On Slinkys, Fleas, and Health Care and Nursing Reform

1. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

2. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

3. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

4. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

5. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

6. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

7. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

8. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

9. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

10. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

11. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

12. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

13. Thomas Cox Ursine On Slinkys, Fleas, and Health Care and Nursing Reform

14. Whole, Part, or Hole?

15. Slinky looks a lot like the normal curve – If Slinkys could they would move in the shape of normal curves Insurance risk transfers to providers are eerily similar to a Slinkys patterns as we shift hands Sometimes it is mostly in the left hand, others the right Insurer loss ratios wobble: Low to High Slinky’s rhythmic pattern is manifest in loss ratios Slinkys gone wild: Katrina, AIG, Health care finance The Importance Of The Slinky

16. Retained insurance risks are like a tight, stable Slinky Insurance risk transfers are like a stretched out Slinky If hands are too far apart, Slinky collapses If risk portfolios are too small, insurers collapse Failure to support our health care system from known risks is like failing to hold your Slinky with two hands Risk transfers impair the health care system and public health The Importance Of Slinky

18. The side to side motion of the Slinky is akin to shifting revenues and costs of insurers and health providers When Slinky is out of balance we see increasing disparities in health care, access problems, declining public health indices, human suffering Slinkys stretched beyond their structural integrity limits are like flawed finance mechanisms – on the edge If we appreciate Slinky’s pattern, we can appreciate the pattern of health care (finance) reform and its likely impact on nursing The Importance Of Slinky

19. Risk theory (RT) does not assume nor produce certainty. It quantifies uncertainty, the fleeting, ephemeral nature of human experience RT should be the method of choice for understanding nursing phenomena from a Rogerian perspective RT, like choreology*, is the aesthetic and scientific study of the performance art of nurses and nursing Dance is no less aesthetic because we document it and the documentation is its own aesthetic... Joan and Rudolf Benesh 1956 Risk Theory & Aesthetics

20. Quantitative work – its quantitative Qualitative – Ongoing discourse on health care finance Critical social theory – Deconstruct dominant paradigms Conservative – Call for a return to traditional values Liberation – Reveals hidden truths Empowerment – Provider/Consumer enlightenment Holism – Details threats to holism in finance mechanisms Hermeneutics – Re-interpretation of the word “Is” as in “What is insurance?” Looking for research $ – Fertile ground – nobody is doing it Want to promote Rogerian perspectives – Acausality and the serendipity of pattern and others may actually “get it” Adopt your chosen perspectives

21. AIG's Financial Products division wrote hundreds of billions of dollars in credit default swaps AIG had insufficient surplus and inadequate reserves AIG was a Slinky stretched to the point of collapse Stockholders and taxpayers had to “bear” the burden of Slinky’s collapse What Can We Nurses Learn From AIG?

22. Whole, Part, or Hole?

23. Health facility Marketing/Finance divisions act like AIG’s Financial Products division Sell services then tell nursing to “make it work” Revenues are inadequate and facilities lack resources Cost cutting measures exacerbate reduce inadequacy Nursing and nurses struggle with scarce resources, cost cutting imperatives, lack of redundancy, end up providing inadequate care Clients bear the burdens: delayed/denied care, long waiting times, and unresponsive providers The Slinky, AIG and Nursing

24. Managed care and capitation are gold standards and dominant paradigms in health care reform But risk transfers are pervasive: Medicare and Medicaid managed care, Prospective Payment Systems for Hospitals, Physicians, Long Term Care and Home Health, Occurrence payments, Pay for performance, Prometheus… Reform that does not address the Slinkyesque impact of inefficient risk management is meaningless A national health insurer is a first, incomplete, step without risk management reform How Do Risk Transfers Arise

25. Uncertain costs assumed for fixed payments “Insurance” “Insurer” has unpleasant implications in meetings between providers and clients – so advocates avoid “insurance” Euphemism: Providers manage “financial risks” caused by their own inefficiency not “insurance risks” Financial risks exist at the start and persist during contracts Providers do not know how to become “efficient” and efficiency always involves tradeoffs – who benefits from efficiency and who is hurt… Why Health Providers Are Insurers

26. Whole, Part, or Hole?

27. We have not learned the lessons: Providers/Insurers should have had resources adequate to serve clients for weeks, not hours or days You get paid on XX/01 to provide care through XX/31 Pre-paid, population focused, payment models can not pay providers enough for these risks or fund their true costs Hospitals and NHs woefully unprepared for a certain event Neither providers nor transferors have been held to account nor are they likely to be… “Who could have anticipated…” Syndrome Katrina & Health Care Reform

28. Risk management through real insurance is key How insurers manage risk – the Slinky Effect How insurer size effects efficiency: loss ratio variation and maximum sustainable benefits Nurses are affected by comprehensible forces It is easy to understand insurance – insurance was in use long before modern actuarial risk theory What We Need to Understand About Health Care (Finance) Reform

29. Everyone keeps $10,000; $100,000 in reserve $10,000  $3.07 Trillion idled $100,000  $30.7 Trillion idled De-regulate insurance and cross State lines Insurer misconduct is common, de-regulation would increase misconduct with little recourse for victims Tax credits for purchasing individual insurance Individual underwriting costs exceed tax breaks Extend litigation protections Litigation protections reward past/future misconduct Deconstructing Myths

30. The normal curve is without an aesthetic equal Regularity, symmetry, ease of definition, perspicacity, and near universal applicability To the mathematically trained it is the equivalent of the best opera, ballet, art, music, cuisine The dynamic motion of a Slinky is like the random aspect of insurer loss ratios, a cyclical pattern of ups and downs, the intensity and rhythm of which vary with the size, shape, and extension of the Slinky The Patterns Are ExquisiteAll It Takes Is Appreciation

31. A Slinky in balance Assumptions Writes 1,000,000 policies per year Charges $4,000 per person Expected Loss ratio = $0.75 Expense ratio = $0.15 Profit margin = $0.05 Risk premium = $0.05 Insurers select portfolios from normally distributed portfolio collections with Standard Error = $0.05 Insurer has probability 0.9987 of remaining solvent Providers and Insurers are EFFICIENT!!!! Exemplar Insurer - Slide 1

32. Implications Probabilities Earns profits > $0.05 (LR<$0.80) 0.8413 Breaks even (No operating loss) 0.9772 Remains solvent (LR<$0.90) 0.9987 Financial Revenues $4,000,000,000 Maximum sustainable benefits $3,000 Surplus required for solvency $202,400,000 Exemplar Insurer - Slide 2

33. Whole, Part, or Hole?

34. Slinky ImbalanceProbabilities of Higher Loss Ratios By Insurer Size Loss ratios higher than $0.85 are operating losses for insurers. Insurer must draw against surplus to pay current costs when LR > $0.85 Our Exemplar can sustain a loss of $0.90 but will become insolvent above that level and will not be able to write new policies close to that level.

35. Comparing Insurers By Size Slinky says: Standard errors of portfolio collections by insurer size 30,700 insurers (10,000) policies) 0.5000 3,070 insurers (100,000 policies) 0.1581 307 insurers (1,000,000 policies) 0.0500 National health insurer (307,000,000 policies) 0.0029

36. Comparing Insurers By Size Slinky says: Probability of profitability by insurer size 30,700 insurers (10,000) policies) 0.5398 3,070 insurers (100,000 policies) 0.6241 307 insurers (1,000,000 policies) 0.8413 National health insurer (307,000,000 policies) 1.0000

37. Comparing Insurers By Size Slinky says: Probability of loss ratios > 0.85 (Net operating loss) 30,700 insurers (10,000) policies) = 0.4207 3,070 insurers (100,000 policies) = 0.2635 307 insurers (1,000,000 policies) = 0.0228 National health insurer (307,000,000 policies) = 0.0000

38. Comparing Insurers By Size Slinky says: Surplus requirements by insurer size 30,700 insurers (10,000 policies)$1,726 Billion 3,070 insurers (100,000 policies) 462 Billion 307 insurers (1,000,000 policies) 62 Billion National health insurer needs no surplus $0.00

39. All insurers seek profits of $0.05 or higher with probability 0.8413 (The Exemplar Insurer’s level) The maximum sustainable benefit is calculated by subtracting the Se for each insurer from the maximum possible payout of $0.80 Maximum Sustainable Benefits

40. Insurers seek profits of $0.05 or higher with probability 0.8413 (The Exemplar Insurer’s level) Calculate the maximum sustainable benefit by subtracting Se from the maximum payout of $0.80 consistent with profit objective. $0.80 - 1 * Se Exemplar: = $0.80 - $0.05 = $0.75 Maximum Sustainable Benefit

41. ***** Comparing Insurers By Size ***** Slinky says: Maximum sustainable benefits per person 30,700 insurers (10,000 policies) $0.3000 3,070 insurers (100,000 policies) $0.6419 307 insurers (1,000,000 policies) $0.7500 National health insurer $0.7971

42. Comparing Insurers By Size Slinky says: Maximum sustainable benefits in $ per person 30,700 insurers (10,000 policies) $1,200 3,070 insurers (100,000 policies) $2,568 307 insurers (1,000,000 policies) $3,000 National health insurer $3,189

43. Comparing Insurers By Size Slinky says: Benefit distribution efficiency by insurer size 30,700 insurers (10,000 policies) 37.50% 3,070 insurers (100,000 policies) 80.24% 307 insurers (1,000,000 policies) 93.75% National health insurer 99.64%

44. Whole, Part, or Hole?

45. We see the impact of risk dis-aggregation on insurer efficiency The smaller the insurer, the lower the Maximum Sustainable Benefit Why are health services researchers failing to identify and quantify a service capacity loss this large? Why did decades of research fail to connect cigarettes to smoking and lung cancer and heart disease? Health Services & Disparities Research

46. Ethics: Old & New

47. Exactly the opposite of how they should Cut costs: Cheaper remote suppliers – 100s of miles away Central storerooms/Limited supply access Eliminate redundant staff – Send nurses home Just enough equipment for routine needs Strain Capacity: Keep beds filled, appointments booked Constant turnover Staff/Resources fully committed - No slack Rely on “just in time” resource replacement Dependent on supply chain integrity How Do Providers Deal With Risk?

48. Maintain much larger supply stores Distributed supplies and increased access Maintain redundant staff More equipment than needed for routine needs Create more capacity: Keep beds in reserve, spare appointments Reduce patient flow – let staff regroup Develop/Maintain slack resources “Well ahead of time” resource replacement Decrease dependence on supply chain Reduce demands on staff Maintain ability to respond to unusually high demand How Should Providers Deal With Risk?

49. Providers and clients are in “voluntary” relationships Providers well being independent of client choices Acute and chronic clients increase revenues Providers free to open/close facilities at will Dissatisfied clients can go elsewhere Providers not obliged to stay in natural disasters Providers not obliged to maintain redundant resources Ethical conflicts – Who we agree to serve… Old Fee For Service Paradigm

50. Providers and clients are in “involuntary” relationships Provider’s well being depends on client choices Acute and chronic clients increase costs Providers not free to open/close facilities Clients stuck in potentially unresponsive networks Providers - obliged to stay in natural disasters Providers should maintain redundant resources, not rely on supply chain integrity Ethical conflicts – Who we deny, undisclosed roles Pre-payment Paradigm