The pitfalls of ‘big’ medicine

This is the problem with ‘scaling up’:  something necessarily gets lost in the process.

I recall when the Canadian government was ‘standardizing’ their IM/IT infrastructure, implementings seamless inter-operability and portability and other optimization measures:  the result was that the whole system was now monolithic, with the necessary loss of flexibility and adaptability to specific, perhaps non-typical applications.

But it gets worse:  the only vendors who could service this behemoth were those who were bundling and re-selling ‘the one big solution’.  No independant little companies with clever, efficient and cost-effective solutions for particular applications could possibly penetrate this marketplace.

It got even worse:  when employees, burdened by the monolithic ‘optimized’ system would write their own bits of code to add back the functionality their specific little segment needed, but which was lost due to this stadardization, they were not celebrated as innovators – they were punished as rogues and ‘not team players’ and, eventually, this sort of innovative initiative had been completely stamped out of our Federal civil service.

This predictably depressing – but important to read nonetheless – article in Washington Monthly shows how this process had occurred in the US, as hospitals strove to optimize their purchasing practices:  they had ‘optimized’ them to such a level that now, highly superior products that would save lives – but which come from small innovators – have little or no chance to even enter the market, much less succeed in it.

‘ …  Edward Goodman, the hospital’s director of infection control, wrote a letter to the purchasing department, saying Shaw’s product was “essential to the safety and health of our employees, staff and patients.” But Shaw soon learned that the enthusiasm of health care workers was not enough to gain him entrée; the hospital initially promised him a contract, only to back out three months later. Though he didn’t realize it at the time, Shaw had just stumbled into the path of a juggernaut. ‘

‘… One of the first witnesses was California entrepreneur Joe Kiani, who had invented a machine to monitor blood-oxygen levels. Unlike other similar devices, Kiani’s worked even when patients moved around or had little blood flowing to their extremities, a crucial innovation for treating sickly, premature infants, who tend to squirm and need to be monitored constantly for oxygen saturation—too little and they suffocate, too much and they go blind. But most hospitals couldn’t buy Kiani’s product because his larger rival, Nellcor, had cut a deal with the GPOs. ‘  (Note:  GPO’s are the ‘purchasing optimization’ which has now gridlocked the hospitals, preventing them from purchasing better, safer and cheaper equipment.)

It also highlights something that ought to be a ‘no-brainer’, but that seems to be a mystery to our law-makers:  exempting anyone – ANYONE – from anti-trust, anti-racketeering and similar legislation is destructive and will end badly, no matter how noble the motivations may be.

‘Then, in 1986 Congress passed a bill exempting GPOs from the anti-kickback provisions embedded in Medicare law. This meant that instead of collecting membership dues, GPOs could collect “fees”—in other industries they might be called kickbacks or bribes—from suppliers in the form of a share of sales revenue.’

‘…But, as with many well-intended laws, the shift had some ground-shaking unintended consequences. Most importantly, it turned the incentives for GPOs upside down. Instead of being tied to the dues paid by members, GPOs’ revenues were now tied to the profits of the suppliers they were supposed to be pressing for lower prices. This created an incentive to cater to the sellers rather than to the buyers—to big companies like Becton Dickinson rather than to member hospitals.’

The article is long – but important and we should heed its message!


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