Inappropriate Indicators And How They Can Hurt You

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As life gets more complex, people who make policy and program decisions use heuristics (i.e., mental shortcuts) to facilitate making decisions. Cognitive biases focus on people-related judgements, while key performance indicators track progress toward goals. Unfortunately, inappropriate heuristics can result in inaccurate and even dangerous decisions. Therefore, it’s important to use the right ones.

A recent Wall Street Journal article highlighted this point: When the Covid-19 outbreak began, the federal government recognized the need to help hospitals gear up to treat patients and save lives. Financially well-off hospitals needed to make room for these patients by postponing non-urgent services that subsidize hospital cash-flow; for hospitals already in financial stress, additional funds to service patients was critical. The Department of Health and Human Services (DHHS) administered the aid.

It would make sense for this financial aid to be targeted at hospitals most in need of it. But the authors who analyzed the distribution of fund found that “the amount of federal cash hospitals received had very little to do with the levels of severe Covid in the areas around them.”

How did this mismatch happen? To determine how much aid a hospital should get, the primary indicator was a hospital’s revenue rather than its Covid caseload or financial stress. The idea was that revenue was a good indicator of a hospital’s size and ability to serve its community. Why? Officials said this formula was used “in order to move quickly.” The result was that the aid enriched some well-off systems while failing to meet the needs of others that were struggling. Indeed, some financially distressed hospitals actually turned away ill patients, with the life-and-death consequences unknown.

This wasn’t the first time that the use of inappropriate indicators caught my attention. When I worked on Capitol Hill to help advance responsive legislation, I had the privilege of working with a member of the House Interstate and Foreign Commerce Subcommittee for Health and Environment and work on its legislation. The subcommittee held hearings and eventually passed the Mental Health Systems Act of 1980 to provide continuing and new funds for local Community Mental Health Centers (CMHCs) to provide disadvantaged people with free or lower-cost mental health services.

The primary indicator of the need to add new centers was identifying all the Mental Health Areas (MHAs) without centers to serve local constituents. Reviewing the data, one Congressman matched the MHA codes to actual communities and questioned why Beverly Hills, an affluent community, needed a federally funded mental health center. Based on that, the inappropriate indicator was replaced by a more appropriate indicator of need, and members favored the service and passed the final bill unanimously.