humani nil a me alienum puto

random rants about news, the law, healthcare law, economics and anything I find amusing

Spread the Light

I’ve been a big fan of the TED Talks (here, here, here).  I’ve also started reading the Marginal Revolution blog after reading Brooks article not long ago that reference an idea that the blog posted.  I think I made a quip about having enough reading on my blog list and that they better impress or I’d drop them like week old kung po chicken in my fridge.  The blog’s still in my fridge and it’s still tasty.

In any event, I read that Alex Taborrak, one of the authors of the blog and holder of the Bartley J. Madden Chair in Economics at George Mason University,  had been invited to make a TED Talk about globalization.  The talk, which I very much liked, is posted below and worth a watch (or listen — podcasts on itunes) since it is looking like we might be slouching off the hang-over from our last several bubbles and this so-called Great Recession.

His theme — economic development in other counties increases the most important marketplace, that of ideas which benefits all nations and peoples — is, I think, optimistic, forward thinking and (the sunnier part of me cries out) ‘spot on’.  He likens the world’s population to a massive computer whose CPUs have been mostly off for lack of wealth driving education maximizing people’s potential.  In other words, if all Einstein could have done would be to work in a farm field, would he have been able to develop and allow us all to benefited from his illuminating ideas?

In the last half the the 20th century, wealth creation throughout the world has been driven by the implosion of trade, communication and political barriers.  This has been particularly robust for the peoples of China and India.  And this explosion has transformed and expanded marks in human ideas — and certainly every other conceivable economic market.   Even Africa is seeing a better future.  (cf a related post of mine that discusses lost opportunity even in the United States educational system (here)).

And yet, another cynical part of me also looks back at the other history of the 20th century and I wonder if the walls and barriers to development could not go up again as fast as they have fallen.  If you want to wallow in gloom, take a listen to Dan Carlin’s Hardcore History podcasts of the WWII eastern front battles Ghosts of Osfronts I, II, III – available on itunes or here.  But I, for one, won’t be Eeyore tonight.  Check out his talk.

Alex Tabarrok on how ideas trump crises | Video on TED.com.

Filed under: Personal Posts, , , , ,

Another View – Get Rid of Comprehensive Healthcare Insurance?

Thanks to Paul Levy’s Running a Hospital blog for putting me onto this article.  I started reading this too late but could not pull myself away from it.

If you are pondering health care reform this season, “How American Health Care Killed My Father” by David Goldhill should be something you read.  He’s an outsider to health care finance and delivery and a consumer that has had the healthcare system profoundly (and negatively) affect his family.

With this personal interest, he’s become quite focused on the question: how can a technically advanced, high cost, reputable, New York area hospital with caring, highly educated and highly skilled physicians and nurses allow his father to die from a facility acquired infection avoidable (probably) by adequate hand-washing protocols?  The experience has led him to an “obsession with [the] health-care system” and to start asking how could it possibly be structured the way that it is.   With this background, he asks whether today’s proposed reforms actually fix what he understands to be wrong with the American health care system?  His conclusion is no:

The most important single step we can take toward truly reforming our system is to move away from comprehensive health insurance as the single model for financing care. And a guiding principle of any reform should be to put the consumer, not the insurer or the government, at the center of the system. I believe if the government took on the goal of better supporting consumers—by bringing greater transparency and competition to the health-care industry, and by directly subsidizing those who can’t afford care—we’d find that consumers could buy much more of their care directly than we might initially think, and that over time we’d see better care and better service, at lower cost, as a result.

A more consumer-centered health-care system would not rely on a single form of financing for health-care purchases; it would make use of different sorts of financing for different elements of care—with routine care funded largely out of our incomes; major, predictable expenses (including much end-of-life care) funded by savings and credit; and massive, unpredictable expenses funded by insurance.

I take issue with some of what he writes, particularly about hospitals.  Nonetheless, it is worth a read and some serious thought, whether you agree or not with all of his statements, conclusions and his solution.

via How American Health Care Killed My Father – The Atlantic (September 2009).

Filed under: Health Law, Reform, , , ,

Healthcare Economic – Supply/Demand Side Goals to Reform

Over the years Uwe E. Reinhardt has written, lectured and testified extensively on health care economics, alternative health care financing and delivery systems (e.g., here and here) and health care financing and delivery reform in the United States.  He’s one of those guys I recall studying back in undergraduate health care economics classes (who can forget a name like Uwe).

In a recent NYT Economix blog post he provides succinct economics supply side/demand side breakdown of what the general economic goals are for health care financing and delivery reform as currently evisioned.  I thought was a useful way of looking at the (rational) parts of the current debate.   I emphatically take no position on health care reform policy initiatives, but in light of so much of the rather less than civil polemics I see around the policy debate, this seems a return to basic analytics of what might be accomplished through reform.

1. Financial barriers should not stand between Americans and preventive or acute health care that they sincerely believe will address concerns over a troubling medical condition, in a timely manner, before that condition grows into a critically serious illness.

2. Having received needed health care, no American family should be so financially devastated by medical bills that it cannot meet routine daily living expenses — for example, make utility or mortgage payments on time or finance the education of the family’s children.

3. The future growth in national health spending should be constrained to fall significantly below currently projected spending growth, which has the United States devoting about 40 percent of its G.D.P. to health care by midcentury.All other goals are subordinate to these three overarching goals, as are the means to reach them.

He breaks it down into into one slide — which I think, again, fairly succinctly states the targeted supply/demand side areas:

I found it natural to categorize these components into those aimed mainly at reforming the demand side of the health sector, those aimed mainly at the supply side, and those cutting across both sides — e.g., payment reform and overall cost control.health care delivery

He then discusses the time frame for reform.   He feels with good reason that the supply side fix (top left box), while incredibly challenging, would be achievable through current legislation.   He indicates, however, that it would not be particularly successful unless certain core requirements are met to address the adverse selection/moral hazard problems inherent in the fix.

He notes, however, that the right box and the cross-cutting payment reform (bottom boxes) can only be accomplished over a much extended period due to their complexity, lack of current infrastructure (e.g., systemic and cross-functional EHR systems, solid quality measurement systems, systems whereby health care providers can assume and manage financial risk for populations) and a public policy and business driven process of how to actually move from FFS systems to some form of bundled payment or capitation.

If 1) either private or public health insurers must accept all comers and may not base premiums on the applicant’s health status, then 2)  individuals must be mandated to purchase at least a basic package of health insurance, lest they freeload on the system. Such a mandate, in turn, requires that 3) families be publicly subsidized to make the cost of that basic package affordable to them. A sound reform of the health insurance market cannot have just two of these features. It must have all three.

****

Designing and implementing the rest of the reform agenda in the chart — reforming the supply side, payment reform and cost control — is a much longer-run effort that may take an entire decade or more. It is more challenging than was landing a man on the moon, as no moneyed lunar interest groups sought to prevent man’s visit there.

The delema should be obvious.  Given Dr. Reinhardt’s core requirements for supply side reform, the ability to subsidize #1 (preventative intervention) and #2 (insurance against catostrophic financial loss due to illness) universally is going to be extraordinarily costly to public fisc.  Without management of #3 (which isn’t going to come without significant challenge) the money must come from somewhere.  And, of course, if #3 is not achievable for some unspecified extended period, gap financing is necessary.   Richard Posner recently has a post on just this point.

Filed under: Health Law, Personal Posts, Reform, , , ,

Reform Moves Stir Talk of Bundled Payments | BNET Healthcare Blog | BNET

A BNet article, Reform Moves Stir Talk of Bundled Payments, discusses healthcare reformers’ conceptualizing bundling payments to align physician and health system/hospital outcome interests.  The article has a number of cites to other reports, discussions and administration statements.  It also points out what I find facinating about the trend — what did not occur in the 1990s may be coming through healthcare payment reform today.   But are today’s integrated delivery systems (and the regulatory environment) prepared for risk in any format other than PPS payments?

All of this reminds some observers of the rapid formation of integrated delivery systems during the ‘90s, when many hospitals and physicians were circling the wagons to fend off the expected onslaught of capitated managed care plans. That never materialized in most places, but many systems retained all or some of their employed primary-care physicians. Now, partly in expectation of healthcare reform, they’re also stepping up their hiring of specialists.

“The handwriting is on the wall,” Bill Jessee, MD, president and CEO of the Medical Group Management Association, tells BNET. “The push is going to be towards more integration of physicians, hospitals, home health, and other services. And Medicare or a private insurer may put the provider at risk, instead of the insurer being at risk. It’s not explicit, but it’s implicit in a lot of the reform discussions that that’s the direction they’d like to move. The bundled payment demonstrations are a manifestation of that.”

via Reform Moves Stir Talk of Bundled Payments | BNET Healthcare Blog | BNET.

Filed under: Comparative Effectiveness Rearch, Health Law, Payment, Reform, , , ,

World Bank and H1N1 Economic Forecast

In a follow-up to one of my prior posts (Birds or Pigs?; Pigs Have It), I spotted (thanks to the WSJ Health Blog and Bloomberg) that the The World Bank issued a recent report on the global recovery, entitled Global Development Finance: Charting a Global Recovery.  In it it discusses the potential impact of H1N1 on economic recovery, estimating that by next season the impact of H1N1 is likely to be at least as severe as the Hong Kong Flue of 1968-69.  It also cites other studies to give a range of potential impact on world-wide GNP between 0.7% and 4.8%.   The impact on Mexico, where H1N1 has had a severe effect on tourism and has shut down large sectors of its economy at the start of (or at least the realization of) the outbreak, has been severe.  Estimates are a second quarter 2009 decrease in that country’s output by appoximately 2.2%.

Simulations of the potential economic and human costs of a global pandemic undertaken for the 2006 Global Development Finance report in the context of avian influenza (Burns, van der Mensbrugghe, and Timmer 2006, 2008) suggest that the costs of a global influenza pandemic could range from 0.7 to 4.8 percent of global GDP depending on the severity of the outbreak. The lower estimate is based on the Hong Kong flu of 1968–69, while the upper bound was benchmarked on the 1918–19 Spanish flu. In the case of a serious flu, 70 percent of the overall economic cost would come from absenteeism and efforts to avoid infection. Generally speaking, developing countries would be hardest hit, because higher population densities, relatively weak health care systems, and poverty accentuate the economic impacts in some countries.

Filed under: Health Law, Personal Posts, Public Health, , , ,

Variations in Healthcare Spending – Anchor-Tenant Theory and Fraud and Abuse?

The New Yorker recently had a very interesting expose discussing one of the fundamental economic challenges of healthcare reform.  (Gawande, Atul, The Cost Conundrum: What a Texas town can teach us about health care, June 1, 2009).  Peter Orszag gave a presentation last year at the American Health Lawyers meeting in San Franscisco that I was able to hear.  Mr. Orszag, President Obama’s budget director and formerly head of the Congressional Budget Office, has observed repeatedly (and is quoted in this article as saying) that “[n]early thirty per cent of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas.”  He, and many healthcare economists’ observe, that there is a tremendous amount of variation in healthcare spending throughout various regions of the country that simply cannot be explained after controling for demographics, illness indexes/cases mixes, cost indexes and other similar factors.  And, most importantly, outcomes are no better in higher spending areas.

This New Yorker article paints a narrative story surrounding this frequent observations by looking at case of McAllen, Texas.  McAllen has the particular notoriety of having the highest per capital Medicare spending in the nation.   I think it is an important read for healthcare counsel because of some of the author’s tangential commentary linking McAllen’s higher per capita spending with a culture that could have support higher incidents of fraud and abuse.

According to the article, McAllen spends (using 2006 data) approximately $15,000 per Medicare enrollee.  This is more than twice of what El Paso, Texas, with very similar demographics and population factors, pays.  It is also more than twice what the region surrounding the Mayo Clinic spends.  Ironically, the per capital Medicare spending is more than McAllen’s per capita income.

The New Yorker author discusses this fact with some local physicians who have no idea of this distinction for their community:

One night, I went to dinner with six McAllen doctors. All were what you would call bread-and-butter physicians: busy, full-time, private-practice doctors who work from seven in the morning to seven at night and sometimes later, their waiting rooms teeming and their desks stacked with medical charts to review.  Some were dubious when I told them that McAllen was the country’s most expensive place for health care. I gave them the spending data from Medicare. In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person. “Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.  Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said. “It’s malpractice,” a family physician who had practiced here for thirty-three years said. “McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere. That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down? “Practically to zero,” the cardiologist admitted. “Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures.  The surgeon came to McAllen in the mid-nineties, and since then, he said, “the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about ‘How much will you benefit?’ ”

via Annals of Medicine: The Cost Conundrum: Reporting & Essays: The New Yorker.

What is the basis for the higher per capita Medicare spending?

To determine whether overuse of medical care was really the problem in McAllen, I turned to Jonathan Skinner, an economist at Dartmouth’s Institute for Health Policy and Clinical Practice, which has three decades of expertise in examining regional patterns in Medicare payment data. I also turned to two private firms—D2Hawkeye, an independent company, and Ingenix, UnitedHealthcare’s data-analysis company—to analyze commercial insurance data for McAllen. The answer was yes. Compared with patients in El Paso and nationwide, patients in McAllen got more of pretty much everything—more diagnostic testing, more hospital treatment, more surgery, more home care.  The Medicare payment data provided the most detail. Between 2001 and 2005, critically ill Medicare patients received almost fifty per cent more specialist visits in McAllen than in El Paso, and were two-thirds more likely to see ten or more specialists in a six-month period. In 2005 and 2006, patients in McAllen received twenty per cent more abdominal ultrasounds, thirty per cent more bone-density studies, sixty per cent more stress tests with echocardiography, two hundred per cent more nerve-conduction studies to diagnose carpal-tunnel syndrome, and five hundred and fifty per cent more urine-flow studies to diagnose prostate troubles. They received one-fifth to two-thirds more gallbladder operations, knee replacements, breast biopsies, and bladder scopes. They also received two to three times as many pacemakers, implantable defibrillators, cardiac-bypass operations, carotid endarterectomies, and coronary-artery stents. And Medicare paid for five times as many home-nurse visits.

The author discusses the high utilization and costs with various hospital executives, who, like the physicians interviewed, also do not know that McAllen is the most expensive place in the country for Medicare beneficiaries.  The executives of the hospitals, to the author’s belief, authentically did not know their peculiar notariety and, not even recognizing it as an issue, had no truly thoughtful responses as to why it might be.

Local executives for hospitals and clinics and home-health agencies understand their growth rate and their market share; they know whether they are losing money or making money. They know that if their doctors bring in enough business—surgery, imaging, home-nursing referrals—they make money; and if they get the doctors to bring in more, they make more. But they have only the vaguest notion of whether the doctors are making their communities as healthy as they can, or whether they are more or less efficient than their counterparts elsewhere. A doctor sees a patient in clinic, and has her check into a McAllen hospital for a CT scan, an ultrasound, three rounds of blood tests, another ultrasound, and then surgery to have her gallbladder removed. How [are the hospital executives] to know whether all that is essential, let alone the best possible treatment for the patient? It isn’t what they are responsible or accountable for.  Health-care costs ultimately arise from the accumulation of individual decisions doctors make about which services and treatments to write an order for. The most expensive piece of medical equipment, as the saying goes, is a doctor’s pen. And, as a rule, hospital executives don’t own the pen caps. Doctors do.

The article suggests, with only a little explanation, that the variation between communities such as McAllen and, in contrast, El Paso or other lower cost regions (with at least the same if not better quality institutions) might be due to an  “anchor tenant theory of economic development.”  Certain markets develop their own economic character, similar to how a mall may be defined by its anchor tenant.  So, the theory goes, certain “anchor tenants” in a market may allow, for example, the development of regional specialization (e.g., biotechnology development in certain cities – Boston, San Franscisco and not in others with similar apparent resources).   Twisting this model a bit, the author posits that the entrepenurial focus of physician medicine in McAllen, changing from the 1990s to present, may be a significant part of the increase in costs.  McAllen was near the median in per capita spending a decade ago.  Importantly, the author then goes on to point out anecdotal evidence of some serious antikickback statute violations — solicitation by certain unnamed physicians of medical directorships in exchange for referrals to hospitals and home health agencies.

This linkage — which is not well developed by the author — is nonetheless a beware moment.   If higher per capita Medicare spending is linked by government enforcement agencies as a proxy for potential higher rates of fraud and abuse behavior, one might see a new horizon for focusing fraud enforcement .  Perhaps this is a stretch – but an interesting linkage is being made here by the author.  It is all the more important due to the prestige of the publication and that the fundamentals of this story find their genesis in the economic theory of healthcare inflation that is the focus of leaders within the current administration.

The author goes on to make a fairly classical example of the challenges of asymetical information in healthcare coupled with the fee-for-service basis of physician payments:

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

The author aruges that changing the payor (i.e., government plan competitor, single payor system) will not change this problem.  Even putting the consumer on the hook through medical savings accounts or high deductible plans won’t solve it (if a physician recommends a cardiac bypass, is the patient going to negotiate with the cardiologist, radiologist, anesthesiologist, cardiothoracic surgeon and hospital over expense or the scope of the procedure?).

Then the author suggest that only flipping the economic model might fix this.  The author isn’t quite specific in how this might be accomplished, although he goes to length to contrast the McAllen “anchor-tenant” model with other “anchor-tenant” models of healthcare (e.g., Mayo), suggesting this is the crux of the problem – what kind of medical care provision culture the United States will be developing based upon the economic incentives that are established by insurance payor systems we perpetuate or change through reform.  Not by who cuts the check.

This is worth the read because it sets a story narrative for the harder data Mr. Orszag and others have frequently discussed as healthcare reform is debated.

Filed under: AKS, Comparative Effectiveness Rearch, Health Law, Reform, , , , ,

Continuing 1Q Drops In GDP and Increasing Effects in Healthcare Sector

I recently posted on a WSJ article and Reuter’s research paper on the effect of the current recession on hospitals and the healthcare system job growth.   The AHA recently surveyed over 1,000 community hospitals (of the nearly 5,000 to which they sent surveys) seeking information on the recession’s effect on the hospital sector.   Similar to the Reuter’s paper from last month, the AHA’s survey shows significant effects on hospital total margins, operating margins, efforts to reduce costs, capital plans.

Healthcare tends to be recession resistant industry, but “The Great Recession” seems to be taking its toll.  And 1Q 2009 reports of economic contraction is worse then expected.   The Department of Commerce in a report issued this morning said that real GDP decreased at a remarkable annual rate of 6.1% Q1 2009.  In Q4 2008, real GDP decreased 6.3% and .5% in 3Q 2008.   Many economists had expected a 4.7% decline in GDP for the Q1 2009.  This is the worst two quarters in more than 60 years.  Since 1947, the economy “had never contracted by more than 4% for two consecutive quarters,” according to MarketWatch.com.  Three consecutive quarter losses has not occured since 1975.

Of note from the AHA survey summary of hospitals:

  • 90 % have taken steps to reduce costs
  • 80 % have reduced administrative expenses
  • 48 % have reduced staff
  • 20 % have reduced services in subsidized service areas
  • 58 % have had at least a moderate increase in uninsured ER visits
  • 70 % have had at lease a moderate increase in uninsured/Medicaid
  • 59 % report at least a moderate decrease in electives
  • 55 % report at least a moderate decrease in admissions
  • 65 % report at least a moderate decrease in total margin
  • 39 % report a significant decrease in total margin
  • 57 % report at least a moderate decrease in operating margin
  • 43 % expect a negative total margin 1Q 2009 (vs. 26% 1Q 2008)
  • 59 % report a at least a moderate decrease days cash on hand
  • 77 % are reducing capital spending
  • 46 % are scaling back established programs for capital spending
  • 54 % have discontinued planned (not started) capital projects
  • 65 % have seen increase in physicians seeking “financial support”
  • Of these 79% for call or other services; 71% seeking employment

via AHA : Press Release : Economic Downturn Taking Toll on Patients and Communities Hospitals Serve: New Survey Finds.

Filed under: Health Law, , , ,

Birds or Pigs; The Swines Have It?

We’ve had a lot of stories the past several days about the swine flu outbreak in Mexico and smaller groupings of confirmed cases in New York, California and elsewhere in the United States.   There has been years of discussion on the H5N1, so called avian flu, pandemic risks.  We all remember the impact of SARS.  And we’ve been rocked, recently, by what some have tagged a ‘depression’ but all of noted as the largest economic downturn since The Great Depression.  The losses associated with this ‘Great Recession’ are still playing out.

But I was wondering — what if the Swine Flu became a pandemic at this time?  All indication (including the CDC site) indicate that aside from some serious implications for Mexico City’s public health, the cases in the United States have been mild, with no hospitalizations.  The 1918 flu pandemic that took 20m lives world-wide, however, is the standard modern example of potential personal and economic costs of a flu pandemic.  Not to minimize the terrible pain and suffering that such a pandemic would cause by putting an economic slant on it– but I was wondering what might be the economic impact to our already tottering United States economy if a pandemic struck.

So I took a look at a study the CDC had commissioned in 1999.  It showed the potential U.S. economic impact of a pandemic.   The CDC used this as a way to assist the public policy discussion in light of strategies regarding flu immunization — i.e., which immunization policy could provide the best net value in the case of flu pandemics of differing severity.   It’s beyond this post (or its author) to analyze the article and it’s conclusions.  But I thought the numbers were notable and summarize the potential economic exposure (without vaccination).  And, of course, this looks at U.S. exposure only.  A pandemic would have a far reach.  Look how quickly in this age of easy travel the virus spread from Mexico to the United States and even potentially exposed the President of the United States during his trip.  From the CDC’s study:

Without large-scale immunization, the estimates of the total economic impact in the United States of an influenza pandemic ranged from $71.3 billion (5th percentile = $35.4 billion; 95th percentile = $107.0 billion) (gross attack rate of 15%) to $166.5 billion (5th percentile = $82.6 billion; 95th percentile = $249.6 billion) (gross attack rate of 35%) (Table 6). At any given attack rate, loss of life accounted for approximately 83% of all economic losses. Outpatients, persons ill but not seeking medical care, and inpatients accounted for approximately 8%, 6%, and 3%, respectively, of all economic losses (Table 6) (Appendix II).

* * * *

If it cost $21 to vaccinate a person and the effective coverage were 40%, net savings to society would result from vaccinating all age and risk groups (Figure 2). However, vaccinating certain age and risk groups rather than others would produce higher net returns. For example, vaccinating patients ages 20 to 64 years of age not at high risk would produce higher net returns than vaccinating patients ages 65 years of age and older who are at high risk (Figure 2). At a cost of $62 per vaccinee and gross attack rates of less than 25%, vaccinating populations at high risk would still generate positive returns (Figure 2). However, vaccinating populations not at high risk would result in a net loss (Figure 2).

via The Economic Impact of Pandemic Influenza in the United States: Priorities for Intervention.

There’s also an interesting Congressional Budget Office (CBO) assessment (and see generally the goverment web page)  of possible economic effects of an avian flu pandemic.  That study concludes that a pandemic involving a highly virulent flu strain (such as the one that caused the pandemic in 1918) could produce an impact worldwide similar in depth and duration to an average postwar recession in the United States — but citing studies ranging from a .5% to 6% decrease in GDP.  Query, of course, what impact if such a pandemic hit during an ongoing recession.

Filed under: Comparative Effectiveness Rearch, Health Law, Personal Posts, Pharmacy, Risk Management, , , ,

I.M.F. Puts Bank Losses From Crisis at $4.1 Trillion – DealBook Blog – NYTimes.com

A recent IMF report increases the total write-downs that are anticipated wordwide as a result of the current financial crisis.  These numbers are just simply staggering:

[T]he International Monetary Fund estimates that banks and other financial institutions face aggregate losses of $4.1 trillion in the value of their holdings as a result of the crisis…[F]inancial institutions would have to write down an estimated $2.7 trillion in loans and securities originating in the United States from 2007 to 2010…Banks are expected to shoulder about two-thirds of the write-downs…though other institutions, like pension funds and insurance companies, also face heavy losses…Banks have raised about $900 billion in fresh capital since the crisis began…, but that is far outweighed by $2.8 trillion in credit-related losses. The fund estimates that the banks have already taken about one-third, or $1 trillion, of those write-downs….United States…banks reported $510 billion in write-downs by the end of 2008 and face an additional $550 billion in 2009 and 2010. In the euro zone, banks reported just $154 billion in write-downs by the end of last year and still face $750 billion. British banks are in somewhat better shape: having written down $110 billion, they face $200 billion more, the fund said.

via I.M.F. Puts Bank Losses From Crisis at $4.1 Trillion – DealBook Blog – NYTimes.com.

Filed under: Personal Posts, , ,

How Might The Education and Healthcare Sectors Be (Economically) Alike?

Thomas Friedman had an interesting op ed today.  He cited a recent McKinsey Study entitled The Economic Impact of the Achievement Gap in America’s Schools.   I read his op ed, but thought to take a look at the summary of the McKinsey Study.  It points out the potential for huge future improvement opportunity in the educational sector, if only that current opportunity may have been lost.  It also discusses an important similarity between the education sector and the health care sector that is worth remark.

Before briefly discussing the McKinsey study, it uses a report, made a generation ago, “A Nation at Risk”, as a springboard.  I just revisited that report this evening.  I recall reading it in an undergraduate education (elective) class a long time ago.  That 1983 report (by the National Commission on Excellence in Education presented to Secretary of Education) began:

Our Nation is at risk. Our once unchallenged preeminence in commerce, industry, science, and technological innovation is being overtaken by competitors throughout the world… History is not kind to idlers. The time is long past when American’s destiny was assured simply by an abundance of natural resources and inexhaustible human enthusiasm…We compete with them for international standing and markets, not only with products but also with the ideas of our laboratories and neighborhood workshops. America’s position in the world may once have been reasonably secure with only a few exceptionally well-trained men and women. It is no longer.

educationThis McKinsey study asks the question: if we had effectively acted in 1983 and closed the international, racial and class/economic gaps in US k-12 educuation, where would we be today?  They stay away from the ‘moral’ and ‘equity’ component of fulfillment of some of the aspects of that old report’s recommendations and keep it at the level of national economic productivity.  The answer is that if we had done better, we’d be, as a society, a lot richer.

We’re now in the midst of the greatest economic downturn in generations.  Economists thinks that the current ‘Great Recession’ has depressed economic output of the United States by somewhere between $1T to $2T.  If the McKinsey study analysis is to be believed, however, we are experiencing staggering lost opportunities in gross national product performance that surpass even those numbers.  The study puts it this way:

[T]he international achievement gap is imposing on the US economy an invisible yet recurring economic loss [of $1.2T to $2.3T per year] that is greater than the output shortfall in what has been called the worst economic crisis since the Great Depression. In addition, the racial [gap of between $310B to $525B per year], income [gap of $400B to $670B per year], and system achievement gap[] [of $425B to $700B] all impose annual output shortfalls that are greater than what the nation experienced in the recession of 1981–82, the deepest downturn in the postwar period until now. In other words, the educational achievement gaps in the United States have created the equivalent of a permanent, deep recession in terms of the gap between actual and potential output in the economy.

Fundamentally,  our society is experiencing lost opportunity and it affects all of us in very real objective ways.  But lost opportunity is opportunity that can be regained.  So, where is this opportunity?  The healthcare sector and the education sector share an important and remarkable trait according to the McKinsey study authors.  As the McKinsey article points out:

The most striking, poorly understood, and ultimately hopeful fact about the educational achievement gaps in the United States involves the huge differences in performance found between school systems, especially between systems serving similar students. This situation is analogous to that found across American health care, where, as researchers like John Wennberg have shown, wide regional variations in costs and utilization of procedures and services exist that bear no relation to quality or health outcomes. In each case, these differences prove there are substantial opportunities to improve…

While at the racial and economic level there are sizable differences in attainment — controlling for these demographic differences one still finds amazing variations in student achievement.   The study authors point out that research shows that these variations “exist at every level in American education: among states, among districts within states, among schools within districts, and among classrooms within schools.”   “Intuition” and “research” suggest that differences in “public policies, systemwide strategies, school site leadership, teaching practice, and perhaps other systemic investments can fundamentally influence student achievement.”

spending3The authors also point out that there seem to be gross inefficiencies in the educational sector.   While they do not extend, by analogy, to the health care sector, I’ve seen other studies that could.  Despite the United State’s very significant per capita education spending, we might have one of the least cost-effective educational systems in the world. The study authors report that by “one measure we get 60 percent less for our education dollars in terms of average test-score results than do other wealthy nations.”  In other words, as the chart from the report shows, we spend more per student to obtain one point on the Program for International Student Assessment (PISA) Math test (2003 data) than any other nation.  We pay a lot to perform far less well than our international peers.

While the authors do not make very specific recommendations regarding reform, ultimately, their main forward looking conclusion can be summed up by the Lord Kelvin observation:  ‘if you cannot measure it, you cannot improve it.’  The corollary — if you can measure it, and use “relentless efforts to benchmark and implement what works[,]” performance can be significantly improved.

This is an interesting and sober read and I recommend it.

Filed under: Comparative Effectiveness Rearch, Health Law, Personal Posts, , , ,

The Public and the Health Care Delivery System

The Kaiser Family Foundation, NPR and the Harvard School of Public Health recently conducted a poll of public attitudes concerning EHR, coordination of care, patient and doctor interaction around effectiveness and cost, the cost of care, the role of government and insurers in cost and comparative effectiveness, the uninsured and cost.  I found a few of the findings from the survey of note.

  • A larger portion of respondents (34%) thought that EHR’s would actually increase costs of healthcare in America than decrease (22%) it.  Even more (39%) thought it would increase their own family’s healthcare costs!
  • There is significant concern about unauthorized access (76%) to online medical records.
  • A significant minority (40%) of Americans report at least minor problems with coordinating care between their different doctors, while half say this is not a problem at all. A smaller minority (17%) say they experience “major problems” coordinating their health care services.   Interesting, those Americans who reported having personally experienced at least three ‘coordination of care’ issues are much more likely (63%) to see overtreatment in the system as a whole compared to other Americans (48%).
  • About half (49%) think that overutilization is a major problem.  Of course, only a minority (16%) say that they have received unnecessary care and a bit more than half (56%) think that insurance companies should have to cover expensive treatments even if they have not been proven more effective than other, less expensive options.
  • A significant majority of Americans  (72%) believe that there is not always clear scientific evidence about which treatment is likely to work best for any one patient.  But only a small minority (9%) say that they have received an expensive medical test or treatment in which a less expensive alternative would have been just as good.
  • A significant majority of Americans (65%) say their doctor’s charges are reasonable and (63%) believe that their doctor is working to keep the cost of their health care down.
  • There is a significant disconnect between the actual cost of insurance and what uninsured Americans are willing to spend for insurance.  Majorities report being willing to pay $25, $50 or even $100 per month for coverage, but only a minority (29%) would pay $200 per month, and only a very small minority (6%) say they would pay $400.  (Nationwide, annual premiums averaged $2,613 for single coverage and $5,799 for family plans in the 2006-2007 period).

The WSJ Health Blog commented on this survey: while patient seem to recognize that there is waste in the system, it wasn’t their physician.  She’s perfect.

Filed under: Comparative Effectiveness Rearch, Health Law, Reform, , ,

Recession Now Hits Jobs in Health Care

In the April 12, 2009 WSJ, they report on healthcare sector softening as the recession lingers.   The article mentions cuts at Mayo, Akron General and others.  Also quotes Paul Levy from Beth Israel Deaconness in Boston (author of Running a Hospital blog earlier posted about concerning their transparent efforts at saving costs):

More than 16 million people — one in eight workers on U.S. payrolls — work in health care today, up from just 1% of the work force 50 years ago…Employment in health care and social assistance — which includes hospitals, doctors offices, nursing homes and social services such as day care — has grown by half a million jobs since the recession began in December 2007, while the rest of the economy has shed 5.1 million jobs…But the pace of job growth in health services has slowed sharply this year. The sector added an average of 17,000 jobs per month in the first three months of the year, less than half last year’s pace…Since1958, there have been nine recessions, but employment in health services has declined only a handful of times…The only significant losses to date occurred in mid-1984, as the industry shed 41,000 jobs…Since then, no month has seen a drop of more than 4,000 jobs in health care, and there have been no back-to-back declines…The decline, while unusual, is still likely to be a temporary break in the industry pattern. Growth in health-care spending, and thus employment in the sector, is likely to rebound when the recession ends, a function of the enormous advances in medical technology and Americans’ strong appetite for health care… “It’s a long-term shift reflecting changes in technology and what consumers want,” says Robert Fogel, a Nobel laureate and professor at the University of Chicago’s Booth School of Business. “Health care is the growth industry of the 21st century.”

via Recession Now Hits Jobs in Health Care – WSJ.com.

Compare to an earlier analysis of the state of US Hospitals and the Current Recession.  Hospitals may be recession resistant; but are by no means recession proof:

“Observed impacts that appear related to the recession:

• Hospital non-operating and total margins have decreased dramatically, especially in the third quarter of 2008. Total margins are at historically unprecedented lows.

• Approximately 50% of hospitals are operating in the red.

• Hospital days-cash-on-hand has deceased significantly, following a pre-recession trend.

• Restricted investment assets have shrunk substantially for major teaching hospitals. These are non-realized losses that are not reflected in total margins declines.

• Hospital reimbursement rate increases appear to be shrinking — with possible negative impacts on net patient revenue in 2009.

• Total inpatient admission volumes may be falling below expectation.

Filed under: Health Law, Reform, , , ,

Friedman Talks about Externalities – No Drill Baby Drill

I love it when someone talks about externalities.  I’m twisted that way.  It gets me going.

As long as I’ve been reading his column, Friedman has continually hit the drum beat for us to recognize the true costs in our use of energy.   The price we pay for our carbon based energy is not fully loaded.  In his article today, he gives us some examples of how we miss these externalities, while he talks about the energy and conservation policies of one of our neighbors to the south.

[I]f a chemical factory sells tons of fertilizer but pollutes a river — or a farm sells bananas but destroys a carbon-absorbing and species-preserving forest — this is not honest growth. You have to pay for using nature. It is called “payment for environmental services” — nobody gets to treat climate, water, coral, fish and forests as free anymore…Right now, most countries fail to account for the “externalities” of various economic activities. So when a factory, farmer or power plant pollutes the air or the river, destroys a wetland, depletes a fish stock or silts a river — making the water no longer usable — that cost is never added to your electric bill or to the price of your shoes.

In fact, there are hidden costs in almost every market.   Many items in a our markets have significant positive and negative externalities.  Friedman provides examples of negative externalities above: the classic example of pollution needing to be recognized in the ‘true’ cost of a product.  But there are also positive externalities.  Accessible public eduction, for example, is the most profound one that has reshaped the United States and our civilization.  If not subsidized through taxes, far fewer would receive education to the detriment of society as a whole.  Tax payers paid more today for a benefit that paid dividends a decade or a generation later.

The bottom line of all this is that if you do not recognize the real cost or benefit of goods and services in a market you will over utilize certain goods and under utilize others.  So, what are we to do if energy markets contain significant externalities?  Well, you and I can’t do much.  We, individually, are  incapable of recognizing these true costs since they are spread out to everyone and energy costs are bundled into just about every downstream derivative product or service we utilize.  Oh sure, a many of us can take actions such as “recycling” and using canvass bags and, maybe, use those lousy fluorescent bulbs to a point.   Stuff that makes us feel good — and it might help to a point.   But externalities have to be addressed systemically — because they are a systemic market problems.

Please do not misunderstand me.  No one should be taking the position that individuals or energy corporations are acting irresponsibly.  Quite the contrary.  They are acting rationally.  It’s the market that’s out of whack.  The objective of a corporation is to maximize return to shareholders within legal constraints.  They have no requirement to identify the true cost of an item to others unless there is some legal contraint that they do so, be it tort law or some regulatory regime.   In fact, if they can arbitrage by exploiting unrecognized externalities, then not only will they, but they must due to their legal directive to shareholders.  And if they do not and their competitors do — they’ll risk being driven from the market.  And you and me, while individuals are as diverse as can be, number in the billions.  In the aggregate and in the longer term, we react en mass to price signals that a market provides more than any other factor.

So, what’s to do?  Well, identifying significant distorting externalities is a core responsibility of government. Friedman gives the example of Costa Rica in his article.

More than any nation I’ve ever visited, Costa Rica is insisting that economic growth and environmentalism work together. It has created a holistic strategy to think about growth, one that demands that everything gets counted.  So it did something no country has ever done: It put energy, environment, mines and water all under one minister… [W]hen Costa Rica put one minister in charge of energy and environment, “it created a very different way of thinking about how to solve problems,”…‘Look, [the minister was able to say,] if you want cheap energy, the cheapest energy in the long-run is renewable energy.  So let’s not think just about the next six months; let’s think out 25 years.’”… [A]nd today it gets more than 95 percent of its energy from these renewables.

So does this mean taxes?  Sure.  Be it direct or a cap and trade system, it’s about taxes.  See Friedman’s article earlier in the week.  We tax a lot of things due to their externalities.  We already tax gas in part because of this in order to maintain roadway infrastructure — which use of gas impacts.  The important point that, if done correctly, and that’s a big ‘if’, the net cost to everyone is far less over time than the cheaper fuel today.

To pay for these environmental services, in 1997 Costa Rica imposed a tax on carbon emissions — 3.5 percent of the market value of fossil fuels … If government policies don’t recognize those services and pay the people who sustain nature’s ability to provide them, things go haywire. We end up impoverishing both nature and people. Worse, we start racking up a bill in the form of climate-changing greenhouse gases, petro-dictatorships and bio-diversity loss that gets charged on our kids’ Visa cards to be paid by them later. Well, later is over. Later is when it will be too late.

I think we’ve finally moved away from the question of whether there are significant externalities in the energy products sector.   You don’t really have to look to ‘global warming’ for this.  You need only realize that carbon based fuels are a finite supply and a critical resource.  The demand/supply curve very possibly will not price the commodity in gradual manner to encourage the infrastructure development to move away from it.  So it’s a pay me now or pay me a lot more later question if sudden price distortions hit the market and then stick around, unlike the 1970s and last year.   So, in any event, we’re finally onto the policy questions:  (a) how big are these unloaded costs and (b) what mechanism or mechanisms do you use to incorporate the true price into these products.

The first is a function of policy choices relying upon terribly incomplete data.  How big is the global warming problem?  What is the probabilities related to loss of GNP in the future due to global warming?  What’s the potential costs of politically fragile regions holding so much of the word’s supply of carbon based fuels?  Carbon based fuels are finite — what is the realistic time frame that they will remain economically cost effective?  Will pricing really gradually rise to encourage alternative development or is the infrastructure costs so huge that we have to encourage significant R&D and infrastructure alternatives earlier?  What effects would major disruption have on supply, the cost of oil and related GNP growth stability?  These are really meaty questions without hard answers.   But we have to make policy judgements on these types of unknows all the time.   Insurers do this every day — they figure out potential costs and probablities of poutcomes and attribute premiums accordingly.  (AIG’s credit swaps, perhaps, excluded. )

And practically, what mechanism is politically possible to pass through Congress?  Can we articulate why we are choosing those mechanisms and the underlying issues.  These are really difficult policy decisions.  And vested interests (and you and me who might not understand why higher prices today mean for much lower overall cost tomorrow) have the ability to block rational policy making.  Still, like Friedman, I remain hopeful.

via Op-Ed Columnist – (No) Drill, Baby, Drill – NYTimes.com.

Filed under: Personal Posts, , , , ,

Op-Ed Columnist – Greed and Stupidity – NYTimes.com

Brooks believes that there are two overriding narratives that we must pick from to explain the current mess: (1) evil oligarchs took over the financial sector and lubed the wheels of power to allow them to get too big and too leveraged, (2) bankers suffered from an extreme lack of epistemological modesty.

There are many theories about what happened, but two general narratives seem to be gaining prominence, which we will call the greed narrative and the stupidity narrative…The best single encapsulation of the greed narrative is an essay called “The Quiet Coup,” by Simon Johnson in The Atlantic…Wall Street got huge. As it got huge, its prestige grew. Its compensation packages grew. Its political power grew as well… The result was a string of legislation designed to further enhance the freedom and power of finance… There were major increases in the amount of leverage allowed to investment banks…The U.S. economy got finance-heavy and finance-mad, and finally collapsed…In short, he argues, the U.S. financial crisis is a bigger version of the crises that have afflicted emerging-market nations for decades. An oligarchy takes control of the nation. The oligarchs get carried away and build an empire on mountains of debt. The whole thing comes crashing down.

The stupidity part of the equation is less paranoid, but just as disturbing:

The second and, to me, more persuasive theory revolves around ignorance and uncertainty. The primary problem is not the greed of a giant oligarchy. It’s that overconfident bankers didn’t know what they were doing… Many writers have described elements of this intellectual hubris… To me, the most interesting factor is the way instant communications lead to unconscious conformity… global communications seem to have led people in the financial subculture to adopt homogenous viewpoints. They made the same one-way bets at the same time…Jerry Z. Muller wrote an indispensable version of the stupidity narrative in an essay called “Our Epistemological Depression” in The American magazine. What’s new about this crisis, he writes, is the central role of “opacity and pseudo-objectivity.” Banks got too big to manage.

He believes that the latter is the the more compelling explanation, and cautions that if policy-makers believe it is the first, we might over-regulate by restructuring the financial sector.  In other words, he cautions against exchanging the hubris of Washington restructuring for the hubris of Wall Street.

The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.

He argues that we need regulatory controls to (1) ensure transparency, (2) reinitiate the separation between “savings banks, insurance companies, brokerages and investment banks”, and (3) ensure that the banks don’t get “too big.”

Hey, I’m in favor of all that.  But what other “restructuring” is really being contemplated?  Aren’t these the most serious and likely regulatory paths?  And when you are constraining growth,  forcing the downsizing of banking entities, or restricting what types of businesses can be integrated, isn’t that fundamentally about the “structure” of the financial sector?

Brooks contends that “one has to choose [among the two narratives] a guiding theory.”  But I don’t think I agree.  I think that both narratives get it partially right, and I think that Brook’s take on the correct regulatory outcome supports that thinking.   Many of the entities got too big to fail, the banking sector and policy-makers were complicit in both de-regulation and allowing this incredible growth of these huge transnational institutions, and these institutions created new markets with new instruments that looked like stocks and looked like insurance but were not regulated like stocks or insurance.   In the end, we (the bankers, the quasi-insurers, our policy makers, our federal reserve, our Congress, and ultimately all of us) were too stupid (or at least ignorant of history) to realize markets like these will cause systemic risk that can cause the whole house to crash down.  No pun intended.  The only way to address this systemic risk is like what came out of the Great Depression.  That is, a regulatory regime that provides transparency and forces individuals as well as institutions to have sufficient assets to secure the leverage that they have taken on.  This might be a gross simplification; the regulatory regime will be far more complex; but I think the principles are very much the same.

via Op-Ed Columnist – Greed and Stupidity – NYTimes.com.

Filed under: Uncategorized, , , , , ,

Op-Ed Columnist – Car Dealer in Chief – NYTimes.com

I think that Brooks has it wrong this time.  I agree that GM cannot restructure itself out of its current situation.  I agree that the Bush administration punted.  I agree that they should have — there needed to be preparation for the imminent bankruptcy.  I also disagree that this one has to remain a political football with Congress or the administration micromanaging GM’s bankruptcy process.   The administration needs to turf this to a real bankruptcy process and then get out of the way.  At the end of the line, it’s a fight between the financial stakeholders, not the politicians.  Throw the bondholders, unions, dealerships and other creditors into the pit (atop the corpse of shareholder equity) and see how it works out.

For 30 years, G.M. has been restructuring itself toward long-term viability. For all these years, G.M.’s market share has endured a long, steady slide…When the economy cratered last fall, the professionals at G.M. went into Super-Duper Restructuring Overdrive… The Bush advisers decided in December that bankruptcy without preparation would be a disaster. They decided what all administrations decide — that the best time for a bankruptcy filing is a few months from now, and it always will be…Today, G.M. and Chrysler have once again come up with restructuring plans…But this, President Obama declares, is G.M.’s last chance. Honestly. Really.No kidding…And yet by enmeshing the White House so deeply into G.M., Obama has increased the odds that March’s menacing threat will lead to June’s wobbly wiggle-out.  The Obama administration and the Democratic Party are now completely implicated in the coming G.M. wreck…The Midwestern delegations, swing states all, will pull out all the stops to prevent plant foreclosures. Unions will be furious if the Obama-run company rips up the union contract… The most likely outcome, sad to say, is some semiserious restructuring plan, with or without court involvement, to be followed by long-term government intervention and backdoor subsidies forever…It would have been better to keep a distance from G.M. and prepare the region for a structured bankruptcy process. Instead, Obama leapt in. His intentions were good, but getting out with honor will require a ruthless tenacity that is beyond any living politician.

via Op-Ed Columnist – Car Dealer in Chief – NYTimes.com.

Filed under: Personal Posts, , , , , , , , ,

High-End Health Care in the Boardroom – DealBook Blog – NYTimes.com

Spouse travel at Footlocker, out of state physicals at Stryker and executive physicals at Norfolk Southern.

Directors and executives at Norfolk Southern may be among the healthiest out there, judging from the proxy that the company filed Tuesday.  That’s because the railroad operator covers up to $10,000 a year in medical expenses for each nonexecutive director as well as a group of top executives, including Charles W. Moorman IV, its chairman and chief executive. Mr. Moorman spent $4,800 on his physical last year and another $4,800 in 2007. Four other executives spent between $3,800 and $4,800 on the perk.

via High-End Health Care in the Boardroom – DealBook Blog – NYTimes.com.

Filed under: Concierge Medicine, Conflicts of Interest, Executive Compensation, Health Law, , ,

Footing the Bill for a Spouse’s Travel – DealBook Blog – NYTimes.com

Thank goodness I don’t have to travel much anymore.  But if I do, I want to be the chief executive at Footlocker.

According to Foot Locker’s preliminary proxy statement, “Mr. Halls’s wife may accompany him on up to eight business trips each fiscal year at the company’s expense.” …The company says the perk is an exception to its normal policy on spousal travel, because of Mr. Halls’s “extensive international travel obligations.” …Last year, Mr. Halls’s spousal travel reimbursement cost the company $123,000 plus another $112,000 to cover the taxes that would have been owed on the perk. In the filing, the company notes that starting this year, it will no longer cover the gross-up.

via Footing the Bill for a Spouse’s Travel – DealBook Blog – NYTimes.com.

Filed under: Compliance Programs, Conflicts of Interest, Health Law, Personal Posts, , ,

Top 25 Lawyers Behind the Deals of the Year – DealBook Blog – NYTimes.com

Wow.  It’s a sign of the times when the vast majority of notable deals are hightlighted as non-traditional M&A related to bailouts and collapses! Remarkable times.

Only six of the dealmakers on the list this year were recognized for their involvement in conventional mergers-related deals (most are at the bottom of the list except for those involved in InBev’s purchase of Anheuser-Busch and Mars’s purchase of Wrigley). The various distressed deals and government–brokered mergers topped the list…

Here were the deals noted in American Lawyer:

1. Bank Bailouts: H. Rodgin Cohen, Sullivan & Cromwell

2. Bank of America’s Merrill Lynch acquisition: Edward Herlihy, Wachtell, Lipton, Rosen & Katz

3. Lehman Bankruptcy: Harvey Miller, Weil, Gotshal & Manges

4. TARP: Lee Meyerson, Simpson Thacher & Bartlett

5. A.I.G. Bailout: Michael Wiseman, Sullivan & Cromwell

6. IndyMac Purchase: Paul Glotzer, Cleary Gottlieb Steen & Hamilton

7. InBev’s Anheuser-Busch Acquisition: Francis Aquila, Sullivan & Cromwell

8. Fannie, Freddie Conservatorships: Harold Novikoff, Wachtell, Lipton, Rosen & Katz

9. FGIC Rescue: Corinne Ball, Jones Day

10. Federal Interventions: Thomas Baxter Jr., Federal Reserve Bank of New York

11. Calpine, Solutia Bankruptcies: Richard Cieri, Kirkland & Elli

12. KazMunayGas Pipeline Renegotiation: George Kahale III, Curtis, Mallet-Prevost, Colt & Mosle

13. Mars’s Wrigley Acquisition: John Finley, Simpson Thacher & Bartlett

14. Latin American Project Financings: Cynthia Urda Kassis, Shearman & Sterling

15. A.I.G. Bailout: Marshall Huebner, Davis Polk & Wardwell

16. Visa I.P.O.: S. Ward Atterbury, White & Case

17. Independent Director Representations: Robert Joffe, Cravath, Swaine & Moore

18. Vallejo Bankruptcy: Marc Levinson, Orrick, Herrington & Sutcliffe

19. Clearwire Asset Acquisition: Joshua Korff, Kirkland & Ellis

20. Sirius-XM Merger: Joe Sims, Jones Day

21. Verizon Wireless’s Alltel Acquisition: Jeffrey Rosen, Debevoise & Plimpton

22. Triarc’s Wendy’s Acquisition: Paul Ginsberg, Paul, Weiss, Rifkind, Wharton & Garrison

23. Citigroup Bailout: George Bason Jr., Davis Polk & Wardwell

24. Washington Mutual Bankruptcy: Marcia Goldstein, Weil, Gotshal & Manges

25. A.I.G. Bailout: Eric Dinallo, New York State Insurance Department

via Top 25 Lawyers Behind the Deals of the Year – DealBook Blog – NYTimes.com.

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Signs of Pessimism Ahead of Tulane M.&A. Conference – DealBook Blog – NYTimes.com

In advance of the Annual M&A conference in Tulane, a survey of participants revealed significant pessimism concerning the near term future of transactional work.   These are the guys that ostensibly have their ear to the ground regarding economic activity.  According to the Deal Book Blog, it’s better than 50% that we won’t recover to prior transactional levels (i.e., certainly not economic levels) of 2007 for five years:

69 percent of respondents believe it will take up to five years to return to the level of M.&A. activity seen in 2007 — up sharply from the 42 percent who shared that view in 2008. Meanwhile, only 29 percent of respondents maintain there will be signs of recovery in a year to 18 months — down from 52 percent last year.

via Signs of Pessimism Ahead of Tulane M.&A. Conference – DealBook Blog – NYTimes.com.

Filed under: Personal Posts, , ,

How to Save General Motors

In its Dealbook Blog, the New York Times presents a solution by several leading bankruptcy attorneys.  GM has an admitted $100 billion negative net worth.  It cannot survive as structured and it cannot be restructured without some strong decision-maker that can cram very unpleasant concessions down the throats of stakeholders.  In any other scenario, that’s a bankruptcy process.  The authors recognized that this is not an ‘ordinary’ bankruptcy, but it is not without precedent.  They also observe:

The current public debate is misplaced over whether or not bankruptcy is the solution to G.M.’s problems. There is a public misconception about what bankruptcy means for a business enterprise. Bankruptcy can mean liquidation, or it can be a means of renewal, taking a financially distressed business and creating a viable company by restructuring or eliminating burdensome contracts, reducing debt, and securing new financing. Chapter 11 is such a process; it is flexible; and it can, and must for G.M., be quick. The paramount goal of the G.M. bailout should be the expedient creation of a viable G.M. Core. A sale to a G.S.E. as part of a Chapter 11 proceeding seems to us to be exactly the process to achieve that goal.

It is worth a read.  And this (or a variation of it) is what’s going to happen, eventually, even if the economy suddenly bottoms out and begins a climb back upward.  There’s no political process to solve this but for unending government cash flows to these insolvent entities.  And I don’t think the taxpayers have the stomach for the kind of cash that will require over the next six months even.  Further, Obama’s axing of the CEO of GM, GM’s recent change of tune regarding its considering bankruptcy, the strict time lines for GM to strike its own deal as set down by the administration, as well as Obama’s commitment that warranties would be backed by the full faith and credit of the US (which was a main argument by the automakers regarding why the could not go into Chapter 11) are not inconsistent with some bankruptcy process being the end game.

See also U.S. Plan Sees Easing of G.M. to Bankruptcy from the New York Times DealBook on

via Another View: How to Save General Motors – DealBook Blog – NYTimes.com.

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Healthcare Economist · Think Aloud: A tool for experimental economists

In his Healthcare Economist Blog, Jason Shafrin discusses a new paper that asks the the pressing economic question:  are individuals rational (in face of some pretty kooky decisions that people sometimes make).  He reviews a recent study that asks participants to “talk outloud” when they make a decision.  And, as it turns out, maybe we are rational, but the assumptions that we bring to the table are kooky.  He gives some examples from the study.   It’s a good lesson for those doing such research (are my assumptions the same as potentially idosyncratic assumptions of my test group?).  And also a psychological question for the rest of us — what is “rational” is often based upon the baseline assumptions that people bring to the table.  Maybe it’s there that the rational decision-maker model breaks down.  Ryan, Watson, and Entwistle (2009) ”Rationalising the irrational: a think aloud study of discrete choice experiment responses” Health Economics, v18(3):321-336.

via Healthcare Economist · Think Aloud: A tool for experimental economists.

Filed under: Health Law, Personal Posts, Risk Management, ,

Finding a Doctor Who Accepts Medicare Isn’t Easy – NYTimes.com

A New York Times article on April 1, 2009 discusses some trends: (i) a national shortage of internists, (ii) more internists and other primary care physicians refusing to accept Medicare entirely or at least new Medicare patients, and (iii) boutique/concierge  medicine.

On the first two points:

[T]he American College of Physicians, the organization for internists, estimates that by 2025 there will be 35,000 to 45,000 fewer than the population needs — and internists are increasingly unwilling to accept new Medicare patients. In a June 2008 report, the Medicare Payment Advisory Commission, an independent federal panel that advises Congress on Medicare, said that 29 percent of the Medicare beneficiaries it surveyed who were looking for a primary care doctor had a problem finding one to treat them, up from 24 percent the year before. And a 2008 survey by the Texas Medical Association found that while 58 percent of the state’s doctors took new Medicare patients, only 38 percent of primary care doctors did.

On the last point:

Another, more expensive option is concierge or “boutique” care, which comes in two forms. In the most popular kind, doctors accept Medicare and other insurance, but charge patients an annual retainer of $1,600 to $1,800 to get in the door and receive services not covered by Medicare, like annual physicals. Before signing up and paying the retainer, patients should get a written agreement spelling out which services the doctor will bill Medicare for and which the retainer covers. And always check carefully for double-billing…The other form of concierge medicine — doctors who have opted out of Medicare — is more expensive still. Fees range as high as $15,000 a year and cover office visits, access to the doctor when care is needed, referrals to specialists and thorough annual physicals…Dr. Knope, the author of “Concierge Medicine: A New System to Get the Best Healthcare,” has this kind of practice in Tucson. His patients sign a contract agreeing to pay $6,000 a year for individuals and $10,000 a year for couples. The fee covers office visits, physical exams and phone consultations, and Dr. Knope will meet patients in the emergency room, see them in the hospital and occasionally make house calls…A list of about 500 concierge doctors throughout the country is available on Dr. Knope’s Web site, http://www.conciergemedicinemd.com.

via Finding a Doctor Who Accepts Medicare Isn’t Easy – NYTimes.com.

Filed under: CMP, Concierge Medicine, Health Law, Medicare, Payment, Primary Care, Reform, , , ,

The Health Care Blog: “Mr. Obama, Tear Down These (Hospital) Walls”

On the Healthcare Blog, Rober Wachter analyzes the recent NEJM report on hospital readmissions, the related

[T]he DRG system created a big black hole, and it is time to fill it. It’s called the post-discharge period. And one large part of the detritus emerging from that hole is readmissions. You probably saw this week’s NEJM study by Stephen Jencks (a former Medicare official and now a Baltimore-based consultant), and my pals Mark Williams and Eric Coleman, of Northwestern and Colorado, respectively. The study found that 20% of Medicare patients are readmitted within a month of discharge, and one-third return within 90 days. Even more remarkably, by a year out more than half of patients (56%) discharged from an acute care hospital are re-hospitalized. The authors estimate that the cost of preventable readmissions was $17 billion in 2004 (the study year), which would make it more like $25 billion today.

via The Health Care Blog: “Mr. Obama, Tear Down These (Hospital) Walls”.

Wachter also summarizes some interesting points of the study:

Like so many things in healthcare, there was striking geographic variation in readmission rates – from a low of 13% in Idaho to 23% in Washington, D.C.

There were also variations by DRG, with the highest readmission rates in patients with heart failure, psychosis, vascular and cardiac surgery, and COPD – pointing the way toward targeted interventions.

More than half the patients readmitted within 30 days appeared not to have had an outpatient visit between hospital discharge and readmission, perhaps another target for intervention.

Most (70%) surgical patients who are readmitted come back for a medical diagnosis such as pneumonia or UTI.

Approximately 30% of readmitted patients come back to a different hospital, so hospitals will underestimate the extent of their readmission problem by looking solely at their own bounce-backs.

via The Health Care Blog: “Mr. Obama, Tear Down These (Hospital) Walls”.

Wachter continues and and discusses why this is becoming critical (healthcare reform/savings dollars) and the health system’s current state as it relates to discharge planning/readmissions:

The Obama budget plan depends on figuring this out. The budget, which aims to save $300 billion (which used to seem like a lot of money) in Medicare/Medicaid costs over the next decade, includes a projected $26 billion in savings from “driving down hospital readmission rates for Medicare patients” …The manifestations of this myopic focus on hospitalization as the unit of analysis can be seen in the paucity of attention that hospitals give post-discharge care. Studies have chronicled a litany of post-discharge disasters…In other words, when it comes to post-discharge care, we suck…Despite powerful literature that shows that simple interventions – like post-discharge phone calls or the use of a transitions coach – can lead to impressive improvements in post-discharge care and decreased readmission and return-to-ED rates, few hospitals have put these interventions in place.

Wacther then makes an observation concerning financial efforts to address the system’s performance in this area:

Harvard’s Arnie Epstein reviews the policy initiatives addressing readmissions – including those that are here today (publishing readmission rates on the Web) and those being actively discussed (financial penalties to hospitals with high readmission rates). But the Cool Kid on the Payment Block is “bundling” – aggregating  payments for doctors and hospitals for a period of time after an illness (an “episode of care”) in an effort to create accountable integrated entities that will improve care across the continuum (the entities somehow have to split up the spoils between hospitals, hospitalists, SNFs, primary care docs, specialists, care coordinators… Have fun with that). Epstein’s verdict: worthy of pilot studies, but “the likelihood that [bundling] will prove to be a successful model is still uncertain.”

He recognizes the challenges, and the laments, of hospitals, that have difficulties in controlling other healthcare provider’s post-discharge data.  Why, hospitals ask, can you hold us responsible if we are not in control of this.

I would also put on the table that if the government goes this route, query if it makes any sense to maintain Medicare CoP restrictions on promotion of hospital/health system owned and controlled providers — such as those exist for home health.

He observes that there are tools ready out there to assist hospitals in this area, including those developed through the Society of Hospital Medicine and its “splendid” Project Boost.

Finally, he observes that “I, like you, don’t know where the money will come from for all of this.”   I tend to disagree.  I pretty much know where (most of) the money will come from — where the largest portion of the Medicare premium dollar comes from — inpatient admissions.   Get ready!

Filed under: Comparative Effectiveness Rearch, Health Law, Medicare, Payment, Quality Reporting, Reform, Risk Management, , , ,

Doctors Urge End to Corporate Ties – NYTimes.com

The NY Times Health Blog on April 1 reports that JAMA published a paper in its April 1, 2009 edition.   The paper recommends that medical professional associations adopt stricter conflict-of-interest guidelines.  Mere disclosure of financial ties to drug and medical device companies is not sufficient.  They also advocate barring members industry financial ties from entering leadership positions and participating in influential committees within the association.

The blog further reports that:

The authors are particularly adamant that professional medical associations should neither accept corporate money to underwrite the development of practice guidelines nor allow members with financial ties to industry to serve on committees that develop the guidelines, which are usually widely adopted as the gold standard for medical practice. … “The consensus here was quite clear: You do not want the piper calling the tune,” said David J. Rothman, a professor of social medicine at Columbia University. “We ask that these groups make every effort to get to zero percent and, knowing that it is very difficult to do that, that they move as rapidly as possible to no more than 25 percent,” referring to how much of their support should come from industry.

Commentary from Marjorie Powell, senior assistant general counsel for Pharmaceutical Research and Manufacturers of America was also reported in the blog, reminding of the amount of money that industry provides for necessary research and other support of healthcare providers.

“The vast majority of the research is funded by pharmaceutical companies,” Ms. Powell said. Important decisions regarding practice guidelines might be made, she said, by “very junior people who have no experience.”

via Doctors Urge End to Corporate Ties – NYTimes.com.

Note a similar post in the WSJ Health Blog.

Filed under: Conflicts of Interest, Drug Policy, Health Law, Pharmacy, Reform, , , ,

Authors of Psychiatric Guidelines Get Funding from Drug Makers – Health Blog – WSJ

The WSJ Health Blog reports a significant portion of those writing the APA’s treatment guidelines have financial ties to industry.

[A]mong 20 authors of the guidelines for treatment of depression, dipolar disorder and schizophrenia, 18 had at least one financial tie to a drug maker, and 12 had ties in at least three categories, such as consulting, research grants, speaking fees or stock ownership.The guidelines are a powerful influence on the way doctors treat patients. This week, big-name docs argued in a JAMA paper that medical specialty groups, which put out the guidelines, should tightly limit their funding from industry. (Drug trade group PhRMA responded that industry funding helps doctors obtain important medical information.) Earlier this year, amid news that many heart-disease guidelines aren’t backed up by rigorous scientific testing, an editorial in JAMA argued that guidelines “often have become marketing tools for device and pharmaceutical manufacturers.”

via Authors of Psychiatric Guidelines Get Funding from Drug Makers – Health Blog – WSJ.

In the referenced Boston Globe article one of the authors Dr. Roy Perlis, after noting that the guidelines in his area promote generics and non-pharmeceutical interventions states:

“My job is to find better treatments for my patients. These are awful illnesses. People really suffer,” he said. “And the people who are most responsible for developing new treatments right now are the pharmaceutical companies. What is being lost in all this is that if I didn’t work with them, I couldn’t do my job as a scientist – the part of my job that says we have people who are suffering that need new treatments.”

Filed under: Conflicts of Interest, Health Law, Pharmacy, Reform, Risk Management, , , ,

Hospital Doors Revolve for Many Medicare Patients – Health Blog – WSJ

The WSJ Health Blog reports on April 2, 2009 that MEDPAC is recommending restructuring hospital payments in a “bundle” to incentive hospitals to minimize readmissions of Medicare patients.  We’ll see how this plays out, but I can certain envision greater integration of bundled prospective payments for, at least, certain types of admissions.

Some 20% of Medicare patients discharged from the hospital are readmitted within a month, and 34% return within three months, according to a study published in the current New England Journal of Medicine. Unplanned rehospitalizations cost Medicare $17.4 billion in 2004, the study says…MedPac, a commission that advises Congress on Medicare policy, has recommended that Medicare start a pilot program in which “bundled” payments extend beyond the first hospital stay to include, say, the first 30 days after discharge. The idea, which is also part of President Obama’s budget proposal, is that if hospitals get paid fixed rates for caring for certain conditions — and they don’t get paid more for those same conditions if patients return — hospitals will have a financial incentive to reduce the risk of readmission.

via Hospital Doors Revolve for Many Medicare Patients – Health Blog – WSJ.

Filed under: Comparative Effectiveness Rearch, Health Law, Medicaid, Medicare, Payment, Quality Reporting, Reform, , , ,

The Washington Independent » Rick Scott on His Health Care Record

The NY Times did an article on Mr. Rick Scott recently. Also of note, The Washington Independent interviewed Rick Scott on March 31, 2009.  You’ll recall him as the ousted CEO of Columbia/HCA after their trillion dollar fraud settlement with the federal government.  He’s back in the headlines as a ‘conservative’ voice against a potential Obama healthcare reform initiative.  I note only due to his comments on Columbia/HCA at the time.

RICK SCOTT: There’s no grudge. First off, if you go back and look at what we accomplished at Columbia/HCA, it was the lowest prices and best outcomes. I left and nothing happened to me. I can’t do anything about what people want to complain about. But if you look at what we’re doing, we’re doing the right things.

TWI: What, specifically?

RICK SCOTT: If you go look at Solantic [which Scott co-founded in 2001], we have transparency on prices, we’re dramatically less expensive than everyone else and we have a great service. Or go back and look at Columbia, look at all the objective measures. Go look at joint commission, accommodation, at accreditation. If you look at the top 100 hospitals, we started with less than seven percent of them. My last year, we had 27 percent of those hospitals. If you look at my management team, all of my management team went on and ran hospital companies.

TWI: People can still say, “Look, this was the guy who resigned in the biggest fraud settlement in American history.”

RICK SCOTT: But, you know, we were the biggest company. If you go back and look at the hospital industry, and the whole health care industry since the mid-1990s, it was basically constantly going through investigations. Great institutions, like ours, paid fines. It was too bad.

via The Washington Independent » Rick Scott on His Health Care Record.

Filed under: AKS, CMP, Drug Policy, Executive Compensation, Health Law, Reform, Risk Management, , ,

Healthcare Economist · Comparison of Pharmacists and Primary Care Providers as Immunizers

In his Healthcare Economist blog, Jason Shafrin writes about a recent paper he wrote with John Fontanesi, Jan Hirsch, Sarah Lorentz, and Debra Bowers and had published in American Journal of Pharmaceutical Benefits.  The paper (which I have not reviewed) analyzes the efficacy and quality of immunizations as provided in primary care offices and pharmacies in California.  The abstact is below and observes that from a consistency, cost and productivity stand point, pharmacies might be a better alternative. 

This study examines the potential role of “alternative community immunizers,” specifically pharmacists, in providing immunization services. A convenience sampling of almost 700 adults eligible for vaccinations was taken from 15 ambulatory care settings and 11 pharmacies in San Diego, California between 2006 and 2008. The results of the study found that patient characteristics and beliefs were similar between primary care and pharmacies, but pharmacies proved more consistent in following safety protocols; had lower unit costs; and were more efficient, with greater productivity. We conclude that pharmacies combine the best immunization practices of routine scheduled primary care visits and mass influenza vaccination clinics, but gaps still exist in pharmacies’ ability to effectively transmit immunization records securely and provider willingness to embrace these “alternative immunizers.“

via Healthcare Economist · Comparison of Pharmacists and Primary Care Providers as Immunizers.

Filed under: Comparative Effectiveness Rearch, Drug Policy, Health Law, Pharmacy, Primary Care, Quality Reporting, Reform, Risk Management, , ,

Attack Of The Zombie Biotechs – Forbes.com

Interesting commentary in Forbes.  Obviously alluding to the downturn’s fears of “zombie” banks and automakers, propped up by government bailout, they, instead, discuss small biotech firms, a small number of whom are sitting on R&D for the next generation of breakthrough drugs and biotech therapies.   The start-ups, however, are starved of cash due to the recession and credit crunch’s impact.

Without a major change in the investment environment, most of these companies will either go out of business, be gobbled up by large pharmaceutical firms where their technology will languish or exist only as Zombie Biotechs, a term used by insiders to describe companies with enough cash to exist on paper but not enough to conduct meaningful research and development. These zombie companies tie up capital, hold on to technology that could be developed elsewhere and discourage investors.

via Attack Of The Zombie Biotechs – Forbes.com.

The authors call for:

[A] meaningful tax incentive would be beneficial to the biotech industry, would eventually benefit the larger pharmaceutical industry, would yield more breakthrough drugs for sick people and would foster continued U.S. leadership in pharmaceutical R&D. This small investment through preferential tax treatment would yield tremendous return for individuals, investors and the economy as a whole.

In addition to the Forbes article, New York Time’s Deal Book had a similar article entitled Small Medical Companies Feel Recession’s Pinch on

In relatively recent op-ed peices, Thomas Friedman of the New York Times has been calling for similar stimulus focus.   Here’s what he said on 2/21/2009:

You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.

via Op-Ed Columnist – Start Up the Risk-Takers – NYTimes.com.

Filed under: Biotech, Health Law, Reform, , , , ,

A Lesson on Health Care From Massachusetts – NYTimes.com

In the March 28th NYT:

In any effort to restructure American health care, two interconnected goals inevitably compete for primacy. One is providing health coverage to the uninsured…The other is slowing the relentless and unsustainable growth of health costs…President Obama[‘s] …positioning suggests he has put cost first…. Mr. Obama’s strategy is to sell the expansion of access — largely through public insurance programs — as inseparable from serious efforts at innovation and restraint…[T]he lawmakers and strategists behind the Massachusetts plan strongly defend their incremental approach. Only by deferring the big decisions on cost containment, they said in recent interviews, was it possible to build a consensus among doctors, hospitals, insurers, consumers, employers and workers for the requirement that all residents have health insurance.

“The [Massechusetts] concept,” Mr. Kingsdale said, “[was] to sequence reform in some way to do the really hard thing, which is expanding access, before we do the nearly impossible thing, which is containing costs. [For the US] don’t want to end up holding 50 million uninsured hostage to cost containment.” ***Massachusetts did not create [a government sponsored] plan [such as being floated by the Obama administration], choosing instead to offer subsidies that make commercial policies more affordable. Diane Archer, co-director of the Health Care for All Project at the left-leaning Institute for America’s Future, questioned whether that put enough competitive pressure on insurers. “If we want to bend that cost curve down, it’s through the public option that we’re going to do it,” she said. …. Although health reformers in Massachusetts acknowledge that the fiscal and political landscape in Washington is profoundly different, there is broad agreement among them about the importance of mandating coverage for adults. The insurance lobby has said that if Washington required coverage for all, it would end the practice of denying coverage to those with pre-existing health conditions. …If history is a guide, the success of health reform may depend on whether the White House and Congress can give interest groups enough to keep them on board.

via A Lesson on Health Care From Massachusetts – NYTimes.com.

Filed under: Health Law, Reform, , ,

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