Physician Report Cards and the Designated Driver

DrRich | June 22nd, 2009 - 10:57 am

A study in the February 2008 issue of the American Heart Journal shows that cardiologists in New York State are less willing to aggressively treat patients with severe heart attacks than cardiologists in other states, and that the mortality of these patients is significantly higher in New York. The authors of the report attribute this reticence to treat to the existence of public report cards in New York, which publish doctors’ names alongside their procedure-related mortality figures.

The study compared the treatments and the outcomes in 220 New York patients with 325 patients from states without public reporting systems, who had shock (severe circulatory instability) caused by myocardial infarctions (heart attacks). They found that patients in New York were significantly less likely to receive either diagnostic cardiac catheterizations or stents. Both groups of patients were equally likely to receive coronary artery bypass surgery, but the surgery was significantly delayed in patients from New York. Among all patients, the risk of death in the hospital was 50% higher in New York than in other states. But among patients who actually received either stents or bypass surgery, there was no significant difference in mortality.

There are many advantages of physician report cards to a system based on covert rationing. Let us review the many benefits that accrue to the payers:

1) Fewer expensive procedures are being done
2) Fewer emergency procedures are being done (procedures like the ones being avoided in this study are often performed in the middle of the night and on weekends, entailing overtime payments and other excess overhead.)
3) More high-risk patients (destined to be chronically expensive) die expeditiously.
4) The docs who do persist in doing these high-risk procedures stand out even more in the public report cards.
5) Eventually, NOT doing these high risk procedures will become the new de facto standard of care, and outliers then can be dealt with directly (instead of relying on bad report cards to weed them out).
6) All the while, payers can stand upon the altar of altruism, proclaiming transparency and the patient’s right to know.

The inappropriately negative fallout experienced by physicians conducting potentially life-saving procedures on high risk patients, of course, could be easily overcome by appropriate risk-adjustment methodologies (to account, for instance, for the very high mortality predicted for any patient presenting with shock due to myocardial infarction). But doing so would wreck the whole notion of using public report cards to further the cause of covert rationing. (See items 1 – 6, above.)

But, as usual, DrRich has a solution.

It’s called the Designated Driver.

Imagine the distinguished Chief of Cardiology approaching a promising 31-year-old cardiology fellow, who is finally at the end of his long course of training and at last is ready to enter practice, and saying, “Son, you are going to have a brief but spectacular career. You are going to be our Designated Driver.”

For an extraordinary annual salary and immediate vesting in a generous pension plan, this young man is going to have the honor of being the one who gets all the high-risk cases for the group. He will agree to do this as long as it is feasible, that is, as long as he’s not run out of town because his report card is so abysmally bad. Given the inefficiencies of collecting and processing data for report cards (a process controlled by tangled bureaucracies of one flavor or another, and often, by several tangled bureaucracies that have to devise even more tangled processes for some semblance of cooperation), this is likely to take at least 5 years, and in many cases may take 10. With a sufficient number of more “routine” cardiac cases tossed his way by his sympathetic colleagues (to help him buffer his report card statistics), he may be able to survive 12 or even 15 years. But in any case, by the time he is in, say, his late 30s, he’ll be able to retire quite comfortably.

The Designated Driver scheme is a win-win for everybody (almost). Very sick patients can get the procedures they need (i.e., the ethics of medicine can be shored up for a bit). Your typical cardiologist can enjoy his/her long, relatively risk-free career. And your young, aggressive cardiologist will be presented with a glorious challenge not unlike those of the gladiators of antiquity (save that when it’s finally time to face the old “thumbs down,” they will be spirited to a much more agreeable retirement.)

This solution, as brilliant as it is, will attract critics. And those critics will eventually demand or pass laws, regulations, and guidelines to turn the Designated Driver into merely one more manifestation of the federal crime of healthcare fraud, punishable by the usual massive fines and jail time.

So when that time comes we’ll have to think of something else. But for now, given the alternatives, DrRich recommends the Designated Driver to cardiologists in the great State of New York.

There’s Not Enough Waste and Inefficiency in Healthcare

DrRich | June 6th, 2009 - 10:35 am

In what has quickly become a bad habit, DrRich once again provides a misleading title. Obviously, there’s plenty of waste and inefficiency in our healthcare system, enough to suit almost any taste, and DrRich deplores every bit of it.

Indeed, DrRich strongly suspects that at least 20 to 30% of all healthcare spending is completely wasted, and has seen claims (masquerading as proof) that the actual value is as high as 50%. So again, despite the title of this post, no matter how you look at it there is plenty of waste and inefficiency to go around.

It’s just that there’s not, well, enough.

Before you go away mad, let DrRich quickly explain (quickly, at least, for DrRich) what he means here. Healthcare reform is in the air, and we all know that any effective healthcare reform is going to have to find a way to control healthcare spending. And a central assumption of any reform plan yet proposed is that we can control spending by eliminating – or at least substantially reducing – the vast amount of waste and inefficiency in the healthcare system. Some propose to do this by incorporating the efficiencies of the marketplace (though these individuals have now been run out of town and won’t be bothering us anymore), some by adopting and enforcing stricter regulations, others by introducing a single payer healthcare system, and still others by mandating new technologies such as electronic medical records. But one way or another, each scheme for reforming healthcare proposes to bring spending under control by reducing waste and inefficiency.

Another way of describing what the reformers are telling us is: There is so much waste in the system that we can avoid healthcare rationing by getting rid of it. Most Americans believe this. Most policy experts believe this. DrRich suspects that even most of his loyal readers believe this, despite what he’s been telling you all this time.

But this is unfortunately false. No matter how much waste and inefficiency you think might be plaguing our healthcare system today, there’s not enough to explain the uncontrolled rise in healthcare spending we have been seeing for decades, and therefore, not enough to allow us to avoid rationing altogether.

And in this sense, there is not “enough” waste and inefficiency in healthcare.

DrRich has tried to explain this before, but he will now try to do it better, because it’s important. He will do it using one of the three universal languages, the language of Math (the other two being the language of Love and the language of Healthcare Rationing, both of which are encumbered by expressions of impassioned pledges, heartfelt exaggerations, and other blandishments, and are thus unsuited to a sober discussion of unpleasant truths).

But first, there is an underlying concept we must agree upon, a concept our political leaders are loath to address. To wit: The real fiscal problem with our healthcare system is not simply that we’re spending a lot of money on healthcare, or even that we’re spending a large proportion of our GDP on healthcare. Surely, if we simply had to live with continuing to spend 15% of our GDP on healthcare, we could figure out a way to do that. But that’s not really the problem. The real problem is that healthcare expenditures are growing at a double digit rate of inflation, several multiples faster than the overall inflation rate, such that, over time, an ever larger proportion of our annual GDP is being consumed by healthcare expenditures. Unless this disproportionate rate of growth is stopped, eventually healthcare spending will consume our entire economy. (Rather, what will actually happen is that it will grow to the point of producing societal upheaval, sending us back to a more typical era for mankind, where healthcare is a little-thought-of luxury, and not a necessity or a right. This will happen well before healthcare consumes 100% of the economy.)

To reiterate, it’s not the amount of spending on healthcare that is creating a fiscal crisis, it’s the rate of growth of that spending.

There are only two things that can possibly account for this excessive inflation in healthcare expenditures. Either it is caused by unrelenting growth in wasteful spending (as we are assured by our political leaders), or it is caused by unrelenting growth in useful healthcare spending. If it is the latter, then in order to get spending under control we must ration. So therefore (we all fervently pray), the rate of growth must be caused by wasted spending.

This desired conclusion, unfortunately, leads to mathematical absurdities, and therefore (for anyone who eschews magical thinking) turns out to be utterly false.

DrRich is going to show you data from a spreadsheet. It illustrates what would have to happen in order for wasteful spending to account for our current healthcare inflation. The spreadsheet is based on the following four assumptions:

Assumption 1) The proportion of healthcare spending today that is wasteful is taken as 25%. The actual number, of course, is not possible to discern with any real confidence. It depends, for one thing, on who gets to define “wasteful.” If I’m a 92-year-old man who gets a $12,000 stent procedure to eliminate my angina, I and my doctor might consider it money well-spent, while you might consider it wasteful. DrRich has arbitrarily chosen a number that falls within the range of popular estimates. But it’s a spreadsheet. If you don’t like 25%, substitute your own estimate. You will find that the rate of wasteful spending we assume for Year 1 in this spreadsheet has little effect on the outcome.

Assumption 2) The annual overall rate of growth of healthcare spending (i.e., healthcare inflation) is 10%.

Assumption 3) The annual growth rate of useful (i.e., not wasted) healthcare spending is economically well-behaved. That is, it matches the rate of overall inflation. The spreadsheet therefore assumes a 3% annual inflation rate for useful healthcare spending. (DrRich begs his readers to notice that this assumption is the one implicitly invoked whenever anyone says that all we need to do in order to control healthcare costs is to eliminate waste and inefficiency. In effect, our spreadsheet is designed to test the logic of this assumption. This assumption must be true if we are to to avoid healthcare rationing, because if useful healthcare spending were not economically well-behaved, then no matter what the rate of growth for wasted healthcare spending, we would still have disproportionate healthcare inflation – and rationing would be unavoidable.)

Assumption 4) The difference between the “well-behaved” growth of useful healthcare spending and the overall rate of healthcare inflation is accounted for by spending on waste and inefficiency. This of course, is the assumption that underlies all proposals for healthcare reform.

(Note: If you would like to play with the actual spreadsheet itself, e-mail DrRich and he’ll send it to you: DrRich at covertrationingblog dot com)


Index of overall Dollars Spent per year

% wasteful spending

% of annual increase due to useful spending

% of annual increase due to wasteful spending





















We see from this table several things. First, as expected, the amount of money we’re spending on healthcare, assuming a rate of healthcare inflation of 10%, is doubling roughly every 8-9 years, a growth rate that is ultimately unsupportable.

Second, in order to account for this unsupportable growth in healthcare spending by invoking waste and inefficiency, the proportion of healthcare spending that is caused by waste must increase to ridiculous proportions very rapidly, such that (for instance) by the 10th year we will have more than doubled (59%) the proportion of all healthcare expenditures that are wasteful; and by the 20th year, nearly 80% must be wasteful. Similarly, the proportion of the annual increases in healthcare spending that would have to be due to waste and inefficiency rapidly climbs to equally ridiculous proportions. By year 5, wasteful spending will have to account for 82% of the annual increase in healthcare expenditures, and that proportion continues to climb, eventually approaching 100%.

To DrRich, these numbers seem absurd on their face. But if you still need to be convinced, consider that in real life, runaway healthcare inflation has already been taking place for decades – so our position on such a spreadsheet would not be at year 1, but at year 20 (or higher). And no matter what value for wasteful spending we might have plugged in at year 1, by year 20 wasteful spending would have to be well above 80%, and more likely approaching 100%. In order for waste and inefficiency to account for the situation in which the American healthcare system finds itself today, therefore, one would have to believe that virtually all healthcare spending is wasteful. (And if you believe that, then what does it matter that tens of millions can’t afford healthcare?)

Now let us illustrate the same point in a slightly different way. This time, let’s assume that as recently as 2006, our healthcare system was 100% efficient. That is, only three years ago there was no waste whatsoever. Then let’s allow that the remaining three assumptions given above are still operative. The following table results:


Index of overall Dollars Spent per year

% wasteful spending

% of annual increase due to useful spending

% of annual increase due to wasteful spending





















We can see from these results that, even if only three years ago we had a completely efficient healthcare system, in order for waste to account for the excess growth in healthcare spending we’ve experienced since that time, then as much as 74% of today’s annual increase in spending has to be due to waste and inefficiency. Indeed, unless at some point within the second term of George W. Bush we actually had a completely efficient healthcare system (which seems doubtful), this spreadsheet tells us (again) either that our fervently held belief that waste and inefficiency accounts for healthcare inflation is completely wrong, or that today virtually all of our annual increase in healthcare spending must be due to waste and inefficiency, and none due to useful healthcare.

Play with the spreadsheet yourself. You will quickly see that as long as we insist that wasteful spending must account for the unsustainable growth we’re seeing in healthcare costs, then whatever our assumptions may be regarding the current proportion of wasteful healthcare spending – whether we say it’s 20% or 50% or 0% – we very quickly encounter the same mathematical absurdities.

One can only surmise from this analysis (done, DrRich reminds you, with actual Math) that our desired conclusion is wrong. A substantial proportion of our growing healthcare expenditures must necessarily be coming from real, honest-to-goodness, useful healthcare. And if we’re going to substantially curtail that growth, we’re going to have to curtail useful spending. Which means we have to ration.

But, once again, we’re Americans and Americans don’t ration. Which is why we’ve commissioned the big insurers and the government to do the rationing covertly, a task they have accepted with great gusto. DrRich is compelled to point out, once again, that waste and inefficiency is the sine qua non of covert rationing. Disguising all the rationing activity as something other than rationing fundamentally requires opaque procedures, unnecessary complexity, bizarre incentives, Byzantine regulations arbitrarily and variably enforced or ignored, and the diversion of healthcare dollars to non-healthcare ends (such as corporate profits, expanding layers of government bureaucracies, and other massive bureaucracies within the healthcare system created to defend against government bureaucracies). Covert rationing multiplies waste and inefficiency, and does so systematically. To reduce the necessary rationing to the smallest amount possible, we will have to figure out a way to do the rationing openly, and not covertly.

In the meantime, DrRich does not kid himself that exposing the mathematical absurdity of the chief assumption espoused by our political leaders, in their brave efforts to reform healthcare, will change hearts and minds. American political partisans, not to mention the American media, eat mathematical absurdities for lunch. And magical thinking amongst the populace, at least when it comes to the exuberant accumulation of household (and national) debt and the application of medical science, far from being discouraged, is actively promoted.