Technology and Productivity. What went wrong?
Kevin Drum wrote a typically brilliant post on absurdly high estimates of the growth of the number of health care administrators. I was very interested in one little passage. My comment.
You used to work for a tech company and IIRC in public relations. Now your day job is as a blogger-journalist. Don’t quit your day job.
you wrote “Once you take into account the growth in health care generally, the share devoted to administration has gone up by 50-100 percent. That’s a lot! But it’s also not that surprising. In 1970, the health care industry spent approximately $0 on IT management. Today they spend a bundle, and all of that is admin overhead. ”
You are saying a huge improvement in information technology explains part of the increase in administrative costs. Better technology is supposed to be more efficient not less efficient. If IT weren’t a waste of money, it would cause lower not higher costs (I’m embarrassed to type a tautology but there it is).
You think it is obvious that IT is a waste of money. This might be excellent work for a blogger journalist (I wouldn’t be surprised if you are right). But it sure suggests you have more of a past than of a future in tech pr.
I am being sarcastic and am also totally serious. In fact, I am quite confident that you are right that IT has caused an increase in administrative costs, and that the use of IT in business administration has been a total waste of money. The reason is the 4th law of thermodynamics — work expands to fill the allowed space. Also known as Parkinson’s law.
I’m sure the number of administrative tasks which can be performed per person hour has increased enormously (this is counting the information techs’ hours too). But I think the amount of the cost of each unit of product which goes to pay salaries of administrators has gone up. The reason is that the number of administrative tasks which are assigned or required is not equal to the number which are necessary or even useful (which I would guess is a low number). Rather it is the number which can be done without hiring more people who have old job descriptions. So the non info techie administrators are kept and given more tasks. This means that the newly hired info techies are an added expense, unless the new tasks given to other administrators are actually useful in some way.
I am fairly sure that they aren’t useful.
I tried the hospital software business for a year, lost 10 grand.
That business is the same business as the compliance tech in finance. It is something needed exogenously, having nothing to so with the internals. It fits in the balance sheet generally like the cost of tax accounting.
If Drum’s complaint is administration is the source of the increases, he is beating the wrong “drum” of blame so to speak.
As I have written in the last year using JAMA and Health Affairs findings, from 1996 – 2013 pricing adjustments were the main cause of 50% of the increase in costs. A more recent 2007 – 2014 study blamed hospital inpatient care pricing which grew 42% in pricing and out patient pricing grew by 25%. A more recent study showing a larger impact is out which I am also writing about and it looks at hospital care.
Not to be left behind and making up 10% of the cost of healthcare, pharma costs have been increasing for both new and old treatments. The biggest increase called out in the 2006 – 2013 JAMA study was in the treatment of diabetes which was $66 billion of which $44 billion was due to pharma. Alex Azar’s Humalog was very helpful in causing such. With new drugs, pharma is instituting a new pricing strategy using improvements offered to patients both clinically and in terms of their quality of life, and the resulting benefits to the health-care system and society. An example?
It is only going to get worst unless healthcare providers of supplies, pharma, and facility are checked against what is reasonable. PBMs in Europe appear to be much more aggressive in their negotiation of pricing than the ones in the US which comprises much of those costs of healthcare. Then too, manufacturing of pharma, supplies, etc. do not set the pricing, governments do.
The prior JAMA study said the growth in population accounted for 23% of the cost increase besides just pricing. I am sure Drum’s complaint may be intermingled there. Far bigger issues to resolve rather than Labor called administrators.
The correct comparison would be against the number of people it would take to run the modern medical office if they were still using the old tehnology.
Maybe what Robert is really arguing is that Medicine has not got customers doing data entry tasks like almost every other business has. There might in fact be good reasons for that in some cases.
But the real problem is that it is using two systems in parallel because it doesn’t really use the full power of IT (except for the VA).