Nudge, or Fudge?
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The Financial Times reports (here) on scandal in behavioral economics, focused on a Harvard professor whose specialty was honesty. “The controversy, which centres on the use of allegedly fraudulent data in published papers, is the latest to hit the field of behavioural science and psychology research. Some well-publicised findings in the discipline have proved hard to replicate, casting a shadow over the highly modish branch of management studies and social science.”
Also, (here), in a follow up, the FT reports that “The episode is the latest blow to a field that has risen to prominence over the past 15 years and whose findings in areas such as decision-making and team-building are widely put into practice. Companies from Coca-Cola to JPMorgan Chase have executives dedicated to behavioural science, while governments around the world have also embraced its findings. But well-known principles in the field such as ‘nudge theory’ are now being called into question.”
The FT reports, “While the claims are a fresh blow to behavioural science, it is not the first time its findings have come into question since Richard Thaler and Cass Sunstein brought the field to popular attention with their 2008 book Nudge.” Sunstein also brought behavioral economics to the White House, coinciding with a period in which CMS promoted physician (and other health field) compensation schemes based on principles such as “nudges,” “value-based,” “alternative,” and incentivized” reimbursement for medical care as CMS staffers thought it should be practiced.
The FT adds, “The exposure of fabricated data in dozens of research projects overseen by Dutch researcher Diederik Stapel a decade ago led to questions about the importance of ‘social priming’, the idea that prompts can change people’s behaviour. Stapel’s downfall led Nobel Prize winner Daniel Kahneman, a father of behavioural research —who cited priming in his cult book Thinking, Fast and Slow — to warn that he saw ‘a train wreck looming’ in the field.”
The director of the UK Behavioral Insights Team told the FT that “The dirty secret of most governments and organisations is that they spend a lot of money, but have no idea if they are spending in ways that make things better.” Historians will recall the late Princeton economist Uwe Reinhardt asking why our health services payment philosophy had to be rooted in “tips.”
DOCTORS, NURSES AND OTHER HEALTH CARE PROFESSIONALS
Private Equity and Doctors, Second Thoughts
The American Antitrust Institute, the Petris Center and the Washington Center for Equitable Growth publish (here) “Monetizing Medicine: Private Equity and Competition in Physician Practice Markets.” The study used claims data from the Healthcare Cost Institute (HCCI) and its data contributors, Aetna, Humana, and Blue Health Intelligence, and was paid for by Arnold Ventures.
Key findings: “Private equity (PE) firms have been increasingly acquiring physician practices across a number of physician specialties since 2012, increasing from 75 deals in 2012 to 484 deals in 2021, or more than six-fold increase in only 10 years; individual PE firms are acquiring competitively significant shares of physician practice markets. In particular, in 28% of metropolitan statistical areas (MSAs), a single PE firm has more than 30% market share by full-time-equivalent physicians, and in 13% of MSAs, the single PE firm market share exceeds 50%.”
Price increases: “When we focus our analysis on markets where a single PE firm controls more than 30% of the market, we find further elevated prices associated with PE acquisitions in each of the 3 specialties with statistically significant results, for gastroenterology (18%), obstetrics and gynecology (16%), and dermatology (13%).” The conclusion: “Increased attention to the competition impacts of PE in physician markets is urgently needed.”
Coverage of the study in The New York Times is (here) and The Washington Post is (here). Separately, the Post reports (here) on anesthesia price gouging by one PE firm rolling up practices in Colorado.
PE Generally, Antitrust Scrutiny
More generally, a report in The Financial Times (here) on the financial performance of firms acquired by PE says “The industry mythology of savvy and efficient operators streamlining operations and directing strategy to increase growth just isn’t supported by data. Instead, there is a new paradigm to understand the PE model, and it’s very, very simple. By and large, as an industry, PE firms take control of businesses to increase debt. As a result, or in tandem, the growth of the business and the rate of spending on capex slows. That’s a simple, structural change, not a grand shift in strategy or a change that really requires any expertise in management.”
The FT also reports (here) increased scrutiny of anti-competitive features of PE acquisitions. A top DoJ official speaks (here) on the importance of vigorous antitrust enforcement in health care. We aren’t alone: the FT reports (here) on PE firms attempting to take advantage of staffing disruption and shortfalls in the UK.
HOSPITALS AND OTHER HEALTH CARE FACILITIES
The Rise of Office-Based Surgery
Outpatient Surgery Magazine (here) reports that “The natural migration of some procedures to physicians’ office settings will likely continue to increase over time, just as many surgeries have shifted over the last few decades from hospitals to ASCs. Technological advances in surgical instruments, imaging systems, diagnostic devices, anesthesia and pain control will pave the way for the relocations. Improvements in these areas will make it easier for patients to avoid traveling to other locations for pre-procedure tests before heading to their doctor’s office for the actual procedures.”
Also, “Reimbursements from payers are likely to grow — and regulations should relax — as the data emerges and practices can show the office locales are safe settings.” The Joint Commission (here) issues 2023 patient safety goals for OBS.
MEDICARE, MEDICAID AND COMMERCIAL HEALTH INSURANCE
340B Bonanza of $9 Billion Coming to Hospitals, But it Must Be Repaid (Budget Neutrality)
HFMA reports (here) that “Hospitals that participate in the 340B Drug Pricing Program stand to receive $9 billion in aggregate lump-sum payments as compensation for underpayments from Medicare during a nearly five-year period.”
“In a proposed rule issued July 7 [here], CMS described how it would provide remedies following a 2022 Supreme Court ruling that the U.S. Department of Health and Human Services (HHS) did not follow proper procedure when it lowered the Medicare reimbursement rate for drugs purchased through 340B by 28.5 percentage points starting in 2018.
“About 1,650 340B-participating hospitals would receive portions of the $9 billion . . . The Medicare payment rate for those drugs during that time frame was average sales price (ASP) minus 22.5%. The lump-sum payment would be intended to increase the compensation to hospitals for those purchases to ASP plus 6%, the rate that was in place through 2017 and then restored last Sept. 28 in the aftermath of the Supreme Court decision.”
“CMS said its reading of the Medicare statute indicates the remedy payments are subject to budget neutrality requirements. Due to those requirements, the higher 340B-related payment rate for 2023 necessitated a reduction of 3.09% in the conversion factor for Medicare outpatient payments to hospitals. Starting in 2025, according to the proposed rule, CMS would reduce the conversion factor for hospital outpatient payments by 0.5% annually.”
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Notes to Fred Hyde, MD, JD, MBA, news@dcmedicalnews.org
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