Health Care Markets, Bureaucracy, and Information Technology

On his blog John Cochrane has posted the transcript of a lecture he gave at University of Chicago Law School proposing a free market in health care. It displays some of the relentless logic which characterised inspirational pro-privatisation, pro-competition, and regulatory-capture articles in the 1980s/90s. Health care is an industry that was protected from that onslaught of common sense, and Cochrane helps expose the disastrous results.

After noting the benefit of individual health insurance (“portable, life-long, guaranteed-renewable, transferrable, competitive, lightly regulated to ensure that companies keep their contractual promises”) Cochrane discusses his proposals to spur cost-cutting, innovation, and consumer-empowering and quality-enhancing competition in health care.

The eye-catching proposal is to bring in new entrants with a track record of disruptive disequilibrium process innovation, maybe such as Apple, Southwest Airlines, and Walmart. Joined to a new regulatory regime crafted to eliminate the back-room dealing which fosters inefficiency, cross-subsidisation and rent seeking in health care, the presence of companies like Apple could lowers costs and raises quality without compromising safety.

“Health care markets need a big supply-side revolution, in which the likes of Southwest Airlines, Walmart and Apple enter, improving business practices, increasing quality and transparency, and spurring innovation. And disrupting the many entrenched interests and cross-subsidies of the current system.”

One issue raised by Cochrane (and readers of his blog) is the excess-bureaucracy of form-filling and record keeping. This is relevant to the much delayed revolution in electronic health records; surely an inevitable development despite the initial cost of investments in new technology and systems, privacy concerns of patient groups, and the difficulty doctors and managers experience while transitioning.

Why, after all, should health care have been relatively exempt from the information technology (IT) revolution? Two recent WSJ opeds highlight the teething problems of computerised health records.

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The first article insists evidence shows no benefit for health or health costs from using IT. Despite the special complexity of health-related industries, and the poor record of health IT, the obstacles listed in the article are surmountable. A reason for failure is that technology vendors did not cooperate on common standards for data and systems. Yet we well know that similar difficulties have repeatedly been overcome in other fields of electronics. Why not in health care too? The author is mainly disappointed by the technology -- “The software, sold by hundreds of health IT firms, is clunky, frustrating, user-unfriendly and inefficient. A doctor looking for a patient's current medications might have to click and scroll through many different screens to find that essential information. Depending on where and when information on a patient's prescriptions were entered, the complete list of medications may only be found across five different screens.”

So why not ask Apple and Walmart to bid competitively for the contract? 

The second article is an entertaining gripe from a practising physician, but flawed for similar reasons. The doctor was in favour of health IT (the handwriting of doctors can be unintelligible, etc.), but became disgruntled when using the system herself. She hates the “maze of menus”, the “pointing and clicking and cutting and pasting”, and the time-consuming complex data collection (which is typically bureaucratic and subject to the now ubiquitous strictures of political correctness). Though conceding she will eventually learn to operate the new system, the doctor suspects it is a meaningless exercise in benchmarking. She is especially concerned that “the laptop presents a barrier between my patient and me, both physically and metaphorically. It's hard to be both stenographer and empathetic listener at the same time.”

Well, hang on a moment … there are only a few degrees of difference between the angle a doctor sits to handwrite a note on paper or, alternatively, to type on the laptop. In fact, I visualise doctors swinging round to face the patient while doing data entry and retrieval with laptop or iPad perched on their reassuringly crossed knees (occasionally the doctor looks over the screen for empathetic eye contact). That would have been impossible when doctors faced a fixed desk with physical folders and stapled pages. Some doctors are extremely conscientious, reassuringly so, in their copious note taking. The patient stays quiet and collects his or her fearful thoughts -- including the thought that a pharmacist or surgeon might misread the handwriting.

I went to a doctor to get a prescription shortly after arriving in Australia. I asked the receptionist whether I should register online with the state health care provider. She raised her eyes to ceiling and said “it is VERY complicated to do”. She was right. I still haven’t succeeded. Admittedly I annoyed the government internet site by questioning the wisdom of its designer. I was asked during a mind-challenging obstacle course to set up five secret personal questions and answers, for security. Five!! Three questions it provides, and the applicant must invent two others. My fourth question was something like “what is the most time-wasting and ineffective method of online security?”, to which my answer was “five secret questions and answers”. The website instantly froze the application.

The super-security conscious Apple and Google have only two secret questions for me to lose and forget. Hoops and hurdles of Electronic Medical Records software may reflect the mindset and incompetence of bureaucratic designers, as well as the kinds of rigidities and closure which Cochrane observes in the so-called 'markets' where health and health IT firms operate.

Cochrane: “It’s amazing that computerising medical records was part of the stimulus bills. Why in the world do we need a subsidy for this? My bank computerised records 20 years ago. Why, in fact, do doctors not answer emails and still send you letters by post, probably the last business to do so? Why, when you go to the doctor, do you answer the same 20 questions over and over again, and what the heck are they doing trusting your memory to know what your medical history and list of medications are?”. Cochrane very usefully explains the legal and regulatory roadblocks that stand in the way of hospitals joining the IT revolution.

Unfortunately, the way some doctors handle their keyboard shows they are not computer literate. It is reassuring that the generation graduating from medical schools now will search and amend records with the lightning speed of practised multiplayer video gamers. However when glancing over the doctor’s shoulder at grey screens and rigid dialogue boxes I’ve been reminded of software on my first computer, the old Atari.

It was on that ancient machine that I wrote a PhD thesis about how telecommunications in developing countries would not necessarily have to wrestle -- as industrial countries then were -- with the burdensome disincentives of sunken costs and vested interests in overblown, unwieldy, ageing, hyperventilated, and habit-formed national telecoms carriers.

In an article on the rising Asian welfare states, the Economist writes: “New technological possibilities should make Asia’s schemes cheaper to run than the West’s old ones. Britain’s NHS spent almost ten years and £6.4 billion trying to get its records digitised before abandoning the effort last year. India’s new health-care scheme for the poor aims to be cashless and paperless from the start, using swipeable smart cards to make payments and convey information.”

The challenge of computerising medical records was too great for the monolithic NHS, and the Daily Mail predictably had a field day -- “£12 billion NHS computer system is scrapped … and it’s all YOUR money that they poured down the drain!").

We can only envy those Asian leapfroggers. Yet, why not attempt to beat the leapfroggers? Why not bring in Apple and Walmart to help sort our health care messes?;

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