When Moneyball Meets Medicaid

May 16, 2013, 8:00 AM, Posted by

New York State Commissioner of Health Nirav Shah is the Billy Beane of health care.

Let me explain. 

Billy Beane—the general manager and minority owner of the Oakland Athletics—and made famous in the book Moneyball: The Art of Winning an Unfair Game by Michael Lewis, was made even more famous when Brad Pitt portrayed him in the movie adaptation. (Generally speaking, having Brad Pitt portray you is a good way to get famous.)

For those who aren’t familiar, Moneyball is about how, under Beane’s unconventional leadership, “the Oakland Athletics achieved an amazing winning streak while having the smallest player payroll in Major League Baseball. (Short answer: creative use of data.)” (Thank you, New York Times.)

Like Beane, Dr. Shah asked himself, "How do I win, given severe resource constraints?" And, like Beane, Shah is using data to bridge that gap. 

As a physician and health services researcher, Shah has built his career on data. He's mined hospital electronic health record data, for example, to develop algorithms that could predict if a patient is likely to develop diabetes.

As New York's Commissioner of Health, Shah had to grapple with both the high and unsustainable cost of Medicaid and the fact that the program wasn't reaching everyone who was eligible. Under budget pressure, he decided to take a finer-grained look at exactly where the Medicaid budget was going.

Shah found a number of examples of spending, with no value to show for it. He found, for example, that 23 percent of elective percutaneous coronary angioplasties were inappropriate according to national guidelines. He found the state was spending extra money on brand-name drugs, when generics were a fine alternative. 

Another example of low-value expenditures: ambulances. At a public meeting Shah hosted in Buffalo, New York, a woman came to the microphone and said, “You send me home from the hospital 10 times a year in an ambulance. Instead of paying $400 for each ambulance ride, pay $40 for a cab voucher.”

Just as Billy Beane didn't limit his thinking to traditional measures of a baseball player's success (valuing on-base percentage more than batting average, for example), Shah hasn’t limited his thinking to traditional definitions of health care costs. For one thing, he began to look beyond spending cuts, and consider whether there were investments the state could be making that would generate a positive return over time. For example, he determined that investing in supportive housing could provide long-term savings on mental health care costs. And he saw value in investing in the Nurse-Family Partnership, a program that brings nurses into young mothers' homes and that has been shown to result in improved prenatal health, fewer childhood injuries, fewer subsequent pregnancies, and even increased maternal employment. The long-term payoff was well worth the upfront costs.

In essence, Shah expanded the playing field, investing in opportunities that promote health, rather than just cutting costs. As a result, in his first year in office, he was able to reduce his budget by $4 billion while providing coverage to more than 150,000 new people. 

The Beane story, of course, has an interesting epilogue: His techniques spread and—unlucky for Beane, but lucky for teams like my fave, the Boston Red Sox—the big clubs soon became both wealthy and smart. Let’s hope that Nirav Shah’s approach of data-driven surgical cuts and high-ROI investments also spreads and becomes the norm in Medicaid agencies throughout the country.

This commentary originally appeared on the RWJF Pioneering Ideas blog.