Friday, October 31, 2008

The downside of competition

A funny moment the other day.

The CEOs of the larger Harvard hospitals founds ourselves in several meetings over the course of consecutive days, working together on areas of common concern -- clinical research, supporting greater diversity on our staff and faculty, and stimulating enhancements between engineering and medical care. These were great sessions, with a clear commonality of interest and purpose, characterized by healthy give-and-take in friendly and helpful discussions, and good progress. After the last of these sessions, one of my colleagues turned to the rest and said, "Okay, enough collaboration for today. Let's go back to competing."

He was joking, of course, and we had a good laugh; but, as I have noted before, this is in fact the nature of the relationship. It has its advantages and disadvantages.

I think the major disadvantage is that the competition in the clinical arena is so intense that we end up duplicating services that could be consolidated or otherwise rationalized. (In saying this, by the way, I also mean to reference the duplication that also occurs when we include the non-Harvard hospitals in Boston.) I have talked about this before, focusing on the area of solid organ transplants. If there are fewer than say, 400, adult liver, kidney, and pancreas transplants in all of Eastern Massachusetts per year, does it make sense to spread them out among six or seven hospitals located within 15 miles of one another?

Each hospital has to make major investments in staff and equipment to carry out a proper transplant program, and the current organization makes economies of scale impossible. It also means that each program is unlikely to be highly profitable -- or perhaps profitable at all -- because it lacks sufficient volume to spread the fixed costs across a large enough patient base.

And yet we persist in this fashion, responsive to the demands and wishes of our physicians and because we have a mindset that we cannot be a "real" hospital unless we offer this service to the public.

As I have said in recent forums and elsewhere, we need to be protected from ourselves in this regard, either by the insurance companies or the state government. Thus far, though, they have been too timid to act. The public ends up paying the price for this inefficiency.

7 comments:

Lee said...

The flip side to your argument is if you consolidate functions (Eg: Cardiology surgery is done at only one hospital) you suffer other effects such as:
- Long wait times
- Not enough staff for sudden surges of need
- Bureaucratic nonsense (Eg: hiring/firing/nepotism/etc because you're the only game in town)
- Loss of the ability for different doctors to innovate

There are advantages and disadvantages to each model. Presenting one side without adequately presenting the other side seems a bit disengenuous, doesn't it?

You also seem greatly fixed on the "central control" model for health care. Some day you should explain why you are, what you don't like about other models, and why your model is better.

nasov said...

I'm amazed that there are so few transplants happening. I would have guessed thousands.

Is there any precedent for hospital specialization directed by government or insurance?

I'm reminded of the intense process banks had to go through to set up a branch.

Anonymous said...

Are there models of academic hospitals that have chosen to invest in only those service lines in which they can provide the highest quality (measurable outcomes) as a business strategy - attracting patients from around the world for procedures that they develop from bench to bedside, so to speak? Can it work in Boston?

Megan said...

I think part of the issue is with referral groups. If I need a specialist, my PCP will refer me first to someone within her practice group. If there is no resource in the group that meets my needs, she will refer me to someone in her affiliated hospital. In order for me to see a physician in a different hospital, she would have to demonstrate that my needs could not be met in the first two categories. It is not a restriction from my insurance plan, but from my PCP's contract.

Paul Levy said...

Good points, Lee. Monopolies tend to be unresponsive over time and also slow to innovate, so you don't want to go that far. Perhaps having somewhere between 10 transplant centers in NE and 1 center could get us to a happy compromise.

Anonymous said...

Well, to make my umpteenth reference to Porter and ___'s book (I always forget the second author), their suggestion of competition based on value (outcome per dollar spent) among bundled providers (e.g. hospitals plus physicians) seems a good model for transplant surgery. I do think the payors need to start thinking in this direction instead of just cost, cost, cost. They need to start requiring the providers to keep such data to inform decisions.
I think much of their proposed scheme would be impossible to implement, but I think this idea is a good model at least.

nonlocal

Toni Brayer MD said...

Our payment system is screwed up. Isn't is all about having the high dollar specialties? Since EDs and maternity are money losers aren't those solid organ transplants, cardiac surgeries and highly specialized services where the $$ is?
I thought they were always profitable with the pull through business too.

I agree that having enough volume to demonstrate quality and efficiency is where we should be. Every hospital duplicating the same services and competing for the surgeons and technical peoople is no way to run health care.