Arnold Kling  

Atul Gawande on Health Care Administration

The Mind and the Market... Making Populism Serious: The C...

He writes,

The theory the country is about to test is that chains will make us better and more efficient. The question is how. To most of us who work in health care, throwing a bunch of administrators and accountants into the mix seems unlikely to help. Good medicine can't be reduced to a recipe.

People engage in a lot of magical thinking about doctors. As a result, the average doctor has a much higher status quotient than the average restaurant cook. That makes it more difficult to embed doctors into management systems.

I have said before that the status of doctors in society has nowhere to go but down. The institutions that pay for health care (government and insurance companies) are not as susceptible to magical thinking, and they are becoming less responsive to consumers (who are happy to confer high status on doctors) and more concerned with budgets and results.

Gawande generally takes a favorable view toward adopting stronger management systems in health care. It is a long article, well written and worth reading. I agree with Gawande about the potential benefits of subjecting health care professionals to management. See Does the doctor need a boss?

However, you have to understand that the concept of consumers and consumer choice is alien to Gawande. He is deeply rooted in folk economics. He trusts individual agents, not market processes. He has a magical-thinking model of government.

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COMMENTS (18 to date)
Ted Levy writes:

Your "folk economics" link doesn't work

Thomas DeMeo writes:

I'm not sure many health insurance companies have an incentive to constrain budgets or care about results. Aren't they really operating on a cost plus basis? Isn't it good for them to have health care costs rise?

C writes:

Arnold is also engaging in magical thinking if he believes that customers/patients are not being realistic about the negative potential involved in their doctor having a "boss."

Patients have a vested interest in having a single point of contact/responsibility/power/accountability that they can blame/influence/trust. Not sure how adding yet another layer of bureaucracy to the most bureaucratic health care system in America is going to create value...

MingoV writes:
Good medicine can't be reduced to a recipe.
No, but it can be reduced to a large cookbook. Physicians hate the concept of "cookbook medicine" (via clinical guidelines and care paths), but the evidence repeatedly shows that quality and cost-effectiveness of medical care rises when well-developed guidelines are followed.* However, this is not an excuse for increased administration. The key point is cost-effectiveness of care. In a health care free market, the physicians who were most cost-effective would make more money per patient and attract more patients (because of the improved quality and lower costs of care).

*Note: Cookbook medicine still requires that the physicians be superbly trained chefs using top-of-the-line ingredients and cooking equipment. The physician chefs also have to know how to handle problems that occur during cooking such as a tainted ingredient or a too-cool oven. Thus, we cannot replace physicians by bureaucrats employing an expert computer system.

Steve Sailer writes:

Paying for health care is mostly in private profit-seeking hands: i.e., the insurance companies. How's that working out?

Michael Stack writes:

As Ted Levy mentioned above, your link to "Folk Economics" is broken. I believe you wanted this link:

Costard writes:

Nice article.

It may be that standardization in best practices would improve success rates. But the main thing arguing for it is that, in a free market, it would lower costs by requiring less experience and training of doctors.

Which I imagine would be attractive to the millions of unemployed and the tens of millions who can't afford or easily access healthcare -- and less attractive to the state medical associations.

But one side has the heavier lobby, and this perhaps explains the way in which the healthcare debate has been cast as "how shall we cut the pie?", rather than "how might we make it larger?"

Ken writes:

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Tracy W writes:

I heartily recommend Atul Gawande's Checklist Manifesto.

stuhlmann writes:

"People engage in a lot of magical thinking about doctors. "

Given phenomena like the placebo effect, perhaps it is good that people engage in this magical thinking. Doctors are more effective when people believe in their abilities to heal.

Steve Sailer writes:

Good point about the placebo effect!

Steve Sailer writes:

Good point about the placebo effect!

John Fembup writes:

Thomas DeMeo asks "Isn't it good for [insurance companies]to have health care costs rise?"

Well, yes - if you consider that rapid increases in the cost of their goods sold, making their product more and more unaffordable and arousing anger and indignation among their customers, is good for insurance companies.

Michael Rulle writes:

Agree completely on your magical thinking dual points.

The best medical advances do have a cookbook element to them, created through some highly remarkable technical, diagnostic and biological advances. Still, much of this requires skill by doctors (heart surgery) while others less so (anti-biotics). To trust a doctor blindly is foolish, just as trusting any service provider blindly is foolish.

One of the most remarkable features of our health care system is how we do not know the price of anything. If you are covered by insurance, you don't care. There are no price lists anywhere.

17 percent of our economy and we have no prices posted? The only prices we see are outside the system; lasik surgery, cosmetic surgery, and "elite" medical groups who offer defined services for a fixed price.

Who could possibly be surprised our system is in chaos?

Thomas DeMeo writes:

John Fembup:

Consider for a moment what the effect would be if insurance companies started applying real cost cutting pressure on customers and providers. Wouldn't that likely cause even more anger and indignation? Would they make more money for their trouble?

Allan writes:

The doctor does have a boss. It is known as the patient who should be free to engage the entity of his choice. Corporations as you seem to describe here and elsewhere might have a purpose in carving out areas of medical expertise, but they should develop naturally in the market place and not be created as an extension of your vision.

In your longer paper in 2009 you mention Kaiser as an example of salaried physicians, but I don't think that is exactly true. My understanding is that based upon what is known as the Tahoe Accords one half of the profits are left to the physician partners who have every incentive in the world to deny or delay needed care and hide its necessity from the patient. That type of non transparent action improves profit for the physician partners who only become partners if they adhere to the Kaiser model and can potentially lose retirement benefits if they don't.

Allan writes:

To Dr. Kling: Your mention of Kaiser in "Does the Doctor Need a Boss?" prompted my above earlier remark, but I felt I should add some documentation to what I said. Referring to Kaiser you said "Both pay physicians on salary, rather than on a fee-for-service basis."

That statement can be challenged by old documents directly from the Kaiser Council of 1955 that if legitimate tells how Kaiser will divide the profits between the hospital corporation and the physician partners making what you call an employee into a part owner.

This documentation is at:

The specific portion exists on page 5, part IV (2). It is old and hard to read but is in good enough shape to dispel any idea of sole employee status.

I did not have time to look for the further documentation I had seen in the past some of which states a 50/50 split. This opens Kaiser to all the problems faced by patients in private ownership HMO's and means the physician partners are NOT the same as what we usually consider salaried employees and that completely alters the incentives.

Eric Szvoboda writes:

First off this is a well written article that articulates the point of the future of health care. I think that this will be taught more and more to people that are interested in studying health care because the political side is important to know as well as the technical.

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