Code Red: Two Economists Examine the U.S. Healthcare System

March 26, 2010

They’ve Reformed Health Insurance. Now It Is Time to Reform Health Care

Filed under: Efficiency,Health IT,Health Reform,Health services research,Health spending,Report Cards — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 8:26 am

I’ve commented about the absence of any meaningful cost containment in the new health reform legislation. It’s not that I favor direct government command and control over spending. So what could the government do to promote efficiency? Very little, and yet quite a lot. After decades of talk and years of effort, it is time to give us integrated EHR. Not the type that the politicians and doctors are talking about, which is EHR for doctors only. We need EHR for managers. Think of EHR not merely as a medical decision making tool, but as a management decision making tool.

I cannot understate the importance of management-focused EHR. Without EHR, we cannot hope to measure either costs or quality. The lack of this basic information doomed physician hospital organizations and integrated delivery systems and is posing insurmountable obstacles to report cards, pay for performance, and accountable care organizations. The idea is so simple and yet no one wants to accept it: if you can’t measure something, you aren’t going to improve it.

The Obama administration is continuing the EHR initiative begun under Bush. But these EHRs are for doctors’ eyes only. And they will not contain the cost or outcome information required to make them effective as management tools. If we don’t fix this, we may as well give up on reforming healthcare delivery. We will have the same messed up fragmented system where no one is accountable to anyone for their costs or quality.

What will it take?

Integrated health records that link patient information across all providers. We are getting there, but not everyone is on board. EHR providers fear being driven out of business (this is a common worry when there is a standards battle.) More problematically, doctors don’t want the kind of transparency that EHR will bring.

Linking clinical and administrative data. We need risk adjusters to do proper quality measurement and this means making clinical data available to managers.

Outcomes data. The outcomes data currently available is shockingly limited. We can measure the quality of an automobile in a hundred different ways. Why can’t we get decent health outcomes data? It can be done, and there is some amazing ongoing research that points the way. Getting this information into EHRs should be job #1.

Won’t this all create concerns about privacy? I don’t think so. Employers and insurers can learn any evil tidbits they need to know from administrative claims data. There have been no privacy scandals thus far. Adding de-identified medical information to the mix wouldn’t threaten privacy, but how it would dramatically improve care delivery! I don’t see how we can reform healthcare delivery without it.


  1. How does the reform affect opportunities for medical assistance in overseas. Pablo Gonzalez. Kellogg ’78

    Comment by Pablo Gonzalez - Ybarra — April 3, 2010 @ 9:18 pm

    • Interesting question. I don’t know if insurance in the exchange will be required to pay for medical care when traveling and I can’t find any mention on the Internet.

      Health reform might put a crimp on medical tourism as those who travel abroad to avoid paying high US charges are now more likely to have coverage here in the states.

      Comment by dranove — April 6, 2010 @ 5:48 pm

  2. In a Shortell class some years ago, I tecall trying to get outcome data to measure quality of care at Chicago area hospitals.
    IL Hospital Association does not release this information. Medicare data was the only available outcome record we could find.
    Even University hospitals resist releasing this data.
    The claim has been that they receive the most difficult cases so morbidity and mortality data would be misleading.
    Since risk adjusted data is so prone to manipulation, this whole program would see a few decades away.

    Comment by Cliff Cornelius — April 8, 2010 @ 8:41 am

    • Cliff,

      My own research is often cited by those who wish to damn report cards for the reasons you have given. But I have not given up on report cards and I believe the main weakness with risk adjustment is the continued reliance on administrative claims data. EHR will permit far superior risk adjustment. But you are correct, if we are unable to improve risk adjustment, report cards will have limited value. And the resulting emphasis on cost containment without accountability for quality can lead to a race to the bottom.


      Comment by dranove — April 8, 2010 @ 9:03 am

  3. You can easily find data and reviews on every hot dog, refrigerator and grass seed you’d ever want to buy. But when you go in for major surgery, you can only pray that the doctor and hospital are competent in the task. It’s astonishing that this enforced ignorance is allowed to continue.

    Comment by Dave Borland — April 8, 2010 @ 6:47 pm

    • David Dranove has co-authored research on report cards. See a summary in Kellogg Insight, “Are Healthcare “Report Cards” Good for Patients?.” In brief: report cards are not always good. Hot dog, refrigerators and grass seeds to get to chose their customers, while doctors are available to do so.

      Comment by Patricia Ledesma — April 13, 2010 @ 12:13 pm

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