I already had a ton of respect for John* as a person, and for his exceptional insight dedication to the healthcare industry and as an industry peer. But this November 5th article featuring took him up even a few more rungs on my respect ladder:
*John Halamka, M.D., CIO at Boston s Beth Israel Deaconess Medical Center, was a critic of Stage 3 of the Meaningful Use program even before it was finalized. Now with the final rule out, he d like to see Stage 3 eliminated altogether.
As a read it (…my head nodding “absolutely”), an interesting analogy struck me as to the whole Meaningful Use evolution: The “Game Theory”. The social economic “Game theory” studies how groups of individuals make decisions in order to maximize personal benefits while limiting risks or loss.
Decision Theory is a branch of Game Theory and “argues that preferences among risky alternatives can be described by the maximization of the expected value of a numerical utility function, where utility may depend on a number of things, but in situations of interest to economists often depends on money income”
Generally there is a single best way to play the game to maximize income and reduce risks and costs given the rules of the game.
For example, during the early days of the Meaningful Use program, the best game theory approach for a physician was early enrollment in the meaningful use program in order to maximize incentive payments but not to progress to Meaningful Use stage II that would subject the physician to increased costs. A typical physician would receive maximal payments in the first three years of meaningful use involvement.The best game theory approach would be to remain at meaningful use stage I level and minimize costs associated with advancing to Meaningful Use 2. This was the exact approach taken by best majority of physicians in the meaningful use program.
The rules of the game changed dramatically for the recently announced Meaningful Use stage III rules of engagement.
During Meaningful Use stage I, the compliance requirements were low and the financial benefits were high. During Meaningful Use stage II, most physicians received a declining financial incentive and the compliance requirements and compliance costs were higher so very few physicians adopted stage II today. During stage III, most physicians have received all financial incentives and the rules of the game have changed from a financial incentive “carrot” to a compliance penalty “stick”. The change in the rules of the MU game would suggest the best play for physicians is to minimize penalties in order to maximize net gain because there’s no longer financial incentive to adopt increased compliance costs.
Unfortunately there’s also a parallel Medicare reimbursement “game theory” being played out over the past ten years. Although there is some variation, Medicare rates have decreased by up to 70% during the past 10 years. In many cases, physicians perform medical treatment for Medicare reimbursement rates at less than the cost required to provide the services. The rules of the “Medicare Reimbursement Game” have changed each year for the past 10 years.
Many educated physicians have concluded the best play to the Medicare reimbursement game is to stop accepting Medicare patients because they cannot lose money on each case and make it up by increasing volume. In the private practice world where cost shifting is not as available as in-hospital practice, many physicians have ceased accepting new Medicare patients.
The combination of low Medicare reimbursement rates and increasing costs for compliance with the Meaningful Use stage III compliance mean that most physicians face increasing information technology costs to achieve Meaningful Use stage III compliance or face decreased Medicare reimbursement rates are penalties for not complying. When faced with this dilemma, many physicians have concluded the best play for the Medicare reimbursement/Meaningful Use game is to opt-out of Medicare reimbursement in order to avoid penalties associated with the Meaningful Use stage III program. Many of my colleagues have already come to this conclusion and have implemented this decision.
The social consequences of this best practice of medical game theory could be disastrous. If only 5 to 10% of physicians in the United States decide that the best practice of Medicare/MU game theory is to cease accepting Medicare and withdrawing from Meaningful Use, Medicare would likely collapse. Patients would be driven to already overloaded medical practices and thereby further diminishing their profit margin and likely causing these practices to adopt the same game theory best practice.
In the Game Theory, the only way to change the best practice decisions of educated players in the game is to change the rules of the game.
In general, this would be to increase the incentives for participation in Medicare by increasing reimbursement rates or by increasing financial incentives to adopt Meaningful Use stage III requirements or by very least delaying penalties.
Unfortunately the ONC and Congress have become intoxicated during the past ten years and have not yet sobered up to the realities of Medical Game theory: It is not in the best interests of a medical provider to invest capital to upgrade to meet MU stage 3 requirements in order to maintain the privilege of losing money on every Medicare patient. Doctors may not always be great businessmen but this is in the “no brainer” category.