Real Numeracy

The Ventura County Star has run a series of four articles on kidney transplants.  Two of the articles feature patients who have received a kidney transplants and have difficulty affording their immunosuppression medications after the 36 month Medicare limit ends.

One of the patients, Matthew Kinney, has just lost his Medicare coverage and scrambles to find the $17,000 annually he will need to keep his body from rejecting his donated kidney. The other patient, Jeannette Castaneda, could no longer afford her meds and stopped taking them. The kidney failed and she is back on dialysis and on the waiting list to receive another kidney.

Interview with kidney patient Jeannette Castaneda. Video still from Ventura County Star

The problem patients face after their losing their 36 month Medicare limit is not a new issue. It was featured in a Sept 2009 blog post.

Another story in the series shows how Amgen, a pharmaceutical company, became a large contributor to Kidney Care Partners, which lobbied Congress to not extend coverage for immunosuppression medications if it meant reduced coverage of drugs used by dialysis patients.

Amgen is the largest manufacturer of epoetin alfa, a synthetic form of erythropoietin, sold under the brand name Epogen. Erythropoietin is a hormone produced by the kidneys that stimulates the production of red blood cells. Many patients with ESRD experience a decline in production of erythropoietin and would suffer from anemia without receiving regular injections of Epogen.

Epogen is a highly profitable drug and Amgen shareholders expect the company to defend its market. This includes funding organizations like Kidney Care Partners and lobbying Congress. Again, this is not a new story and was featured in a Dec 2009 blog post.

[Disclosure: I once held Amgen stock in my portfolio but sold it before I decided to become involved in kidney-related charities.]

by George Taniwaki

Patients with end-stage renal disease (ESRD) often wait many years for a transplant. There are currently over 85,000 people in the U.S. waiting for a kidney transplant and the number grows each year. The average wait time is over three years. The mortality rate for those with ESRD on dialysis is over 15% per year, meaning that almost half of the patients die and never get a transplant.

Eliminating the waiting list for kidney transplants is a complex problem. But I see four separate solutions. They are reduce the incidence rate of ESRD, increase the supply of deceased donor organs, increase the supply of live donor organs, and apply new technologies to enhance or replace human organs. These solutions are not mutually exclusive and should each be investigated and instituted by the appropriate organizations. In fact, I don’t believe any one of these solutions will eliminate the list on its own, and so possibly all of them will need to be pursued.

I will illustrate the various pieces of this problem with the four flow charts shown below and then discuss each of the four solution areas in future blog posts. The text in orange boxes represent actions that can be taken. The text in green boxes indicate the intended results of those actions.

Access to healthcare

For blog posts related to patient access to preventative care, patient education on treatment modalities, or dialysis treatment, see entries tagged with Access To Healthcare or Dialysis.

Note that in the right side of Figure 1, educating patients about the advantages of transplant therapy will increase the demand for transplants, which will make the waiting list longer if other steps are not taken to reduce the incidence of ESRD or increase the supply of organs.

Figure 1. Actions that may reduce the incidence of ESRD (left) and increase demand for transplant therapy (right)

Deceased donor transplants

For blog posts related to deceased donor transplants, including patient evaluation and experience, see entries tagged with Deceased Donor.

Figure 2. Actions that may increase supply of deceased donor kidneys

Live donor transplants

For blog posts related to live donor transplants, see entries tagged with Live Donor or Kidney Exchange. (For more on the live donor evaluation process, see entries tagged with Donor Story.)

Figure 3. Actions that may increase supply of live donor kidneys

New technologies

For blog posts related to alternatives to current transplant therapy, see entries tagged with Artificial Organs, Stem Cells, and New Therapies.

Figure 4. New technologies that may someday replace standard transplant therapy

Disclosure note: I am a community member of the Organ Donation Legislative Workgroup in Washington state. I am also a volunteer for several organizations that provide healthcare services to patients with ESRD. However, the opinions in this blog post are my own and do not represent those of any group.

All images by George Taniwaki

[Update1: I modified Figure 3]

[Update2: I added links to tagged blog posts]

Dying to Live is an hour-long documentary produced and directed by John Robbins and Lance Lipman. It follows the lives of patients and donors involved in organ transplants, all of them at Piedmont Hospital in Atlanta. The title is a bit of a misnomer. Of the two donors featured, one is actually a live kidney donor who has no complications after her surgery.

The one kidney patient in the documentary, Andrew Persaud, is a re-insurance broker who has been on hemodialysis for several months. He wants to get a transplant as soon as possible. Rather than wait for a deceased donor, he conducts a search for a live donor. He has created a website AndrewNeedsAKidney to describe his situation and promote in his search. Barbara Kilgore, a teaching nurse at Emory Adventist Hospital does not know Andrew, but hears about his condition from her daughter, who is a friend of Andrew’s sister. Ms. Kilgore volunteers to get tested. She is a match and a few months later she becomes a living donor for Mr. Persaud.

Andrew Persaud and Barbara Kilgore. Video still from Dying to Live

The other three patients featured in the movie are on the liver waiting list. Their experience is much more desperate than that of Mr. Persaud. As mentioned in many previous blog posts, patients with end-stage kidney disease (ESRD), can be kept alive mechanically through dialysis. Since kidney patients can survive several years on dialysis, the distribution of organs is weighted mostly by time on the list and difficulty of finding a match.

The situation is quite different for liver patients. There is no mechanical therapy available for liver failure. The only treatment is transplant. There is also a severe shortage of transplantable livers. Thus, rather than distributing livers based on how long a patient has been waiting, they are distributed to the sickest patients first. The United Network for Organ Sharing (UNOS) uses a measure called the MELD score (model for end-stage liver disease) to prioritize patients who are likely to die soon without an immediate transplant.

In a poignant scene shot during a transplant support group meeting sponsored by Piedmont Hospital, a patient candidly talks about his desire to get sicker faster so that he can move to the top of the waiting list and get a transplant sooner (or die sooner if an organ isn’t found).

One of the liver patients is Kevin Ferwerda. His condition is serious and his health is declining. He has been on the waiting list for several years but he is not yet near death, so does not qualify for an immediate transplant. Instead, he continues to wait while he struggles with recurring blockage of his bile duct that results in serious infections that require frequent hospital stays. When he is sick, his MELD score goes up and he moves up the list. As the doctors treat him, he gets better, and he moves down the list. This cycle puts a lot of stress on him both medically and emotionally. You can see and hear the tension as he and his wife Alyson discuss their life together raising three young children.

Kevin and Alyson Ferwerda. Video still from Dying to Live

Because of the large number of family members and friends interviewed, it is often hard to keep track of which story goes with which patient. But overall the movie does an excellent job of describing the ups and downs experienced by everyone who is waiting and hoping for an organ or agonizing over the death of a loved one. The film also does a good job of confronting and dispelling some common misconceptions family members have about consenting to organ donation. The movie made its debut at the Hawaii International Film Festival in 2010 and later that year won an award at the Los Angeles Film Festival.

Note: Dying To Live is available for $248 at the Icarus Films website, a price that includes public performance and broadcast rights. However, if you contact the firm via email, you can purchase a copy of the film for individual use for $39 plus shipping. Unfortunately, this movie isn’t available for sale at Amazon or for rent on Netflix.

One of the most active areas in online advertising is local deals. And the biggest part of that market appears to be social network-driven, deal-based discount gift certificates (or paid coupons). There are several agencies that facilitate these deals, such as Groupon, LivingSocial, and a large number of other competitors. Below is a description of how the deals work from each entity’s point of view.

Let’s start by explaining the business model of Groupon and similar firms. They are advertising and promotion agencies that focus on small customer service oriented businesses. Groupon has thousands of sales people, designers, and copywriters located in big cities in the U.S. and several international markets calling on small businesses and selling gift certificate deals. In this sense, their efforts are similar to those of direct mail companies, newspaper advertising sales teams, and yellow pages publishers.

The client firm agrees to allow the agency to sell gift certificates to customers at a deep discount, typically half off, such as $15 for $30 worth of goods. The client also agrees to pay the agency a fee for handling the promotion, typically half of the amount collected from customers, so $7.50 for each $30 gift certificate sold.  In exchange, the agency guarantees a certain minimum number of customers, most of whom will be new, will accept the deal or else the deal will be cancelled. The client does not pay anything upfront for this promotional work, Groupon and its ilk only get paid as the gift certificates are sold.

On the promotion side, these agencies maintain opt-in email subscriber lists of consumers who are  interested in receiving daily notifications of deals that are relevant to them. The agencies use recruitment techniques to grow their subscriber lists as large as possible. They encourages social interaction among the members in an attempt to increase the number of participants for each gift certificate deal and to increase the number of gift certificates purchased by each member.

There are two common attributes of the deals offered. First is that a minimum number of purchases must be made or the deal will expire. This encourages members who like the deal and have accepted the offer to solicit their friends to also purchase the gift certificate. The other is that the deal expires after 24 hours or after a maximum number of certificates is sold. This creates a sense of urgency that encourages rapid purchase decisions.

Despite the tremendous growth of group shopping, not all small businesses have been happy with the results. Part of the problem is that small businesses are often not geared to handle a large surge in customers. They underestimate the effect of long waits on profitability and on customer satisfaction. They also don’t have the customer relationship management (CRM) programs in place to convert first time visitors into long-term loyal customers.

Below are a couple of videos that describe the problem. The first one is an AP news story about a nail salon that is overwhelmed when deal seeking Groupon customers crowd out the regulars. It makes what should be a pleasant relaxing experience into a stress-filled, impersonal exercise. The second video is an interview by blogger Rakesh Agrawal that appeared in TechCrunch and has become a viral hit.

Groupon impact on Crystal Nails in Chicago. Video by Associated Press

Groupon impact on Posie’s Café in Portland. Video by Rakesh Agrawal

If you want a first-hand account, you can read a Sep 2010 blog post by Jessie Burke, the owner of Posie’s Café.

AmazonLocal Launches in Seattle

Earlier this year, Amazon made a small investment in LivingSocial, one of the social network, deal-based coupon providers described above. About the same time, Groupon, the largest coupon deal provider rebuffed a multi-billion dollar offer from Google and is expected to launch an IPO later this year.

Last month, and only a day apart, both Amazon and Google jumped into the coupon deal business. Google launched Google Offers in Portland, Oregon. Amazon launched AmazonLocal in Boise, Idaho. This week AmazonLocal expanded into Seattle, where I live. For now, it appears that AmazonLocal is merely wrapping its logo around offers sold by LivingSocial (see example below).

Example offer from AmazonLocal. Image from email

I’m not drawn to mob activity, so I’ve never bid on an auction item on eBay and have never participated in a coupon deal. But lots of people find this type of buying fun. All I can say is that growth at eBay stalled after expert buyers automated auction purchases by bidding at the last second, stealing away deals from novices. Bidding at auctions stopped being fun and became a job. eBay is still looking for a new business model to jump-start growth.

Incidentally, eBay is exploring group-buying coupons too. It is testing a website called Kuponan in the Philippines and Social Shopping in India. However, in the U.S., eBay has decided to partner with Groupon for now.

Facebook is starting a group buying service called Deals on Facebook. As you can see, the barriers to entry into this market are low, which is why I am surprised that Google felt it needed to buy Groupon and that Groupon’s IPO is so wildly anticipated.

Charts showing data over time, called time series, are an excellent way to show trends and to make forecasts for the future. However, time series data may need to be adjusted before plotting to avoid errors in analysis.

First, if the data being displayed is in monetary units (for instance, dollars), then one has to be careful to take into account the effect of inflation. For short periods, omitting inflation isn’t a critical error. However, as the time scale increases, the error can become significant, especially if the time scale includes the 1970s and 1980s when inflation was quite high.

When looking at historical price or monetary data, the unadjusted raw dollar amounts are called nominal values.  The adjusted dollar amounts are called real. (One has to be aware that there are many different inflation adjustments available, but that is beyond the scope of this blog post.)

Second, when comparing country economic data such as gross domestic product (GDP) across multiple years, it should be corrected for population growth. Both the U.S. and the world population are much larger today than 50 years ago while the population of many European countries and Japan are stable or shrinking. Thus, when comparing the well-being of these countries, one should use changes in per capita real GDP. Notice that the U.S. nominal GDP must grow about 4 percent a year just to keep per capita real GDP constant.

Finally, when comparing spending on a particular good or service, the data should be adjusted for changes in household income, consumption patterns, and the quality of the good or service. This is often difficult to do and there are disagreement on the best way to do this. The biggest example is change in house prices. For example, the median house today is much larger than a house 20 years ago. Also, the quality of appliances and materials is much higher than 20 years ago. This is true for the median home and can be very expensive in high-end homes, which will cause the average to be skewed.

Consumption patterns are changing as income increases. The median U.S. and world household income is higher today that it was 50 years ago, even adjusting for inflation). However, much of this gain has been directed toward college graduates who work in jobs that are located in big cities on the east and west coast. This has driven the price of houses upward in cities like New York, Boston, San Francisco, and Los Angeles relative to houses in smaller cities away from the coasts. The interaction between income and house prices is hard to analyze separately.

Rising income also affects the composition of goods and services a household consumes. As a proportion of income, people spend less on food and durable goods and more on entertainment, education, and health care.

Example of a badly drawn chart and a corrected version

In January 2011, Bain & Company released a report on electronic publishing that included a warning that publishers should not repeat the mistakes of the music industry. The warning was illustrated the following chart.

The rise and fall of the music industry. Image from Bain

Michael DeGusta picks apart this chart in a Feb 2011 Business Insider article. He notes that the chart makes it look like the music industry grew steadily from 1973 a peak in 1999 and has since fallen about 40%.

However, he corrects the chart for changes in purchasing power and population growth as shown in the revised chart below.

The rise, fall, rise, and collapse of the music industry. Image from Business Insider

This revised chart is much more interesting. It shows that real per capita music sales peaked in 1978 and began to fall until CDs arrived. Sales reached a new peak in 1999, but then fell. Digital music sales have not been able to stem the fall and per capital sales in 2009 have fallen 63% (not 40%) from the level of ten years earlier.

Mr. DeGusta goes on to provide an insightful analysis of why sales of digital music have not been able to replace CDs. Read his blog for more details.

by George Taniwaki

There are over 6,000 hospitals in the U.S. but only 268 of them offer kidney transplant therapy. Further, these transplant centers tend to be clustered in big cities. For instance, in the Northwestern U.S. which includes Alaska, Washington, Idaho, and Montana, there are only five transplant centers to cover an area of 965,000 square miles (2.5 million sq. km). But they are not broadly distributed. Four of the five are in a single city, Seattle, within a few blocks of each other.

This is very inconvenient for patients and donors who don’t live in or near a big city. However, the answer is not to open more transplant centers in medium or small cities. That’s because organ transplantation is a complex process that involves a lot of specialized skills and coordination with external organizations.

Transplant therapy involves a lot of medical and psychological testing for both the patient and the donor (in the case of live donation). It also involves a lot of record keeping, coordination with an organ procurement organization (in the case of deceased donation), working with dialysis centers, working with the United Network for Organ Sharing (UNOS), and with a variety of other government agencies, medical organizations,  and insurance providers.

Not every hospital can qualify to become a transplant center. And not many hospital administrators would want to commit the time and resources needed to become a transplant center. Further, research shows that better medical outcomes are associated with hospitals that perform a large number of procedures. Thus, patients have a better chance of success at a hospital that performs 100 or more transplant surgeries per year than at one that only performs 20 per year.

A clever solution

Texas is a large state, both in size and population with 33 transplant centers. But as mentioned above, they are not evenly distributed. The city of Laredo, located along the Rio Grande River in south Texas, is the tenth largest city in the state with a population of about 236,000 according to the 2010 U.S. census. Despite the city’s size, it does not have a transplant center.

The nearest cities with transplant centers are San Antonio which has four, Corpus Christi which has one, and McAllen with one. See the map below for the location of all these cities.

Map of Texas. Image from Microsoft

The Laredo Sun Jun 2011 reports that Providence Medical System is partnering with the South Texas Transplant Center in McAllen to open an evaluation center for kidney patients and donors at Providence’s Doctors Hospital in Laredo.

This evaluation center will not perform transplants, but will provide all the necessary patient and donor testing and monitoring services pre- and post-transplant. This will save transplant participants living in or near Laredo from having to travel to McAllen to get evaluated. This can shorten a round-trip driving distance of 250 miles (400 km) for each visit. An evaluation may require several visits for various blood tests, CT scan angiograms, 24 hour urine tests, psychological exams, and post-surgical follow-up examinations. Thus, being able to get the evaluation done closer to home can save many days spent traveling. Even more important, it can help ill patients who find it difficult to travel and people who cannot miss time from work from dropping out of the transplant option entirely. This will increase the number of patients who will pursue transplant therapy, extending their lives and improve their quality of life.

This new hospital partnership helps kidney patients in Laredo get transplants even though that city doesn’t have a transplant center. I hope more transplant centers partner with hospitals in medium-size cities to create evaluation centers to assist these underserved patients and donors. Improved access to health care requires innovative programs like this.