Economicks is hard!

I had the privilege of training in hospital epidemiology under Dr. Richard Wenzel, and alongside a number of really smart people (including fellow blogger Mike Edmond). We put a lot of time and energy into estimating the impact of HAIs on costs, lengths of hospital stay (LOS), and mortality…and our approach was simple and intuitive. If our HAI cases had a mean cost/LOS/mortality of x, and matched controls had mean cost/LOS/mortality of y, then the attributable cost/LOS/mortality must be x minus y. Right?



Yes, I’m oversimplifying, and I will give us credit for understanding that it was a little more complicated than that. However, at that time we were still trying to convince people that HAIs actually killed people, and that the damage they did was above and beyond that due to the patient’s underlying illness. So if our estimates were on the high side, it seemed OK (at least to me), since the main purpose was to jar people out of their complacency and increase resources for prevention.



The climate has changed. We know a lot more about the complexity of estimating the costs of HAIs (two excellent sources on this are here and here), and we’ve (at long last) succeeded in attracting needed attention to HAI prevention (from the public, from legislators, from the media, even from our hospital administrators!). So it now behooves us to “take it up a notch”, as advocated by Nicholas Graves and colleagues in a recent letter to the editor at ICHE (with response). You can read these at your leisure, but I want to highlight this section of their CID article, which I think is on target:

"The 'HAI costs a lot' approach to influencing decision making has served the infection control community well…..The time has arrived, however, for the methodological advances that have been achieved in this area to be implemented by researchers. Complete economic evaluations that include changes to all costs and health benefits should be performed...

The information used to update these studies should be of high quality and bias free. Inexorable growth in health care costs is forcing decision makers to respond to scarcity and work toward extracting greater value from health care resources….The time when reliable economic arguments will be paramount for obtaining extra resources—and even retaining existing ones—is close. Those working toward reducing the number of HAIs should craft valid economic arguments on the basis of sound methods and use them to build strong and cost-effective infection control programs"

Holy Superlatives, Batman! Hospital-acquired infections have significant economic costs!

1935 Dollar


There is a well done study out in Medical Care by Rebecca Roberts et al. from Stroger/Cook County that assesses the attributable costs of HAIs in a cohort of patients from 2000.  What sets this paper apart is the careful attention they paid to design and analysis methodology.  Just to paste from the abstract, they used "ordinary least squares linear regression and median quantile regression, Winsorizing, propensity score case matching, attributable LOS multiplied by mean daily cost, semi-log transformation, and generalized linear modeling. Three-state proportional hazards modeling was also used for LOS estimation. Attributable mortality was estimated using logistic regression."  They did all the right things and it's a bit like that Snicker's commercial from years ago - "No matter how you slice it, it comes up peanuts."  Costs ranged from $9300 to $21,000 depending on the method used - hey methods matter!  Attributable variable costs, which are more likely to be recoverable in the short term, ranged from $1500 to $6800. Excess Length of Stay (LOS) ranged from 5.9 to 9.6 days.  Of note, the sample was selected from a higher-risk pool, so their estimates might over estimate the "true" costs.

When their data was extrapolated to estimate national impact of HAIs, they predicted that there are ~350,000 HAIs annually in the US with an impact of $3.2 to $7.3 billion.  Not chump change, but far lower than other published estimates.  They suggested that 1/3 of infections might be preventable (Mike - What do you think about that?) so that in 2009 dollars, preventing these infections could save $8.4 billion in medical AND societal costs. They also offer a nice comparison amount, since most of us have no idea what a billion dollars represents, when they state that estimated 2008 medical malpractice claims were about $3.6 billion. No word on how many of those claims were for HAIs!

Overall, a great study with great methods.  Health economics can be pretty ugly at times, these investigators should be congratulated.

Link: Roberts RR et al. abstract Medical Care November 2010

Quality, safety, and value

There is an interesting commentary in JAMA this week. The money quote:

“So more than 40 years after the birth of the quality improvement movement, there is still not much known about what has been accomplished.”

The author, Robert Brook, argues for embracing the business case for quality, and for developing a new “epidemiology of value”,

“…which contains both measurement of cost and quality, and is applicable to both the developed and developing world. The results of this work would help to distinguish between a level of quality that is a good value and the best available quality that may produce small improvements in health at enormous cost.”

Eli, as our house economist, has a better grasp of what it takes to build a business case for quality…I should let him take it from here…

Infection Prevention is Customer Service (or Dave Carroll's Guitar)

James Surowiecki has a nice piece in the New Yorker that discusses the angry worker, the angry customer and the reasons behind the decline in customer service.  When reading this, I couldn't help thinking about the parallels between corporate handling of customer service and many hospitals' relationships with their infection control departments.  I've excerpted and highlighted key portions of the article:

For a start, most companies have a split personality when it comes to customers. On the one hand, C.E.O.s routinely describe service as essential to success, and they are well aware that, thanks to the Internet, bad service can now inflict far more damage than before; the old maxim was that someone who had a bad experience in your store would tell ten people, but these days it’s more like thousands or even, as in Carroll’s case, millions. On the other hand, customer service is a classic example of what businessmen call a “cost center”—a division that piles up expenses without bringing in revenue—and most companies see it as tangential to their core business, something they have to do rather than something they want to do. Although some unhappy customers complain, most don’t—one study suggests that only six per cent of dissatisfied customers file a complaint—and it’s tricky to quantify the impact of good service. So when companies are looking for places to cut costs it’s easy to justify trimming service staff, or outsourcing. 

 

The real problem may be that companies have a roving eye: they’re always more interested in the customers they don’t have. So they pour money into sales and marketing to lure new customers while giving their existing ones short shrift, in an effort to minimize costs and maximize revenue. The consultant Lior Arussy calls this the “efficient relationship paradox”: it’s only once you’ve actually become a customer that companies put efficiency ahead of attention, with the result that a company’s current customers are often the ones who experience its worst service.

 

Full New Yorker article

Universal MRSA screening in Newborns

We are all just digging out of our email (and other) piles created while spending a week in Atlanta at the Decennial. In doing so, I just came across this abstract (or here) that I must have missed while there. I found the economic evaluation interesting. Researchers at Loyola University completed a study on 2031 newborn-mother pairs during a 21-month study. The study only detected four positive neonates and 3 positive moms. The testing cost their health system $40,000/MRSA detected. Of note, the authors suggested that this level of cost was not cost-effective but it is pretty clear they didn't using the US Panel for Cost-Effectiveness (1996) criteria to make such a claim.

While this does seem like a lot of money to pay to detect an MRSA colonization, what it really points out is that these types of studies shouldn't be used to make any medical decisions. The main reason is that unless the hospital you work at has the same population prevalence of MRSA colonization, the results can't be applied to your hospital. Even the much talked about cluster-randomized trials are basically useless for informing medical decisions around what is the best method to control transmissible infections in a specific setting. That is of course, unless these trials intervene in 30+ hospitals that are similar to yours, which isn't going to happen. There's just too much variability between hospitals in terms of size, length of stay and MRSA prevalence. The only way to properly analyze MRSA transmission and prevention is through the use of mathematical simulation models which allow for variable hospital characteristics and MRSA prevalence. If these models use the best available data, they could greatly inform medical decision makers.

Government spending depresses housing market.

An AP story yesterday demonstrates why government interference in the economy will never "work" (assuming one's definition of "work" is to promote prosperity instead of to wreck the economy so as to pave the way for dictatorship)no matter what action the government takes:

The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.

But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.

That's the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won't be able to afford.

Every action the government will be defeated by some consequence about which the government and the MSM/DNC will not warn the public.

To understand how this is all connected, you have to think like a bond trader.

No, you need only think like someone whose livelihood does not depend on a government check.

Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.

That is only partially right. Inflation is everyone's enemy (except for those who want to wreck the economy to pave the way for dictatorship) because it will destroy savings and make it impossible for planning, economic calculations and hiring decisions. Without savings and long term planning, there will be no jobs and no production. If that thought has not sunk in, it will. Just wait until the stimulus money kicks in.

Quote of the day - Mogambo Guru

As an interesting aside, as in, "We're freaking doomed by a clot of corrupt government devils," Mr Willie says to "give credit to the US Govt stat rats in their busy laboratories. They decided to ramp up the Q2 Gross Domestic Product by including all US Govt rescue funds for the big banks, including the diverse funds from the many liquidity facilities. All those funds will go directly into the GDP for Q2 as a special line item. Expect a miraculous economic recovery in the second quarter, based on vapor."

Miraculous indeed! Hahaha! What a blatant governmental affront! What a colossal, transparent, low-IQ fraud!

Magambo Guru - June 6, 2009

Quote of the day - Mogambo Guru - [Richard Daughty]

And what is the problem with creating excess paper, fiat money? Well, ask the people of Zimbabwe, whose moronic government has been creating so much of it for almost 15 years that, towards the end, inflation in prices could only be poorly estimated, as prices soared more than a million percent, or a billion percent, or more. Nobody knows. A lot, though!

Richard Daughty [Mogambo Guru] - May 2009

Quote of the day - The Mogambo Guru - Inflation

. . . . inflation in prices is going to get a lot worse, as the loathsome and thoroughly despicable Federal Reserve is financing the absurd stimulus programs of Barack Obama so much that (audience shouts out, "How much, Marvelous Mogambo Master (MMM)?") on Wednesday, April 15, the national debt was $11,218.8 billion, while on April 8, One Freaking Week (OFW) earlier, the debt was $11,145.4 billion, which is not only $73.4 billion more, but is also a Hell Of A Lot Of Money (HOALOM) in OFW!

Mogambo Guru - Richard Daughty - 4-23-2009

Rick Santelli; Chicago Tea Party; CNBC

Here is the video from CNBC last week when Rick Santelli started what may turn out to be the next phase in the conservative revolution. I saved the video here because Youtube videos have a habit of disappearing. Bookmark this page and save this video, if you have the technology.



The MSM/DNC has spent the past few days trying to repudiate Santelli and trying to force Santelli to recant in a fashion reminiscent of the Stalinist show trials of the 1930's. The MSM/DNC does not realize that most Americans already know what Santelli is talking about. Santelli has merely given voice to the silent majority.

Quote of the day - Steve Czaban

If we need to spend 1 trillion dollars to rescue the economy, wouldn't spending 2 trillion dollars work even better?

sportscaster and radio host Steve Czaban - 2-9-09

Energy policy under Obama; price controls, shortages, lines

Gasoline prices have fallen tremendously in the past four months. But if they return to their previous levels [Spring-Summer 2008], it is a safe bet that Obama's solution will involve some kind of price controls or rationing or both. That is the only solution of which a leftist/socialist can conceive. [Obama and a Democrat Congress will never allow drilling or the construction of new refineries.]

But remember, price controls cause shortages. You will find yourself waiting in long lines at the gas station if price controls are ever enacted. A worst-case scenario would make gasoline almost totally unavailable [except for high government officials]. Your car would be useless and you would be forced to relocate to the nearest city in order to maintain employment - unless you are lucky enough to work near your existing home and your occupation does not depend upon travel. This forced relocation would be labeled a "transition" by the Obama administration and the MSM/DNC. Government funds would be available to help defray the cost of the "transition" to city living and to make available low cost, subidized housing in the city [and a greater number of overcrowded public buses].

For further reading.




A good hobby to learn now might be bicycle repair. Bicycles will become a more popular method of transportation under an Obama administration. You might want to start hoarding bicycle tires and accessories for your own future use or for their resale value during the coming "transition."

This is one prediction about which I will be glad to be wrong.

Bicycle tires - your future investment portfolio?





Your future residence?

Baby Boomer comeuppance; Richard Berry; American Thinker; Crash of 2008

American Thinker has posted an essay detailing how the baby boomer values led to the crash we have experienced over the past few years (most sharply in the past few weeks):

We are seeing in the Wall Street implosion the inevitable result of the Boomer Elite outlook and the behavior it spawned. Storied investment banks were being run on 40 to 1 leverage. Fancy new securities were designed and widely disseminated whose terms are opaque even to highly knowledgeable and experienced hands. Mortgage securitization techniques were developed which, our bettors assured us, would magically spread risk and thus stabilize the financial system. However, simultaneously with these brilliant innovations, lenders were being forced -- by Boomer Elite congressmen with an aching love of the poor and oppressed unique to themselves -- to loan to uncreditworthy borrowers at subprime rates and without adequate documentation. These loans, packaged into securities together with standard, performing loans, rendered unknowable the value of the securities, leading to mandatory write downs and drastic capital impairment or outright insolvency for many very large firms. Given the high degree of integration of the international financial system, critical destabilization was the real result of this confluence of Master of the Universe genius and Boomer Elite turpitude.

The next time you hear or see:

• a TV program extol the virtues of the 60's generation and how they stopped the war in Vietnam;
• a speaker refer to Vietnam as the "crucible of a generation";
• 60's music referred to as idealistic and the catalyst for peace and love, etc.;
• John Lennon referred to as the voice (or the conscience or whatever) of a generation;
• commercials or news accounts celebrating the empowerment of the baby boomers as they grow older;
• any other whitewash of the generation that has done so much damage;

click on this American Thinker article and remember the price we pay for our indulgence in this 40 year fantasy.

Mark Steyn; How Barney Frank's gay lover caused the Fannie Mae collapse; Herb Moses

Mark Steyn comments on another aspect of the financial crisis for which taxpayers must now suffer:

Last week in this space, I made a jocular reference to a global economy "so
vulnerable that only the stalwart action of Barney Frank stands between it and
ten years of soup kitchens". I tittered too soon. It turns out the
entire planetary meltdown is due to Congressman Frank's sex life:

. . . . . . . .
Moses "helped develop many of Fannie Mae’s affordable housing and home
improvement lending programs."
Critics say such programs led to the mortgage
meltdown that prompted last month’s government takeover of Fannie Mae and its
financial cousin, Freddie Mac. The giant firms are blamed for spreading bad
mortgages throughout the private financial sector...
. . . . . . . . .

while the old Moses parted the red sea, the new Moses drowned us in one.

See also this.

So it appears that taxpayers will now pay $700,000,000,000 for Barney Frank's failed gay relationship. The Moses/Frank partnership will turn out to be the most expensive gay marriage in history.

- In the 1970's (and before), gay bathhouses were responsible for the spread of aids throughout the western world (although the left undoubtedly blames George W. Bush (and, by extension, John McCain (and Sarah Palin's downs syndrome baby))).

- In the 1990's, Fannie Mae became a financial gay bathhouse, spreading the financial equivalent of aids throughout the economy of the western world.

Fannie Mae


[See the analysis of how even this was made possible only by the Federal Reserve policy of credit expansion during the credit boom of the 1990's.]

Classics of Conservatism - Part XXIV - America's Great Depression

This month's Classic of Conservatism is Murray Rothbard's 1963 work, "America's Great Depression."



25 years have elapsed since I read this book, but I will never forget its main lesson (and that of the other Austrian economics books I read at that time). The Depression of the 1930's was caused by the alternating periods of expansion and contraction of the money supply by the Federal Reserve Board. The Federal Reserve, under the leadership of Benjamin Strong (Governor of the Federal Reserve Bank of New York) began a long credit expansion in 1922. This expansion continued until the summer of 1929, when the FED reversed course and began contracting the money supply. Several months later, the stock market crashed. The stock market crash is typically considered the beginning of the Great Depression. In fact the Depression had its roots at the beginning the 1920's. (I am somewhat fuzzy on the dates due to the time elapsed since I read the book.)

MSM/DNC mythmakers usually assign the crash of October 1929 as the beginning and attempt to address stock trading practices as the cause. They have convinced generations of students that the activities of a few stock traders somehow caused the collapse of the entire economy. The "historians" ignore the role of centralized credit expansion on the entire economy over a period of years. The term "fractional reserve banking" never appears in print in today's "newspapers."

Instead of focusing on the period from 1922 through 1929, the establishment mouthpieces have caused the average reader to focus on the activities of a few stock brokers at the very end of the great credit expansion. Even conservatives who try to explain the issue in terms of FED policy blame the FED for contracting in the summer of 1929 instead of blaming the FED for creating the bubble over the course of a decade.

If fractional reserve banking did not exist, the economy would not grow nearly as fast as it has during the various bubbles of the 20th (and 21st) century, but the inevitable collapses would not have occurred either. Growth would be slow, steady and safe. We need not fear the crises that have plagued our economy on a regular basis since 1913 (and the inevitable and predictable crisis that now threatens to destroy the economy completely).

Rothbard is one of the few writers to explain the Depression in terms of the 1920's credit expansion instead of the non-issues that the most writers and teachers focus on. In Rothbard's book, you will not read first hand accounts of bread lines and soup kitchens. Nor will you see a rehash of such events as the "bonus army" or the creation of the WPA. These events were the results of the policies that created the Depression. Most writers focus only on these results and teach nothing about the causes.

Rothbard explains the business cycle theory and its application to the credit expansion of the 1920's.

We all acknowledge that today's crisis results from bankers making bad loans to unqualified individuals. But very few have bothered to ask why so many lenders made these mistakes at the same time. This is the question that Rothbard asks in America's Great Depression. Like anyone else, businessmen will make mistakes (and usually pay the consequences). But the business cycle over the past century features all businesses making the same mistakes at the same time. Whether these mistakes include risky lending, overproduction, investment in unprofitable lines, overspending, etc., the mistakes are coordinated throughout the economy and are not limited to one region or one city or one sector. Rothbard shows that this phenomenon occurred even in the 1920's - well before today's "global economy" existed. The one factor that tied all of these errors together was Federal Reserve policy. And Federal Reserve policy has served this function in every recessionary cycle since the FED was created in 1913.

If you are not sure of the extent of misinformation that relates to the Depression, ask a friend if he knows when the Federal Reserve Board was created. Far too many people will say that the FED was created by FDR as one of his many reforms following the stock market crash. Only when one realizes that the FED existed 16 years before the stock market crash will one see an example of how common beliefs about the Depression and economic conditions have become so muddled.

Rothbard provides detail and documentation to demonstrate where the blame truly belongs. After reading America's Great Depression, you will realize that today's crisis was inevitable decades ago and that modern policies and "solutions" will only make the problem worse.

For further reading on the business cycle and the role of a central bank, see Ludwig von Mises' "Theory of Money and Credit." For more history of the Depression and how it related to credit policies following the creation of the FED, see Garet Garrett's "Bubble that Broke the World."

Quote of the day - Dick Morris [Gas prices, gas taxes]

In fact, liberals basically don’t see much wrong with $5 gas. Many have been urging a tax to achieve precisely this level, just like Europe has done for decades.

Obama said that he was unhappy that there was not a period of “gradual adjustment” to the high prices, but seems to shed few tears over the current levels. After all, if your imperative is climate change, a high gas price is worth 10 times a ratified Kyoto treaty in bringing about change.

Dick Morris - July 15, 2008

Ronald Reagan at the von Mises Institute

I posted most of this as a comment at another blog. I liked it so much I am going to repeat it here. I have always been annoyed that so much of the national discussion has always focused on white noise, trivialities and ad hominem attacks. There are core values underpinning the Republican party and conservatism. These values go beyond the arguments of the moment.

Michelle Malkin posted a lengthy item the other day featuring extensive quotations from a 30 year old Reagan speech before the von Mises institute, in which he discussed the role of "profits" and how the left has misused that word. But read it NOT for the implied criticism of McCain. Forget about McCain and the primaries for a moment. Read the item just to rediscover what conservatism is all about. See what issues we SHOULD be talking about instead of ad hominem attacks. Reading the item should make you optimistic (as it does for me) because it will remind you of the potential that conservative philosophy really has. It will remind you that conservatism offers the kind of basic values, deep thought and core philosophy that transcend any one campaign or any temporary battle of insults.

Quote of the day - Steve Czaban

If the government could just magically stimulate the economy to get it going, why wouldn't they do that all of the time?

Steve Czaban - 1-29-08

Michelle Malkin needs a man; Leftist proposals prolong housing market crisis

Not literally. I, too, was disappointed to discover what she really meant:

Michelle needs a man

"I need a man. A man who can say “No.” A man who rejects Big Nanny government. A man who thinks being president doesn’t mean playing Santa Claus. A man who won’t panic in the face of economic pain. A man who won’t succumb to media-driven sob stories.

A man who can look voters, the media, and the Chicken Littles in Congress in the eye and say the three words no one wants to hear in Washington: Suck. It. Up."

In fact, she has presented the only solution (not only to the real estate bubble collapse, but to the entire economy). All of these "stimulus" packages not only are going to create further federal debt and erode our currency and our future, but they are delaying the real solution - a price correction.

By bailing out the homeowners, the government is delaying the inevitable drop in prices and preventing market forces from working. If prices could drop from the ridiculous levels to which government sponsored currency inflation has driven them, those of us who have saved our money could snap up some deals. The new mortgages would reflect actual values instead of inflation inspired fantasies. The sooner we endure the pain, the better. The sooner that the fools among us lose their properties or write off inflated mortgage values (or some combination thereof), the sooner that the thrify among us can be rewarded for our thriftiness. The price correction would have the added benefit of allowing the normal volume of sales to go forward, instead of this stalemate that has resulted from expectations of bailout or a vain attempt by individuals to hold on to unrealistically expensive homes.

All of us are going to have to go back to square one to counter the "stimulus" propaganda over the next few months. If the idea of a price correction scares you, take a look at the following short, simple books.





By educating yourself now, you are preparing for the onslaught so that you won't find yourself swept up by "stimulus" hysteria. Learn the basics so you can be the man Michelle wants you to be.

Quote of the day - Pat Buchanan

This self-indulgent generation has borrowed itself into unpayable debt. Now the folks from whom we borrowed to buy all that oil and all those cars, electronics and clothes are coming to buy the country we inherited. We are prodigal sons, and the day of reckoning approaches.

Pat Buchanon - January 14, 2008