More Than Just Economies of Scale: A Response to Dr. Atul Gawande's "Big Med"
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In a recent New Yorker article entitled "Big Med", Dr. Atul Gawande raises a number of good points and thoughtfully describes a few anecdotes that offer valuable insights into how we manage healthcare, and how healthcare could do better. He is absolutely right to look to other industries for lessons to apply to healthcare delivery. To date, the healthcare industry has relied on a series of experiments that only adopted fringe elements of process change, rather than making fundamental, market-based improvements. But even with PPACA upheld, we won't necessarily see these types of changes through increased size and scale (e.g. Accountable Care Organizations (ACOs)), as Dr. Gawande implies. The government has even less incentive and accountability for efficiency than the current delivery system has. What we need are market-based solutions.

Dr. Gawande analyzes the potential for healthcare delivery to be run like a Cheesecake Factory. To summarize, he asserts that through a more efficient model that includes transparency and accountability for correctly producing a food order (in a standardized way), Cheesecake Factory creates a high-quality dining experience at a low cost. Toyota also famously improved its processes; it, too, had a market incentive to do so. All of these models have been out there for the taking, but they haven't been adopted and integrated in healthcare except selectively, as in the case of free-standing independent specialty facilities. These are all market-based solutions, not government solutions.

But as Gawande notes in his article, healthcare consolidation has typically led to higher costs, not lower ones, and, as they say, the definition of insanity is repeating the same activity and expecting different results. The threat of oligopoly, and healthcare delivery organizations becoming "Too Big to Fail" cannot be overlooked, and I have less faith in the government's ability to prevent it than Dr. Gawande does. As I wrote in a previous blog post:

"In theory, larger groups could mean greater efficiencies. But large healthcare delivery organizations have generally not been more efficient, integrated or consumer-centered. By encouraging consolidation, the current environment reinforces the negative aspects of the current model -- lack of transparency, accountability, and cost effectiveness. ACOs and other consolidation efforts offer no new business model, and simply reduce provider options for the consumer and create behemoth organizations with added layers of complexity... not better outcomes at lower cost. The net result is likely to exacerbate current problems."

Furthermore, The Cheesecake Factory, for all its successes, is hardly perfect. Even in this successful chain, the wait times are legendary -- particularly in bigger cities like Chicago -- hardly a model we'd like to have at the doctor. Add in additional government controls, and the doctor's waiting room starts to look more and more like the DMV. In addition, the chain has been widely criticized for its unhealthy menu, earning the accolade "worst family restaurant in America" in 2010. Dr. Gawande cites their 49 "SkinnyLicious" items, but these represent less than one-fifth of their total offerings, and even these items are dubious; for example, the SkinnyLicious Shrimp Summer Rolls contain nearly a full day's worth of sodium per serving. So maybe The Cheesecake Factory has figured out how to deliver food more efficiently, but this efficiency has come at the expense of our health.

Until we create a truly market-based approach to the healthcare industry, we won't be able to crack rising costs in any meaningful way. Transparency, increased accountability, and a consumer-centered model for healthcare will be table stakes to achieve the goal of better health outcomes at lower cost. These large scale "chains" will just repeat the mistakes of the past. Government solutions, such as ACOs, merely add layers of bureaucracy without changing the fundamental problems. Sure, the healthcare industry has undertaken some efforts to alter processes... but they haven't reinvented a new model. They have essentially just repackaged the same old inefficiencies in a bright, shiny new box. It's time America stops having to pay for second-hand healthcare!

1 Comment

Why are you knocking the Cheesecake menu in on sentence and claiming that we need a free market health care system in the next? Isn't the menu at the cheesecake factory the result of a "free market?" You raise a good point about wait times, and then go off on a political rant instead of contributing thoughtfully to the discourse.

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