 hour shifts, 3 days on, 4 days off, then 4 on, 3 off. Which means they have a predictable schedule. Both are married with young children, so it works for their family life. I expect when the kids get older they may go into a more specialized field and things would be different. But not all doctors would oppose being salaried if it meant they had more control over their lives.
DeleteMy doctors are all salaried. The hospital system tells them how long they can spend with a patient. If they get behind, they get in trouble. So they triage. My oncologist barely comes in the room. Numbers stable, get blood test every three months, see me in a year, I have acute young patients to deal with.
DeleteIf their patients aren't compliant, docs get in trouble. I no longer bother with mammograms, and that means I blow my GP's benchmark of having 100 percent of women in my age group have one every other year.
I think that having docs on salary would be fine if the hospital systems weren't busy spending money on advertising and opulent campus building projects (patients can now look at a mobile in the hospital lobby designed by Someone Famous and walk in the cancer meditation labyrinth) and expecting to make up for it by skinning time off the docs.
I would happily trade this crap for an extra three minutes to ask about my prognosis. Or to pay for an oncology nurse to come in to ask questions after the doctor leaves.
Do doctors really give a prognosis? I am becoming addicted to the idea that I can find out as much about whatever is ailing me (admittedly minor) by squirreling around the internet as by asking the doctor.
DeleteHere Margaret.
ReplyDelete1. "If doctors were salaried like nurses, pharmacists and technicians would that make the pricing and payment system more rational?"
Most doctors are salaried now. The days of kindly doctor Jones in his independent practice are over and these are becoming rare. There will be salary differentials between doctors in the same hospital, clinic, or group practice and I remember a long negotiation we once had with an orthopedic hospital that stalled because one of their main doctors demanded a rate for his personal participation that was much higher than the rate offered by the hospital for the service he participated in and we couldn't figure out how to support it in the contract. (The contract paid a set rate for a knee replacement. He wanted much more just for the ones he did.) The frustrated hospital negotiator revealed over drinks one night that the doctor had some med school friend in New York who was also a rival and who had recently gotten a raise. This knucklehead wanted to match it. We eventually came up with something to feed they guy's ego. But this is how these go sometimes.
Doctors like being salaried because they can then let the larger organization handle much of the overhead worries. They don't like it because it makes them into employees just like the rest of us peasants and they now have to answer to the boss and increase their productivity in conventional ways like common proles.
There are economy of scale savings with salaried doctors (one receptionist where there once were ten) but this if offset in our system with the insurer now having to negotiate a higher rate with a larger organization.
Salaried doctors have no affect on the payment system since that is dependent on the multiplicity of different payers and products, one doctor or a group.
2. "If insurers are foreseeing a single payer system, what are they building in as their recompense? Costs of administering the system? If they are profit-making do they build in dividends? Or do they need to become "non-profit," and simply accept what's on offer for doing the job?"
The big insurers are investing in non-risk ancillary businesses like health data management, disease management, informatics, claims processing technology, fraud and abuse tracking, disease management etc. They do a lot of this now and it's becoming a big unsung part of American medicine. But we are seeing this stuff spun off as separate corporations. United Healthcare did this with Optum/Ingenix and that company is now huge. So huge that it sells products and services to United Healthcare's competitors. (I remember in Chicago when I worked for United Healthcare that there was a product that we wanted to buy from them that we were told we could not afford. But Blue Cross in Chicago did have it and they were using it to beat the hell out of us).
1. So there is a "performance" or "famous" bonus for some doctors. How do national health services elsewhere deal with this?
Delete2. So...if we get to a single-payer system will all of these ancillary businesses up the costs? Do they remain in the private sector? What leverage will the "single-payer" system have?
It seems like eye doctors still exist as group practices. Not sure, but looks to me like a worker owned business with the doctors as workers and has some economy of scale benefit. If so, it appeals to my democratic socialism better than giant for profit medicorporations. My OR male nurse friend has lived through the transition from nonprofit to corporation. He worked intensely before physically and mentally. No doubt, the squeeze is on. Everyone is more stressed and irritable. And they're just as liable if they make a mistake while overworked. I guess the new misery might make the capitalist overlords happy, as evidence their magic is working.
ReplyDeleteI wouldn't say everyone is stressed and irritable. I have a reliable source that tells me that the executives feel good about things, pausing only to cry on the way to the bank.
DeleteWell, Margaret.
ReplyDelete1. "So there is a "performance" or "famous" bonus for some doctors. How do national health services elsewhere deal with this?"
I don't know. However, if I were to speculate......
2. "So...if we get to a single-payer system will all of these ancillary businesses up the costs? Do they remain in the private sector? What leverage will the "single-payer" system have?"
The main problem with the adoption of single payer in the US is figuring how the providers would be paid. The Medicare of All folks (since this is the single payer flavor of the month for the Left) generally think that providers would just be paid Medicare rates. But most people don't know (although God knows I've tried to tell them) that Medicare and Medicaid are heavily subsidized by commercial payers now. Reducing them to Medicare fee schedules would be life reimbursing them at cost.
Moving to Medicare for All would save money on administration costs and this would lower provider costs (although I think the savings people talk about are overstated). So let's say that we do Medicare for All, cut those costs, and then just pay the providers what we paid them before those costs were cut? This creates a built in profit for them. If the admin cost cuts amount to the pretty crazy estimate of 30 percent, this would give the doctors a profit margin of 100/70, which would cause costs to lower quite a bit at first, but would be a pretty stiff profit, even for doctors and hospitals.
But another issue would be the future cutting of costs. In the short term, costs would be cut by "something" reflecting the admin cost cuts. By why should costs go down in the future? What would be the incentive?
Would pushy doctors get fat raises in the future? There are two ways they might. One would be their usual tactic of just bullying for a larger share of resources within the organization. So they'd get paid more by taking from the other doctors, in a zero sum game. The second would be for them to seek employment elsewhere. When Medicare reimburses a provider, they work from a base average of national costs for each service, then they adjust this on the basis of things like geographic area, whether (with hospitals) the hospital is a teaching hospital, how much charity care is done, and how much under-reimbursed Medicaid work is done. In a Medicare for All world, the last two would disappear. The price differentials would therefore flatten out somewhat and without these reimbursement differentials there would be fewer fat hospitals for the fat doctors to flee to.