The article I am reviewing is
Health Care Cost and Medical Technology.
By the Hastings Center a nonpartisan research institution dedicated to
bioethics and the public interest. By,
Daniel Callahan The printed version Daniel Callahan,
“Health Care Costs and Medical Technology,” in From Birth to Death and Bench to
Clinic: The Hastings Center Bioethics Briefing Book for Journalists,
Policymakers, and Campaigns, ed. Mary Crowley
(Garrison, NY: The Hastings Center, 2008), 79-82.
The
problem being addressed is the cost of healthcare and medical technology.
- New or increased use of medical technology contributes 40–50% to annual cost increases, and controlling this technology is the most important factor in reducing them.
- Universal care is the only tried and effective way to control costs but will involve a large cultural shift because cutting the use of technology will seem wrong—even immoral—to many.(Callahan 2008)
While arguable that
healthcare cost could be linked to technology one can disagree that the single
solution is government run healthcare. The issue of healthcare cost and
healthcare finance are linked together in healthcare delivery and access. I
would say this fits under TCO B Given the
importance of basic economic concepts such as, supply, demand,
production function, utility, efficiency, and marginal analysis, apply these
economic concepts to the healthcare environment.
When I think of healthcare
technology I think of Capital Budgeting. Capital Budgeting is choosing projects
that add value to the firm. This can be purchasing land, trucks, or replacing
machinery. Businesses go through a process of evaluating projects which will
increase profitability. (Investopedia
2014)
Within the Capital Budgeting
Process there are various finance tools to evaluate a projects cash flow,
payback period, and future value. Herein are some of the problems of the
healthcare community. Economic theory holds that the value of a firm is equal
to the present value of the expected future cash flows the company will
generate (Damodaran 2002). Assumptions about the expected future cash flows and
the uncertainties of those cash flows, however, often vary among investors.
Consequently, the notion of value to whom and under what circumstances becomes
important. The ultimate success of a technology is its usefulness (Boer 1999).
If new and increased use of
medical technology contributes to 40-50% of annual cost increases, and
controlling this technology is the most important factor in reducing them. Why
is there not more emphasis placed on how the projects are chosen for
implementation? The author then states
that Universal care is the only tried and effective way to control costs? How
is a complete shift in the way healthcare delivered more effective than a
financial alternative?
According to a
PricewaterhouseCoopers Report on Identifying Waste in Healthcare spending,
there are approximately $81-$88 Billion Dollars wasted due to inefficient
healthcare technology. Claims processing is estimated to be $21- and $210
Billion. This estimate is based upon automating the billing process as well as
implementing an electronic health record according to PwC (PwC 2008)
Another perspective is that
according to the Centers for Medicaid and Medicare Services there are an
estimated 174 million persons in the United States with private health
insurance 41.7 million with Medicare and 42.5 million people with Medicaid
insurance according to the CMS. The total amount paid in 2012 for CMS was
$993.7 Billion while out of pocket and private insurance paid out $1.2
Trillion. (CMS 2012) With an estimate of 88 million persons in the United
States totaling $993.7 Billion dollars for services versus 174 million people
accounting for $1.2 trillion dollars for services I would be skeptical that the
government would do a better job at containing costs.
My personal perspective is
that reviewing the TCO B Given the
importance of basic economic concepts such as, supply, demand,
production function, utility, efficiency, and marginal analysis, apply these
economic concepts to the healthcare environment. Looking at specifically
the demand production function one can use an analysis to gauge what kind of
technology should be employed in a healthcare system based on measurable
outcomes. If any other business put into place technology that created an
increase in price upwards of 50% without realizing the benefits prior to
purchasing I believe they would go out of business. Because the healthcare
industry has a different model of payment I believe the industry has been
allowed to increase prices and invest in technology that does not produce a
demand induced utility. I believe the answer is getting back to basic business
functions as the PwC and Commonwealth fund have pointed out where the savings
are.
References
Boer, P.F. (1999) The Valuation of Technology: Business and
Financial Issues in R&D, Hoboken,
NJ: John Wiley & Sons
Callahan, Daniel (2008) Health Care Costs and Medical
Technology, The Hastings Center, Retrieved from:
http://www.thehastingscenter.org/Publications/BriefingBook/Detail.aspx?id=2178
Centers
for Medicare and Medicaid Services (2012) National Health Expenditures Table
Retrieved from http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/tables.pdf
Damodaran, A. (2002) Investment Valuation: Tools and
Techniques for Determining the Value of
any Asset, second edition, Hoboken,
NJ: John Wiley & Sons.
Pinkasovitch, Arthur (2011) An Introduction to Capital
Budgeting, Investopedia Retreived From
PricewaterhouseCoopers Health Research Institute. (2008). The
Price of Excess.
http://pwchealth.com
Retrieved from PricewaterhouseCoopers Health Research Website: http://pwchealth.com/cgi-local/hregister.cgi?link=reg/waste.pdf
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