Via the must-read Susan of Texas, Ezra Klein finally comes to some of his senses:

couldn't get an answer to a very simple question: What level of spending on health care was optimal for innovation? Should we double spending? Triple it? Cut it by 10 percent? Simply give a larger portion of it to drug and device manufacturers? I'd be interested in a proposal meant to maximize medical innovation. I've not yet seen one.

It turned out that concerns about innovation weren't really about innovation at all. They were just about attacking universal health care ideas of a certain sort. Which is why I stopped taking them seriously. As it is, I'm less worried about squeezing out medical innovation than I am about rising medical costs squeezing out innovation in every other sector of society.

The final point is a key one; if you're talking trade-offs and DSGE Models, you better not be looking at an area in isolation. (Or, as I noted earlier, if you're looking at an area in isolation, you need to be able to explain what "equilibrium" means in context: quadrupling the amount diverted from the alleged business does not count.

Tom aka Rusty

Models for health care organizations?

In a recent post I opined the Mayo Clinic and Cleveland Clinic, both favorites of President Obama, were not models for wide application to the rest of the nation.

In response to a spirited debate (thanks Coberly) I wrote up these comments.

Starting in the 90s a common model has been the Medical Services Organization, or MSO.

(I seem to remember the MSO evolving from failed staff model HMOs.)

In the model, the hospital or integrated network buys and/or starts physician practices, manages those practices, and the physicians are employees of the MSO corporation.

Many of the MSOs were/are an attempt to provide adequate primary care medicine in an era when primary care practices are tough to manage. The MSO model allowed a central organization to hire, deploy and re-deploy physicians in accordance with the needs of the community.

Many of the early MSOs failed, for a variety of reasons, but often bad management. Hospital executives thought “I can manage a hospital, therefore I can manage physician groups,” and that was very misguided thinking. Some still use that line of thinking, producing poor results.

Advantages:

The MSO model can be used in both large cities and small communities.

The model allows (or forces) better coordination between physicians and hospitals.

The model can be combined with an insurance product, or not.

The model allows better coordinated negotiations with private insurers.

Patients can often keep their doc, just under a different nameplate.

There is a potential in integrate information systems.


Disadvantages:
Hospitals often do a poor job of management.

Hospitals often botch physician contracting.

Most hospitals lose money on MSOs, theoretically making up the difference by capturing ancillaries and through management efficiencies.

Many physicians are lousy employees. Physicians rarely trust hospital executives.

Physician motivation and work ethics change, structuring physician contracts is very difficult.

Specialists, by and large, have not bought into the MSO model, which remains a province of primary care (often including internal medicine and ob-gyn).


Prediction:
Health care reform will drive providers to start new MSOs and to expand current MSOs. There will be a honeymoon period, but the marriages may not live happily ever after.