By Sarah Klein
Quality Matters: Your book uses behavioral economics to explain why some problems in the health care system are difficult to solve. A recurring theme is that patients and providers, like other humans, have an aversion to loss even when what they stand to lose is trivial or is an impediment to achieving their long-term goals. As you put it, people hate losses more than they love gains. How does loss aversion impede quality improvement efforts?
Hough: People not only dislike losses, they hate them at about twice the rate they like gains. This explains why people tend to stick to the status quo even if they don’t particularly care for the status quo. It has to be demonstrated, almost proven, that whatever benefit they are going to have from changing their behavior is going to be twice as good as what they have.
This is part of the conundrum of health care. Providers are like everyone else. We’ve got physicians and other health care providers who believe they are doing a good job and are not convinced that changing their style of practice will make their patients better off or make their own lives better, but they see the potential for loss. The losses include taking longer to see patients, as physicians incorporate the new practice, which means being less productive and having to make patients wait even longer to see them. They’re also concerned that changing their practices will create other problems because it will disrupt patient flow.
Quality Matters: How do successful organizations overcome this?
Hough: Often it’s a peer who convinces a physician that adopting a new procedure or process is worthwhile. That’s considered strong evidence. Data that show how they perform relative to their peers helps too because it shows—very vividly and memorably—that their patients’ health could be improved, and that is an important motivator. Mandates don’t go over well, because we all crave choice and autonomy even if we would choose what the mandate is. It works better if the medical staff at the hospital or the physicians in the group practice come together and say, “This is really right, this works better.” That is going to be more effective than any mandate.
Quality Matters: Can money tip the scale?
Hough: It’s not as helpful as you’d think. There’s a lot of evidence not just in behavioral economics, but in organizational behavior that money is not a good long-term motivator, for several reasons. First, money quickly blends into the background. We know this ourselves: we get a pay increase, even a big one, and we think that’s really great but after a couple of months, we don’t notice it. People have what [Princeton University professor and Nobel Laureate] Daniel Kahneman calls hedonic adaptation—a fancy term for getting used to it. The other problem with money and other extrinsic motivators like it is they have a tendency to crowd out important intrinsic factors such as social norms and altruism, which can be very powerful motivators. The Choosing Wisely campaign is a good example of using intrinsic motivation: it appeals to physicians’ professionalism and inherent concern for patient welfare. There’s also a danger of money turning all health care into an economic transaction, like the airlines, which may one day charge us to get off the plane. Once health care becomes a transaction, rather than a relationship, I think we will lose some fundamental values that have been a hallmark of health care—trust, commitment, caring.
Quality Matters: You also write about the endowment effect—that is, people’s tendency to place a higher value on an object they already own than they would be willing to pay if they were in the market to buy it, even for something as small as a coffee mug. Does this hold true with ideas? And if so, does it help to explain in part why providers are slow to adopt new practices, drugs, and protocols even when there is significant evidence to support them?
Hough: Yes. Marketers have known this for eons. They want to be the first one to get in someone’s head because once someone has an idea, it is hard to dislodge it. It is probably not as quantitatively established as loss aversion, but the rule of thumb seems to be you have to have twice as much evidence against something to change someone's opinion. To dislodge a method of practice is incredibly difficult because the physician has to stop practicing medicine by using his ingrained knowledge, experience, and even rules of thumb and instead step back and deliberately think through all the different possibilities and think through a new way of diagnosis or treatment. They are not being obstinate. It’s that they have found a way of practice that is efficient and provides what they consider to be good, high-quality care.
Quality Matters: Do you expect the principles of behavioral economics to become a bigger part of pay-for-performance and other incentive programs?
Hough: People are really glomming on to behavioral economics because they think it is the next new thing. They say standard economics is not giving us the answer; maybe behavioral economics will. But it is still a very new field. It has only been around for about 30 years. Neoclassical economics has been around for 150 to 200 years. In many cases we haven’t even figured out the right terminology. If you look up cognitive bias—a term generally used to describe how people make mistakes—on Wikipedia, it comes up with over 90 different kinds. I can’t believe that all of these are truly distinct. The results that we are getting are tantalizing but also they are not universal. For example, while the concept of loss aversion is robust, it is not going to occur every single time to every single person. It is more of a tendency. This is not physics here. This is how imperfect people make imperfect decisions.
Hough: People not only dislike losses, they hate them at about twice the rate they like gains. This explains why people tend to stick to the status quo even if they don’t particularly care for the status quo. It has to be demonstrated, almost proven, that whatever benefit they are going to have from changing their behavior is going to be twice as good as what they have.
This is part of the conundrum of health care. Providers are like everyone else. We’ve got physicians and other health care providers who believe they are doing a good job and are not convinced that changing their style of practice will make their patients better off or make their own lives better, but they see the potential for loss. The losses include taking longer to see patients, as physicians incorporate the new practice, which means being less productive and having to make patients wait even longer to see them. They’re also concerned that changing their practices will create other problems because it will disrupt patient flow.
Quality Matters: How do successful organizations overcome this?
Hough: Often it’s a peer who convinces a physician that adopting a new procedure or process is worthwhile. That’s considered strong evidence. Data that show how they perform relative to their peers helps too because it shows—very vividly and memorably—that their patients’ health could be improved, and that is an important motivator. Mandates don’t go over well, because we all crave choice and autonomy even if we would choose what the mandate is. It works better if the medical staff at the hospital or the physicians in the group practice come together and say, “This is really right, this works better.” That is going to be more effective than any mandate.
Quality Matters: Can money tip the scale?
Hough: It’s not as helpful as you’d think. There’s a lot of evidence not just in behavioral economics, but in organizational behavior that money is not a good long-term motivator, for several reasons. First, money quickly blends into the background. We know this ourselves: we get a pay increase, even a big one, and we think that’s really great but after a couple of months, we don’t notice it. People have what [Princeton University professor and Nobel Laureate] Daniel Kahneman calls hedonic adaptation—a fancy term for getting used to it. The other problem with money and other extrinsic motivators like it is they have a tendency to crowd out important intrinsic factors such as social norms and altruism, which can be very powerful motivators. The Choosing Wisely campaign is a good example of using intrinsic motivation: it appeals to physicians’ professionalism and inherent concern for patient welfare. There’s also a danger of money turning all health care into an economic transaction, like the airlines, which may one day charge us to get off the plane. Once health care becomes a transaction, rather than a relationship, I think we will lose some fundamental values that have been a hallmark of health care—trust, commitment, caring.
Quality Matters: You also write about the endowment effect—that is, people’s tendency to place a higher value on an object they already own than they would be willing to pay if they were in the market to buy it, even for something as small as a coffee mug. Does this hold true with ideas? And if so, does it help to explain in part why providers are slow to adopt new practices, drugs, and protocols even when there is significant evidence to support them?
Hough: Yes. Marketers have known this for eons. They want to be the first one to get in someone’s head because once someone has an idea, it is hard to dislodge it. It is probably not as quantitatively established as loss aversion, but the rule of thumb seems to be you have to have twice as much evidence against something to change someone's opinion. To dislodge a method of practice is incredibly difficult because the physician has to stop practicing medicine by using his ingrained knowledge, experience, and even rules of thumb and instead step back and deliberately think through all the different possibilities and think through a new way of diagnosis or treatment. They are not being obstinate. It’s that they have found a way of practice that is efficient and provides what they consider to be good, high-quality care.
Quality Matters: Do you expect the principles of behavioral economics to become a bigger part of pay-for-performance and other incentive programs?
Hough: People are really glomming on to behavioral economics because they think it is the next new thing. They say standard economics is not giving us the answer; maybe behavioral economics will. But it is still a very new field. It has only been around for about 30 years. Neoclassical economics has been around for 150 to 200 years. In many cases we haven’t even figured out the right terminology. If you look up cognitive bias—a term generally used to describe how people make mistakes—on Wikipedia, it comes up with over 90 different kinds. I can’t believe that all of these are truly distinct. The results that we are getting are tantalizing but also they are not universal. For example, while the concept of loss aversion is robust, it is not going to occur every single time to every single person. It is more of a tendency. This is not physics here. This is how imperfect people make imperfect decisions.