Like many entrepreneurs, Bush began by trying to solve one problem and ended up having to solve another. The problem that he and his partner tried to solve was reducing the cost of childbirth, in part by making more effective use of midwives. However, the business foundered because of weaknesses in its management information systems, particularly those that tracked the byzantine process of collecting payments.
As Bush's company invested more resources in developing better systems for payment tracking and other functions to support the obstetrics business, solving the problem of health care information systems emerged as a greater profit opportunity than solving the problem of the high costs of medical services for childbirth. Thus, the company pivoted toward software services.
This is from Arnold Kling, "American Health Care as Viewed by an Entrepreneur," the other Econlib Feature Article for September. Kling, as most of you readers know, was the founding blogger of Econlog. This is his review of Where Does It Hurt?: An Entrepreneur's Guide to Fixing Health Care, by Jonathan Bush and Stephen Baker. Jonathan Bush is a cousin of former president George W. Bush.
Kling quotes a striking idea by Bush and Baker, one that some of my students in the military have stated also:
The army had effective programs in place for teaching sophisticated procedures to all of us, no matter what education we came in with...
Later, when I graduated to medic training... the same model prevailed. Ordinary people were trained to carry out sophisticated work, but now in medicine. Those who tested well were mastering work that in hospitals is only entrusted to surgeons.. If we got this training into the private sector (and loosened up regulations), you'd be getting primary care for $18 an hour.
Bush and Baker see clearly the difference between the political process and free-market processes:
But let's consider this process [lobbying members of Congress to loosen a regulation in the health-care sector] for a moment. It has nothing to do with innovation or satisfying customers or delivering results. It has everything to do with cultivating influence among politicians and regulators.
Slightly humorous aside: I just noticed that the first two words of this post's title are "Kling on." I don't think I would have noticed if my wife and I hadn't been watching a lot of reruns of "The Big Bang Theory."