Speech by Senior Minister of State Dr Balaji Sadasivan to the Chapter of Neurosurgeons, College of Surgeons, Singapore on 31 July 2009 at 6.45pm

MADOFF AND MEDICINE

I am expected to make a speech that serves as food for thought. Fortunately we live in interesting times and so there is much we can ponder about. We can speculate on what went wrong in the financial world and what we doctors can learn from it.

2 The financial crisis which exploded last year has caused the most serious contraction of global economic activity experienced since the Great Depression. The world took more than a decade and the stimulus of a world war to recover from the Great Depression. Although, the Great Depression began in America, its effects were felt worldwide. When global rubber and tin prices collapsed, the impact of the Great Depression was felt in Singapore.

3 The current financial crisis again has its origins in the United States. It has caused a contraction in world trade which has affected our exports and contracted our GDP. Government policies have moderated its effects on our society so that when one walks about Singapore, one does not feel the full impact of the economic slowdown. Some of the restaurants still have long lines with people patiently waiting to enter them.

4 Few expected or anticipated the financial crisis. Certainly none of the worlds leading economists predicted the crisis before its occurrence. After the fact, it appears that with hind-sight it was obvious that the crisis had to happen. In hindsight, we can all learn from the lessons of this financial crisis and hopefully apply them to our areas of endeavour.

5 Had there been better standards of governance and greater transparency, the crisis may not have occurred. Unfortunately, the regulators did not keep up with the changes in the financial industry and the standards of governance while suitable for the 20th century, were inadequate for the 21st century. A transparent banking system may have alerted regulators to the crisis much earlier but since the financial institutions were in a competitive industry, their business practices were opaque. With inadequate regulation, the seeds of the financial crisis were sown, while the lack of transparency allowed the problem to be hidden until its sudden explosion. Had there been transparency, the regulators would have discovered the nexus between AIG and the banks before the entire financial system was put at risk of collapse.

6 The current financial crisis has been explained by many learned economists using financial jargon like sub-prime mortgage, credit squeeze, failure of the derivative markets, liquidity crunch, over-leverage, debit swops, etc, etc. Paul Krugman, the Nobel laureate has a simpler way of explaining the financial crisis, using an analogy that we can all understand. He used the Bernard Madoff fraud as an analogy. Madoff ran a Ponzi scheme, in which new money was used to pay high returns to earlier investors. On paper, he was creating wealth- 50 billion dollars of it, but in reality it was all fictitious. His financial house of cards collapsed once the truth was obvious.

7 The financial industry did a Madoff. Wall Street generated fictitious profits by hiding its liabilities. The profits were converted into mammoth salaries and even larger bonuses. This fuelled the growth of the financial industry. In the process of finding more and more ways of showing profit which was the key performance index that determined the remuneration of bankers, the captains of the financial industry threw caution to the wind and allowed the bubble of fictitious wealth to reach an unsustainable level. When the bubble burst, the world economy sputtered and started contracting as people changed their behaviour when they realised that the excesses fuelled by all that imaginary wealth had to be paid for by the tax-payer. Many ordinary people lost their life-savings. Even ordinary Singapore heartlanders were touched by the financial collapse when many lost their money after buying Lehman Mini-Bonds.

8 Even though Krugman draws similarities between Madoff and Wall Street, I believe there is one major difference. While Madoff knew he was running a scam, the thousands of people working in the financial industry were unaware that a significant portion of the apparent wealth being generated by their industry was non-existent. Most of the workers in the financial industry were ordinary people, like you and me. Some of them were among the brightest in society. New graduates from the Ivy League colleges, Oxford and Cambridge were paid astronomical salaries to move paper around within the system. Just as Madoff needed to have a front of wealth and respectability to hide his fraud, many of these young people served as decorative pieces to mask the bubble within the industry. They went to work and conscientiously did what they thought was constructive work. They believed in their own myths. When the financial crisis erupted, they were among those surprised by the event. Many lost much of their savings as they had invested in the very firms and companies that they worked for.

9 How could all this happen when so many of the brightest entered the financial industry? I think there are two reasons. The first is that the financial industry had evolved into a highly complex system. Not many people could understand how the different parts of the financial system impacted on the overall health of the industry.

10 The second reason is the specialisation within the industry. Many workers in the financial system were doing specialised work. Each specialist just concentrated on his work, be it that of a hedge-fund trader, a creator of structured deposits or a mortgage salesperson. It was not necessary for them to understand the whole system. So they were caught unaware by the financial crisis. This is the danger of specialisation, - as you know more and more about less and less, it is possible to loose the perspective on how the whole system works.

11 In these two respects, complexity and specialisation, the healthcare industry and financial industry share similarities.

12 Healthcare is becoming more and more complex. It is sometimes even difficult for doctors, patients and healthcare administrators to decide whether what is being offered to patients is really good or harmful. Let me give one example - PSA screening for prostate cancer. Today is the last day of the Prostate Awareness Month promoted by the Singapore Urological Association. Men can have their prostates screened at a 50% discount. Is this good or bad? If 1,400 men were screened, and 48 operations were done, in the long run, over 10-15 years, one cancer death will be prevented. But to prevent that one cancer death, 47 men have to undergo surgery that is not needed. They will suffer from the side effects of the treatment such as incontinence, prostatitis, impotence, infections and risk of surgical death. The benefits of cancer prevention are in the future but the morbidity of the treatment is usually immediate. If there is a 2% risk of mortality over 10 years attributable to the treatment or the morbidity from the treatment, than even the benefit of preventing one cancer death is lost. It is not suprising therefore that the US Preventive Services Task Force has concluded that there is inadequate evidence to support PSA screening. The Task Force also concluded that screening causes moderate to substantial harm, such as erectile dysfunction and urinary incontinence, bowel dysfunction and death as a result of treating those who may never have needed the surgery. Just like financial products which have to be evaluated in terms of benefits and risk, health decisions also require the same type of analysis. If we focus only on the possible benefits of a test or procedure and ignore the risk and disadvantages, the decisions made may not be beneficial to the patient and sometimes may even be downright harmful.

13 With doctors becoming highly specialised, sometimes they loose sight of the larger picture. Some time ago, I met with the doctors who treat HIV patients. They are a dedicated group of doctors who are good at what they are doing. I am happy that our HIV patients have such dedicated doctors. The HIV specialists argued passionately for more resources to be directed towards the care of HIV patients. However, very few of the HIV specialists were involved in HIV preventive efforts in their hospitals. It is not their area of specialisation or interest. Our rate of new HIV infections doubled over the past 8 years, from 226 new cases in 2000 to 456 new cases in 2008. We have increased substantially the resources spent on treating the disease. In 2000, there were only 11 infectious disease specialists; in 2008, the number has tripled to 33. While this specialists perform other duties beyond HIV care, it is however unlikely that in the long run, this rate of increase in resources being diverted to HIV care will be sustainable. If the HIV physicians stepped back and looked at the data, it will be obvious to them that their current HIV patients can have significantly more resources allocated to their treatment if HIV physicians were more active in contact tracing and preventing the spread of the disease. Then, there will be less new cases of HIV and there will be more resources available for each patient already infected with HIV. I hope in time more of the HIV physicians who are passionate about the care of their patients will see the bigger picture and become equally passionate about preventing the spread of HIV.

14 The financial industry in the US will emerge from this crisis with rules that promote greater governance and transparency. The financial crisis sent some of America's biggest companies into bankruptcy. Two weeks ago, President Obama addressed the American Medical Association. He explained to the doctors that a big part of what led General Motors and Chrysler into trouble in recent decades were the huge costs they racked up providing health care for their workers; costs that made them less profitable, and less competitive with automakers around the world. He was emphatic that if they did not fix their healthcare system, America may go the way of GM; paying more, getting less and going broke. One of the problems identified in the US health system is the system of remuneration of doctors which rewards doctors for the quantity of healthcare that they can sell to patients and not the quality of healthcare that they provide.

15 The Americans have no choice but to reform their healthcare system as healthcare spending accounts for more than 16% of the nation's GDP or more than S$10,000 per person annually. This is almost twice as much as that in Europe or Japan. The financial crisis has exposed the unsustainability of their healthcare system.

16 Singapore is in an enviable position. The high quality of care available here is internationally recognised. There was a report in Businessweek that an American supermarket chain and the health-insurer for its employees have agreed to pay for employees to travel to Singapore for their knee or hip replacement surgery. They have found our medical care to be equal to that in the US. Our life- expectancy is one of the highest and the infant mortality is one of the lowest in the world. Yet we spend only about 4% of our GDP on healthcare.

17 The medical profession has a stake in preserving our high quality health system. The profession should support and promote governance, transparency and ethics within the healthcare system.

18 Governance does not have to mean more rules or a greater bureaucracy. The profession can have better governance if doctors monitored themselves through peer-review. It will be infinitely better for everyone, especially doctors and patients, if organisations like the college of surgeons with its many chapters conducted peer review of their specialities from time to time to ensure that patients were receiving the best care. If the profession does not take the lead, than it is likely that one day we may find ourselves reviewed not by our peers but by regulators who may not appreciate the finer nuances that govern our decision making when we look after patients.

19 In a digital age, data is not difficult to capture and it is possible to have greater transparency. Hospitals have an enormous amount of data on procedures and tests being done. There are data on outcome and complications. If this data were available on the net, the public and the medical profession will be able to monitor the state of our healthcare services. This transparency will serve as a check against any systemic failure in the health system.

20 Our hospitals are transparent about their achievements and successes. Quality control can be improved if there is also transparency about the errors within the system. Unfortunately when there are errors made, even when the hospital acknowledges them, they are usually kept confidential. I can appreciate that such information is embarrassing, but we should rise above such feelings and acknowledge that all systems have errors. The best way to improve the quality of care in our healthcare system is to use every error as a learning case-example so that the error is not repeated. Perhaps, the hospitals should review their practise and consider if it is in the best interest of the public to keep the information about the any error confidential as a condition of any settlement reached. Transparency will reduce medical errors and lead to better medical outcomes.

21 Lastly, the profession must strive for a higher standard of ethics. Ethics has no formal role in the financial industry where the bottom-line determines decision making. Well paid lawyers advise financial institutions on the legality of their practise and not on the ethics or social consequences of their actions. In law if a practise is not prohibited by the law of the land, it is legal. Such a legalistic approach in medicine will not benefit the medical profession or the public. We must adhere to a much higher standard of ethics than that found in other industries and professions because our profession deals with people's health and lives.

22 The neurosurgeons who work at the National Neuroscience Institute are very fortunate to work in an environment that is conducive to ethics after the PFS scheme was scraped a few years ago. They don't have to worry about hospital revenue. Business and revenue considerations do not influence your decision. Not all doctors in the public sector are as fortunate. I understand that doctors in some of the public hospitals are evaluated by the amount of revenue they earn for their hospitals. Every month, they receive a note informing them of their performance not as doctors but as revenue earners for the hospital.

23 In the short run, it may make sense for hospitals to pay doctors in the same way as most businesses do. The more revenue you bring to the hospital, the more useful and valuable you are to the business. Therefore you are paid more. But in the long term, this business model may not be in the best interest of society.

24 If revenue earned for the hospital is a key indicator of performance, over time, there is a danger that doctors will advise patients based on what brings most revenue to the hospital. As a result, patients may end up with tests and procedures that are unnecessary. Doctors who promote the consumption of a greater quantity of healthcare and therefore bring in greater revenue and profits for their hospital do not necessarily provide a better quality of healthcare. If we equate the quantity of healthcare consumed with the quality of healthcare provided, in the long run, our system could become unsustainable much like what has occurred in the US.

25 We are fortunate to be able to practise neurosurgery in what is possibly one of the best healthcare systems in the world. But we must never be complacent. A system can deteriorate over time if its stakeholders are not vigilant in preventing rot entering into the system. If we wish to maintain the health of our healthcare system, we must all constantly work towards attaining better governance, transparency and ethics in our medical practise and in our healthcare system.

. . . . .