Arnold Kling  

Health Care and Organization

Arnold on Atlas: Where'... Economic Communication Prize...

Russ Roberts writes,

Within a firm and within a family, resources and decisions get made without prices and often without profits. The answer (as Coase understood and as Lauren notes in her comment) is that in these organizations, the savings in transaction costs overcomes the loss of feedback and information benefits from using prices...

So why doesn't a hospital work better? The answer I think, is that the level of specialization in medicine has emerged from a process that has very few incentives to make sure that the level of specialization is as productive as it should be. There are very few informational feedback loops.

I believe that it used to be worse. It used to be the case that doctors operated independently. Two doctors could issue orders on the same patient that were duplicative, or even contradictory. That has been fixed. Nowadays, at least where my father is, the doctor who is in charge of the unit is what in my business days we called the "owner" of the process.

So at any one time, one doctor "owns" all of the medical resources for the patients on his or her unit. That is an improvement.

The problem is that no one really "owns" the patient. If my father is in the cardiac unit, nobody really has responsibility for checking on the condition of, say, his skin. Or his emotional state.

I am getting ready to return to St. Louis (weather permitting). This afternoon, he is changing units again--it's been at least 6 or 7 units within three weeks. Given that, it's pretty amazing that there has been as much continuity of care as there has.

We have asked the physical therapists assigned to rehabilitate his hip about his likelihood of being able eventually to leave the hospital under his own power, and the response we get is that it is high. Unless they are being dishonest, I think that this argues against pulling him out of the hospital orbit altogether.

I may be wrong, but what seems to be missing in this process is what in business is called a project plan. A project plan lists tasks, dependencies, time frames, and accountabilities. For a patient who is on one unit his entire stay, the unit doctor's orders serve that function. But every time my father changes units, the plan gets torn up and they start all over.

For example, with each new unit his diet plan needs to be assembled from scratch. For breakfast, pretty much all he can eat is oatmeal. But for the first day or two on each unit, they just default to sending him bacon and eggs. Once, while I went down to the cafeteria to get him oatmeal, he for some reason tried to eat the bacon, and the nurse had to come in to stop him from choking. So it's not a minor issue.

The absence of a project plan means that some effort is wasted (every time he changes units he gets a new interview with a dietician), and some processes work poorly (the dietician interview always takes a day or two to work through the system). It also means that some things slip through the cracks. Long-term issues, such as skin care, are low priority when you know that the patient is going to be leaving your unit tomorrow.

Also, before my father can be mobile and out of the hospital, some things have to happen that are not on the radar screen for doctors' orders right now. I fear that he could reach a point where he can move tolerably well using a walker, but then he has to stay two or three days because of other issues that would have been prevented or resolved earlier in the context of a plan. Obviously, to the extent that I can anticipate those, I can help. But I wish that I could be confident in the process taking care of it.

Finally, a plan introduces an element of accountability. Are things going according to plan? Is the plan really leading to an outcome that the patient desires? Are there issues being overlooked?

Again, I think it all comes back to who pays the bill. In industries where the customer pays, sooner or later competition forces the business to put together a process that works for the customer. Given the way we use health "insurance," medical care is not subject to that same discipline.

Comments and Sharing

CATEGORIES: Business Economics

COMMENTS (7 to date)
Chuck writes:

I'm not quite sure how to characterize it, but I have to respect you sharing your thoughts on this when it is somewhat personal as it involves your father.

I agree with your assesment of the problems for patients with lots of complications. For my father, it was a similar situation where things got fairly complicated.

But I wonder how much of a difference who pays the bills would make in a situation like this. I'm thinking about the stories I hear when people have home improvements done or a 'custom' home built. A lot of the issues are similar - it is complicated work, the unexpected arises, lots of people and resources have to be coordinated, and each homeowner has different priorities and a different building plan.

In the end, the experience one has with that situation seems to depend a bit on luck, and how smart and experienced the home owner is, etc. There's sort of a vague plan out there, but it doesn't survive 'first contact' with reality, so to speak. And generally, it seems to me, people have a terrible time of it.

And then to take it from another angle, when you think of any of the fairly common out patient surgeries that are paid for by insurance, they are, from my experience, at least, pretty smooth running operations (think vasetomy, laproscopic knee repair, etc).

I think the salient issue isn't so much who's paying, but how predictable/routine the activity is.

manuelg writes:

I have no idea how different parts of the world and different cultures handle "quality of life" issues with the elderly.

My rough feeling, from my dealings with other cultures, is that "dignity" is much, much more highly valued than "medical interventionism". The results are predictable.

All best wishes to you and your father. I appreciate you sharing the stories of a son caring for the health and dignity of an elderly father.

Unit writes:

The analogy of "the guy with whip" from the recent Econtalk with Mike Munger comes to mind. Why haven't hospitals evolved these managerial roles? Maybe some private hospitals have already developed what you are proposing.

bingo writes:


I offered this earlier. Your Dad's PMD needs to take charge. Demand that he become the quarterback, the hub of the wheel of your Dad's care. It's his job. Either he does it or find someone who will. One family member to be point for the family, an involved PMD to take charge and coordinate care.

Then get him the hell home.

Dr. T writes:

Some hospitals have adopted a care system that I believe is superior to the norm (an office-based admitting physician and ad hoc specialists).

For decades, hospitals have considered the intensive care units to be special, and they hired full-time physicians to staff them. These "intensivist" physicians oversee all aspects of care, which improves coordination and reduces duplicative or wasteful services.

The extension of the above process is the use of "hospitalist" physicians. All admitted patients come under their purview. The office-based attendings may provide limited services to their hospital patients, but all major decisions and care coordination efforts are made by the hospitalist.

The hospitals I know of that brought in hospitalists are attaining higher quality with lower costs. Patient satisfaction is high. The office-based physicians like it because they spend less time in the hospital and more in the office (where reimbursement per minute is better). The one problem I see with the hospitalist model is that some administrators want to keep salaries low, which means that mostly mediocre physicians will be retained (the current VA model).

Floccina writes:

I have to wonder are these hospital visits really helping him at all?

waldo writes:

Accountability, yes, within a plan that includes a comprehensive daily checklist for skin integrity, diet consistency, special instructions, ect. Then any deviation from the plan would be considered neglect.

One very arresting issue in quality of care is the treatment of nurses, from within as well as external forces. Nursing at this point lacks a true identity, with to many varying levels of education, pay, and responsibilities. Nurses are often placed in confusing roles, sandwiched in between the demands of physicians and the non-compliance of aides. I think the healthcare industry, and quality of care, would benefit exponentially from the elimination of LPN and Associates level nursing, in favor of more masters level nursing with distinct, well-defined responsibilities.

Thank you for sharing Arnold and I wish your father well.

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