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Vol. III, Issue No. 6 In this issue:
Healthcare Costs - UP AND AWAY - No Matter What!!! ARTICLE "Health care costs have an incurable disease" William Baumol PhD, a NYU economics professor developed the principle known as Baumol's Disease. This principle maintains that because productivity in the labor-intensive service sector tends to lag behind manufacturing, costs in service-related business tend to increase over time. COMMENTARY This is so, the assumption goes, because salaries in the labor-intensive industries must keep pace with those in capital-intensive industries. The assumption goes further to intimate that capital-intensive industries tend to be more productive. As it relates to health care the underlying assumption is that health-care by definition is labor-intensive and productivity will never be comparable with the productivity levels in the capital-intensive sector. It seems to me that this assumption misses two important factors. The medical device and equipment sector of the health care industry has been relatively free from uncompetitive interferences, thus the explosion of dramatic advances in this sector over the past four decades. The other noteworthy sector that has enjoyed this relative freedom, has been the pharmaceutical sector. These two sectors have been able to contribute significant advances to the health care sector in both financial and outcome terms. The delivery part of the sector, physicians and hospitals, have benefited the least from productivity enhancing technological advances. They, as a consequence of significant interference in their ability to acquire and save investment capital, have seen their ability to acquire and implement productivity and outcome improving technologies significantly eroded over time. It is no wonder that productivity increases in healthcare, especially in the delivery sectors, have lagged and will continue to lag other sectors. Thus the reliance on labor intensive solution will continue to increase and this will further erode the ability of the sector to acquire and implement productivity and quality enhancing capital-intensive solutions. Health Care Technological Advances - Our Edge ARTICLE "Tiber Group conferees see cardiology advances altering
health care delivery" "Potential developments in cardiology…may significantly reduce the occurrence of 'heart disease' and sudden death by arrhytmia. But they will also force an overhaul of the healthcare system." COMMENTARY This report is useful addition to the literature reporting on the impact of technology on health care. The technological advances in health care, as noted in the previous commentary, have enjoyed an environment that has been relatively unencumbered by bureaucratic and regulatory interference. Coupled with the dramatic advances noted by the pharmaceutical industry, they have made a significant contribution to the extension of Americans' life span and their quality of life. From a healthcare cost point of view, they have added to the absolute amounts spent on pharmaceuticals, and on medical procedures that rely on these new technologies. At the same time, they have also contributed to the reduction of lengths of stay in hospitals and to the shifting of many heretofore hospital delivered procedures to office based settings. Spending on healthcare in absolute terms will probably continue to rise as a consequence of natural growth, longer life-span and improved life quality, and the balance in spending will continue to shift from the delivery of care in labor-intensive setting, such as hospitals, to the pharmaceuticals and technology-based diagnostic and out-patient care delivery settings. This trend is expected to continue as long as technological advances and pharmaceutical innovation is allowed to continue unfettered along with the efforts of entrepreneurial physicians. One can easily envision a time in the near future when the shape of one's life curve will dramatically change. In the past this curve had a long slowly dropping slope in the last stage in life. It is in this phase of life that the overwhelming majority of health care costs are incurred. The advances in technology, pharmaco-genetics, changes in life style will tend to flatten this slope and make the portion that drops towards the end of life, shorter and steeper, with the distinct impact of leveling in the cost of healthcare services while extending the stages of life that are the productive years and the highest quality of life. Should Hospitals Be Allowed to Decide Who practices in their Facility? ARTICLE "Hospital medical staff privileges: Troubling precedent
from South Dakota" The editorial finds troubling and dangerous precedent setting by the South Dakota Supreme Court which allowed hospital boards to deny privileges to certain physicians based on certain economic concerns. COMMENTARY The reaction of the AMA to this ruling, while understandable, is slightly disingenuous. The present system where the hospitals are expected to provide and pay for the most advanced technology and staff to cater to the needs of their physician clients is anachronistic to say the least. The Medical Staff with its independent status decides on who gets admitting privileges, many times with no regard to the economic consequences to the hospital but rather to that of physicians already on the medical staff. I wonder how this process would look if admitting physicians would be expected to shoulder some of the cost of services delivered to them and/or their patients. In a future issue I will describe an experiment in Hospital-Physician Relations that just may be the way of the future. Do We Need to Train More Physicians? ARTICLES "Is it time for US to start training more physicians?" "Dr. Mullan, former chair of the Council on Graduate Medical Education, surprised many when, in a July 20,2000 commentary in the New England Journal of Medicine, he urged US med schools to boost enrollment." "TRENDS: United Kingdom, Canada, moving to train more
physicians" "Facing physician shortages that have angered patients, caused delays in surgeries and weeks of backlogs in office appointments, the United Kingdom and Canada are increasing funding to medical schools and residency programs." COMMENTARY It would be advisable for the US, UK and Canada to analyze the reasons for the physician shortages that are prevalent and expanding in their countries. In the US, and would venture to say in the UK and Canada as well, physicians are retiring in increasing numbers at the prime of their practice life, reducing their practice time or leaving medicine altogether for other fields. The reasons are many, most notably among them, the malpractice insurance crisis, the continually reduced fees paid, the unrelenting pressure of increased bureaucratic interference and the general lowering of personal and professional satisfaction to be gained from this most noble and demanding professions. Given such an environment, opening up more medical school seats will not only not reverse this trend, but will add to the over all pressures for schools to lower standards to fill seats, over time leading to the cheapening of a medical education and the proliferation of the field with lesser trained and qualified professionals. The proper response to the shortage crisis is to address the root causes of the present trend and make the profession, once again, attractive to the best and the brightest. Client focused and result driven, Health Q Associates, Inc., has been answering the communications, management, organization and leadership consulting needs of healthcare organizations since 1984. Copyright © 2006 Health Q Associates, Inc. All rights reserved. Republication or Redistribution of BRIDGES ©, Health Q Associates content, including by framing or similar means, is expressly prohibited without the prior written consent of Health Q Associates shall not be liable for any errors or delays in the content or for any actions taken in reliance thereon. |
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