Managed Care - A Variant of Looterism?

I follow several economic and financial blogs and I came across this piece on looterism yesterday.  For those of you not interested in clicking on the blog post, looterism is defined as maximizing private benefit irrespective of a goal of creating value or "private benefit regardless of the damage."  The author is focused on economic examples like banking corruption.  If you actually follow the politics and corruption in our financial system there turn out to be endless examples.  Dao references an earlier paper that nicely describes the current dynamic of maximizing extractable value rather than net economic worth so that the current creditors are left holding the bag.

I can't think of  better example of looterism than managed care.  Starting at the top end, what exactly occurs when a managed care company decides that they are not going to pay for an inpatient hospitalization for a patient with suicidal thinking.  It gets more complicated in a hurry if that person has no housing, a history of actual suicide attempts, and a substance abuse problem.  What happens if they say that they can be seen in an outpatient visit despite the fact that visit is two weeks away and it will involve a 15 minute conversation and a prescription that  also may not be covered by the managed care company?  I am a psychiatrist - so all of these denials are abhorrent to me, but what is the economic analysis of this situation?

The economic analysis is straightforward.  The managed care company is not creating any value.  Their product is supposed to be patient care and the situation as I described it is anything but patient care.  Managed care advocates might say they are creating value by being better stewards of the resources.  That is quite a stretch when they have essentially destroyed inpatient psychiatric care by promoting their mantra that a person needs to be "dangerous to oneself or others" in order to get admitted.  Forget the notion that things are out of control at home and nobody has slept for a week.  If the patient doesn't use the suicide word in the emergency department they are not getting in.

That completely artificial barrier to hospitalization has destroyed inpatient psychiatric care as a resource.  People come in a crisis and many leave in the same crisis.  There is no time for stabilization or a thoughtful analysis of the problem.  Short crisis stays and inadequate reimbursement has a corrosive effect on staff morale, resources for the physical plant, and the quality of care delivered.    Less and less value is created.

Eventually, staff with expertise can no longer tolerate the environment - especially when they are seeing more people and they are less able to help them given the managed care restraints.  These staff leave and move to a more suitable patient care environment.  The loss of knowledge workers creates even less value but it is a critical strategy in extracting value from mental health services and putting it somewhere else.  If knowledge workers can't be demoralized managed care can always come up with a strategy to simply not pay them or pay them very little.  The outpatient equivalent of inpatient care is seeing high volumes of outpatients - often for the sake of producing billing documents.  The associated appointments are often low in value.

I would say that looterism is alive and well in the medical industry.  You don't have to look very far in the health care economics field or your own health plan.  The associated marketing campaigns that talk about high quality care associated with looterism should be cautiously approached.  But that is a story for a different day.

George Dawson, MD, DFAPA

Francisco Dao. Looterism: The Cancerous Ethos That is Gutting America.  August 7, 2012.