There’s quite a nasty little scandal emerging in the Victorian health system. It emerged through an Auditor-General’s report showing – amongst other things – at least one hospital was indulging in “data manipulation”. It now appears that other Victorian hospitals are playing similar games, apparently in response to financial concerns about incentive payments.
The Age argues that the current systems of incentive payments makes this kind of thing inevitable:
As The Age has argued before, the incentives system is not, as its advocates maintain, an effective way of curtailing costs. It is rather an implied invitation to institutions to engage in exactly the sorts of rorts that have been reported. There would be greater transparency in record-keeping — and much better patient care — if public hospitals were funded on the basis of need. What Victoria had until the minister suspended bonus payments this week, however, was a system in which hospital administrators were forced to choose between honest reporting and reliable funding.
It seems to me that the editorial has a point. While the idea of encouraging better performance by incentives is fine in the abstract, hospitals are a place that would seem particularly sensitive to manipulation. The data is generally going to be collected by the hospitals themselves, often by medical professionals on the basis of their own subjective judgment. Those health professionals tend, as a group, to regard the care of their patients as the priority, and are not likely to be too worried about the implications for the state budget (frankly, from the perspective of an individual patient, that’s exactly the way I’d want my doctor to think). I’d expect most would regard fudging data to ensure hospital funding as by far the lesser of two evils. The hospital administrators, too, when faced with a choice of fudging the figures or causing chaos in their hospital when “bonus” money (which they inevitably grow to count on as “essential”, given that there is never going to be “enough” money for health), are always going to be very tempted to fudge the figures. And, at the very top of the chain, the department and, ultimately, the minister himself, have no particular incentive to probe too deeply into precisely how the beautiful sets of numbers are being obtained – if the hospitals aren’t meeting their targets, not only does the money go back into consolidated revenue, the media will be all over things demanding to know why. Indeed, if you were mind-blowingly cynical, you might even think that an incentive for operators to fudge the figures to hide problems is a desirable feature for the minister (though I very much doubt a conscious decision was made along those lines, more that the line of least resistance was taken). So everybody involved has strong incentives to fudge things until it blows up in all their faces.
Given the inherent rubberiness of the figures, and the incentives – nay, perceived moral imperatives at the coal face – to fudge, it seems that using performance-based incentives in the health system are going to be very tricky to get right, and in many cases, far more trouble than they’re worth.
CORRECTION: The Auditor General’s report did not refer to the Royal Women’s hospital. However, as this report in The Age puts it:
THE Royal Women’s Hospital has been systematically lying about its surgery waiting list for almost a decade, says a damning report that has forced the Government to overhaul Victoria’s hospital funding system.
Health Minister Daniel Andrews yesterday apologised to patients who waited months longer for surgery than the Women’s has claimed since the late 1990s. He said an independent audit — commissioned after The Age earlier this month revealed the hospital had incorrectly reported data to the Government — confirmed the creation of a “second waiting list” that was disguising the hospital’s real performance.
The hospital’s are fudging figures so they can keep operating. There is a lot of money wasted by hospitals having to collect [and massage] these statistics to justify their meagre funds. Micromanaging hospitals doesn’t make them cheaper to run.
Contrast this with the total lack of accountability boards of directors have toward their shareholders [by and large the superfunds the little people have to compulsorily contribute to] when paying themselves massive remuneration even when they run the company into the ground.
Society is really stingy about funding health care adequately and very twitchy about permitting euthanasia at the other end. It we are going to ration the health care dollar then we should put in place strict guidelines about not reviving / resusitating patients who clearly have compromised quality of life outcomes like the 78 year old woman who collapses with a heart attack in the street, the pneumonia ridden nursing home patient, the 24 week old baby
The principal-agent problem doesn’t go away, look at the failure of incentives in the US financial crisis and also under state socialism.
The naive application of neo-liberal models to health care organisations were always going to encourage this kind of rot. This report merely confirms the experiences of the UK. Adam Curtis documented the problem well in The Trap
Well, maybe. But it’s still easy enough for hospitals to fudge those figures too.
It’s the usual problem with gathering metrics: as soon as you tie them to reward or punishment, they will be gamed. Whether it’s lines of code, widgets per hour, average time per phonecall, turnaround time for patients, the behaviour is the same.
It’s a classic problem with central planning. It’s also something markets and/or voucher systems are good at reducing — it’s much harder to game the system if the patient is the payer.
Is it just me or are these types of bonuses pro-cyclic under the above argument? Pro-cyclic public spending is in my view a very bad idea.
Jacques: what makes you think that the information provided to consumers of health services is going to be any better than that provided to governments, given that many of the same disincentives (and a number of unique ones) to honesty still apply?
The fact remains that the only way to allocate public funded services is through rationing – waiting lists.
The sooner the Gordian knot of Federal/State/local health care is cut by removing two tiers, the better for all.
Numerical Metric? Meet Human Judgement! Oh, you two may not be as compatible as I had thought.
This isn’t just a difficulty of “neo-liberalism”, is it? Quantification of the difficult-to-quantify is a much more fundamental problem. This is probably just another instance.
Good on you Robert for recognising it’s not simply a matter of a few low persons fibbing. A problem would still exist with such a set-up, had no-one fibbed.
My mind boggles at the idea of trying to run something as essential and complex as hospital-based health care through a voucher system.
The Age editorial is correct. There is no place for financial incentives / disincentives in something as fundamental as public health. What there should be is needs based funding, a single tier of government, and an independent auditing body with teeth and sufficient resources to carry out random checks etc. and enforce the results.
I wouldn’t go that far. What about bonuses for doctors who agree to practice in under-serviced areas?
Wouldn’t a need based system be just as open to rorting? The money would go to those who could demonstrate that they have the greatest need (which may well not be the ones who do indeed have the greatest need).
Myriad @ 9 – Is it possible to remove financial (dis)incentives though? A lot are implicitly there – eg pay doctors per procedure and there is a financial incentive to churn through patients, pay doctors simply by time and there is a disincentive to be efficient at all.
I don’t think its a matter of whether or not there should be financial incentives because every system will have them. Its a matter of what incentives we think are appropriate.
It also sucks that gravity makes lots of things expensive and difficult. But it isn’t going away. People act according to their perceived interests and desires. A smart system doesn’t try to fight that, it works with it and through it.
Robert — my point was that tying money to an easily-gamed statistic leads to rampant gaming. If you tie the money to the patient it’s harder (though not impossible) to game. Someone presents, they get a bill, the bill gets paid by them, the government, insurance or some mix of the three.
Really. We rely on the profit motive to keep us in food, petrol, tweezers, entertainment and myriad other things. There’s nothing magical about health and education that makes economics inapplicable. Health and education are widely perceived as basket-cases. Yet apparently it’s the market’s fault, even though these are the main vestiges of command-and-control economic irrationalism in our society.
Robert, I was thinking at the systemic / aggregate level, which is what has led the Victorian hospitals to game the system (well that a chronic under-funding).
Chris – it’s why I’m a big fan of independent auditing. There’s no system we can design that will stop people either being greedy or lazy (in the most simplistic of terms) in any system (although obviously we can design ones that are worse than others). But we can bring in the best system we can – and I’d argue a needs based system for health is the most appropriate – and use regular, rigorous and enforceable audits to minimise the amount of waste, graft, gaming etc.
It also sucks that gravity makes lots of things expensive and difficult. But it isn’t going away. People act according to their perceived interests and desires. A smart system doesn’t try to fight that, it works with it and through it.
what was it aristotle said?…something about sarcasm and the lowest form of wit.
I’m really not sure what you’re disagreeing with. Your last sentence is spot on, but doesn’t support financial dis/incentives being the basis of a good health system.
Your overall point ignores the fact that our health systems are fundamentally built right now around completely inefficeint administrative money allocation, not the patient’s needs – which is why we have such a woeful underfunding of primary preventative health care, dentistry being left off public health even though serious dental cases contribute significantly to clog in public hospitals (and contribute to mortality rates) etc etc. None of it is actually cheaper, or more efficient, or provides better patient care. What it does do apparently is satisfy an administrative view of how health should be delivered. Actually I’m not even sure it does even that. It’s a schmozzle of titanic proportions, and not even the cheapest, and certainly not the most effective we could have in terms of actual health care outcomes.
I’m surprised that anybody might be surprised by this (looking at photo of Health Minister…). The system of ‘bonus’ funding in Victorian hospitals is so obviously a case of perverse incentives I’m inclined to think its designers wanted it that way.
I was part of a parliamentary inquiry into bulk billing, GP and Emergency Department presentations in Victoria a few years ago. Let’s just say I’ve never had a great deal of confidence in publicly reported health statistics since.
“what was it aristotle said?…something about sarcasm and the lowest form of wit.”
I think what Aristotle said was “man, do I really have to wait two thousand years for Oscar Wilde to say something witty about sarcasm?”
Jacques Chester wrote:
Well, it depends on your point of view. Education is a bit harder, but having a health system built around the economics of fire fighting rather than petrol selling seems to work out much better for everybody. Poor analogy, it’s true, but emergency and preventative health provision by the state has been more efficient than private health judging by the horrifying US experience, where insurance companies effectively decide what’s an emergency and what isn’t. Canada isn’t full of health refugees from the US for nothing.
I think you’ll find that’s the fault of the regulators DR. Too much. Or the wrong kind.
Or something.
Oh yeah FDB – I forgot that. Them regulators. The libertarian convenient catch all excuse.
No offense intended Jacques, but the Cato institute arguing itself into ever decreasing circles isn’t particularly edifying and you repeating their talking points doesn’t add much, c.f. Austrian economics and the GFC, whose convenient scapegoat was magically a tiny number of poor people who couldn’t pay mortgages, and not the overpayed numbnuts who created fraud based credit default swaps. Whose fault was it supposed to be again?
FDB, DR;
My point was that incentives and price signals apply to health too. I agree that people underestimate the value of preventative health and that there’s a case for tilting incentives to support and favour those. I can’t on the one hand preach preventative defect prevention in software engineering and deny the same to doctors and dentists without somebody calling bullshit. Mostly, for me, it comes down to how we pay for it with a minimum amount of coercion and maximum amount of market-based allocation.
Call it libertarian realpolitik, if you like: I won’t get to live in Galt’s Gulch (oh teh lulz) but at least I’ll try to meet you in the middle.
The Austrian analysis of the GFC — not necessarily shared by Cato which is mostly a monetarist outfit — is that the root cause was the Federal Reserve. No point blaming people for taking loans pushed on them. The root cause is that there was too much money chasing too few good debtors so it started puffing up asset prices and created a huge subprime sector where previously it almost didn’t exist.
I apologise for going off topic to talk about the GFC. Back to health economics, huzzah!
Jacques Chester wrote:
That approach assumes that diseases and ill health respond to the same price signals as commodities. Clearly, they don’t and it’s trivial to discern why (except for cosmetic surgery which is already a special case under most socialised health care systems).
In fact Jacques, I’d wager that the current system we have already fits your criteria.
Of course there is gaming of statistics where there are incentives to do so. But in over 20 year in health statistics I’ve yet to see examples where the numbers are totally removed from reality, and in general the gaming is neither rampant nor of a huge magnitude. There are lots of reasons why the gaming is not out of control, which I won’t go into. But the important thing here is not to throw out a system which encourages more efficient effective practices because there is some gaming. Every policy (like every medical intervention) has some negative side effects, but economists only throw out policies if the costs exceed the benefits (or you find another policy with higher net benefits).
“…emergency and preventative health provision by the state has been more efficient than private health judging by the horrifying US experience…”
Agree on the emergency health care, but not necessarily on the preventative side. My private health insurer is heavily into preventative health care. They are always offering me cut-price extras like ‘health coaching’ and ‘wellplans’ that are all about managing down health risks. I don’t have to tell you why. Indeed, the incentives to prevent health problems rather than simply treat them once they occur would seem to be stronger on the private side of things.
BBB
BBB – The “wellness” extras are far less preventive care and much more about tangible benefit. The Health Funds need lots of the young and healthy to subsidise the old and sick. They are not allowed to price risk beyond the 1% per year after 30yo the last government allowed them. That means they need to sell yoga, running shoes and Gucci glasses to the under 40′s so they do not notice the massive outlay for minimal current benefit.
From an actuarial point of view, preventive intervention is not usually helpful. Risk factor demographics are helpful, intervening borders on futile.
Jacques – The problem with consumer-led health care is essentially around the imbalance of knowledge. You have absolutely no idea if I am any good at my job. You can tell if I am a convincing conversationalist but even my colleagues in other specialties find it difficult to tell a good sub-specialist neurologist from the merely mediocre. And this is only on the superficial level of selecting a doctor. Once you want to select your own treatments as a fully informed consumer you are little better off than if you let your second hand car dealer select your next vehicle sight-unseen.
Also, if you are sick then your capacity to make rational decisions is even further eroded.
Sick people don’t consume well.
The proof of this is that unlimited private health care leads to people purchasing silly things. Private medicine, even in fairly well regulated Australia, involves a grotesque amount of over servicing. Much of which is potentially harmful but avidly appreciated by it’s consumers. The Americans… no, I shall not start…
Extra, slightly random input. Many of Victoria’s hospital KPIs are destructive. The Emergency Trolley Penalty (12 hours in ED and NO MONEY FOR YOU) means people get kicked upstairs half sorted. In other words, out of a department with massive numbers of staff and onto a quiet ward with 4 doctors on for the night covering 300 beds. Out of a unit akin to ICU into the general ward. Because people get outraged that they might get a sore bottom. Silly, even when functioning as planned.
Dr S;
I appreciate where you are coming from. But isn’t this true of other fields? Lawyers specialise, software engineers specialise, even plumbers specialise. People going through a divorce or trying to use Windows are under stress too.
There has to be a different mix of market and single payer that works better. Command-and-control is clearly not working.
Jacques: I put it to you that, in this specific area, the empirical evidence is strongly in favour of command-and-control.
Dr S: Nice summary of the issues.
Mind you, there is an argument to suggest that more statistical evidence of doctors’ performance could, and probably should, be made available.
Jacques – Yes, there are information issues in other services. It is one of the reasons professional ethics are felt so important. The idea is that the profession as a whole has a reputation to keep that should limit your action as an individual provider.
The specific issues in medicine include that the outcomes are a nightmare to produce metrics of. Surgical figures are relatively easy and widely appreciated. However, as a KPI they strongly influence practitioners away from high-risk procedures and people. In other words, away from people who actually need the procedure. The complication rate for unnecessary gall bladder surgery is much lower than for those with diseased biliary tracts.
I would contend that the level of stress in medicine is often higher and that people’s thinking can be directly affected by their illness. To pick a minor example, there is no-one capable of making a fully rational decision during a migraine, not just because of the pain but also because their brain just ain’t working right.
I would also contend that the services that should be provided are an empirical question based on proof of efficacy and estimation of impact (the estimation of which is what Health Economists are FOR). Once you manage care, as even the USA does, to the point of deciding which services should be provided then the choices exercisable are already limited. I personally feel that most of the rest of the choices are made for reasons that, while personally valuable to the patient, are not producing competition in a way that can improve service. The private system in Australia provides a lot of services that are unnecessary and the equivalent services in the public system are quicker, cheaper and less friendly. What people tend to choose is an extra few days in hospital, pleasant staff and a nice meal. All of which is expensive and does not advance their health one teensy tiny bit.
Oh, and although I do not begrudge my Barrister friend his billings, the idea that his capacity to charge through the nasal passages produces competition of a meaningful or improving kind id far from unimpeachable.
And another thing … Despite all the doom and gloom, Australia’s health system actually works rather well. More pleasant than the NHS, cheaper than many equivalent European systems and, given the tyranny of distance, reasonably good in terms of coverage. Sure, you may wait for your procedure but acute care is actually pretty good.
I think there are significant improvements to be made but it really ain’t all that broke.
Dr S: fair point about surgery and the potential for discouraging of high-risk procedures. But, as I understand it there are ways of risk-rating patients. Nick Gruen proposed the Gruen Tender as one approach.
And, yes, our hospital system may be broken, but it’s less broken than just about every other place on Earth.
Robert, it is a fairly well established issue in the American system and not unknown here.
Also, I think Nick Gruen has a slightly optimistic view of my capacity to prognosticate in a way that is consistent and clearly related to the outcome. We have a whole branch of the profession set up for this (epidemiologists) and most of the predictions end up being for fairly limited circumstances.
One can risk-rate patients but the methods are, at best, clunky. Also, these systems are largely weighted towards surgery, a minor part of health care.
Dr S, I don’t know which State you’re in, but there’s just been an Inquiry into the health system in NSW. Peter Garling SC more or less agrees with you (PDF):
“What then is the public to make of the alarming reports which regularly appear in the media and suggest quite the opposite?”
What indeed?
Along with alarming reports on crime sprees, dodgy builders, fat kids, rampaging footballers, share prices plummeting, exports dwindling, immigrant misbehaviour, etc.
That’s where the blogworld brings in critical perspectives.
But exaggerated accounts of medical errors/delays hit home because ‘there for the grace of Medicare go I’
there *but* for the grace
Robert @ 25 – I wonder if it would be possible to have a public “rate your doctor & GP practice” site for GPs without getting sued. Finding a GP when moving into a new area and you don’t know many people is quite hard.
Chris: but as Dr S points out, it’s very, very difficult for us to know whether our doctors are any good or not.
I used to think my country GP was a wonderful doctor, but, in retrospect and with the aid of subsequent reading in the area, he did a couple of things which I’m very, very dubious were the right course of action (and not only relating to Crohn’s).
Robert @ 34 – I agree about it being hard for most people to determine whether doctors are good or not but I also think GPs are different from specialists in that its much more important to have a good relationship with your GP which is easily measurable on a personal basis. And it could be useful for example to see feedback like “Doctor X was great/hopeless about treating disease X”. Its all personal anecdotes with possibly incorrect information mixed in, but patterns would still appear if enough people use them. Also perhaps gives GP useful anonymous feedback that they otherwise wouldn’t get short of a lawsuit.
And practical feedback about GP practices like how late they tend to run, how long you have to wait for an appointment and how they treat more urgent matters would be handy.
So hospital administrators are falsifying statistics to maximise their funding under the current funding model? Someone refers to this as “gaming” the system.
What happened to the term “fraud”?
I will not debate the public/private models. This is done to death.
What we have here is a funding system put in place under legislation passed by the Victorian parliament.
Hospitals who receive funding under this initiative do so in terms of a formula based on set criteria. Some hospitals have falsified the data in order to get more funding than they were otherwise entitled to. Why have the police not been called? By the seriousness of the Audit report it would appear that the amounts misappropriated are in the millions. Is this not a serious matter or is it just a game?
The money doesn’t (oops didn’t – the scheme is over finished kaput due to a previously commissioned audit by the AG NOT a result of the current kerfuffle)anyway, it didn’t go back into consolidated revenue – it formed the bonus pool and was divided up amongst the “winners”. That is the less hospitals that met the targets the more money there was to be divided up.
As at least Dr S above has pointed out if an informed person was to choose the best health system in the world (excluding Cuba of course) then many many of us informed persons would choose Australia and specifically Victoria. If you were very wealthy and / or had a good health insurance scheme paid for by your employer then you might choose USA, but then if you were truely wealthy you might still choose Australia because their isn’t much going in USA that you couldn’t get equal or better care CHEAPER in Oz even in the private sector.
Only the English would put up with the UK system although it is very much a curate’s egg.
I think it was Dr S who mentioned A&E and trolleys and time on trollies. What a nonsense. Anyone with any nous would prefer to be in an A&E corridor, next door to what is effectively a well staffed ICU, on a trolley being checked on regularly by the best and their apprentices than up in some ward with a registrar and a nurse in a marginally softer “bed”.
FXH: I’m not sure I’d take even unrestricted US insurance, on the basis that their system has a lot of incentives toward unnecessary and even medically counterproductive interventions, as I understand it.