Nothing like a hip-hop song focused on economics:
April 28, 2011
April 26, 2011
Thoughts from a Surgeon
Some must read stuff on Mish's blog:
Hello Mish
I am a shrugging surgeon, having left practice in disgust that the medical system has no concept of value. Instead of seeking results of therapy, the system focuses on how to pay for the inefficiencies.
The general government mantra is simple: If are you for the kids, the poor, the teachers, the police, the military, the farmers, etc., then it is necessary to keep throwing money at targeted programs without questioning whether the increased spending ever does any good.
While it is obvious to anyone paying attention that most of this spending is a waste, it is unpatriotic to point it out. Yet until there is some accounting for what we get, and a genuine incentive to control costs and add value, we will just keep spending more and more while getting less and less.
I tried to introduce sanity in the form of global fees for operations and outpatient centers that could provide operations for a fraction of the prevailing cost at the local hospitals.
Unfortunately, such programs are feared, even banned by government bureaucrats (and other beneficiaries of governmental bureaucratic waste) who fear genuine competition. I was harassed every step of the way in my efforts to provide value to patients.
Thanks, Ed Schmitt
I sent an email to Dr. Schmitt asking him to expound upon the last paragraph in his email to me. Here is the reply from Dr. Schmitt ...
Hello Mish
It is a long story but I believe I can summarize it for you.
I am a surgeon. I am not practicing now, but once one has invested as much as is needed to become a surgeon, the surgical personality is ingrained into my life. Thus I am still a surgeon.
The early part of my career was consumed by learning the trade, when to operate and how to operate. Once I was in practice it was clear that excellence in practicing medicine was not enough.
Many doctors are not aware of the financial implications of what they do. The thinking is "if insurance pays, then who cares what it costs?"
However, I was too observant of what was really going on around in the hospitals and for my patients. There were huge financial implications for anyone who touched the medical system whether or not they had insurance.
I hate waste and respect value. I saw lots of waste and little value in my daily practice. It became clear that common sense issues regarding a diagnosis were important but overlooked.
For example, when facing a patient's medical problem, the thinking should be along the lines of "What is the most effective way to treat this problem, that causes the least disability, quickest recovery, and is a reasonable in cost"?
While most people lump all medical costs into the category "doctors' bills", it is actually the facility fees and extras that cost far more than I billed.
Since I controlled everything that went on in the operating room, it was up to me to decide what instruments and supplies I needed. In this respect there were huge differences in the cost and functionality of the different options.
I had to have total control over these things to make an impact. The myth is that hospitals control these things for everyone. That is false. They have a contract with huge companies to provide whatever the company offers without a true understanding of what really works.
I had an eye toward getting the job done perfectly for the least cost. I was one of the first general surgeons to put an operating room in my office. I was able to realize great savings on drapes, equipment, and supplies. I love to operate so I could quote a very reasonable price to patients for something that was satisfying and fun to do.
Unfortunately, I couldn't put these global fee packages together for insured patients because the insurance companies didn't have a mechanism to deal with any creative new ideas.
I was even on the boards of some insurance companies. The conversations were extremely frustrating. I was constantly asking questions like "You will let me do these procedures in a facility of lesser quality, a facility that costs five times as much as my office, when my office is fully licensed and inspected, and I will do the operation itself for less than half of what you are used to paying, and you won't let me?"
Mish, I could offer these global fees for patients that didn't have insurance. For example, I charged $750 for a hernia repair, ($1250 for both sides), and this included everything associated with the repair of the hernia and came with a guarantee.
It was obvious to me that the usual way of doing medicine was absurd from the patients point of view. They had a problem they wanted solved and were interested in how much it would cost and how long they would be laid up.
Business as usual would have them see multiple doctors prior to the procedure with lots of lab work that was unnecessary, then have an operation with no warranty and prolonged follow up, with every encounter ringing the cash register.
As long as someone else paid it was just frustrating and wasteful, but when the patient had to pay out of their pocket, it was intolerable. That was what I was trying to address.
Unfortunately, hospitals immediately targeted me. Hospital executives told family doctors not to refer patients to me, anesthesiologists on the staff were forbidden to work in my office, and I was increasingly harassed by the administration.
One hospital threw me off their insurance panels and tried to sanction my medical license. I continued in the outpatient and hospital setting.
An independent surgery center opened in town and rather than continue the fight to have the one in my office, I started using them. That lead to increasing distance from the hospital and my practice becoming almost exclusively outpatient. I started to resent my affiliation with the hospitals. Eventually I let all my hospital privileges go to the least level of involvement.
To make matters worse, credentialing laws require doctors to have some hospital privileges even to had an outpatient surgical practice. Since credentials have to do with how competent one is, you might think that economic affiliation with a surgery center would not have any bearing on hospital credentials.
You would be wrong.
Colorado made it acceptable for a hospital to deny privileges for economic reasons. One city hospital offered me privileges as long as I would sign a document that said I would never in any way criticize the hospital and that if anyone ever thought they heard me doing so, I would surrender my medical license.
This was from a hospital that wouldn't let me have any say in the gloves I wore, bandages I applied, or sutures I used. I figured it was a good time to shrug.
I love fly fishing and have had a lot in Alaska on the best river in the world so I built a house and live up north fishing, skiing, kayaking, and reading. It is sad because most doctors know the system doesn't work and are very frustrated. They don't dare do anything to try to fix it because of the things that have happened to me and many other creative docs who are also shrugging.
You are very welcome to quote me, I wish there was some creative way to help move the medical system toward value.
Thanks, Ed
Hello Mish
I am a shrugging surgeon, having left practice in disgust that the medical system has no concept of value. Instead of seeking results of therapy, the system focuses on how to pay for the inefficiencies.
The general government mantra is simple: If are you for the kids, the poor, the teachers, the police, the military, the farmers, etc., then it is necessary to keep throwing money at targeted programs without questioning whether the increased spending ever does any good.
While it is obvious to anyone paying attention that most of this spending is a waste, it is unpatriotic to point it out. Yet until there is some accounting for what we get, and a genuine incentive to control costs and add value, we will just keep spending more and more while getting less and less.
I tried to introduce sanity in the form of global fees for operations and outpatient centers that could provide operations for a fraction of the prevailing cost at the local hospitals.
Unfortunately, such programs are feared, even banned by government bureaucrats (and other beneficiaries of governmental bureaucratic waste) who fear genuine competition. I was harassed every step of the way in my efforts to provide value to patients.
Thanks, Ed Schmitt
I sent an email to Dr. Schmitt asking him to expound upon the last paragraph in his email to me. Here is the reply from Dr. Schmitt ...
Hello Mish
It is a long story but I believe I can summarize it for you.
I am a surgeon. I am not practicing now, but once one has invested as much as is needed to become a surgeon, the surgical personality is ingrained into my life. Thus I am still a surgeon.
The early part of my career was consumed by learning the trade, when to operate and how to operate. Once I was in practice it was clear that excellence in practicing medicine was not enough.
Many doctors are not aware of the financial implications of what they do. The thinking is "if insurance pays, then who cares what it costs?"
However, I was too observant of what was really going on around in the hospitals and for my patients. There were huge financial implications for anyone who touched the medical system whether or not they had insurance.
I hate waste and respect value. I saw lots of waste and little value in my daily practice. It became clear that common sense issues regarding a diagnosis were important but overlooked.
For example, when facing a patient's medical problem, the thinking should be along the lines of "What is the most effective way to treat this problem, that causes the least disability, quickest recovery, and is a reasonable in cost"?
While most people lump all medical costs into the category "doctors' bills", it is actually the facility fees and extras that cost far more than I billed.
Since I controlled everything that went on in the operating room, it was up to me to decide what instruments and supplies I needed. In this respect there were huge differences in the cost and functionality of the different options.
I had to have total control over these things to make an impact. The myth is that hospitals control these things for everyone. That is false. They have a contract with huge companies to provide whatever the company offers without a true understanding of what really works.
I had an eye toward getting the job done perfectly for the least cost. I was one of the first general surgeons to put an operating room in my office. I was able to realize great savings on drapes, equipment, and supplies. I love to operate so I could quote a very reasonable price to patients for something that was satisfying and fun to do.
Unfortunately, I couldn't put these global fee packages together for insured patients because the insurance companies didn't have a mechanism to deal with any creative new ideas.
I was even on the boards of some insurance companies. The conversations were extremely frustrating. I was constantly asking questions like "You will let me do these procedures in a facility of lesser quality, a facility that costs five times as much as my office, when my office is fully licensed and inspected, and I will do the operation itself for less than half of what you are used to paying, and you won't let me?"
Mish, I could offer these global fees for patients that didn't have insurance. For example, I charged $750 for a hernia repair, ($1250 for both sides), and this included everything associated with the repair of the hernia and came with a guarantee.
It was obvious to me that the usual way of doing medicine was absurd from the patients point of view. They had a problem they wanted solved and were interested in how much it would cost and how long they would be laid up.
Business as usual would have them see multiple doctors prior to the procedure with lots of lab work that was unnecessary, then have an operation with no warranty and prolonged follow up, with every encounter ringing the cash register.
As long as someone else paid it was just frustrating and wasteful, but when the patient had to pay out of their pocket, it was intolerable. That was what I was trying to address.
Unfortunately, hospitals immediately targeted me. Hospital executives told family doctors not to refer patients to me, anesthesiologists on the staff were forbidden to work in my office, and I was increasingly harassed by the administration.
One hospital threw me off their insurance panels and tried to sanction my medical license. I continued in the outpatient and hospital setting.
An independent surgery center opened in town and rather than continue the fight to have the one in my office, I started using them. That lead to increasing distance from the hospital and my practice becoming almost exclusively outpatient. I started to resent my affiliation with the hospitals. Eventually I let all my hospital privileges go to the least level of involvement.
To make matters worse, credentialing laws require doctors to have some hospital privileges even to had an outpatient surgical practice. Since credentials have to do with how competent one is, you might think that economic affiliation with a surgery center would not have any bearing on hospital credentials.
You would be wrong.
Colorado made it acceptable for a hospital to deny privileges for economic reasons. One city hospital offered me privileges as long as I would sign a document that said I would never in any way criticize the hospital and that if anyone ever thought they heard me doing so, I would surrender my medical license.
This was from a hospital that wouldn't let me have any say in the gloves I wore, bandages I applied, or sutures I used. I figured it was a good time to shrug.
I love fly fishing and have had a lot in Alaska on the best river in the world so I built a house and live up north fishing, skiing, kayaking, and reading. It is sad because most doctors know the system doesn't work and are very frustrated. They don't dare do anything to try to fix it because of the things that have happened to me and many other creative docs who are also shrugging.
You are very welcome to quote me, I wish there was some creative way to help move the medical system toward value.
Thanks, Ed
New Blog
I wanted to make you aware of a new, must-read website I have helped to create for anyone and everyone with even a remote interest in college football.
The site is called Coaches By The Numbers (http://coachesbythenumbers.com) and is dedicate to the analysis of college football coaches by the numbers.
Over the last six months, we have collected (outside of normal business hours of course) over 800,000 pieces of information on college football coaches. Going back to 2001, we have collected detailed statistical and biographical information on every Head Coach, Offensive Coordinator, and Defensive Coordinator for all 120 FBS programs. We have also collected statistical information on Head Coaches for all 126 FCS programs dating back to 2001.
We have come up with a proprietary system to rank and rate Head Coaches and Coordinators using the available statistical data. In addition to our proprietary rankings, we have come up with 21 additional rankings for coaches. We have rankings for Recruiting, Revenues, NFL Draft Picks, Graduation Rates, and almost any other stat you can or can’t think of. In addition to the obvious data on coaches, we have collected the not so obvious data as well. We have information on what position a coach played in college, what state he is from, and what school he attended. Our coach profile pages are unparalleled in their attention to detail and scope.
If you have ever felt that you knew you were right about a coach but just didn’t have access to the appropriate information, look no further than http://coachesbythenumbers.com.
If you have ever wanted to disprove your coworker’s “gut feeling” on a coach, look no further than http://coachesbythenumbers.com.
If you have ever wondered if you can prove statistically that the SEC, Big Ten, ACC, etc. has the best coaches, look no further than http://coachesbythenumbers.com.
If you ever wondered why you keep losing money on your can’t miss bets, look no further than http://coachesbythenumbers.com.
Please browse our site and let us know what you think and please forward this email to anyone that has a vested interest in college football.
As we are just getting off the ground with this new venture, it would help a lot if friends and family would support us by subscribing to our site. We offer one month, six month, and annual membership options.
Also, don’t be afraid to click on a few of our sponsors while visiting the site as we generate revenue this way as well. Be sure to “like” us on Facebook and follow us on Twitter as well.
Thanks in advance for your support and we look forward to everyone’s feedback on the site.
April 22, 2011
Other People's Money
Every now and again my mom will give me a gift card to Starbucks.
When I am shopping at Starbucks without my mom's money, I tend to keep in pretty simple. I will by a Grande Coffee and leave it at that.
When I am shopping with my mom's money, I tend to buy a Venti Coffee, Sausage Sandwich, the Wall Street Journal, and whatever suits my fancy on that particular day.
To say the very least, with mom's money, I become a very irresponsible consumer.
The chart below goes a long way in explaining one of the reasons health care costs have exploded over the last 20-30 years.
When we have other people's money to play with, we seem to alway play a little more recklessly.
When I am shopping with my mom's money, I tend to buy a Venti Coffee, Sausage Sandwich, the Wall Street Journal, and whatever suits my fancy on that particular day.
To say the very least, with mom's money, I become a very irresponsible consumer.
The chart below goes a long way in explaining one of the reasons health care costs have exploded over the last 20-30 years.
When we have other people's money to play with, we seem to alway play a little more recklessly.
April 14, 2011
Obama's Budget Speech
From Congressman Paul Ryan's office on Obama's budget speech:
- Counts unspecified savings over 12 years, not the 10-year window by which serious budget proposals are evaluated.
- Postpones all savings until 2013 – after his reelection campaign.
- Runs away from the Fiscal Commission’s recommendations on Social Security – puts forward no specific ideas or even a process to force action.
- Calls for the appointment of another commission, after mostly omitting from his Fiscal Year 2012 Budget any of proposals submitted by the commission he appointed last year.
- Non-specific framework fails to meet his Fiscal Commission's own deficit-reduction goals.
- Taxes:
- Proposes to raise taxes on the American people by more than $1 trillion, devastating our fragile economy and stifling job creation.
- Endorsed the Fiscal Commission’s ideas on taxes, which specifically called for lower tax rates and a broader base, but then called for higher tax rates. Which is it?
- Government health and retirement programs are growing at more than twice the speed of the economy. At the current rate of spending, revenue would have to rise “by more than 50 percent” just to keep debt at its current level, according to the Government Accountability Office. That means tax increases across-the-board, now and in the future.
- Medicare:
- Instead of proposing structural reforms that would actually reduce health care costs, the President proposed across-the-board cuts to current seniors’ care.
- Strictly limits the amount of health care seniors can receive within the existing structure of unsustainable government health care programs.
- Gives more power to unelected bureaucrats in Washington to determine what treatments seniors should or shouldn’t get, against a backdrop of costs that continue to rise.
- Conceded that the relentlessly rising cost of health care is the primary reason why the nation is threatened by debt, and implicitly conceded that his health care law failed to solve the problem.
- Eviscerates the only competitive element anywhere in health-care entitlement programs – the competition amongst Part D prescription-drug plans – which allowed the drug benefit to come in 41 percent under budget.
- Medicaid:
- Acknowledges that the open-ended financing of Medicaid is a crippling financial burden to both states and the federal government, but explicitly rejected the only solution to this problem, which is to give states the freedom they need to design systems that work for the unique needs of their own populations.
- Defense:
- Proposes more cuts on top of $78 billion in cuts included in his own defense budget, which he proposed just two months ago – all at a time when he continues to task the military with new missions.
- Secretary Gates has said that the military needs 2 percent – 3 percent real growth just to keep executing the missions that DOD has already been assigned.
- Secretary Gates described deficit reduction plans that let budget targets drive defense policy as “math, not strategy.”
April 13, 2011
Uh-Oh! Cov Lite Coming Back Strong
This is either a really good sign that the market is recovering or a really bad sign that history is simply doomed to repeat itself:
From Clusterstock:
In retrospect, the incredible volume of cov-lite loans -- loans with few strings attached -- was one of the surest signs of a credit bubble. That obviously ended in tears.
Anyway, they're back.
In his latest presentation, Jeff Gundlach takes a look at cov-lite volume and notes that through just one quarter of 2011, we've already surpassed 2010's level of cov-lite. We're already on pace for one of the highest years ever.
With the Fed keeping rates incredibly low, and options for yield not widespread, it's no wonder his presentation was called Deja Vu All Over Again:
From Clusterstock:
In retrospect, the incredible volume of cov-lite loans -- loans with few strings attached -- was one of the surest signs of a credit bubble. That obviously ended in tears.
Anyway, they're back.
In his latest presentation, Jeff Gundlach takes a look at cov-lite volume and notes that through just one quarter of 2011, we've already surpassed 2010's level of cov-lite. We're already on pace for one of the highest years ever.
With the Fed keeping rates incredibly low, and options for yield not widespread, it's no wonder his presentation was called Deja Vu All Over Again:
April 1, 2011
Not a Good Sign
From Scott Hodge with the Tax Foundation:
| B. Percentage shares of richest 10% | |||
|---|---|---|---|
| 1. Share of taxes of the richest 10% | 2. Share of market income of the richest 10% | 3. Ratio of shares for richest 10% (1/2) | |
| Australia | 36.8 | 28.6 | 1.29 |
| Austria | 28.5 | 26.1 | 1.1 |
| Belgium | 25.4 | 27.1 | 0.94 |
| Canada | 35.8 | 29.3 | 1.22 |
| Czech Republic | 34.3 | 29.4 | 1.17 |
| Denmark | 26.2 | 25.7 | 1.02 |
| Finland | 32.3 | 26.9 | 1.2 |
| France | 28 | 25.5 | 1.1 |
| Germany | 31.2 | 29.2 | 1.07 |
| Iceland | 21.6 | 24 | 0.9 |
| Ireland | 39.1 | 30.9 | 1.26 |
| Italy | 42.2 | 35.8 | 1.18 |
| Japan | 28.5 | 28.1 | 1.01 |
| Korea | 27.4 | 23.4 | 1.17 |
| Luxembourg | 30.3 | 26.4 | 1.15 |
| Netherlands | 35.2 | 27.5 | 1.28 |
| New Zealand | 35.9 | 30.3 | 1.19 |
| Norway | 27.4 | 28.9 | 0.95 |
| Poland | 28.3 | 33.9 | 0.84 |
| Slovak Republic | 32 | 28 | 1.14 |
| Sweden | 26.7 | 26.6 | 1 |
| Switzerland | 20.9 | 23.5 | 0.89 |
| United Kingdom | 38.6 | 32.3 | 1.2 |
| United States | 45.1 | 33.5 | 1.35 |
| OECD-24 | 31.6 | 28.4 | 1.1 |
Want to Be More Efficient? Quit Making Left Turns
WHY UPS IS SO EFFICIENT: "OUR TRUCKS NEVER TURN LEFT"
BOB STOFFEL, SENIOR VP OF UPS, REVEALED AN UNUSUAL WAY TO SAVE TIME AND MONEY TO FORTUNE:
STOP MAKING LEFT-HAND TURNS.
ENGINEERS MAP OUT EVERY ROUTE, HE SAYS, AND PROVIDE RIGHT-TURN ONLY DIRECTIONS TO DRIVERS.
THIS SEEMINGLY SILLY STRATEGY HAS PAID OFF: UPS'S ROUTING SOFTWARE SHAVED 20.4 MILLION MILES OFF THEIR ROUTES LAST YEAR* WHILE DELIVERING 350,000 MORE PACKAGES. IT ALSO DIMINISHED CO2 EMISSIONS BY 20,000 METRIC TONS.
DON'T BELIEVE IT? MYTHBUSTERS TRIED IT OUT. THE SHOW HAD DRIVERS TAKE THE SAME ROUTE, ONLY SOME MADE RIGHT TURNS WHILE OTHERS TURNED LEFT. THE RESULTS WERE SIMILAR.
WHY DOES THIS WORK? A FEW REASONS, SAYS STOFFEL. TURNING RIGHT DECREASES SAFETY HAZARDS AND DELAYS. IF A DRIVER IS STUCK WAITING FOR TRAFFIC TO PASS WITH A LEFT BLINKER ON, IT'S GOING TO SET THEM BACK. JUTTING OUT INTO TRAFFIC IS ALSO A GOOD WAY TO GET SIDE-SWIPED, ESPECIALLY WHEN DRIVING A BIG TRUCK.
*THE 20.4 MILLION FIGURE IS NOT JUST FROM MAKING RIGHT-HAND TURNS. IT IS THE TOTAL MILES THE ROUTING SOFTWARE HELPED UPS SAVE LAST YEAR IN ALL CAPACITIES.
BOB STOFFEL, SENIOR VP OF UPS, REVEALED AN UNUSUAL WAY TO SAVE TIME AND MONEY TO FORTUNE:
STOP MAKING LEFT-HAND TURNS.
ENGINEERS MAP OUT EVERY ROUTE, HE SAYS, AND PROVIDE RIGHT-TURN ONLY DIRECTIONS TO DRIVERS.
THIS SEEMINGLY SILLY STRATEGY HAS PAID OFF: UPS'S ROUTING SOFTWARE SHAVED 20.4 MILLION MILES OFF THEIR ROUTES LAST YEAR* WHILE DELIVERING 350,000 MORE PACKAGES. IT ALSO DIMINISHED CO2 EMISSIONS BY 20,000 METRIC TONS.
DON'T BELIEVE IT? MYTHBUSTERS TRIED IT OUT. THE SHOW HAD DRIVERS TAKE THE SAME ROUTE, ONLY SOME MADE RIGHT TURNS WHILE OTHERS TURNED LEFT. THE RESULTS WERE SIMILAR.
WHY DOES THIS WORK? A FEW REASONS, SAYS STOFFEL. TURNING RIGHT DECREASES SAFETY HAZARDS AND DELAYS. IF A DRIVER IS STUCK WAITING FOR TRAFFIC TO PASS WITH A LEFT BLINKER ON, IT'S GOING TO SET THEM BACK. JUTTING OUT INTO TRAFFIC IS ALSO A GOOD WAY TO GET SIDE-SWIPED, ESPECIALLY WHEN DRIVING A BIG TRUCK.
*THE 20.4 MILLION FIGURE IS NOT JUST FROM MAKING RIGHT-HAND TURNS. IT IS THE TOTAL MILES THE ROUTING SOFTWARE HELPED UPS SAVE LAST YEAR IN ALL CAPACITIES.
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