March 29, 2009

Centurion To Select Arbitrator For NAFTA Proceedings


We are in the beginning process of selecting arbitrators for our NAFTA proceedings. Under NAFTA articles the parties can choose their own arbitrators. Under Article 3 of the UNCITRAL Arbitration Rules, arbitration proceedings are initiated when the claimant gives the respondent a notice of arbitration. Which has already been submitted to the Government of Canada. This notice can include a proposal for the appointment of an arbitrator, a “notification of the appointment of an arbitrator,” and a statement of claim. An arbitrator can be appointed at any time from the delivery of the notification of arbitration, which was also done by us last week. A proposal for selection of arbitrators was submitted by the Government of Canada we agreed with all of the deal points instead of one. However it is a major one it’s the issue of the newly appointed Secretary General of the International Centre for Settlement of Investment Disputes (ICSID) Meg Kinnear.

Meg Kinnear Elected ICSID Secretary-General Ms. Kinnear was counsel for the Government of Canada in these proceedings before she took her post to become Secretary General at the ICSID. The reason this is important to me besides the obvious conflict. Is the amount of authority the Secretary General has over the dispute resolution process. The Secretary-General of ICSID, is the appointing authority for arbitrations under NAFTA's investment disputes.Under Article 1123, Chapter 11 disputes are presided over by a tribunal of three arbitrators unless the parties to a dispute agree otherwise. Each party may pick one arbitrator; the third arbitrator is the presiding arbitrator and is to be appointed by the agreement of the parties. The specific mechanics of actual appointment of a person as arbitrator are governed by the rules under which the claim is made, unless the parties have agreed to some other procedure. Under the ICSID Convention, the procedures for appointing arbitrators are governed in a large part not by the Convention, but instead by the ICSID Procedure Rules established by the Administrative Council under the authority given to it by Article 6 of the ICSID Convention. In large part, the Additional Facility Rules combine the elements of the ICSID Convention and the ICSID Procedure Rules into one document. In most instances, the rules under the ICSID Convention and the Additional Facility Rules are the same. So what happens if both parties cannot agree on the third arbitrator? You guessed it one party may request the Secretary General to step in.

Appointment by the Secretary-General

Article 1124 of the NAFTA establishes a system by which the Secretary-General of the ICSID may appoint one or more of the arbitrators for a dispute, on application by one or more of the parties to the dispute. This system exists to prevent an intransigent party from holding the process hostage to its refusal to appoint an arbitrator. Such provisions exist in the ICSID Rules and UNCITRAL Arbitration Rules as well.

Here is something else I need to be on the look out for accordingly, in any NAFTA Chapter 11 arbitration that does not come under the tent of the ICSID Convention, there remains, as in any other interna­tional arbitration, the risk that a domestic court, ex­ercising its power to register a NAFTA award, might purport to vacate or refuse to enforce the award.  The key procedural advantages that  ICSID Convention arbitration has namely, nonappealability pursuant to Article 54, under which any ICSID Convention award is tantamount to a final, nonappealable money judgment in each ICSID Contracting State. From an investor’s perspective, it prevents (or at least should prevent) the host state from nullifying an adverse award through action in its own courts. NAFTA also explicitly grants parties the freedom to select their arbitral locale.  Absent such a choice, pursuant to both the ICSID Additional Facil­ity Rules and the UNCITRAL Rules,18 the choice is left to the arbitrators, the only restriction being that the arbitration must take place “in the territory of a Party.” Also NAFTA’s does not expressly require that arbitration take place in a “neutral” forum unconnected with either of the parties. So jurisdiction becomes important as well. So these issues need to be addressed as we move forward to arbitration. Check back later for an update.

March 22, 2009

Canada's Hippocratic Oath And NAFTA

Canada claimed protectionism in the US stimulus bill. But Canada is a hypocrite when it comes to protectionism in their health care system. 

By Melvin J. Howard

Upon meeting with The Government of Canada Foreign Affairs and International Trade office. I have decided that we will proceed with the Arbitration process under NAFTA Chapter 11. There were a number of factors on why I chose to proceed not to mention that we have a strong case against the Canadian government. But I also want to expose the inside secrete barriers that Canada puts up for American health care providers. So knowing this I have made this trade dispute like a military operation where precision and timing are crucial. You have to know what motivates the other side. It would be inaccurate to say that the Government of Canada and its entities are not also motivated by financial objectives to some extent. But when a foreign state entity is involved in a dispute with a private commercial enterprise, commercial considerations typically are not its primary interest. Governments have no shareholders. Their actions are more often influenced by national public policies, economic development goals, political objectives, lobbyists, nongovernmental organizations, multilateral institutional lending requirements, world trade issues, regional public policy, media reaction inside and outside of the country, and other such factors. This must be understood when entering into talks so knowing all of this you begin to form your strategy. And if there is an election going on that was the case in Canada all of these issues are exacerbated.

Now given Canada has enormous power over the operations of foreign investments within their borders. To maximize the prospects for a successful negotiation of a dispute arising out of a foreign investment. I should be aware of the following, know thy enemy I am talking in military terminology of course. Non-the less you should have a very thorough understanding of the sector you are targeting. I have a wealth of knowledge of the Canadian health care system how it is financed and the politics involved.

It is also vital to understand the law governing the entity's activities. With this information, I can determine whether the entity is legally, financially, and logistically independent from the state. This means understanding the "supervisory" relationships between those who run the entity and those who run the state itself. In this regards I am talking about individual Canadian Health Authorities. If the contracting entity is not independent from the state, it may be more productive to negotiate directly with the people who run the state-i.e., the officials who are most likely have the final say on a possible settlement.

You must also understand the relationship between a host state and a private investor, from the host government's point of view, is not simply commercial. Now the Government of Canada has informed me that they will vigorously defend themselves against my claim. That is a standard reaction to most claims or lawsuits where the other party is the defendant you can’t blame them for using it. They also say things like this case has no merit is should be dismissed I never pay attention to those comments Instead I want to learn what makes the government of Canada tick. So I have acquired a sophisticated appreciation of the macro-political, economic and policy issues that are likely to condition the government's negotiating stance. I have to investigate the legislative, executive or other approvals that must be obtained for a settlement to take place.

After assessing that good faith negotiations will not be taking place as per Article 1118 of NAFTA. It is time to move to a formal arbitration as mentioned. Making the trip was against my better judgment but in the spirit of the Article 1118. I wanted to give the Government of Canada the benefit of the doubt now all bets are off. Based on the number of NAFTA cases that were ever settled per Article 1118 the answer is nil I knew this going in. In my opinion Article 1118 is of no value to the investor. You have your lawyer fly into the host country on your dime he would come back empty handed. Basically it’s a PR move for the host country. All it did was delay the inevitable arbitration.

Complaining to Canada’s local Provincial authorities can be like complaining to a self-regulating organization that can pass and amend its own enabling legislation and is run by the very entity that the complaint is about. But investors who have enough money to get the attention of a foreign country also have enough sense, generally, to anticipate these problems. Smart investors are reluctant to invest in capital importing countries, and, when they do, they expect a return commensurate with the risk. The problem is easily stated. The investor wants protection and the foreign government wants capital. The solution that has developed has two components, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "Convention") and a Bilateral Investment Treaty. Bilateral Investment Treaties ( BITs ) are intended to protect investments and to provide for arbitration in the event of an investment dispute. The Convention provides the mechanism for arbitration of investment disputes and the means of enforcing arbitral awards.

Canada for all its hoopla over protectionism in the US stimulus package. Have yet to  level the playing field when it comes to fair treatment for US investors in health care ventures. Canada needs to send a clear and positive message to US foreign investors in health care we are playing by signed trade agreements. They should clearly outline what is deemed an acceptable investment and under what criteria. Must move to address the uncertainty clouding the Canada Health Act, particularly with regard to foreign US investments. Not introduce any new walls or barriers to legitimate foreign investment in the health care sector. Canada needs uphold their commitments in word and in practice to

welcome market-driven foreign investment by not regulating in a manner that discriminates against or impedes US investments in health care as in our case.

Canada Ratify The ICSID Convention Already!

NAFTA included unprecedented guarantees to protect the value of investments and even the rights of corporations to earn profits in the future, arising out of changes in government regulations or policy. In particular, NAFTA created specific clauses that provide for compensation for lost investments and loss of future profits because of regulations that are “tantamount to expropriation.” NAFTA essentially represented an ironclad commitment on the part of the Mexican and Canadian governments to a development strategy hinging on attracting foreign investment by harmonizing investment deregulation with standards in the US. NAFTA Chapter 11 also gives investors the right to take investment disputes with NAFTA member states to arbitral tribunals rather than to domestic courts of law. The process it established was meant to be used; it was designed to give investors faster due process, As it often is with government--let alone multi-government--intentions, it hasn’t worked out that way. As I was so gently reminded by the head representative at my meeting with Canada’s foreign affairs office. This process can take an average, of almost three years from the beginning of the case to the Final Award on Merits. This is approximately three times longer than NAFTA timetables suggest and two to three times as long as the World Trade Organization (WTO) Understanding on the Rules and Procedures Governing the Settlement of Disputes.

NAFTA investor-state cases proceed very slowly and are very costly. They proceed much more slowly than NAFTA Binational Panel review under Chapter 19, than NAFTA state-to-state dispute settlement under Chapter 20 and state-to-state dispute settlement under the WTO. The main advantage of conducting arbitration under the ICSID Convention is that it contains its own review and enforcement mechanisms. Awards issued under the ICSID Convention are binding on the parties and not subject to review except as provided for under the ICSID Convention. Decisions rendered under an  ICSID arbitration are effectively final. An administrative “appeal” may be made to the ICSID Secretary-General for an annulment of award but only on one of five narrow enumerated grounds: that the tribunal wasn’t properly constituted; that the tribunal has manifestly exceeded its powers; that there was corruption on the part of a member of the tribunal; that there has been a serious departure from a fundamental rule of procedure; or that the award has failed to state the reasons on which it’s based.

 Awards can’t be challenged outside of ICSID, and national courts have no power to review an ICSID Convention award. Parties to the ICSID Convention are bound to recognize the award as binding and to enforce it as if it were a final judgment of a national court.

 It’s telling that the Canadian government hasn’t yet indicated a timetable for ratification of the treaty. Only four provinces and one territory have passed similar implementing legislation: Ontario, British Columbia, Newfoundland and Labrador, Saskatchewan and Nunavut. With its announcement of the passing of the act, the government issued an “invitation” to the provinces to adopt implementing legislation. What’s taking so long is Canada dragging its’ feet? Once Canada ratifies it, foreign investors in Canada will be able to use the dispute resolution mechanisms under the ICSID Convention via investment treaties or investment contracts. Jurisdiction of the ICSID Convention is limited to those instances where a foreign investor’s home state and the host state where the investment is made are both ICSID member countries.

The investment dispute settlement provisions of NAFTA Chapter 11 generally provide that disputes between investors and the host government may be resolved through arbitration under the ICSID Convention. But until Canada’s ratification, recourse must be made to the less defined, more-circuitous Additional Facility Rules of ICSID or the ad hoc United Nations Commission on International Trade Law Rules. Among the parties to NAFTA, only the US has ratified the ICSID Convention, meaning that, until Canada’s ultimate ratification, NAFTA Chapter 11 arbitration under the ICSID Convention remains unavailable to both Canadian investors in the US and American investors in Canada. I wonder why it is taking so long for Canada to get this ratified I do have my thoughts on that but I will not voice them here. Just read between the lines and you can get a sense on where my thoughts are about that. As of now, I am as well as other  US investors left with a time-consuming process. Any investor would readily admit that time is money, and the Government of Canada recognizes this. As was mentioned a number of times in my meeting as to say. Wow this is really going to take a long time you should just give up and quit. Like Beyounce says you must don’t know about me. I am in this for the long haul. 

I am pursuing this case not only to establish precedent I want to collect damages owed as a result of Canada’s alleged breach, damages that could approach USD 160 Million Dollars plus. I am sure the Government of Canada is likely to rely on this imbalance to prolong the process, increase costs so they can thwart justice.

In the hopes as a business decision, I will simply give up in the face of unending delays and mounting expenses. Hello Canada it’s not going to happen. This is why the Government of Canada is so in a hurry for me to appoint legal counsel so I can start racking up costs and start the delaying process. I know that game and decided not to play it. No doubt I will be appointing legal counsel but their job is going to be collecting the money that’s owed to me. To be sure I have just added clauses to my Trusts that if I become incapacitated for whatever reason. The estate is to proceed with these NAFTA proceedings. In essence I have now made it a responsibility of the insurance companies to collect damages. In addition I have invited all independent US surgical facilities to join in my NAFTA claim. Of which several have already signed on. It is clear Canada has a private health care sector they cannot claim otherwise here is a partial list:


Canada Diagnostic Centres, Vancouver (MRI, CT)

Canadian Health Scan, Abbotsford (CT)

CML Healthcare, Burnaby (MRI)

CML Healthcare, Victoria (MRI)

Comox Valley MRI, Courtenay

Fraser Valley MRI Clinic, Abbotsford

Image One MRI Clinic, Kelowna

Okanagan Health MRI Clinic, Kelowna

Specialty MRI Clinics, Vancouver

Vancouver PETscan Centre

Private surgery centres (excluding cosmetic)

Ambulatory Surgical Centre Vancouver

Cambie Surgery Centre, Vancouver

Comox Valley Surgical Centre, Cumberland

Delbrook Surgical Centre, North Vancouver

False Creek Surgical Centre, Vancouver

Kamloops Surgical Centre, Kamloops

McCallum Surgical Centre,Langley

New Westminster Surgical Centre, New Westminster

Okanagan Health Surgical Centre, Kelowna

American providers want equal access like Canadian providers have already in the US without barriers. I will advocate and call on US representatives to bring this issue to the forefront.


The UNCITRAL Arbitration Rules were adopted in 1976 by the United Nations Commission on International Trade Law (UNCITRAL). They were adopted by the United Nations General Assembly on December 15, 1976. Unlike the ICSID, the UNCITRAL is not an arbitral institution; the UNCITRAL Rules are used in ad hoc arbitrations.

What I think is so ironic is that the Administrative Council of the International Centre for Settlement of Investment Disputes (ICSID) elected Ms. Meg Kinnear, a Canadian national, as the new Secretary-General of ICSID. Ms. Kinnear had been General Counsel (Senior General Counsel from 2006) and Director General of the Trade Law Bureau of Canada, a joint legal unit of the Departments of Justice and of Foreign Affairs and International Trade of Canada. She was the lawyer representing Canada in my trade dispute before she left for that post. Canada is the only OECD country that has not yet signed the ICSID Convention 143 States have ratified the Convention.

These arbitrations are subject to the same review and enforcement procedures as ordinary international commercial arbitrations under the New York Convention.  However, even contract clauses containing a submission to the ICSID (Additional Facility) must be treated with special care. Canada goes on to compare the ad hoc nature of the tribunals to the standing dispute resolution system of the WTO. Canada argues that the arbitration be given a low level of deference using the 'pragmatic and functional approach and the court should review awards on the 'correctness' standard. The tribunals are set up for commercial arbitrations not for treaty interpretation. I find this so hypocritical since Canada signed NAFTA knowing that disputes would be resolved through international commercial arbitration panels. But hypocritical has been one of my main focal points of our claim so I am not surprised.





March 15, 2009

It's Going To Take Beautiful Minds To Reform Health Care

Health care reform the perfect storm has come

 By Melvin J. Howard

Health care costs are high, and rising even higher. The United States spent about $2.1 trillion on health care. Health costs is a strain American businesses, which directly finance about one-fourth of health spending. Employer-sponsored health insurance premiums rose by 98 percent between 2000 and 2007—four times faster than cumulative wage increases. The average cost of a family, employer-based insurance policy in 2007 was $12,105, nearly the full-year, full-time earnings of a minimum wage job. In addition to high premiums, people are paying higher amounts for deductibles and service use. Americans are spending more than 10 percent of their income on premiums and cost-sharing. This has a profound impact on seniors: the typical couple may have to save nearly $300,000 to pay for health costs not covered by Medicare alone.

The cost problem has contributed to an access problem. The number of nonelderly Americans covered by employer-based health insurance fell from 66 percent to 61 percent between 2000 and 2006, with small business employees affected disproportionately.8,9 Indeed, in 2007, only 45 percent of firms with three to nine employees offered health benefits, in contrast with 99 percent of firms with 200 or more employees.10 Firms that are less likely to provide health benefits also tend to have a significant part-time or low-income workforce, are not unionized, and are in nonmanufacturing.

With few affordable alternatives, people losing employer coverage often become uninsured. Nearly 16 percent of the population 47 million Americans, were uninsured, up roughly eight million since 2000. Approximately 80 percent of the uninsured are in families with at least one worker. While most uninsured have low incomes, more middle-income working Americans are falling victim to this trend. Nearly half of the increase in the uninsured population between 2005 and 2006 occurred among middle-income families.

For the first time in history there is bipartisan call for health reform. Leaders of such companies as AT&T, General Mills, Intel, Kelly Services and Wal-Mart have joined forces with SEIU and the Communication Workers of America to form the Better Health Care Together (BHCT) coalition. BHCT is seeking health reform that promotes quality, value-based coverage for all Americans, with an emphasis on shared responsibility, and an implementation goal of 2012.


Let’s start with $2.1 trillion dollars. Of this amount, $1.1 trillion, or 54 percent, came from private sources of funding; $705 billion (34 percent) came from the Federal government; and $265 billion (12 percent) came from state and local government. Dividing further by major source of funding, the majority stemmed from private insurance, at $723.4 billion in 2006. Medicare was the next largest source at $401.3 billion, a rise of 18.7 percent from the prior year largely due to the introduction of the Part D drug benefit. Medicaid spending totaled $308.6 billion, and out-of-pocket spending comprised $256.5 billion.

In addition to government spending through Medicare, Medicaid, and public health programs, tax codes provide subsidies for over 90 percent of private health insurance and certain health care expenses. The most significant of these is the Federal and state individual income and payroll tax exemption for all employer premium contributions and many employee premium contributions. Under the codes, these premium contributions are not included as part of employee taxable income.

The cost of these exemptions, in lost Federal and state revenue, is estimated at $208.6 billion. This is the nation’s largest tax expenditure. The Federal tax exemption alone is equivalent to nearly half of what the Federal government spends on Medicare. The effect of these tax provisions extends beyond the impact on Federal revenues. In 2007, tax breaks were associated with $732 billion in employer and employee contributions toward health insurance.

The other major Federal health-related tax expenditures include deductions for medical expenses, self-employed medical insurance premiums and health-related charitable contributions. A tax break also exists for Health Savings Accounts (HSAs) tied to high-deductible health insurance. Consumers can make tax-deductible contributions to an HSA account that is then used for health-related expenses.


There is a disagreement on whether individual market competition or group purchasing can best achieve cost containment while promoting access to valuable innovations in care. This is very important because from what I witnessed in single payor government run health care systems innovations and creativity is sorely lacking. In addition to systems like Canada’s protectionism seems to be instilled in the frame work. Protection of the status quo which is also a big problem. There are proposals to change how people get insured, supporting a shift from employer-based and public coverage to the individual (i.e. nongroup) market. There all proposals, that seek to reform current coverage options by building on existing sources of coverage. Others support a shift from private to public insurance (e.g., a single-payor system). I am not convinced that this solution is the Holy Grail for America. Beyond these differences, health reform proposals are similar in their goals of improving the value, sustainability, quality, and coverage of health care for all Americans.

They often include policies that promote practices of sharing information through health information technology; make useful price and quality information available to patients, providers, and purchasers; and invest in health services research to better guide public policy decisions. Perhaps most critically, the need to constrain health care costs is an overarching theme of many health reform proposals. That, in turn, has yielded support for policies such as aligning financial incentives for providers and patients toward early and effective disease detection. One thing is clear this is the perfect time to reform US health care. This could not have happened before this time the current economic climate is the perfect storm so to speak for change. So the way I see it is whoever can come up with a way to cover all Americans, foster innovation and technological advances. Promote competition, contain costs, train additional physicians and nurses as well as fast track and train international physicians and nurses. Without destroying the free market innovations that makes America great has a beautiful mind.




March 06, 2009

Health Care Reform We Are Going To Need The Wisdom Of Solomon

By Melvin J. Howard

Reforming health care in the US will be a major task and it won’t be easy. The US health care system is complicated. So when I here comparisons to other countries and using their models to fix ours I just want to yell. Our system is unique and it comes with a unique price tag of over 2 Trillion Dollars. Whatever way we go it must be solved uniquely by Americans with industry knowledge. This week I am featuring some of the players and stakeholders in the reform effort. One is a economist, One has a MBA in health care the other a MD through all bring up valid concerns. I will also over the coming weeks submit several proposals that has a chance to become a working model. What is clear we need to fix this problem there is no getting around it.      

Will Healthcare Save the Country from Recession?

Posted by: Michael Mandel on January 04

I wrote this story in Businessweek September 2006. The headline reads “What’s Really Propping Up the Economy: Health care has added 1.7 million jobs since 2001. The rest of the private sector? None.” Well, here we are back to the same point again. The healthcare and social assistance sector added 37,000 jobs in December. By contrast, the rest of the private sector lost about 50,000 jobs. Over the past two months, health care and social assistance have added 66K jobs, and the rest of the private sector 8K.

In fact, I believe that the continued growth of health care employment will be the reason that the U.S. economy skirts official recession. With a baseline job growth of 30-40K per month, funded in large part by government spending, healthcare may be enough to keep the economy afloat.

 In fact, healthcare is this generation’s version of keynesian economic policy. Both Republicans and Democrats are willing to “borrow-and-spend” to fund healthcare (though Bush was able to sustain his opposition to expanding the State Children’s Health Insurance Program). In fiscal year 2008, Bush’s budget calls for spending roughly $750 billion on various health-related programs, up almost $40 billion from the previous year). That’s a river of money.

 You can argue about whether we should be spending more or less, about whether there should be a single payer or more competition, about whether the money is well spent or badly spent…but it’s there, and it’s paying for lots of jobs.

 MARCH 08, 2007

 Why a Health Care MBA? - Health Care's Role in the American Economy

 The health care industry promises to be a major force in the American economy over the course of my career. Already comprising 16% of the GDP, health care is expected to balloon to 25% of the GDP by 2030. Late last year, Business Week had an excellent article entitled "What's Really Propping Up the Economy" that I recently re-read. It articulates well what the health-care industry currently provides and promises to provide in the future to the American economy.  


 The article states that, since 2001, the health-care sector has added 1.7million jobs to the American economy, while the rest of the private sector (aside from construction and real-estate adding 940K jobs) has lost 1.2million jobs. The article claims that the US unemployment rate is 4.7% (at the time of the article's publication), significantly below European counterparts at 8.2% and 8.9% (Germany and France). But without the addition of health care jobs, the US employment rate would be 1 to 2 percentage points higher. If current trends continue, 30-40% of all new jobs created over the next 25 years will be in health care. The other promising sector of the past decade, the information technology segment, has turned into "one of the greatest job-growth disappointments of all time", losing over 1.1million jobs in the past five years.


The health care sector is fortunate to be perceived as incredibly valuable to society, and thus governmental spending provides about half of all health care dollars (ranging from Medicare paying for hospital costs or the NIH funding promising new academic research ventures). The total expenditure is already over $2 trillion and growing. These monies are propping up economies and local job markets all across the United States as communities erect new or different provider facilities or promote economic development by incentivizing biotech or research facilities to headquarter nearby. Private industries, from hospital networks like HCA to insurance companies like Humana, to pharmaceutical companies like Merck, also provide tremendous investment into the system, and already are becoming dominant forces in the US economy both through their monetary outlay, their massive workforce, and their impact upon almost every American citizen.


Sounds promising right? While "propping up" the economy and seeing tremendous growth opportunities, an economy that relies heavily on sector does not make an efficient system. Heavy governmental spending (predominantly through support of Medicare and Medicare Part D - which are increasingly seen as a right of citizens as the government has "promised" payment to seniors for their health expenditures) is straining the federal government. Federal outlays have totaled $600 billion in 2005, roughly one quarter of the entire federal budget, causing some to fear that the American government is increasingly reliant upon borrowing from foreign investors (like China) to support growing health care investments and costs.

American corporations and businesses also are feeling the burden, as an increasing segment of their budget goes to providing health care for their employees, leading some to cite an outflow of jobs from the American economy for locations that provide governmental health care. As most consumers know, the costs of receiving health care are also increasing well-beyond inflation rates. This is caused by a deficient system that attempts to "pass the buck" to the next person: Pharmaceutical companies attempt to recoup R&D expenses (already sunk costs) by charging the American consumer more (other countries negotiate prices with the pharma companies to keep their prices down); the healthy are financing the care of the sick; the working funding the retired; the insured covering the uninsured, etc. 

There are also incredible inefficiencies at all levels of health care that, in any competitive market, would be quickly worked out. However, with many different segments within the industry not playing traditional market roles (the consumer/patient is not the payer/insurance companies; the government is a provider - VA, a payer - Medicare/Medicaid, and an innovator - NIH funding of research), these inefficiencies are not resolved as segments again "pass the buck" of responsibility.


No matter what the future is of the economy, whether the health care sector is allowed to grow unrestrained or the government places a cap on spending, health care will remain incredibly important to Americans. Therefore, the industry needs knowledgeable leaders of tomorrow to help navigate future challenges. These leaders must understand every segment, how they interact, what they think, future trends, and historical context. This knowledge can only  be gained from a comprehensive knowledge of the health care industry, and the Health Care MBA from Owen School of Management at Vanderbilt provides that. I have personally learned tremendous amounts of sectors of the industry I would never had examined before coming to Owen. I have shared this knowledge during conversations with major business leaders and future employers, and I know that I will look back upon this education as being the most singular important of my career.

| Posted by Tyler Richardson on March 8, 2007 |



Doubling Down   Westby G. Fisher, MD, FACC is a board certified internist, cardiologist, and cardiac electrophysiologist (doctor specializing in heart rhythm disorders) practicing atNorthShore University HealthSystem, Evanston, IL and is an Associate Professor of Medicine at the Feinberg School of Medicine, Northwestern University, Evanston, IL. 


Barack Obama is placing a heavy bet on health care as the nation’s economic savior.

I wish him well as he goes “all in.”

But his "prescription for change" contains potions that are not a safe bet for our economy. And yet we are told, we have to change,

“It’s not something that we can sort of put off because we’re in an emergency,” he said. “This is part of the emergency.”

I nearly had to slap myself when I realized he was saying what I said they'd say:

“Now we are in crisis. There is no choice in crisis. You must do as we say.”

And so, as part of the Great Promise, we are led to the three cornerstones of the current already-constructed-but-not-yet-implented plan: Information Technology, Prevention, and Paying Incentives for better care. These things, above all others we are told, will save us from ourselves and ultimate economic collapse.

And I’ve got some ocean-front property in Arizona I’d like to sell you.

But before you put down a contract, let’s look briefly at these cornerstones:

Information Technology to Build “Efficiency”

To frame my comments, realize that I work in a hospital system with one of the most “efficiently” deployed installations of the hospital information system
 EPIC in the country. We have inpatient and outpatient versions of the software fully implemented. It is a wonder to behold as I efficiently type my operative note, copy the referring physician, and send a copy of my note to our billing personnel before the patient even leaves the operating room. Within seconds, literally, the ICD9 codes are analyzed, the diagnoses cross-referenced to assure they jive with the procedure codes, the whole package sent to the billing “scrubbers” to be sure the electronic Medicare claim submission form has all the t’s crossed and the i’s dotted, and * BOOM* off to Medicare the bill is sent, even before the patient leaves the laboratory. Man, talk about efficiency! 

If there’s something out of whack when Medicare gets it, it’s sent back electronically, with a pointer to the boo-boo, and because of the “efficient” claims denial service that “works” the accounts receivable to get back to me as I see another patient so I can change the diagnosis code to a “more appropriate one” that will insure payment according to their “efficient” reimbursement assurance algorithm: *ZAP* we send it back. It’s the most efficient game of electronic ping pong you’ll ever see! So efficient, infact, that instead of our accounts receivable of 110 days before the system, we’ve now cut them to about 38!

And as anyone in business knows, cutting the time in accounts receivables to less than half is REALLY how you measure efficiency of any business system!

Oh sure, there are plenty of other “efficiencies” built into IT like ours. It’s hard to quantify them all. Nurses
 love the "efficiencies" of charting now. And who can argue with the efficiencies of lab reporting with this system? It’s truly remarkable to order a test and get the results routed to your in basket the same day or maybe even within the same hour. Seriously, it’s impressive. I’d hate to do without this now that we have it. This is "good" efficiency because it helps doctors to their jobs. Zipping those reports instantaneously to me and providing them to the referring physicians probably shortens hospital stays and saves money, but is that enough to offset the cost of the additional testing that's being performed these days? I wonder. 

That's because electronic medical records greatly facilitate
ordering tests, too. Tests that haven’t been done in a year or screening tests that are made to assure “quality.” (“Gee, I wonder how his ejection fraction is doing? Maybe I should get another echo.”) Alerts can be programmed to assure you order tests or consults. Just a simple *click* and another test is on its way. Increasingly when patients are admitted, nearly every one has a “critical pathway” designed for “efficiency” of care based on “best practices.” Panels of tests and consults medications are ordered automatically with just one click rather than ordering them individually. What could be more efficient? Heck, it’s so easy, I just want to order MORE, don’t you? Get them in, get them out. Over their length of stay? Where’s our Coordination of Care representative? Can't we move him to a skilled nursing facility? Let’s GO people! Efficiency, efficiency, efficiency! 

Seriously, where is the cost savings to our health system with this model of “efficiency?” Is it to our health system as a whole or for the business administrators who get their money faster from the Medicare National Bank while it’s still solvent? Will skilled nursing facilities be our Great Savior in this time of economic need as we try to demonstrate cost savings to the system, or will they just facilitate patient bounce-backs? Will we dare to examine this?

Prevention to Save Costs

This cornerstone scares me because short of the public health initiatives of seat belts and smoking bans, we’ve done poorly at saving money with “prevention” initiatives when it comes to costs. One only needs to look at Illinois who still permits motorcyclists to ride without a helmet to have some understanding for my skepticism here. Or nationally, we can look at the Jupiter trial that
 promises to save millions of lives if we just put patients on a little Crestor. I’m feeling cost savings there! And prevention effectively means more testing of the healthy, more ominous spin from reporters assuring your death if you don't get checked, and plenty of advertising to boot, which leads to more revenues and costs. But it's all in the name of “efficient use of our health care dollar," remember? We're so proud of our "guidelines," too. Even when these "guidelines" are manipulated to assure people receive expensive tests or devices "in the name of quality." It's hard to see the cost savings here, folks.

Paying Incentives for Better Care

Now this is an interesting concept that is so flawed it boggles the mind. If we just do as the Big Boys say, walk lock-step in unison with the ever-growning (now, 153)
 Great Directives, we will be paid the full amount due. Seriously, do the policy wonks think hospitals and doctors were born yesterday? Presently, legions and legions of people now work on the Hill just to get a jump on the Lastest Edict coming from On High so they can implement the change to their work flows and assure payment from the Medicare National Bank. (You know, I’ve got a dog I can train to do just about anything I want, too.) But where are the cost savings with this model? To date, pay-for-performance initiatives have been a dismal and utter failure at controlling costs. By their own admission:

"Since we began accepting the quality data in July 2007 for the 2007 PQRI, we have identified and begun to remedy issues and questions raised about the 2007 PQRI results and feedback. CMS analysis of the results of the completed first cycle of reporting has identified a number of unanticipated issues we believe may have impacted the success of physicians and other professionals in meeting program requirements for reporting quality data. These issues, which are outlined in more detail in this report, include claims-based reporting mechanisms issues, National Provider Identifier (NPI) numbers not being included on the claims forms, incorrect quality reporting data or claims submission errors and the content of the feedback reports."

In our system, it cost more to implement this "initiative" than earned from Medicare. But why stop? We should do MORE! Change those doctors' behavior! Tell the IT boys with their “efficient” systems to put a “hard block” in their orders so they HAVE to be sure to order another test or write a prescription or show that we’ve counseled them on smoking (we did, didn’t we?) to assure we get paid. Look how “efficient” we are! See the money we're saving?

And so it goes.

IT, Prevention, and Pay-for-Performance: all bad bets for cost savings. But as Mr. Obama goes “all in” by building health care bigger, we must realize the risks inherent to this approach for our economy. Can we really provide “affordable, accessible health care for every single American,” without even a modicum of conversation about the true costs involved?

These bedrocks for change, while interesting, will be a losing hand for our economy without serious constraints on spending. Instead, get the employers out of the game (what are they for anyway? They only cloud the real costs involved). Provide incentives for training and maintaining primary care doctors. Work tort reform nationally. Discuss and implement end-of-life care limitations. Transparency. Cut the middle men. Do the Insurance Pool thing. Spend a little up front on IT so we can SIMPLIFY billing and collections.

But please, oh PLEASE, stop touting prevention and pay for performance as our health care saviors.

To do otherwise is risking fiscal disaster.