How Low Can Oil Go?

Posted on December 16th, 2014 in Uncategorized by Karl
The article below argues that a 2-3% increase in supply (Libya and US shale) combined with a slowdown in the economy in the US, Europe and China is responsible for the 40% drop in oil prices in the past six months.  
The New Yorker, 12/16/2014.  By: James Surowiecki

Just in time for Christmas, there’s a surprise present for consumers: plummeting oil prices. They have fallen forty per cent since July—gasoline now costs well below three dollars a gallon—saving Americans hundreds of millions of dollars a day. This has been a mini-stimulus for the economy, and one that was almost completely unexpected. Before the summer, prices had been high for years. Despite a lot of geopolitical turmoil and macroeconomic anxiety, the oil market had been remarkably stable, and it seemed possible that, as one study put it, “hundred-dollar oil is here to stay.” But in a matter of months all that changed.

So what happened? At the most basic level, it’s a simple supply-and-demand story. Europe’s continued troubles and a slowdown in the Chinese economy muted the demand for oil. Meanwhile, the U.S. shale-oil boom and a rebound of drilling in Libya boosted supply. “Libya’s ramping up of production caught people genuinely off guard,” Steven Kopits, the managing director of Princeton Energy Advisors, told me. “That’s the kind of thing that’s hard to predict unless you have really good intelligence assets on the ground.” The result was that the market was producing many more barrels of oil a day than were consumed. As oil was dumped on the market, prices inevitably fell.

Such volatility is exactly what the history of oil prices would lead us to expect. Commodities are more volatile than other assets—the price of copper fluctuates a lot more than that of a television set—and oil has historically been more volatile than most other commodities; a 2007 study found that in the U.S. it was more volatile than ninety-five per cent of other products. The biggest reason for this volatility is that short-term supply and demand for oil are what economists call “price-inelastic,” which means that they don’t respond much when the price of oil changes. People don’t immediately start driving less when gasoline prices spike—they just pay more for gasoline. On the supply side, drilling projects take a long time to start up or to shut down, so higher prices don’t immediately translate into more supply, or lower prices into less. This means that the way prices typically return to normal—through increasing supply or diminishing demand—doesn’t really happen in the oil market. So a two- or three-per-cent change in supply, which is about how much the shale boom and the Libyan rebound added to global daily production, can spark a huge move in price.

In recent years, hedge funds and commodity-index funds have put hundreds of billions into the oil market, and studies suggest that this flood of investment may have increased the market’s volatility. By its nature, oil trading is beset by uncertainty. It’s not just the precarious geopolitics of where most of the world’s oil reserves are. There’s also the fact that predicting future demand requires forecasting the performance of the entire world economy.

You might think that the existence of OPEC would guarantee stability. But OPEC is weaker than it once was, thanks to the emergence of big non-OPEC oil producers, like the U.S. Besides, enforcing stability at a time of falling prices is easier said than done. OPEC’s members face a classic collective-action problem. They’d be better off ultimately if they all agreed to curb production—Saudi Arabia, in particular, would have to cut back—but individually they have a greater incentive to continue pumping. And the Saudis know from history that cutbacks don’t always work. In the early nineteen-eighties, they slashed output in an attempt to prop up energy prices. “They cut production and cut production and cut production, and all it did, more or less, was wreck their economy for the next twenty years,” Kopits said. “This time around, they’re drawing a line in the sand and saying We’re going to keep pumping, and everyone else is going to have to adjust around us.”

The shale-oil boom has added to uncertainty, too. OPEC has no control over what U.S. producers do. And even though shale-oil producers often face higher production costs than traditional drillers do (which should make them quick to cut production when prices fall), many also have debt payments to make and fixed costs to meet if they don’t want to go out of business. So they’re likely to keep pumping, since that keeps revenue coming in until (they hope) the price recovers. But continuing to pump, of course, makes it harder for prices to stabilize.

It would be a mistake for oil producers to expect a return to the high, stable prices of recent years. By the same token, American consumers shouldn’t get too used to cheap gas, since in the long run low oil prices erode the conditions that brought them about. Producers are already starting to adjust: ConocoPhillips just announced that it’s cutting its drilling budget. And, because cheap oil gives everyone an economic boost, eventually it leads to higher demand. We’re awash in oil right now. Soon enough, we may be wondering where it all went. ♦

Oil Needs to Drop Below $18 Before US Shale Goes Bust

Posted on December 9th, 2014 in Uncategorized by Karl

Forbes, December 9, 2014

Oil prices have a lot more room to fall before things get really scary. Here’s why.

The recent drop in crude prices won’t kill off the US shale oil industry. It’ll just make it more efficient.

Profit margins and break-even points are relative not only to the price of oil, but also to the cost of doing business. As oil prices drop, producers will undoubtedly renegotiate their ludicrously expensive oil service contracts, slash wages for their workforce and cut perks to bring their costs in line with the depressed price for crude. The demand for oil remains strong, which should provide an adequate floor for producers in the long run, but only after they get their finances in order.

How oil prices ever reached $100 a barrel still remains a mystery to many who have followed the industry for years. But the 40% drop in oil prices over the past six months has been shocking for oil bears and bulls alike. Why on earth did it fall so hard, so fast? There is plenty of speculation, ranging from the Saudi’s wish to “crush” the U.S. shale industry, to the U.S. colluding with the Saudi’s to flood the market in order to bankrupt an aggressive Russia and an obstinate Iran.

Conspiracy theories aside, the fact is oil prices have dropped and they may stay “low” for a while. This has analysts, journalists, and pundits running around claiming that it’s the end of the world.

It is understandable that people are nervous. After all, the oil industry is a major producer of jobs and wealth for the U.S. It contributes around $1.2 trillion to U.S. GDP and supports over 9.3 million permanent jobs, according to a study from The Perryman Group. Not all that money and jobs come directly from the shale oil industry or even the energy industry as a whole but instead derive from the multiplier effect the industry has on local economies. Given this, it’s clear why any drop in the oil price, let alone a 40% drop, is cause for concern.

Nowhere in the U.S. is that concern felt more acutely than in Houston, Texas, the nation’s oil capital. The falling price of crude hasn’t had a major impact on the city’s economy, at least not yet. But people, especially the under-40 crowd—the Shale Boomers, as I call them—are starting to grow very worried. At bars and restaurants in Houston’s newly gentrified East End and Midtown districts, you often hear the young bucks (and does) comparing notes on their company’s break-even points with respect to oil prices. Those who work for producers with large acreage in the Bakken shale in North Dakota are saying West Texas Intermediate (WTI) crude needs to stay above $60 a barrel for their companies to stay in the black. Those who work for producers with large acreage in the Eagleford shale play in south Texas say their companies can stay above water with oil as low as $45 to $50 a barrel.

Both groups say that they have heard their companies are starting to walk away from some of the more “speculative” parts of their fields, which translates to a decrease in production, the first such decrease in years. This was confirmed Wednesday when the Fed’s Beige Book noted that oil and gas activity in North Dakota decreased in early November due to the rapid fall in oil prices. Nevertheless, the Fed added the outlook from “officials” in North Dakota “remained optimistic,” and that they expect oil production to continue to increase over the next two years.

What are these “officials,” thinking? Don’t they worry about the break-even price of oil? Sure they do, but unlike the Shale Boomers, they also probably remember drilling for oil when it traded in the single digits, which really wasn’t that long ago. For these seasoned oil men, crude at $60 a barrel still looks mighty appealing.

Doug Sheridan, the founder of EnergyPoint Research, which conducts satisfaction surveys, ratings, and reports for the energy industry, recalls when he had lunch with an oil executive of a major energy giant 10 years ago who confided in him that his firm was worried that oil prices had risen too high, too fast. “He was concerned that the high prices would attract negative attention from the press and Congress,” Sheridan told Fortune. “The funny thing was, oil prices were only around $33 a barrel.”

The shale boom has perpetuated the notion that drilling for oil, especially in shale formations, is somehow super complicated and expensive. It really isn’t. Fracking a well involves just shooting a bunch of water and chemicals down a hole at high pressure—not exactly rocket science. The drilling technique has been around since the 1940s, and the energy industry has gotten very good at doing it over the decades. Recent advances in technology, such as horizontal drilling, have made fracking wells even easier and more efficient.

But even though drilling for oil has become easier and more efficient, production costs have gone through the roof. Why? There are a few reasons for this, but the main one is the high price of oil. When oil service firms like Halliburton and Schlumberger negotiate contracts with producers, they usually take the oil price into consideration. The higher the oil price, the higher the cost for their services. This, combined with the boom in cheap credit over the last few years, has increased demand for everything related to the oil service sector—from men to material to housing. In what other industry do you know where someone without a college degree can start out making six figures for doing manual labor? You can in the oil and gas sectors, especially in places like Western North Dakota. There, McDonald’s employees make $20 an hour and rent for a modest place can top $2,000 a month.

But as the oil price drops, so will costs, bringing the “break-even” price down with it. Seasoned oil men know how to get this done—it involves a little Texas theater, which is sort of like bargaining at a Turkish bazaar. The producers will first clutch their hearts and tell their suppliers that they simply cannot afford to drill any more given the sharp slump in oil prices. Their suppliers will offer a slight discount on their services but the producer will say he’s “walking away.” This is where we are in the negotiating cycle.

After letting the oil service firms sweat a bit (traditionally around two to four months), a producer will give their former suppliers a call, saying they are “thinking” of getting back in the game. Desperate for work, the suppliers will now be willing to renegotiate a whole new agreement based on a lower oil price. The aim of the new contract is to give producers close to the same margin they had when prices were much higher. Profits are restored and everyone is happy.

This negotiation will happen across all parts of the oil and gas cost structure. So welders who were making $135,000 a year will probably see a pay cut, while the administrative staff back at headquarters will probably miss out on that fat bonus check they have come to rely on. Rig workers and engineers will see their pay and benefits slashed as well. Anyone who complains will be sent to Alaska or somewhere even worse than Western North Dakota in the winter, like Siberia (seriously). And as with any bursting bubble, asset prices will start to fall for everything from oil leases to jack-up rigs to townhouses in Houston. Oh, and that McDonald’s employee in Western North Dakota will probably need to settle for $15 an hour.

But oil production will continue, that is, until prices reach a point at which it truly makes no sense for anyone to drill anywhere.

So, what is the absolute lowest price oil can be produced for in the U.S.? Consider this—fracking last boomed in the U.S. back in the mid-1980s, when a barrel of oil fetched around $23. That is equivalent to around $50 a barrel today, when adjusted for inflation. That fracking boom went bust after prices fell to around $8 a barrel, which is worth around $18 in today’s money. With oil last week hitting $63 a barrel, it seems that prices have a lot more room to fall before things get really scary.

How Medical Care is Being Corrupted (NYT, 11/21/2014)

Posted on November 21st, 2014 in Uncategorized by Karl

WHEN we are patients, we want our doctors to make recommendations that are in our best interests as individuals. As physicians, we strive to do the same for our patients.

But financial forces largely hidden from the public are beginning to corrupt care and undermine the bond of trust between doctors and patients. Insurers, hospital networks and regulatory groups have put in place both rewards and punishments that can powerfully influence your doctor’s decisions.

Contracts for medical care that incorporate “pay for performance” direct physicians to meet strict metrics for testing and treatment. These metrics are population-based and generic, and do not take into account the individual characteristics and preferences of the patient or differing expert opinions on optimal practice.

For example, doctors are rewarded for keeping their patients’ cholesterol and blood pressure below certain target levels. For some patients, this is good medicine, but for others the benefits may not outweigh the risks. Treatment with drugs such as statins can cause significant side effects, including muscle pain and increased risk of diabetes. Blood-pressure therapy to meet an imposed target may lead to increased falls and fractures in older patients.

Physicians who meet their designated targets are not only rewarded with a bonus from the insurer but are also given high ratings on insurer websites. Physicians who deviate from such metrics are financially penalized through lower payments and are publicly shamed, listed on insurer websites in a lower tier. Further, their patients may be required to pay higher co-payments.

These measures are clearly designed to coerce physicians to comply with the metrics. Thus doctors may feel pressured to withhold treatment that they feel is required or feel forced to recommend treatment whose risks may outweigh benefits.

It is not just treatment targets but also the particular medications to be used that are now often dictated by insurers. Commonly this is done by assigning a larger co-payment to certain drugs, a negative incentive for patients to choose higher-cost medications. But now some insurers are offering a positive financial incentive directly to physicians to use specific medications. For example, WellPoint, one of the largest private payers for health care, recently outlined designated treatment pathways for cancer and announced that it would pay physicians an incentive of $350 per month per patient treated on the designated pathway.

This has raised concern in the oncology community because there is considerable debate among experts about what is optimal. Dr. Margaret A. Tempero of the National Comprehensive Cancer Network observed that every day oncologists saw patients for whom deviation from treatment guidelines made sense: “Will oncologists be reluctant to make these decisions because of an adverse effects on payments?” Further, some health care networks limit the ability of a patient to get a second opinion by going outside the network. The patient is financially penalized with large co-payments or no coverage at all. Additionally, the physician who refers the patient out of network risks censure from the network administration.

When a patient asks “Is this treatment right for me?” the doctor faces a potential moral dilemma. How should he answer if the response is to his personal detriment? Some health policy experts suggest that there is no moral dilemma. They argue that it is obsolete for the doctor to approach each patient strictly as an individual; medical decisions should be made on the basis of what is best for the population as a whole.

Medicine has been appropriately criticized for its past paternalism, where doctors imposed their views on the patient. In recent years, however, the balance of power has shifted away from the physician to the patient, in large part because of access to clinical information on the web.

In truth, the power belongs to the insurers and regulators that control payment. There is now a new paternalism, largely invisible to the public, diminishing the autonomy of both doctor and patient.

In 2010, Congress passed the Physician Payments Sunshine Act to address potential conflicts of interest by making physician financial ties to pharmaceutical and device companies public on a federal website. We propose a similar public website to reveal the hidden coercive forces that may specify treatments and limit choices through pressures on the doctor.

Medical care is not just another marketplace commodity. Physicians should never have an incentive to override the best interests of their patients.

Pamela Hartzband and Jerome Groopman are physicians on the faculty of Harvard Medical School and co-authors of “Your Medical Mind: How to Decide What is Right for You.”

ISIS and SISI – Both are doomed

Posted on June 25th, 2014 in Uncategorized by Karl

By Thomas Friedman, NYTimes 6/25/2014

The past month has presented the world with what the Israeli analyst Orit Perlov describes as the two dominant Arab governing models: ISIS and SISI.

ISIS, of course, is the Islamic State in Iraq and Syria, the bloodthirsty Sunni militia that has gouged out a new state from Sunni areas in Syria and Iraq. SISI, of course, is Abdel Fattah el-Sisi, the new strongman/president of Egypt, whose regime debuted this week by shamefully sentencing three Al Jazeera journalists to prison terms on patently trumped-up charges — a great nation acting so small.

ISIS and Sisi, argues Perlov, a researcher on Middle East social networks at Tel Aviv University’s Institute for National Security Studies, are just flip sides of the same coin: one elevates “god” as the arbiter of all political life and the other “the national state.”

Both have failed and will continue to fail — and require coercion to stay in power — because they cannot deliver for young Arabs and Muslims what they need most: the education, freedom and jobs to realize their full potential and the ability to participate as equal citizens in their political life.

We are going to have to wait for a new generation that “puts society in the center,” argues Perlov, a new Arab/Muslim generation that asks not “how can we serve god or how can we serve the state but how can they serve us.”

Perlov argues that these governing models — hyper-Islamism (ISIS) driven by a war against “takfiris,” or apostates, which is how Sunni Muslim extremists refer to Shiite Muslims; and hyper-nationalism (SISI) driven by a war against Islamist “terrorists,” which is what the Egyptian state calls the Muslim Brotherhood — need to be exhausted to make room for a third option built on pluralism in society, religion and thought.

The Arab world needs to finally puncture the twin myths of the military state (SISI) or the Islamic state (ISIS) that will bring prosperity, stability and dignity. Only when the general populations “finally admit that they are both failed and unworkable models,” argues Perlov, might there be “a chance to see this region move to the 21st century.”

The situation is not totally bleak. You have two emergent models, both frail and neither perfect, where Muslim Middle East nations have built decent, democratizing governance, based on society and with some political, cultural and religious pluralism: Tunisia and Kurdistan. Again both are works in progress, but what is important is that they did emerge from the societies themselves. You also have the relatively soft monarchies — like Jordan and Morocco — that are at least experimenting at the margins with more participatory governance, allow for some opposition and do not rule with the brutality of the secular autocrats.

Indeed, the Iraq founded in 1921 is gone with the wind. The new Egypt imagined in Tahrir Square is stillborn. Too many leaders and followers in both societies seem intent on giving their failed ideas of the past another spin around the block before, hopefully, they opt for the only idea that works: pluralism in politics, education and religion. This could take a while, or not. I don’t know.

We tend to make every story about us. But this is not all about us. To be sure, we’ve done plenty of ignorant things in Iraq and Egypt. But we also helped open their doors to a different future, which their leaders have slammed shut for now. Going forward, where we see people truly committed to pluralism, we should help support them. And where we see islands of decency threatened, we should help protect them. But this is primarily about them, about their need to learn to live together without an iron fist from the top, and it will happen only when and if they want it to happen.

Life Lessons from the World’s Most Successful People

Posted on June 5th, 2014 in Uncategorized by Karl

In 30 years at Fortune, I’ve interviewed CEOs and billionaires and other titans about what makes them succeed. Here are 10 things I’ve learned, plus wisdom from Warren Buffett.

The best career advice is universal. It applies to a CEO of a Fortune 500 company and to a kid aspiring to make it through college.

I tried to keep this in mind last week when I spoke at Allentown Central Catholic High School, which in 1978 sent me on my way from Pennsylvania to what has turned out to be a thrilling and very satisfying life and career. I told the CCHS students, who packed Rockne Hall for inductions of their new Student Council and class officers, that I’ve spent the past 30 years at Fortune ”going to school on success.” That is, my job profiling some of the world’s most successful people–fromOprah Winfrey to Yahoo (YHOO) CEO Marissa Mayer to Rupert Murdoch (NWS) to Melinda Gates–is to learn and explain what makes these extraordinary people win and adapt to all sorts of challenges. I pared my message to 10 pieces of advice, which include a few obvious truths and, I hope, some enlightening points that are universal.

1. Don’t plan your career.  Most of the really successful people I’ve met and interviewed these past 30 years at Fortune had no clue what they wanted to do when they were in high school or even in college. They stayed flexible and open to possibilities.

2. Forget the career ladder; climb the jungle gym. In a world that’s unpredictable and changing faster than ever, who knows what tomorrow’s ideal jobs will be? Think of your career as a jungle gym. Sharpen your peripheral vision and look for opportunities over here or over there, and swing to them. Facebook (FB) COO Sheryl Sandberg kindly credits me in Chapter 3 of her best-seller, Lean In, for introducing the concept of the jungle gym.

3. Pick people over pay. Work with good people who are smarter than you are, so you can stay stimulated and learn everyday.

4. Do every job as if you were going to be doing it for the rest of your life. If you spend your time thinking about what you want to do next, you’re not fully focused on your current assignment. And unless you focus, you won’t compete successfully with people who are “all in.”

5. Do the job that you’re supposed to do, but think: What’s not getting done? Always consider how you can contribute to the bigger whole — and don’t be afraid to stumble. I wrote a 1995 cover story called “So you fail, so what!” Today, recovering from failure is a badge of honor that bosses want to see in people they hire.

6. Be curious. Everyone you meet is worth learning from. People derail in their careers, studies show, when they stop learning. Yes, continual learning matters more than where you go to school or how many degrees you rack up.

7. Be nice to everyone. As you get older, you’ll have fewer degrees of separation with more and more people. Who knows how someone who doesn’t matter to you today might matter critically tomorrow? Don’t burn any bridges. Build your bridges now to last forever.

8. Listen. Listen more than you talk. I was shy in high school. I’m still a closet introvert, but I’m a good conversationalist because I’m extraordinarily interested in people, I ask questions (sometimes too many) and I listen carefully. Listening to someone carefully is giving them a gift.

9. To lead, line up your followers. Leadership has no long-term value without followers on track to become as strong as you are. Show a generosity of spirit that makes people want to work with you, because they know you’ll make them better.

10. Be honest and true. If people are in a foxhole with you, do they trust you to protect and help them? Make sure they do completely, by doing what you say you’re going to do, always.

I closed my talk with wisdom from Warren Buffett, who told me during an interview last year how he defines success. The Berkshire Hathaway (BRKA) chief actually has two definitions: 1. Success is having what you want and wanting what you have. 2. Success is having the people whom you love love you.  Isn’t it reassuring that one of the wealthiest men in the universe doesn’t equate success with money?

Post by: Patricia Sellers

Oncology Pathways – Good Idea. Ain’t Working.

Posted on May 28th, 2014 in Uncategorized by Karl

The attached WSJ article describes yet another push for oncology pathways from the payers in their effort to reduce the oncology drug spend.

What I found interesting is that docs are effectively using the precision medicine argument to counter the payers’ insistence that providers adhere to therapeutic pathways for most of their cancer patients.  Docs have always been successful in waving the clinical card when payers have attempted to restrict the way they practice.  However, using precision medicine and molecular sequencing against any payer mandated oversight is pure genius.  The payer will lose this fight.

The only real solution to our uncontrollable (and unsustainable) healthcare spend (and oncology is up there as one of the worst offenders) is to include healthcare providers in the solution by encouraging them to take on financial risk of treating patients.

Hot Spotters in Healthcare

Posted on April 30th, 2014 in Uncategorized by Karl

The Intermountain Health, the largest health system in Utah and Idaho, just wrote a Harvard Business Review Blog that stated alarming numbers on their “hot spotter” patients.  Hot spotters are the most expensive healthcare consumers (ie. the sickest patient population).  At Intermountain, the top 1% (or bottom 1%, depending on how you view it) of patients consume 28% of overall healthcare dollars.  Moreover, the top 5% consume 50% of the expense.  Wow!  Thus, if Intermountain focused on the sickest 5% of patients, it could reduce 50% of its healthcare expense.

To date, these top 5% were HUGE revenue generators.  In a fee-for-service environment, these “frequent-flier” patients should have been given red carpet treatment as they generated a lot of revenue for the hospital.

However, the reimbursement world is changing.  In an ACO environment, Intermountain and other health systems need to thoughtfully care for these patients and focus on both quality and COST of care.  Additionally, Intermountain needs to solve one of the biggest problems:  coordination of care.  Hot spotters typically have 3-4 comorbidities and, thus, see several medical specialists.  The traditional problem is that no one healthcare provider (doctor or nurse) is coordinating/quarterbacking all of these specialists for the benefit of the patient.  So the end result is that the right hand often doesn’t know what the left hand is doing (or what they have prescribed).  This results in a big, fat waste of money and crappy results.

A link to Intermountain’s HBR Blog can be found here.


Even Steve Jobs suffered from “Uncoordinated Care”

Posted on April 30th, 2014 in Uncategorized by Karl

I was rereading the biography of Steve Jobs by Walter Isaacson over the weekend and was struck by the following passage on page 549.  It essentially describes how Steve Jobs’ care was uncoordinated among his oncologist, pain specialist, nutritionist, hepatologist and hematologist.

This was one of the most famous people in America—a VIP of VIPs—being treated at one of the most famous medical centers in America and even he had uncoordinated care.  If Steve Jobs couldn’t get coordinated care, then, if you are an employer, you can almost guarantee that your employees are not getting coordinated care.  Tests and even medications are either being duplicated or ‘not ordered’ because each doctor assumes that the other doctor is ‘taking care of it.’

Specific examples of uncoordinated care that may affect healthcare consumers are:

1) Cardiovascular care–patient has a PCP and a cardiologist and each doctor assumes the other doctor is managing the patient’s high blood pressure and as a result the patient is ‘compliant’ with their doctors orders, but new medication or higher dosages are never prescribed.  RESULT—the patient has uncontrolled hypertension and is at higher risk of heart attack and stroke.

2) Arthritis pain—patient has an orthopedist and a rheumatologist and both doctors prescribe anti-inflammatory pain medications in a class called NSAIDS: the orthopedist prescribes Naproxen and the rheumatologist prescribes Diclofenac.  Both medications don’t ‘interact,’ but they are duplicative and can damage the lining of the stomach and impair kidney function—especially if both are taken at the same time.  RESULT—when the  patient gets the stomach flu and becomes mildly dehydrated it results in temporary kidney failure and a 5 day hospital stay.

The list could go on and on.

What does this mean for employee benefits professionals and healthcare consumers?

  • For every employee that has multiple doctors, it should be assumed that their care is uncoordinated until proven otherwise.  Think Steve Jobs.
  • You as an employer and healthcare consumers themselves must play an active role in coordinating their own care.  Take ownership.  You are not necessarily an expert, but you will ‘care’ more than anyone else.  In Steve Jobs’ case, it was his wife that took ownership and got all of his doctors in a room together to talk—they had never done that before!

Posted by Dr. Eric Bricker, April 14, 2014

ACOs Explained – article by Kaiser Foundation

Posted on April 28th, 2014 in Uncategorized by Karl

The Kaiser Foundation just published a good (and balanced) background piece on what Accountable Care Organizations (ACOs) are and the challenges that exist today.  The best line in the article is:

“Some people say ACOs are HMOs in drag,” says Kelly Devers. But there are some critical differences – notably, an ACO patient is not required to stay in the network.




Meaning of a Successful, Fulfilling Life

Posted on April 28th, 2014 in Uncategorized by Karl

When I heard this week that Michael Phelps was planning to return to competitive swimming, my first reaction was to feel a little sad for him. I honor Mr. Phelps for the discipline, grit and passion he needed to win a record 18 gold medals. But I also sense that he’s going back to swimming because he’s chasing a high that hasn’t held up.

In the same way, I respect Michael Jordan for all he achieved in basketball. But after reading Wright Thompson’s brilliant article about him in ESPN Magazine, I was struck by the emptiness of his life since he retired as a player 11 years ago.

We celebrate and envy people’s extraordinary individual accomplishments and successes, but the pleasure they derive from their efforts is often surprisingly fleeting. And there is a reason for that. What generates an enduring experience of meaning and satisfaction in our work is the sense that what we’re doing really matters — that we’re truly adding value in the world.

Or as Viktor Frankl put it so eloquently: “Don’t aim at success. The more you aim at it and make it a target, the more you are going to miss it. For success, like happiness, cannot be pursued, it must ensue, and it only does so as the unintended side effect of one’s personal dedication to a cause greater than one’s self.”

For me, the threshold question is this: In the service of what?

It’s the question I find myself asking when I read about the amazing wealth being accrued by hedge fund managers. I respect the financial acumen of someone like David Tepper, who earned $3.5 billion last year or John Paulson, who earned $1.9 billion, or Carl C. Icahn, who earned $1.7 billion. But ought we to revere these investors simply for accumulating ever more wealth? Building one’s own value to feel more valuable is ultimately a losing game.

Imagine instead that Mr. Tepper decided he had enough money for himself and his family, and truly dedicated himself instead to a greater cause. Mr. Tepper could use the $3.5 billion he earned in 2013 — or even just keep $100 million — and hire 75,000 people at $40,000 each over the next year to create his own Works Projects Administration and take on our crumbling infrastructure. Or he could use that money to support tens of thousands of passionate but struggling artists, or give generous grants to thousands of worthy scientists whose critical research isn’t funded sufficiently, if at all.

It’s great that a group of billionaires, led by Warren E. Buffett and Bill Gates, have pledged to give away half of their fortunes when they die. But why wait? Why not right now?

Of course, “In the service of what?” isn’t just a question for billionaires. It’s one we all need to be asking ourselves.

I’ve long been haunted by an article called “The Tragedy of the Commons” written by the ecologist Garrett Hardin for the magazine Science in 1968. The article focuses on the dangers of overpopulation, but Mr. Hardin’s broader argument is about how individuals, acting from their rational but narrow self-interest, can collectively destroy something they all need to survive and prosper. He uses the example of an open pasture to which struggling herdsmen are invited to bring their cattle to feed. Eager to improve their economic circumstances, the herdsmen naturally want to feed as many cattle as possible. The problem is that over time, overgrazing takes a progressive toll on the commons, and, ultimately, it’s destroyed for everyone.

We need to redefine self-interest to recognize that it requires serving the commons — even if only for the selfish reason that our survival, and the survival of our children, depends on protecting our shared planet.

The answer to “In the service of what?” is to add more value to the commons than we take out, and not to discount any good that we can do.

“We must not, in trying to think about how we can make a big difference,” said the children’s rights advocate Marian Wright Edelman, “ignore the small daily differences we can make, which, over time, add up to big differences that we cannot foresee.”

Personal accomplishments make us feel good. Adding value to other people’s lives makes us feel good about ourselves. But there is a difference. The good feelings we get from serving others are deeper and last longer. Think for a moment about what you want your children to remember about you after you’re gone. Do more of that.

NYT, April 28, 2014