The fundamental questions in economics do not go away.
Each generation asks the questions in its own way, and has its own perspective on the answers economists provide. Economics is about decision-making – how things get built or grown and how they are sold. One fundamental question that pervades a great deal of economic decision-making is this: Now or later?
It is an important question for both sides of the supply-demand function: consumers and producers; savers and investors. It is also, as it turns out, important for hospitals and doctors; patients and taxpayers.
For consumers, the question is often one of deciding how much to spend now and how much to save for later. Producers, on the other hand, confront much the same question, but in reverse. They must decide how much to spend now in order to reduce costs later.
In the medical sphere, the question has traditionally been centered on the issue of preventive medicine and whether it was worthwhile. Generally speaking, reasonable preventive medicine is always worthwhile from a health standpoint. And in a simpler time, individual consumers could always make an informed decision as to when the health benefits outweighed the costs.
In a world where the medical costs are most often shared through insurance or various forms of social programs, though, the economic benefits of preventive medicine have been tougher to measure and justify. For the payers of medical costs, the “What’s in it for me?” question hasn’t always had a clear answer.
One of the reasons for this is the complexity of the accounting systems that support and surround medical care. A combination of technological and economic factors has resulted in much more centralized emergency services, for example, just at the time when emergency rooms have become a default provider of medical care. This means that hospitals must deal with a bewildering array of private and public insurers as well as freakishly complex and balkanized government accounting systems for reimbursement when uninsured patients are treated.
Hospitals find a way to deal with this because they have to. At the emergency room, patients must be treated. But it does make it difficult to calculate the benefits of things such as preventive medicine. If the hospital provides a preventive medical service, it may not be compensated for it.
Some hospitals around the country are taking a broader perspective on both the medical benefits and the economic costs of different forms of preventive medicine. Sometimes it involves giving patients access to basic health care, sometimes it involves a major medical intervention in a chronic disease, and sometimes it involves a task force of social services.
This makes economic sense to the hospitals despite a reimbursement system that leaves them bearing much of the cost. The reason is in the underlying math of emergency room visits.
Edward Dwyer-O’Connor is the manager of Psychiatric Emergency Services at Harborview Medical Center and is responsible for dealing with the cost constraints in a way that allows the patient to receive the best possible care. He says that, “In 2005, 1.3 percent of the patients accounted for 15.1 percent of the visits to our ER.”
That kind of math is a great management opportunity, of course, but the problem is not an easy one to solve. These patients present some formidable obstacles to efficient treatment through any sort of preventive medicine.
As Dwyer-O’Connor says, “Most of the frequent users of our psychiatric emergency services also suffer from chemical dependency and are homeless. Once they leave here they are difficult to locate or communicate with and we would normally not have any contact with them until they show up here again in need of help.”
One of Dwyer-O’Connor’s approaches to this problem has been to set up a case review system for the frequent users. (As you might expect, they are inevitably, but never officially, called frequent fliers by those who work with them in hospitals around the country.)
The case review system involves people from the hospital, police, fire and rescue, city and county health social services, clinics, and anyone else with a medical, operational or financial interest in diverting patients into a healthier behavior pattern.
The actions being taken by Harborview and other hospitals in the U.S. are an indication that there are things that can be done to improve medical care, especially to the large numbers of uninsured patients who look to emergency rooms for care.
These are what MBA schools call bottom-up solutions to problems, and it isn’t an accident that they often work better than the broad, headline-grabbing, top-down programs that rain down from Congress and our state capitols. When dealing with fundamental problems, good management never hurts.
James McCusker is a Bothell economist, educator and consultant. He also writes “Business 101” monthly for the Snohomish County Business Journal.
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