Winning the Hardware Software Game book Winning the Hardware-Software Game

Using Game Theory to Optimize the Pace of New Technology Adoption

Innovators of new technology systems requiring users to combine both hardware and software components often face delays in adoption of their new systems.  Users will not buy the hardware until enough software or content is available, while at the same time software providers will not provide content until enough users have adopted the new system.  This book examines the dynamics of this adoption process and provides methods for optimizing the pace of adoption of new technology systems.     Read more...

healthcare

  • A Comparison of Private System and Public System Healthcare Dollars

    Being a data junkie and always wanting to see the numbers for myself, I decided to look at actual trends in US healthcare expenditures to see where the dollars are actually going. I went to the US Health and Human Services website and downloaded annual expenditures on healthcare from 1960 through 2007.

  • Considerations for a Single-Payer Healthcare System in the US

    This analysis considers how the US healthcare system would change if we were to transition from the current multi-payer system to a single-payer system. The analysis first presents facts that will be important in considering what a single-payer system might look like. Then, given these facts, the analysis considers specific issues about the transition. 

     

    Facts

    1. Four factors affect a person’s risk of premature death.

    Behavior, genes, environment, and healthcare services are the four factors that Impact people’s risks of premature death (Kaiser Family Foundation) (see Figure 1).

    Figure 1

    1 impact factors on death 

    (i)  Behavior: 40%

    From Kaiser Family Foundation: “Health behaviors, such as smoking and diet and exercise, are the most important determinants of premature death.”

    According to OECD, “Health at a Glance 2015”

    While genetics is a risk factor, only about 5% to 10% of all cancers are inherited. Modifiable risk factors such as smoking, obesity, lack of exercise and excess sun exposure, as well as environmental exposures, explain up to 90-95% of all cancer cases.

    (ii)  Genes: 30%

    (iii)  Social and Environment: 20%

    Figure 2 (from Kaiser Family Foundation) displays specific social and environment factors contributing to health.

    Figure 2

     2 social determinants

    More from the OECD report:

    Recent analysis shows that, although overall spending on social services and health care in the United States is comparable to other Western countries, the United States disproportionately spends less on social services and more on health care.

    (iv)  Health Care: 10%

  • Creating a Competitive Edge by Inducing New Technology Adoption in Sub-Networks

    Inducing Adoption of New Technologies by Network Members

    Creating Sub-Network Competitive Advantage

     

    A recent article in the NYT, “E-Records Get a Big Endorsement” by Steve Lohr, describes how hospitals are seeking a competitive edge” by offering subsidies to doctors to join the hospitals’ digital networks:

  • Creating Price Transparency for Outpatient Surgery Will Help Align Patient Expectations and Improve Patient Outcomes

    Current Doctor-Patient Communications Involve Miscommunications

    Suppose a patient damages his knee. He goes to see an Orthopedic Surgeon. The surgeon conducts some tests and concludes that the patient has torn his meniscus and needs arthroscopic surgery to fix it (see Figure 1)

    Figure 1

    1 mensicus

    Source:http://www.newhealthguide.org/Meniscus-Surgery-Recovery-Time.html

    After informing the patient of this, the patient then asks the surgeon, “How much will this surgery cost me?”

    The surgeon replies to the patient’s question with something akin to, “I have no idea,” or “I can’t tell you.”

    That simple statement goes a long way towards killing the patient’s trust of the doctor. And without trust, patients are less likely to comply with the doctor’s recommendations, which, in turns leads to worse patient outcomes, less satisfied patients, fewer patient referrals, and more billing disputes.

    And all this happens due to a miscommunication between the surgeon and the patient.

  • Healthcare Industry Errors

    Source of Healthcare System Errors

    Barriers to Error Reporting

    Characteristics of an Ideal Error Reporting System

     

     

    A 1999 study, “To Err Is Human: Building a Safer Health System” by the Institute of Medicine reports “that that at least 44,000 Americans die each year as a result of medical errors,” and “the number may be as high as 98,000…Total national costs (lost income, lost household production, disability and health care costs) of preventable adverse events (medical errors resulting in injury) are estimated to be between $17 billion and $29 billion, of which health care costs represent over one-half.”

    A May 2009 study, “To Err is Human – To Delay is Deadly: Ten years later, a million lives lost, billions of dollars wasted” by the Safe Patient Project laments that since the 1999 report was issued, nothing has changed, and “we believe that preventable medical harm still accounts for more than 100,000 deaths each year – a million lives over the past decade.”

  • How Do You Know If You're Getting Good Advice?

     A recent article in the NYT, “Weighty Choices, in Patients’ Hands” by Laura Landro, discussed the difficult choices patients face in making healthcare decisions, as treatment options become more complex. Due to the overwhelming nature of the information and the inability of physicians to provide patients with the ins and outs of all their options, some medical services providers are providing patients with “coaches” to help educate them about the upsides and downsides of all the patients’ choices and to help guide them in preparing relevant questions for the patients’ doctors. In the excerpt that follows, I’ve highlighted in blue the results reported in the article for this new patient education process.

  • How to Solve the Healthcare Problems using Free Markets

    Healthcare Markets Are "Less Rational"

    Clearly, the Current System Has Problems

    How to Solve the Current Healthcare Problems

     

    Healthcare Markets Are "Less Rational"

    Over the past several months there has been an absolute deluge of articles in the media regarding how out-of-hand US healthcare spending has become. Many are convinced that the provision of healthcare involves various unique situations, which make the private markets unable to efficiently provide healthcare. For example, Jim Heskett of the Harvard Business School presents 10 reasons why participants in the healthcare market may be "less rational" than participants in other markets:

    1. Consumers have personal fears and lack of information that don't exist with food and fuel,
    2. They equate cost with quality, turning the idea of rational markets upside down,
    3. Individuals' decisions regarding wellness affect the rest of us,
    4. Rationing is necessary but difficult to achieve,
    5. There is an agency problem when neither payers nor providers (including pharma) are penalized by higher costs,
    6. There is a "fee for services" vs. a "fee for results" payment system,
    7. The U.S. has too many high-cost specialists performing work that could be performed more effectively by general practitioners and registered nurses,
    8. High levels of liability encourage the practice of "overly-safe" and expensive medicine,
    9. Providers have fragmented and often incomplete information, and
    10. Consumers either have too little information with which to make rational decisions or don't make good use of the information they have.
  • Playing the Consumer Food Game

    Food Engineering

    Description of the Consumer Food Game

    Types of Solutions to the Obesity Problem that Won’t Work

    Types of Solutions to the Obesity Problem that Are More Likely to Work

     

    Everyone knows that America has a weight problem. According to one source, “More than two-thirds of U.S. adults are overweight or obese.” Everyone also knows that all you have to do to lose weight is to consume fewer calories than you burn off. So why can’t so many people just do it?

  • Playing the Doctor-Patient-Insurance Company Game, Part 1

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    The healthcare industry has been undergoing a massive state of transition recently, especially since the American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law in 2009, and the Affordable Care Act (ACA) (Obamacare) was signed into law in 2010.

    The ARRA required healthcare providers to adopt electronic medical records in order to continue to receive current levels of Federal reimbursements. More specifically, “Federal Mandates for Healthcare: Digital Record-Keeping Will Be Required of Public and Private Healthcare Providers” states:

    As of January 1, 2014, all public and private healthcare providers and other eligible professionals (EP) must have adopted and demonstrated “meaningful use” of electronic medical records (EMR) in order to maintain their existing Medicaid and Medicare reimbursement levels.

  • Playing the Doctor-Patient-Insurance Company Game, Part 2

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Part 1 of this analysis, I described the main issues facing Doctors: (i) decreasing reimbursements, (ii) divergent reimbursements by location, (iii) transition from fee-for-service to pay-for-performance, (iv) increasing costs, and (v) increasing regulations.

    In this part of the analysis, Part 2, I describe the main isssues facing Patients and Payers.

    In the last part of the analysis, Part 3, I will discuss the tensions (conflicts) between the different sets of players that are engendered by the different incentives each player faces.

  • Playing the Doctor-Patient-Insurance Company Game, Part 3

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Part 1 of this analysis, I described the main issues facing Doctors.

    In Part 2 of the analysis, I described the main isssues facing Patients and Payers.

    In this last part of the analysis, Part 3, I discuss the tensions (conflicts) between the different sets of players that are engendered by the different incentives each player faces.

  • Playing the Healthcare Insurance Game

    Healthcare Premiums under Alternative Scenarios

    Players' Actions

    The Obama Healthcare Plan

      

    Healthcare Premiums under Alternative Scenarios

    I was thinking about the various situations and implications associated with the current healthcare system and some of the changes that have been proposed. I wanted to get a better handle on what, exactly, each of the issues means in terms of dollars spent by people paying into the healthcare system. To this end, I created a little numerical model that lets me play with the different scenarios to see what they each mean in dollar terms.

    The assumptions I’m making that form the general layout of the model are:

    • There are 100 people in the population.
    • The population is distributed into three classes, high, medium, and low, based on the level of lifetime healthcare spending per person.
    • Each person in the population that pays into the healthcare system makes a payment every month for healthcare from the time they are 18 years old until the time they die.
    • The monthly payments made by the portion of the population that pays into the system exactly cover the total lifetime healthcare costs of the population.
  • Playing the Microbial Resistance Game, Part 1

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    Infectious diseases are the second leading cause of death worldwide. Since their discovery in the 1940s, antibiotics have been the primary treatment for infectious diseases. However, over time, many diseases have become resistant to the antibiotics that have been used to treat them, causing tens of billions of dollars in added treatment costs and millions of deaths globally.

    This analysis analyzes the factors (game) involved in (i) the supply and use of antibiotics to treat disease, and (ii) the eventual resistance of many of these diseases to the use of antibiotics.

  • Playing the Microbial Resistance Game, Part 2

    A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

     

    In Part 1 of this analysis, I provided a brief description of the Microbial Resistance Game, and I described the various pathways of microbial resistance to antibiotics.

    In this section I describe the players involved in the Antimicrobial Resistance Game (as illustrated in Figure 1), together with their incentives.

  • Should Government "Encourage" Less Salt in Prepared Foods?

    Is There a Market Failure in the Market for Prepared Foods?

    Is There a Costs vs. Benefits Rationale for Government Intervention?

     

    A recent article in the NYT, “Citing Hazard, New York Says Hold the Salt” by William Neuman, discusses how the government of New York City plans to “encourage” manufacturers to decrease the salt content in their prepared foods:

    On Monday, the Bloomberg administration plans to unveil a broad new health initiative aimed at encouraging food manufacturers and restaurant chains across the country to curtail the amount of salt in their products.

    The plan, for which the city claims support from health agencies in other cities and states, sets a goal of reducing the amount of salt in packaged and restaurant food by 25 percent over the next five years.

    Public health experts say that would reduce the incidence of high blood pressure and should help prevent some of the strokes and heart attacks associated with that condition.

    … the changes it [the city’s salt campaign] prescribes require cooperation on a national scale, city officials said, because major food companies cannot be expected to alter their products for just the New York market.

    And removing salt from many products can be complicated. Salt plays many roles in food, enhancing flavor, preventing spoilage and improving shelf life. It helps bread to rise and brown.

    … While most food companies say they agree at least with the goal of reducing salt, some medical researchers have questioned the scientific basis for the initiative, saying insufficient research had been done on possible effects. While agreeing that reducing salt is likely to lower average blood pressure, they say it can lead to other physiological changes, some of which may be associated with heart problems.

  • Two Common Analysis Fatal Flaws

    Information Sets

    Faulty Sampling

     

    A recent article in the NYT, “Weighing Medical Costs of End-of-Life Care” by Reed Abelson, uses the cases of two hospitals, UCLA and the May Clinic, to discuss the issue of how to provide cost effective medical care:

    [C]ritics in the Obama administration and elsewhere who talk about how much money the nation wastes on needless tests and futile procedures. They like to note that U.C.L.A. is perennially near the top of widely cited data, compiled by researchers at Dartmouth, ranking medical centers that spend the most on end-of-life care but seem to have no better results than hospitals spending much less…

    According to Dartmouth, Medicare pays about $50,000 during a patient’s last six months of care by U.C.L.A., where patients may be seen by dozens of different specialists and spend weeks in the hospital before they die. By contrast, the figure is about $25,000 at the Mayo Clinic in Rochester, Minn., where doctors closely coordinate care, are slow to bring in specialists and aim to avoid expensive treatments that offer little or no benefit to a patient…

  • Why Are Healthcare Costs So High? - Part 1

    Underlying Issue

    Trends in Total US Healthcare Expenditures

    Trends in Personal Healthcare Expenditures

    Trends in Healthcare Expenditures by Condition

    In Sum

     

     

    Underlying Issue

    The total annual costs of healthcare paid by each individual is the sum of the healthcare premiums he pays and the out-of-pocket costs he incurs:

    Total Cost of Healthcare = Insurance Premiums + Out-of-pocket Costs

    Roughly speaking, the annual insurance premium an individual pays is the average of the total annual costs paid by his insurance company for the healthcare costs incurred by all individuals in his (age) group. What this means is that if the healthcare costs of one individual rise, then that individual does not bear the full burden of the costs increase, but rather, the burden is shared by all members of the group. This is the very nature of risk-pooling, and it works fine when all the members in the group face the same risks.

    Out-of-pocket costs for healthcare depend on the type of coverage an individual has, plus the amount of healthcare individuals use.

    Moving on, the amount of healthcare an individual will use/need during the year depends on several factors:

    • Genes: People will end up using more healthcare services to the extent that they have “bad” genes.
    • Luck: People will end up using more healthcare services to the extent that they have bad luck or are otherwise accident prone.
    • Lifestyle: People will end up using more healthcare services to the extent that they have an unhealthy diet, don’t exercise, smoke, don’t take safety precautions (e.g., wear seatbelts), or otherwise lead more risky lifestyles.
    • Compliance: People will end up using more healthcare services to the extent that they don’t comply with their doctors’ recommendations (e.g., take medication, lose weight, stop smoking, etc.)

    Obviously, people can’t control whether they have bad genes or bad luck. However, they can control the type of lifestyle they live and whether they comply with their doctors’ recommendations.

    This begs the following question: To what extent are healthcare costs attributable to factors that people cannot control (bad genes and bad luck), as opposed to factors that they can control (lifestyle and compliance)?

    Most people would probably agree to have society (government) subsidize healthcare costs associated with factors people cannot control. However, to the extent that people choose to not control those factors over which they do have power, then to what extent should society be responsible for subsidizing those people’s higher healthcare costs?

    Clearly, the issue becomes more important as the costs of healthcare have increased so dramatically over the years.

  • Why Are Healthcare Costs So High? - Part 2

    Healthcare Expenditures Are Concentrated

    High-Cost Healthcare Users

    Causes of Common Chronic Conditions

    Addressing the High Costs of Healthcare

     

    In my previous blog entry, Why Are Healthcare Costs So High? - Part 1, I presented data indicating that

    • US healthcare expenditures have been increasing over time (see Figure 1 below reproduced from my previous blog entry),
    • There seems to be a shift during the 1980s, in which annual personal expenditures on healthcare started increasing at a faster rate (see Figure 1 below reproduced from my previous blog entry),
    • Healthcare expenditures for treating the top 20 medical conditions account for 75% of expenditures captured in surveys of healthcare expenditures for hospital inpatients, patients treated in physicians’ offices, and prescription medication, and
    • The increases in spending for the top 20 diseases are due mostly to increases in the number of people being treated for (chronic) diseases, rather than to increases in per-patient costs of treatment (see Figure 2 below reproduced from my previous blog entry).

    In this blog entry I examine the distribution of healthcare spending across different portions of the population.

     

  • Why Are Healthcare Costs So High? - Part 3

    Factors Contributing to Rising Healthcare Expenditures Over Time

    America’s Weight Problem: Increasing BMIs Over Time

    Changes in Society Causing Increases in BMI over TIme

    The Rise in Healthcare Expenditures is a Consequence of America’s Weight Problem

     

     

    In my last two blog entries, I found that

    Part 1

    • US healthcare expenditures have been increasing over time,
    • There seems to be a shift during the 1980s, in which annual personal expenditures on healthcare started increasing at a faster,
    • Healthcare expenditures for treating the top 20 medical conditions account for 75% of expenditures captured in surveys of healthcare expenditures for hospital inpatients, patients treated in physicians’ offices, and prescription medication, and
    • The increases in spending for the top 20 diseases are due mostly to increases in the number of people being treated for (chronic) diseases, rather than to increases in per-patient costs of treatment.

    Part 2

    • Healthcare expenditures are concentrated, where the Top 5% of Users account for over half of total healthcare expenditures
    • the Bottom 95% of the population is paying roughly twice as much for healthcare services than they actually use, where the difference is going to subsidize the Top 5% of healthcare users, and the Bottom 70% of the population is paying seven times as much as they use, where the difference is going to subsidize the Top 30% of healthcare users.
    • The high-cost healthcare users are people with multiple, chronic conditions, including coronary artery disease, diabetes, congestive heart failure, and chronic obstructive pulmonary disease.
    • At least seven of the top ten medical conditions that account for the majority of healthcare spending can be at least partially prevented and/or mitigated by factors under the control of individuals, namely, weight control, eating habits, drinking (alcohol) habits, activity levels, and smoking status.

    In this blog entry I examine how changes in society over time have led us to where we are now, with so many people suffering from chronic medical conditions.

  • Will Adoption of Electronic Medical Records Live up to the Promise?

    Proponents of electronic medical records (EMR) claim their full-scale adoption will lower the costs of providing healthcare, improve the quality of healthcare, and save lives.

    For example, in 2009, ABC News reported

    In the latest step toward the computerization of Americans' medical information, President-elect Barack Obama said in a speech Thursday that the government will push for electronic health records for all Americans within five years in order to save both dollars and lives.

    "To improve the quality of our health care while lowering its cost, we will make the immediate investments necessary to ensure that, within five years, all of America's medical records are computerized," Obama said in a speech from George Mason University in Fairfax, Va. "This will cut waste, eliminate red tape and reduce the need to repeat expensive medical tests."

    "But it just won't save billions of dollars and thousands of jobs; it will save lives by reducing the deadly but preventable medical errors that pervade our health-care system," he said.

    Will electronic medical records actually live up to these promises?

    An analysis was undertaken to examine all the various plusses and minuses – in terms of costs, quality of care and efficiency of care – electronic medical records are expected to achieve and have been found to have achieved with their implementation in the US.

    This blog entry provides a summary of the actual/expected gains and losses found and answers the question posed above as to whether or not adoption and use of EMR systems will reduce medical errors.

    A full copy of the report is available here for download.