Dain threw up the next shot—it missed the iron and backboard.
“Airball.”
Dain walked over and picked up his gym towel and blotted his face before draping it around his neck. He stared at Drummond.
“I don’t know,” Drummond said.
50
P
eter Lowsley said, “the US health care system is the most advanced and specialized in the world due in large part to financial incentives built into the industry. Capital allocation requires the potential to earn income streams sufficient to amortize research and development and provide investors with attractive returns.
“Access to basic health care should be a right for all humans, but Americans ought to have the option to ‘buy up’ if they can afford a richer benefit. The buy-up option is necessary to spur continued R and D in medicine.”
“Great minds think alike,” Drummond said. “I recommended a two-tier benefit design in my thesis.”
“PHFffffffssssshhh—who farted?” Gupta demanded. “Jiang, it came from your direction. I thought Asians expectorated in public.”
“Not me,” Jiang cried out, her face beet red, her embarrassment exacerbated by cultural differences.
Baturina came to her rescue, stooping down to locate the source of amusement, when the sound cycled, “PHFffffffssssshhh.”
“It’s coming from this iPhone.” Baturina held it up, triumphant.
“Perhaps we should place the phone in this pitcher of water so we’re not interrupted again.” Baturina held it just above the pitcher, waiting to see who’d claim the device.
“Uh…I would appreciate it if you didn’t,” Gupta said in a sheepish voice. “It’s just an app. I thought it would enliven the discussion…You can set a timer delay.”
Drummond was sure Jiang would’ve thrown a fastball at Gupta if she’d found the phone. “I’ll work with Baturina to prepare schedules for the next week. Look for the schedules to be posted near the kitchen. We’ll continue to have debriefs in the evening. Our first deadline is in six days—we’re required to submit a progress report. In the interim, work independently. I will meet with you over the next few days.”
51
C
hris Drummond, Peter Lowsley, and Rakesh Gupta were seated in the Karama conference room.
“OK, Wonderboy, show us how your software works. The dossier indicated the enhancements you programmed into Informatics Systems’s SAS software were so revolutionary they said you wear a cape and fly around the technology park.”
“Did it say that?”
“No—the superhero metaphor was mine—but there were heaping praises.”
“Our objective is to uncover interventions to reduce health care spending—right? We need to build into our modeling algorithms that predict future health care spending when we change inputs. The software uses programmed logic sequences and decision rules to automate these calculations. We can test the accuracy of the algorithms by analyzing data retroactively. Think of it as an exercise to identify causation.” Gupta grabbed a blue marker from the tray below the whiteboard and created a flow chart to aid in his explanation.
“The process is simple. We identify the root causes—the inputs—and the software creates a series of algorithms to calculate the outcome. The software ranks
the sensitivity of the input to changes in the predicted outcome…It tells us what inputs are impactful by using differential analysis to identify links between inputs, teasing out causation versus correlation. The software accuracy can be enhanced by improving the quality of the inputs. For example, longitudinal data is more accurate than finite points in time. And we can add a trending coefficient if we know future inputs will deviate from historical data.”
Lowsley had his hands laced, drumming his thumbs together, listening to Gupta. He gave Drummond one of those looks—
the kid talked a good game…differential analysis, causation, data smoothing, was he for real
? They would find out soon enough.
“Let’s look at hospital pricing. What are the inputs that affect hospital pricing?”
“Wages, benefits, supply costs, the volume of procedures performed, and profits,” Drummond said.
“What’s a good source to obtain the data inputs you just identified?”
“Medicare Cost Reports. Hospitals submit financial reports on an annual basis to CMS.”
“I define the input, for example, ‘nurse wages,’ and create a pointer by directing the software to a specific file containing the input values. The source can be a database of raw values or a single proxy for the input.”
“What if the user isn’t sure which inputs to select?” Lowsley asked.
“The software can identify potential inputs by parsing the universe of data—in this example, the software would parse the entire Medicare Cost Report file. The software
will scan the database, perform an analysis, and rank the sensitivity, making recommendations for actual algorithms. For each input, it gives the relative percentage of the input’s explanatory value—a high percentage value explains substantially all of the outcome variability.”
Lowsley and Drummond pondered the statements Gupta made. He was twenty-three years old and in many ways had the maturity of an adolescent. His peach-fuzz facial hair and heavy metal T-shirts were a distraction, but when it came to high-level software programming, he knew his stuff.
“I’m anxious to see it. What work product do you need from us?”
“If you can describe the inputs, I can run the application. I’ll also need to know the source for the input values, i.e. raw data or descriptive statistics…the shape of the distribution. It’s best to use a file of raw data. I don’t need you to capture the data as long as I have access to a file name or URL address.”
“Can we discuss another project for you while we pull this data together?” Drummond asked.
“Shoot.”
“The health care industry suffers from ‘black box syndrome.’ The industry lacks transparency. Health care information needs to be ubiquitous to realize the efficiencies of a market-based system.”
Lowsley nodded his head in agreement. He had picked up a handful of pistachio nuts and was cracking the shells with his teeth.
“Health plans consume twelve percent to sixteen percent of the premium dollar for claims processing,
provider contracting, and premium collection. These services could be performed at less expense if financial companies entered the market; claims processing and payment are similar to check processing and credit card transactions.
“We need to figure out how to capture all data—from premium dollar to provider payment and everything in between—more efficiently. Gupta, use your gifts as a
technologist
to imagine a better solution.”
“Data collection and aggregation…What about analyses?” Gupta asked.
“The market will analyze the data. IBM and others specialize in helping companies extract valuable information from mountains of data.”
52
T
he team finished its evening debriefing while Cala cleaned up the kitchen.
“Thank you for dinner, Cala.”
“Yes, thank you.”
“Thank you, it was wonderful.”
“You’re welcome.” Cala turned on the dishwasher and excused herself for the night.
“Has anybody been able to get cell coverage?” Gupta asked.
“No.”
“Me neither,” Drummond said.
“I tried on the other side of the island,” Lowsley said. “Nothing.”
“The loftiest place on the island is the rooftop. I checked this afternoon,” Dain said.
“What were you doing on the roof?”
“Antenna reconnaissance—I wanted to know their communications capability. It appears to be satellite. Restricted outbound communication…If you read the agreement, it’s referenced in the indemnification provision. Unauthorized communication results in forfeiture of all prize money and opens you up to a lawsuit,” Dain
said. “We were placed here because it’s a controlled environment. I thought I’d chat with Cala’s husband Fahad…see what he’ll share. Cala says he speaks Arabic.”
“They’ve disabled e-mail functionality,” Gupta said. “They’re controlling Internet access at the fire wall.”
“I was able to log onto Pub-Med this afternoon,” Lowsley said.
“I logged on last night to play cyber chess without a problem…Three games with opponents on three continents,” Dain said.
“I’ve had no problems viewing MSN and other news websites,” said Vogel.
“What are you going to do with your money?” Gupta said, changing the direction of their conversation. “I authenticated at least fifty times to make sure the money was real—and still in my bank account.”
“And was it?” Dain quizzed.
“Yes, last time I looked, but they’re blocking the site.”
“He who giveth also taketh away. As soon as the funds hit my account, I wire transferred them to seven other accounts, two offshore.”
“Why?”
“You must’ve read it somewhere…It’s common knowledge—you can’t trust Clive Donald.”
“Lowsley, you wire transferred your funds, didn’t you?”
“Of course.”
“Vogel?”
“Within sixty seconds of receipt. To an offshore account in the Cayman Islands,” Vogel said.
“How about you, Baturina?”
“Converted to gold bullion—same day.”
“That sucks, Gupta—how are you going to stay focused, worrying about your prize money?” Dain asked. “Tough luck, kid.”
53
C
hris Drummond looked out the conference window to the southeast. In the distance he saw a blue container ship—a speck, but it reminded him of the Port of Tacoma, and he was suddenly homesick, thinking about how his life had upended.
Was Sarah still alive? What would he do without Barbara?
He could feel his body slump in the chair, depressed.
“Are you OK, Drummond?” Lowsley asked. “You seem a little preoccupied.”
“Homesick…I bet you’re missing your wife and kids.”
“Definitely…but this is important work. I feel like it’s a once-in-a-lifetime experience.”
Drummond sat up in the chair.
“According to CMS, the Office of the Actuary, and the National Health Statistics Group, seven percent of all health care dollars are consumed by program administration, compared to less than two percent for Medicare’s administrative costs,” Lowsley said.
“Commercial health plans have bloated overhead,” said Drummond. “I calculated the mean administrative overhead for commercial plans at nine percent to ten percent. And many nonprofits operate with twelve percent to sixteen percent overhead.”
“It’s a joke,” Lowsley said. “The other issue is health plans are over accruing for future claims costs—padding their expected claims makes them look less profitable. They’ve accumulated huge war chests of cash reserves. It’s egregious. In my state, the attorney general is trying to clamp down on this practice. The cash should be returned to subscribers or used to reduce premiums.”
“Health plans aren’t going to accept our assessment.”
“Uh-huh.”
“They’ll argue health plans add value providing quality assurance, health education, and risk management services.”
“Window dressing. These services can be transitioned to ACOs. They’re better equipped to handle this because they’re in the trenches of care delivery. The key to unlocking health plan savings will be cost-efficient data collection and exchange of information.”
“What do you think the potential is for health plan savings if we recast the traditional health plan model as one of transaction processing?”
“If we’re at seven percent now, and Medicare is less than two percent, savings of two percent to five percent is reasonable…It’s significant.”
“I’ll write up the list of URL addresses for Gupta. This data is on file with the Office of the Insurance Commissioner in most states,” Lowsley said.
54
C
hris Drummond, Peter Lowsley, Rakesh Gupta, and Sheryl Vogel met at the tennis courts. Lowsley and Vogel were members of a racquet club, so they were split. Gupta and Drummond drew toothpicks, and Drummond was paired with Vogel, Gupta with Lowsley. Jiang and Baturina sat at a circular table at the edge of the court. They positioned the direction of the umbrella so the canvas provided full shade.
“Volley to see who serves.”
Lowsley hit an easy forehand to Drummond. He put his racket on the ball and returned it down the line to Gupta, who popped it up in the air. Vogel stepped into it with a vicious overhead slam and smoked it past Gupta to win serve.
“Get the hell out of the way Drummond when you see me set up for the shot—I almost took your head off,” Vogel said.
“We felt this session ought to be a full team discussion. The granddaddy of health care economic colloquy is America’s overutilization,” Lowsley asserted. “Can you hear me?” Lowsley asked, looking toward Baturina and the others. They nodded.
“The medical literature indicates thirty percent of all health care services delivered add minimal value. Thirty percent! The citation is referenced in the handouts Drummond gave us.”
“Patients aren’t being dragged into the operating room,” Vogel said.
“True—health insurance is patient driven. A provider can recommend treatment and must document medical necessity by describing the patient’s limitations, but plans authorize payment if the patient chooses treatment. Because the patient’s out-of-pocket cost is a fraction of the total bill, there’s no initiative to evaluate the incremental benefit…And it’s often difficult to qualify. The result: significant resources are consumed with minimal incremental benefit.”
“If we understand what drives overutilization—and change the rules of engagement—we can realign behavior with our aim for affordability,” Drummond said.
Vogel hit her first serve into the net. Her second serve cleared the net, but Gupta hit it too hard and it sailed out of bounds.
“Fifteen-love.”
Vogel appeared warmed up. Her next serve had velocity, and Gupta was wise enough to let Lowsley return it. He hit a hard forehand with downward spin, and Drummond whiffed.
“Come on, Drummond, you play like a girl,” Vogel said.