Friday, January 23, 2015

Nursing Staff Levels and Payments Related to Outcomes

An interesting news item describes a study that was planned in the state of Minnesota but that was unable to be completed.  Some say that the hospitals chose not to provide information.  The hospital association in the state claimed that providing the data would have place an undue burden on the members of the association.  Regardless, it is worth considering what the study was trying to examine.

There have been a number of studies that have asked the question, "What happens when there are lower levels of nurse staffing in a hospital?"  And, as the news item points out, there are some studies that suggest that lower levels of nurse staffing have been associated with failure to rescue after surgical complications, falls, medication errors, and missed aspects of nursing care.

The challenge is that few studies have shown that after a change from a lower level of nurse staffing to a higher level of nurse staffing there is an improvement in these types of outcomes.

Why might there not be?  Perhaps in cross-sectional observations hospitals with higher nurse staffing have other positive characteristics that encourage better outcomes.  In this case, if a hospital simply hires more nurses, that may not solve the problems.  The problems may continue if there are not other structural and systematic changes made in the hospital.

As hospital and health system payments become more dependent on outcomes, what should a hospital do?  If the hospital does not hire more nurses and has poor outcomes, the hospital will have to bear the costs of the extra care for complications without reimbursement.  This could lead to losing money.  If, on the other hand, the hospital hires more nurses it would have to spend more money up front.  The key question is whether this is less costly (and whether it is more predictable) than the cost of poor outcomes.  In addition, it should help to improve the hospital's reputation and bring in more patients.  And if the hospital hires more nurses but there are not other systematic changes that may be necessary, then the hospital will definitely lose financially compared with where it is now.

As we move ahead, having information on the value of increasing nurse staffing (or any other type of staffing in hospitals to improve outcomes) will help to make better resource allocation decisions.  Failing to provide this information is unfortunate.  Hopefully in the future Minnesota hospitals can provide information at the unit level to shed some light on this subject without overburdening their data systems or another state will take up the challenge to conduct such a study.      

Saturday, January 17, 2015

Patient-Centered Supply Chain

In thinking about interesting health care finance topics, the article here caught my attention.   The article discusses the concept of building a so-called "patient-centered supply chain."  The key is to understand what the incentives are, when the incentives push toward this type of arrangement, and how it can help a hospital or health care system particularly as the incentives for achieving better patient outcomes (and not simply providing care for the patient) are made stronger.

The most important thing to recognize is that, in theory, there may always have been incentives pushing this direction.  Specifically, one might ask "why wouldn't an organization want to set up a supply chain that reflects a focus on optimizing the outcomes of patients?"

There has always been a tradeoff between making sure that there is always an abundance of resources at hand for any patient anywhere in the system at any time (which has particularly high costs for inventory that is being held) and the idea of getting the right resources to specific patients just in time--while not being late.  That will lead to lower costs of holding inventory but it takes an investment to set up the information system and change the business practices that will drive the patient-centered supply chain.

Information systems can become more interlinked so that hospitals can link patient conditions and patient care to inventory systems that control where their supply is held and the companies that supply them.  Analytics can be used to predict and anticipate the resources that are needed to care for patients with specific conditions.  Inventory can be held in central locations that can then be sent to the patient care locations on an as needed basis.  As systems grow larger there is a greater opportunity to set up this type of system with centralized inventory control and distribution across the system.

A business must make a decision on the basis of the costs of the information system, the costs o the analytics, the costs of the changing business practices (how supplies are moved) against the savings from reduced holding costs of inventory and the potential savings from improved patient outcomes.  As health care financing changes to focus more on incentivizing the achievement of improved patient outcomes, there will be a stronger and strong incentive to adopt new practices.  

Monday, January 5, 2015

Market Segmentation for Personal Training and the "Information" Economy

In the Wall Street Journal on January 2, there was an interesting article about personal trainers.  In this article it talked about trainers who work at gyms and trainers who work privately.  The latter type make more money per hour, but the downside, as described by the article, is that these individuals have to find their own clientele.

The article described a number of different market segments to which different trainers have appealed.  Individuals who want very challenging workout three days a week for ten minutes a day.  Plus sized women.  Type-A personalities in general.  Even personal trainers for the dogs of otherwise fit people.  (Although my personal experience is that, at least with larger dogs, I'm willing to give up some of the time I would otherwise use for more intense fitness activities to combine spending time with my dog, my dog's fitness, and a little less intense fitness activity for myself, but that is a matter of personal preference.)

An interesting fact to consider is that at least in the New York City area some  personal trainers can charge up to $100/hour.  That is a pretty hefty price to pay for fitness.

The key is market segmentation.  Defining a very narrow niche of the market in which, if the person is able to offer a service that is directly relevant to that narrowly defined group, the group is willing to pay a large amount and would not change the quantity demanded much with any price change.  In this case, the trainer can find a relatively small number of individuals, charge a high fee, and make quite a bit of money.  Perhaps even making economic profits by recognizing not only an important segment of the market but also differentiating the service in a way that creates few substitutes for exactly what the personal trainer is providing.

What does this suggest more broadly?  There are many services for which no one will ever be able to charge $100/hour.  But as individuals lead increasingly busy lives and are looking for someone to help to hold them accountable, to offer new insights that they cannot get from friends and family, and to provide expertise that they do not have, people will probably be willing to pay for clearly differentiated services.  This is a terrific example of the "information" economy.  This has nothing to do with information technology.  It has everything to do with being rewarded for having information, understanding those who want the information, and understanding how to communicate that information to those who want it and have the resources to pay for it.

Wednesday, December 31, 2014

Epidemics and Public Goods

In a recent article about Ebola in the Wall Street Journal, Peter Piot, the Director of the London School of Tropical Medicine & Hygiene, referred to epidemics like Ebola as what economists refer to as a public good.  For most readers of the Wall Street Journal, I’d imagine that the economic definition of public good might be familiar.  It might not be for most of those interested in public health but without economics and business training. 

Public goods have two key characteristics: being non-excludable and non-rival.  Non-excludable means that it is impossible to keep someone from experiencing it.  Non-rival means that one person’s experiencing it doesn’t limit another person’s experience.  National defense has characteristics of a public good—everyone in a country experiences it and my enjoyment of the United States’ national defense does not limit anyone else’s experience.

So, an epidemic does have these characteristics—everyone gets to experience the risk and no one is excluded from the exposure to the risk.

While the epidemic has characteristics of a public good, some solutions do not have elements of public goods but instead have externalities.  For example, for a vaccine, if I get the dose no one else can have it.  But, when I get the dose, my protection also provides some amount of protection for those around me.

The funding of public goods comes at the public expense and there must be a way to determine how much of the public good the public desires.  Externalities imply that individuals will either overconsume (in the case of negative externalities) or underconsume (in the case of positive externalities like a vaccine) the good without some type of incentive or enforcement.   

Within national borders or provincial borders within a country, it is possible to have laws that encourage or require specific behaviors, to provide monetary incentives,  or to coordinate activity through a Department of Ministry of Health.  Economists would ask about the costs and benefits of such rules or coordinating efforts.  When the epidemic is within borders the power to regulate, incentivize, and enforce is clear. 

When the epidemic is actually an international pandemic the situation is more challenging.  There is no authority that has the same type of legislative role or public health coordinating role internationally as a government within a province or nation.  As a result, efforts at coordination are, of necessity, more voluntary. 

Given the risks of the emergence of new infectious diseases and the resurgence of old ones, this is a time to consider how best to develop international cooperation for to deal with future international epidemics.  Someone may find a way to provide incentives across countries that are enforceable and that lead to better coordination and appropriate amounts of action.  If not, this is an opportunity for those who want to conduct business (and run countries) with humanity in mind to think carefully about how to encourage stakeholders to act not just with local or national humanity in mind, but with all of humanity in mind. 

Monday, December 15, 2014

Remote Exercise Partners

The most recent article that I found in the Wall Street Journal focusing on exericse talks about two individuals in Tennessee and New York City who take a spin class together.  Why do I find this interesting?

First, it is another example of the value of having someone with whom to undertake an activity.   The old expression is "two heads are better than one."  This is not so much a matter of two heads in the classic sense in which the expression was originally used.  This has nothing to do with getting ideas from two people.  This is almost "two hearts are better than one".  Not in the sense of love as we would use for Valentine's Day.  But rather love of something.  Almost anything.  Having two people together who love to do something can make it much easier to do.  Each can hold the other accountable.  Each can help to encourage the other.  The process of checking on each other can be one of peer mentoring.  Or it could simple be peer pressure.  But the key is that to have someone to engage in an activity and to engage in checking up on progress with the other person can be very helpful to sticking to an activity and working to continue to improve performing an activity.

Second, it is a great way to re-imagine a use of a technology.  Live streaming can be used for so many things.  So, why not use it for doing workouts together.  So far, it seems like it would work best for activities that don't require a person to get up and move around very much.  But it would be very interesting to imagine some type of "visor-cam" that could help individuals to run together whether they are in the same place or not.

So, in exercise, it is wonderful to re-imagine a use of technology to increase interpersonal accountability.  There are many other parts of life in which re-imaginging technologies to help individuals to connect and to grow better in their performance of activities could also arise.  Leadership skills.  Really any skill at work.  Parenting.  Musical instruments.  And any type of concentrated effort will support concentration in general and have spillover into other parts of life as a person chooses to direct efforts that start in one area of life to other areas that need improvement.  People are likely to find useful the opportunity to connect.  Those can find ways to help individuals connect are likely to be the economic and thought leaders of the future.  

Tuesday, December 9, 2014

Prescriptions for Exercise

Yesterday, I came upon an article in the Wall Street Journal that talked about prescriptions for exercise.  This article fascinated me for several reasons.

  1. I have not been to a medical care provider for anything other than an acute GI issue or subsequent to a fall while running since November 2010.
  2. For many years I did not exercise (August 1999-January 2006), but since January 2006, I have gotten myself into shape, taken off approximately 25 pounds and kept them off, and run xix marathons including a 3:09:49.
  3. I recognize that to go from no exercise to a marathon did not occur overnight.  Even from the time I began being physically active again to being comfortable running a half marathon distance (which I had not done since 1986), took me 20 months until Labor Day weekend 2007.
  4. Despite my success I recognize clearly that what has led to my success has largely been driven by accountability.  Accountability to a coach who designed a training program for me to follow from mid-July through the weekend before Thanksgiving and accountability to a friend with whom I trained who challenged me not to let me dream of running a marathon faster than 3:10 slip away in the last four miles.
So,  what are the parallels I see between physicians writing prescriptions for exercise, my own experience, and some basic habit changing (and habit forming) approaches that can lead to success in multiple types of business and career situations?

First, there needs to be a trigger to change a habit.  For me, it was seeing the scale hit 185 pounds, looking at myself in the mirror, and just feeling not good.  For some, it will take someone in authority, like a physician, telling them they need to make a change.

Second, the change needs to start small.  I didn't even run for the first several months.  I just took my dog at the time on longer and longer walks.  That was a level of effort that I could reasonable make.

Third, the change needs to be accompanied by a longer term goal.  Why set the short term goals?  To reach the even longer ones.  but having only long term goals does not usually work.  It is necessary to to find something rewarding long before the long-term goals completely materialize.

Fourth, there needs to be accountability.  In the case of the patients getting prescriptions for physical activity they are accountable to their physicians.  In my case, I was accountable to my coach and fellow runner.

So--a trigger, short and long term goals, and a sense of accountability can be brought together for an incredible outcome.  The challenge is that medical care providers feel so overburdened that sometimes even taking the couple of minutes to discuss physical activity and write a prescription can seem daunting.  And for those who have not been performing any physical activity, when they look at their counterparts who are running 5 to 7 days a week and getting in 30-40 miles per week, they may think, "I could never do that."  But as I tell my less active friends--you don't need to do that.

This type of approach--finding something to trigger a change that is associated with short and long term goals and someone to whom a person is accountable--can generalize to almost any habit a person would want to start (or break).  This could improve personal outlook, job performance, or many other things and make a person happier, healthier, and perhaps even wealthier over time (spending less on health care and perhaps even health insurance premiums in the example here).  Guarantees?  None--as with much else in life.  The only thing even close to guaranteed is that change is more likely to continue with the combination of things discussed above than without.  Ultimately, sticking to the change and making the best of it is left to the individual. 

Friday, December 5, 2014


The other day, I, along with two student leaders from an organization called Net Impact, met with Amy Klosterman.  Amy is involved with an organization she calls TUBA, the acronym for The Uganda-Baltimore Alliance.  Why does she call it TUBA?  Because it revolves around a brass band in Uganda and her US base is Baltimore.  And, in true “Smaltimore” (i.e., Baltimore is really a small town) style, just a couple days after I’d spoken with Amy and the students, I chose a seat at random in a faculty luncheon and ended up next to someone who teaches business communication in our program and who is Amy’s neighbor.  We took some time to continue to discuss the business issues around TUBA.  And that wasn’t the first “Smaltimore” story related to TUBA.  I first found out about the organization when my son, who is now a freshman at the conservatory at Johns Hopkins, played as part of a benefit concert for the organization. 

What is the purpose of TUBA?  First, to promote improved performance by the band members.  They are outside Kampala.  Amy has made numerous trips to work with the group by herself and has taken students from Peabody (the conservatory at the Johns Hopkins University) on one occasion, one student from Peabody on a second occasion, and a high school student from Baltimore City College on one occasion to work with the musicians in Uganda. 

Second, to become self-sustaining.  There are two young men who were part of her earliest group in Uganda who are now leading the organization in East Africa.  They need income to support themselves so that they can lead the other musicians and the organization.

Third, to provide opportunities for a flow of US musicians (whether from Peabody or elsewhere) to Uganda to work with, help train, and make music with the musicians in Uganda.

We spent some time talking about the interest that business students could take in this project.  Amy’s background is a musical one, and the business skills are something she has had to develop and looks to continue to improve or to find others to help her.

We discussed seven challenges that the organization will face.  These are fundamentally business challenges.  If Amy and the team she develops can work through these challenges, she will be able to promote business with humanity in mind in some really exciting ways.  If not, there is a risk to the enterprise that she has developed.  So, it is worth considering what the challenges are and whether they are unique.

First, the goal is to make the Ugandan part of the organization self-supporting.  A key question is “what is actually meant by self-supporting?”  Does that mean no need for donations of any sort?  Does it mean that the two leaders can support themselves but them might still need instruments donated?  What about paying the musicians?  And what fraction of the musicians’ income would this be expected to account for?  The answer to what it will take to make the organization on the Ugandan side self-supporting will vary quite a bit depending on the answer to the first question. 

Second, and still along the lines of needing to define things, what are the set of measures of success?  In particular, are there non-financial measures of success?  Are the non-financial measures going to be on both the US and the Ugandan sides fo the equation?  Or only on the Ugandan side?  Will the measures of success be tangible or intangible?  How will the measures reflect the notion of doing business with humanity in mind?  And how can the criteria be optimized under different financial sustainability levels? 

Third, and following on the discussion of non-financial goals in two places, it is important to consider the resources that need to be managed in two places.  On the US side, at present, the main source of revenue will be donations.  On the Ugandan side the organization has diversified into a new area to try to provide the revenue.  There are both ongoing needs for revenue (salaries) and one-time needs for investment (e.g., building a dwelling to house visitors).  The management of different sources of revenue with different flows of costs in different settings is a non-trivial challenge.  Particularly for an organization that is not a 501(c)(3) organization in the United States yet. 

The diversification question has been answered in part.  They are building a facility to house 400 fryer chickens.  Raising the chickens will have a rhythm because it takes six weeks for them to grow and then the sanitization process before the next group of chickens can come in is 2 weeks.  During that time, the two men whose livelihood will be supported by the chickens can catch up on musical and other pursuits.  The key question with the diversification is whether this was the right one, what are the risks to this potential stream of revenue, and what will happen if it fails.  All standard questions.

To grow the revenue will require more musical activity—and more chickens.  A key question is the appropriate rate of growth.  What can musicians be convinced to do in terms of more activity?  How quickly can expertise in chicken raising by learned?  How much land is available and how much more would be required to grow?  What are the risks of failing to grow?

Sixth, with the potential for growth in musical activities, this raises an interesting question.  Does this mean more practice time and better individual skills for existing musicians?  Does this mean more practice time as a band and better playing as a band?  Does this mean more live events?  And will the band ever be ready for recording?

Finally, when is it time to tell the story?  Of course, Amy and her partners would like to have success and be able to tell a story about success.  As I have learned in many aspects of my life there is actually quite a bit to discuss even before the outcome of success or not is known.  Many people will be interested in the process.  What has worked and what has not?  What are lessons learned?  What would Amy and her partners do again?  What would they make absolutely sure NOT to do again?  What are some tough lessons that have been learned?  And what have been the small and big “victories” along the way to the hoped for final measure of success?  The process can be as important as the outcome when sharing information with other social entrepreneurs who are trying to do well by doing good. 

My blog is just one way of sharing that will be read (on average) by 50-100 people.  However, if you are ready this, I would encourage you to share it.  Then, it will be read by, and hopefully inspire, others.  Inspire them to contribute, should the opportunity ever arise.  But more importantly, inspire them to dream big about making a difference for stakeholders in whatever organization they are a part of.

Hopefully, the business school will also provide Amy with an opportunity to address an audience of students, faculty, and staff with her story.  And perhaps some of them will have other ideas or other connects to help Amy and TUBA to share their amazing story, albeit still a work in progress, so that through the connections that are made, the organization can maximize its chances of success.