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2010 Potpourri XIV

By April 24, 2010Commentary

Price Waterhouse Cooper released its latest tally of venture investing in conjunction with the National Venture Capital Association.   (Venture Capital Report) The year is off to a slow start, the slowest since 1993.  In the first quarter, only $3.6 billion in funding went to venture-backed companies, down about a third from last year.  The number of exits by venture-backed firms, however, went up, which tends to encourage further investing.  There were nine IPOs, three by biotech companies, and 111 acquisitions, 21 in health care.  In regard to funding, biotech companies received about $825 million; medical devices about $517 million and health care services only $18 million.  Of the ten largest funding deals, most were industrial or energy related.  Two were biotech companies.  These numbers are important for several reasons.  One is that these companies provide a lot of job growth.  Another is that they are the start of the innovation funnel which creates advances in health care, but also tends to raise costs.

Rand released a study examining whether patient safety efforts could reduce malpractice exposure and claims.  (Rand Study) The research looked at safety outcomes data and malpractice claims in California between 2001 and 2005.  The study found a strong correlation between safety and malpractice.  For every ten fewer adverse events, there were 3.7 fewer malpractice claims.  One of the theories of the report is that patient injuries often occur not because of negligence, but because of complex system failures and that comprehensive quality and safety improvement measures may be the best way to lessen harm to patients from provider interactions.

Thomson Reuters put out a report on employer health cost increases for 2009.  The report is based on their database from 144 companies covering about 9.5 million persons.  (Thomson Report) Costs per capita went up 7.3%, while general inflation actually decreased last year.  This was also higher than the 6.1% increase in 2008.  Large employers, those with over 50,000 workers saw only about a 5% increase, which was lower than in 2008, but medium and small firms’ costs went up around 10%, substantially higher than in 2008.  The bulk of the increase was due to medical costs, although drug costs were up about 4%, all due to price increases.  Inpatient and outpatient hospital costs rose rapidly, again almost all price increases.  The report demonstrates the persistence of medical cost inflation, even in a recession, largely driven by provider and supplier market and pricing power.

The Sacramento Bee carried an article analyzing hospital costs and charges in California.  (Sacramento Bee Story) California hospitals are required to report what it costs them to provide services to insured patients, what they charged insurance companies for those services and what they actually collected.  The total collected has increased by over 30% since 2005.  The gap between hospital costs and what they collected from the insurers increased from 40% to 53%.  This during a recession.  It is pretty clear that hospitals basically can charge whatever they want and that this ability also drives their costs up.  Still waiting for policymakers to actually address a real cause of premium increases.

Public Citizen released its rankings and other information on how active state medical licensing boards are in policing the profession.  (Public Citizen Release) This is actually very useful information, but we must defend our home state, which consistently is at the bottom of the rankings.  Minnesota has an excellent health care system, always near the top among the states in overall health and health care.  We don’t discipline our physicians because they are all so good–above average as another Minnesotan would say.  Either that or its just Minnesota nice and we don’t want to offend or upset anyone.

Finally, the Harvard Business Review publishes a brief article that may explain why government and policymaking are so screwed up in this country.  (HBR Article) It turns our that people in positions of power are really good liars, much better than the rest of us.  They don’t feel as guilty about it either and apparently most of us are pretty bad at telling when people are lying in general and really bad at telling when these powerful people are lying.  We have a thought, lets just assume that politicians are lying until proven otherwise.  Then we won’t be surprised when things like the health “reform” bill turn out much worse than advertised by our “leaders”.

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