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McAllen Texas: A Less Exciting Explanation

by Jaan Sidorov

Readers may recall McAllen Texas was the topic of an essay in The New Yorker magazine by the impressive surgeon-essayist and Democratic advisor Atul Gawande. The McAllen ‘hospital referral region’ has the dubious distinction of being identified by the Dartmouth Atlas as close to the top nationwide for the amount of total fee-for-service Medicare dollars spent per beneficiary in 2006. That hapless locale was subsequently seized upon by Peter Orszag of the Office of Management and Budget (OMB), Consumer Reports and some notable blogs as the symbol for all that ails American healthcare. Commentators have been accusing the ‘McAllens of this country’ of consciously and unconsciously economically ripping off the system with precious little quality to show for it.

Is there something really special about McAllen or is something else going on?

To illustrate the point, conduct a thought experiment by imaging many bags of pennies (to pay the primary care providers), quarters (for the rest of the physicians) and dollars (for the hospitals) suspended above a huge map of the United States. Mentally open the bags, releasing coins that fall, clatter and roll across the map. Since the distribution of the coins is random, some areas of the U.S map will have no coins, others might have just pennies, others may have dollars and pennies, some will have all three and a few will have lots of all three. Somewhere on that map, however, there will be a pile of coins that is bigger than the rest. Perform the same experiment using Monopoly style plastic clinics and hospitals across a board-map and the same thing will happen. In these thought experiments, the area of the map with the extreme outlier status happens to be McAllen.

It’s hard for non-statisticians/non-economists to think of human behavior in markets as being ‘randomly’ distributed around an average, but it’s true. The best (painfully so) examples of this are the performance of mutual funds, as well as what happens to losing vs. winning teams and their professional sports coaches . The same is true in healthcare: given the overall upward growth in the number of hospitals, specialists and clinics with an inevitable distribution (both high and low) around that trajectory, it is statistically inevitable that there will be a McAllen somewhere in the United States.

It is the nature of our minds to believe there must be something “causing” outliers. In other words, there must be something about McAllen that attracted all those coins, right? That may be true in Miami (which is number 1 in the U.S), but that doesn’t seem to be the case for McAllen as described in the New Yorker magazine article. The gumshoe M.D. reporting clearly shows the McAllen providers are mystified by their status. It’s not as though they planned to take advantage of the system. In fact, they didn’t. That’s because it’s all random.

This is important because most healthcare providers involved in quality improvement learned long ago that ‘identifying’ and then ‘managing’ outliers with targeted interventions is a poor way to promote overall system improvement. Outliers naturally regress to the mean over time and they’re not the problem anyway. Rather, the trick is to reduce overall variation around the mean (reducing the standard deviation) and to move all providers toward a better average level of behavior. That’s a lot of complicated work that, frankly, isn’t as enthralling to editors or the readers of The New Yorker.

While popular media can be forgiven for using simplistic descriptions of extreme outlier anedotes to pander to a political agenda, what about Dr. Gawande? However, the reaction of the OMB is frightening. Short of complete central planning for the entire health care system, random distributions of performance, expense, quality, claims, satisfaction and countless other measures around a mean will be unavoidable. Of all persons, Dr. Orszag should understand that outliers are an ironic certainty, not evidence of malfeasance. Most are anomalies, not proof of anything. They are, in short, interesting, but not necessarily lessons and certainly not the stuff of policy making.


2 Comments »

  Jake wrote @ June 3rd, 2009 at 8:30 pm

Are you really claiming that random variation is solely responsible for McAllen’s ‘outlier’ health care cost status? Would you also then argue that the relatively low cost of health care delivered at the Mayo Clinic is solely due to random chance?
I could see an argument for taking caution before assuming that the reasons for higher cost care in McAllen are generalizable to all cities or practices, but to say that there are no reasons at all beyond random chance sounds absurd to me.

  Jaan Sidorov wrote @ June 4th, 2009 at 1:37 am

I’m claiming that I really don’t know if random variation COULD account for the outlier status. It’s a possibility that hasn’t been addressed in any of the media.

Integrated delivery systems like Mayo are also outliers, but in reading about them, it makes sense why and it’s intellectually feasible to not believe it’s a matter of chance. However, I wouldn’t compare Mayo to McAllen, because that’s not apples to apples.

I admit to being a fan of Nassim Nicholas Taleb’s book “Black Swan.” It turns out there is a lot more randomness around us than our brains are accustomed to dealing with. Better to start off believing events are random and then disprove it. What is there to disprove McAllen isn’t a fluke in an admittedly dysfunctional health care market?

Thanks for your comment. Maybe I am being absurd but we bloggers like the feedback and the challenge of having to defend ourselves. We like to think it makes for better policy too!

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