[ Thursday, September 15, 2005 ]


Whose cost, whose benefit? One of the perpetual problems of the healthcare industry is its perversion of market forces due to the "OPM factor." When Joe Blow wants to buy a car, he goes to the local car dealer and negotiates. He may shop other dealers, and he'll decide which options he wants based on his own personal cost-benefit analysis. He may need the car to get to work, but what he buys, and from whom, is governed by this cost-benefit analysis. If he takes fewer options, or a less impressive or popular model, it means money in Joe's pocket. But when Joe wants to see a doctor (which he needs just as much as his car), if he has insurance of any sort, he doesn't do the cost-benefit analysis. Naturally, he wants all the bells and whistles, because he isn't paying for it; he's spending Other People's Money, and when you're spending OPM, there's no governor on what you'll take. The seller is also not constrained, and is incentivized to sell everything it can. Copays and coinsurance may damper this freespending impetus, but not completely. Comparatively speaking, picking fewer options or a less popular model in healthcare doesn't put money back in Joe's pocket. Patients won't rationally choose the most cost-effective care, nor will providers, so payors have to try to impose discipline on the process, resulting in "you know you have a bad HMO when . . . " jokes.

This disconnect between cost and benefit may also play a factor in the slow adoption of electronic medical record (EMR) technology by physicians. According to this CNN article, payors and the government stand the most to gain from the efficiencies generated by EMRs. Patients will also gain in fewer errors (at least in theory). And while physicians may gain from fewer errors and improved workflow, there are still two big downsides for physicians: cost and potential risks. Costs are obvious; doctors are the ones who have to pay for the EMR systems. And there are at least two types of risks that EMRs pose to doctors: one is that the doctor will choose the wrong EMR, and he'll end up a Betamax guy in a VHS world; the other is that the EMR system will pull in information way in excess of what the doctor would normally see or have time to process, and would make it easy for a med mal plaintiff's lawyer to second guess the doctor later (this is a problem radiologists have had to deal with in the computer-assisted diagnosis programs that generate many false positives that must be inspected and eliminated).

Obviously, unless physicians can see some sort of return on investment (financial, professional, medical, efficiency, etc.), they won't buy into EMRs.

Jeff [10:10 AM]

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