<story><title>Presumption of stupidity</title><url>http://www.aaronkharris.com/presumption-of-stupitidy</url></story><parent_chain><item><author>brandonb</author><text>To generalize: competitors in a market usually behave rationally, and what looks like &amp;quot;stupid&amp;quot; behavior from afar may actually be unseen incentives.&lt;p&gt;Which suggests a test for your understanding of a market: can you map out the incentives and explain why what looks like apparently-irrational behavior is happening?&lt;p&gt;For example, in healthcare, we waste 30%+ of the $3T we spend each year. Much of that waste is due to hospital readmissions for an ongoing condition like heart failure. Startups sometimes try to fix this by developing a special machine learning algorithm to predict readmissions and apply an intervention. But even when the technology succeeds, the business fails: hospitals charge for readmissions, so there&amp;#x27;s an active disincentive for the hospital to buy the product. (That is now changing with ACOs, and a change in incentives is an opportunity for new companies.)</text></item></parent_chain><comment><author>ropman76</author><text>The hospital admission&amp;#x2F;re-admission policy (or lack thereof) is exactly the type of thinking that this article is addressing.  ER&amp;#x2F;Urgent Care doctors have a list of criteria for hospital admissions that are not always present at the time but may comeback later.  If they are use more caution then required a hundred dollar medical bill may turn into a several thousand dollar hospital stay over a minor issue.  Doctors are dealing with imperfect information when making a diagnosis so to say that they need an &amp;quot;algorithm&amp;quot;  is trivializing a complex problem.  There is room for a lot of improvement in terms of helping medical staff make better decisions with more complete information.  I am uneasy that some of the new regulations in this area will end up handcuffing doctors in ways that will not always be in the best interests of the patients
Note: not medical staff.  Many years ago I processed claims for an insurance company and had some long and heated discussions about this topic with hospital staff.  If some of these new regs are like what my oversized insurance company had, it will not end well.</text></comment>
<story><title>Presumption of stupidity</title><url>http://www.aaronkharris.com/presumption-of-stupitidy</url></story><parent_chain><item><author>brandonb</author><text>To generalize: competitors in a market usually behave rationally, and what looks like &amp;quot;stupid&amp;quot; behavior from afar may actually be unseen incentives.&lt;p&gt;Which suggests a test for your understanding of a market: can you map out the incentives and explain why what looks like apparently-irrational behavior is happening?&lt;p&gt;For example, in healthcare, we waste 30%+ of the $3T we spend each year. Much of that waste is due to hospital readmissions for an ongoing condition like heart failure. Startups sometimes try to fix this by developing a special machine learning algorithm to predict readmissions and apply an intervention. But even when the technology succeeds, the business fails: hospitals charge for readmissions, so there&amp;#x27;s an active disincentive for the hospital to buy the product. (That is now changing with ACOs, and a change in incentives is an opportunity for new companies.)</text></item></parent_chain><comment><author>nradov</author><text>It&amp;#x27;s not just ACOs. CMS is also changing the reimbursement structure to penalize hospitals that have unnecessary readmissions.&lt;p&gt;&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.cms.gov&amp;#x2F;Medicare&amp;#x2F;medicare-fee-for-service-payment&amp;#x2F;acuteinpatientPPS&amp;#x2F;readmissions-reduction-program.html&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.cms.gov&amp;#x2F;Medicare&amp;#x2F;medicare-fee-for-service-paymen...&lt;/a&gt;</text></comment>