August 8, 2023

Part 1: The Cobra Effect

Written by: Carl Byron, CCS, CHA, CIFHA, CMDP, CPC, ICDCT-CM/PCS, OHCC   

This 3-part article shares insight regarding how well-meaning decisions can turn into unintended consequences. Part 2 addresses how we, as health care professionals during the post-pandemic era, can learn not to repeat mistakes of the past.

The Cobra Effect - A Study in Laws of Unintended Consequences

EVERY decision or action we make carries unintended consequences.   The “Cobra Effect” is a term coined for a solution that makes a current problem worse based on incentives, rewards and/or punishments exposing chinks in the planning. Perverse Incentives are nearly natural by-products, motivating unscrupulous individuals to game the system to make easy money or cut corners in regulations.

The “Cobra” - In the late 1800s-early 1900s when India was ruled by the British government, there was a problem with venomous cobras invading major cities. The British government decided to take action and offered citizens a bounty to redeem for dead cobras. While this was an effective short-term solution it eventually failed.

Indian citizens started breeding cobras for the cash reward. Cobra breeders killed the majority of the cobras and redeemed them for money while they continued to breed more cobras. The government eventually found out and stopped the financial incentives. The result? The cobra breeders released the snakes onto the streets since the snakes were no longer money makers - which made the cobra problem much worse.

A variant of The Cobra Effect is known commonly as The Hanoi Rat Bounty.

When Hanoi, the capital of Vietnam, was under French colonial rule they discovered their villages had a major rat problem. So, the regime created a bounty program, similar to that of the British cobra bounty, that paid a reward for each rat killed. To get paid, people would provide a severed rat tail and get a little cash. Colonial officials, however, began noticing rats in Hanoi with no tails. The Vietnamese would capture rats, sever the tails, and then release them so they could reproduce more rats, thereby increasing the rat catchers' revenue.

The Cobra Effect is Alive and Well in Health Care

As you can imagine, the cobra effect is alive and well in health care. Whether leaders and policymakers are well intentioned or not health care is so complex, expensive and fraught with policies, laws, rules and regulations they make health care a very difficult maze to navigate. So much complexity in any arena will invite unforeseen consequences. Even well-meaning changes and upgrades to policies can make a previously compliant industry noncompliant.

Has the U.S. Learned from an Iconic Canadian History Lesson?

One of the earliest healthcare cases I know of occurred in Canada. The timeframe varies depending on the author; but it is generally agreed this took place from 1940 through at least 1960. It goes by the unassuming title of “The Duplessis Orphans”. According this article on the Canada’s Human Rights History page, this began in the mid 1940’s and continued into the 1960s when the Quebec government received subsidies from the Canadian federal government for building hospitals, but hardly anything to build orphanages.

According to historians, government contributions worked out to be $1.25 a day for orphans, but $2.75 a day for psychiatric patients. So, to get more money from the government, the Catholic Church of Quebec frequently misdiagnosed orphaned children as mentally ill, affecting up to 20,000 people.  This led to 80% of the misdiagnosed children reporting that they underwent a traumatic experience between the ages of 7 and 18, and over 50% said they underwent physical, mental, or sexual abuse.

More Recent History Lessons

An example likely familiar to many was in Forbes’ Aug 26, 2020, in an article entitled Beware Of The "Cobra Effect" In Business. The article states “An example of this was Wells Fargo in 2016. Wells Fargo wanted customers to use more of its products. It added incentives for its employees to sell more products and open more accounts to meet quotas. While the incentives did drive more sales and create more accounts, many of these new opportunities were not authorized by the customers. Instead of enhancing relationships with customers, the decision to offer these incentives influenced employees to act unethically, and it led to customers losing trust in Wells Fargo, as well as to the company simply losing customers.”

A Health Care History Example - Although slightly dated, being before the turbulence of the pandemic, an article appeared in the May 2018 Annals of the American Thoracic Society entitled Unintended Consequences of Quality-of-Care Measures demonstrates how the Cobra Effect is activated by certain moves made by the Centers for Medicare & Medicaid Services (CMS), the single largest payer for health care in the United States.

To begin, the authors use Medicare patients who are diagnosed with aspiration pneumonia:

  • “This study, one of the largest undertaken of aspiration pneumonia, confirms that patients with aspiration pneumonia are older, have more comorbidities, and are more likely to die than with other forms of pneumonia. Aside from its importance as an epidemiologic reference for aspiration pneumonia, this study found an association of hospital coding with quality metrics. Hospitals with the highest rates of coding aspiration pneumonia were much more likely to have low pneumonia mortality rates. Because aspiration pneumonia is excluded from Centers for Medical & Medicaid Services (CMS) pneumonia mortality scores, the implicit conclusion is that a hospital can improve its public rating by coding its oldest and sickest patients with pneumonia as having aspiration pneumonia. The reclassification of pneumonia into another diagnosis has been studied previously.”
  • “When CMS scores are used to reward or punish hospitals, it takes little imagination to realize that a hospital could decide to improve its score by legitimately coding its sickest patients with pneumonia as having aspiration pneumonia. The authors found in this study that hospitals could improve their CMS scores by legitimately recoding patients with pneumonia into sepsis or respiratory failure. The study suggests that recoding patients does improve the scores.”
  • The authors further state “More recently, we have witnessed Campbell’s law in medicine, where a Veterans Affairs hospital in Roseburg, Oregon, reportedly denied care to its sickest patients to improve its quality-of-care ratings. Doctors there were instructed to reclassify congestive heart failure as hypervolemia (an untracked diagnosis), and were instructed to admit veterans only as hospice patients, whose deaths would not be counted against the hospital. These interventions occurred as part of the unintended consequence of measuring and rewarding quality-of-care metrics.”
  • “Hospitals and physicians want to improve the quality of their care. However, it is difficult to quantify care accurately. A high-volume referral hospital or a safety net hospital may have sicker patients and greater mortality in spite of providing better care. We attempt to adjust for this by characterizing and adjusting for these factors, albeit imperfectly. We report the measures of quality to an unsophisticated public, who may make financial decisions on the basis of these data. We penalize based on these imperfect scores, naturally leading to behaviors that optimize the score. Although it seems easy to look down on the hospital administrator or teachers who gamed the system, we should explore what characteristics of the system promote such behavior.”

The Cobra Effect and COVID

In light of the Public Health Emergency (PHE) ending in May, 2023, we find the Cobra effect very active during the PHE. In October 2020, Brigham Young University (BYU) issued the following warning: “Students who…have intentionally exposed themselves or others to [Covid-19] will be immediately suspended from the university and may be permanently dismissed." BYU apparently received credible information that some students were trying to become infected in order to score a bigger paycheck when donating plasma.

Healthy individuals are paid $50 per visit by a plasma donation center near the BYU campus. However, the same donation center offers $100 per visit for those with Covid-19 “convalescent plasma.” Like entrepreneurs seeking to capitalize on a niche market, some students may have seen Covid-19 as an opportunity to apply what they learned in Economics 101 about supply and demand.

After the pandemic had traveled its confusing and massively complex path for some time, studies started coming out showing how and in so many areas from politics to healthcare, the Cobra Effect savagely “bit” around the world. One of the biggest culprits? Some say the COVID-19 lockdowns.

Numerous articles have been published and, to summarize, the findings were that too many political leaders used the lockdowns as a knee jerk reaction to a rapidly spreading and unknown problem. They had never had to deal with anything like COVID before so perhaps the lockdowns were all they could think of. The Cobra Effect struck most places based on one policy: immediate lockdowns. And if anything (even if misreported) came to their attention about the disease gaining speed/victims, the politicians ordered more lockdowns.

Although it is not a formal study, an advisory was published by the State of Ohio on May 5, 2020. In the period of the pandemic to date, the State of Ohio went from a Fiscal Year (FY) state revenue surplus of over $200 million to a deficit of $776.9 million. The Governor had to balance the budget for the next FY (Ohio’s fiscal year ends June 30). Because of the abyss caused by the deficit, the Governor instituted the following reductions:

  • March 23rd directive to freeze hiring, new contracts, pay increases, and promotions at all state agencies, boards, and commissions.
  • Medicaid: Reduction of $210 million
  • K12 Foundation Payment Reduction: $300 million
  • Other Education Budget Line Items Reduced by $55 million
  • Higher Education cut of $110 million
  • All Other Agency budges reduced by $100 million

As an Ohio resident, I can attest the lockdowns were virtually immediate. Even when minimal return-to-work allowances appeared, the slow reopening policy backfired too. There were strict rules governing citizens outside their homes, such as the policy which continued the forced closure of day care centers and schools to remain closed even after parents were allowed to return to work.

Globally and with vastly differing economies and medical systems, the “cobra” struck without mercy, and for the same reason: hip-shoot decisions to lock the populations down far too rapidly. Not only did the lockdowns massively shift and reshape economies and people: the Disaster Risk Reduction study found another enormous problem was the resulting panic buying. People had precious little time but the politicians threatened all manner of punishment against “disobedient” citizens in most states.

Last, but by far not least, politicians in every sector of the globe were forced to contend with a global Cobra Effect result they are wrestling with to this day: civil disobedience.  From defiance to open riots, citizens around the world started pushing back against what are increasingly being viewed as tyrannical moves by political institutions.

So, did the lockdowns actually make COVID cases worse? Maybe, maybe not. Did this affect healthcare? This remains to be seen, because as far as I can find the same entities who disregarded the civilian warning signs then are as willfully defiant now. I believe healthcare, as a profession, is safe.  The media drew light on the suffering of health care workers during the height of the pandemic and because people still trust their doctors and health care professionals. 

Read more about this topic in the Perverse Incentives & Health Care article also written by Carl Byron addressing the similarities and differences between the Cobra Effect and Perverse Incentives.

About the Author

Carl Byron is part time on the professional staff of the American Institute of Healthcare Compliance and a full-time health care auditor for the Department of Defense.  He is a certified coder with AAPC and AHIMA, and is certified by AIHC in compliance, auditing, investigations, clinical documentation improvement and as an ICD-10-CM instructor.

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