The Fallacy of Treating Health Care as an Industry

By Richard Gunderman

The Institute of Medicine calculates that the U.S. system wastes $750 billion annually, but the practice of medicine and approaches to reform are uniquely immune to standard economic analyses.

Hippocrates [a.drian/Flickr]

On September 6 the well-respected Institute of Medicine (IOM) released its report, "Best Care at Lower Cost." Its authors argue that the U.S. health-care system is falling far short of its potential and continuing to rack up unsustainable cost increases. For example, they estimate that fully one-third of annual U.S. health-care expenditures -- $750 billion-- are wasted, and fully one-third of the 40 million Americans hospitalized each year are harmed during their stay.

The solution, they argue, is for the health care system to adopt practices already in use by other industries. The non-transferability of medical records between practitioners can be remedied by mimicking online banking. The solution to the growing complexity of medical care is to adopt the information technology systems that enable manufacturers to manage vast supplier networks. The way to prevent medical errors is to follow the airline industry's lead in learning from mistakes.

If we evaluate medical practice solely by whether or not physicians are following clinical pathways favored by industrial analysis, we will omit more than we capture about how physicians care for their patients.

Consider the problem that nearly two-thirds of patients do not know the cost of their care until they receive their bill. The authors argue that medicine needs to allow patients to shop for medical care as they do for appliances and hotels. Someone wanting to buy a dishwasher or book a hotel room can go online and compare reviews of performance and prices. Why shouldn't a patient seeking treatment for diabetes or a knee replacement be able to do the same?

While there is much to praise in the IOM report, it's based on assumptions that merit careful scrutiny. One is the unquestioned notion that health care is an industry. We have an energy industry, an automotive industry, and a telecommunications industry. Just as we transplant organs from well patients into sick ones, the authors seem to suppose, we should be able to transplant effective practices from healthy industries into our ailing health care system.

One problem with a patchwork approach to reforming healthcare is the danger that we may produce a sort of Frankenstein, a monstrosity made up of parts that look strong when viewed in isolation but turn out not to fit well together. We cannot merely mix up two-thirds of a cup of banking, a quarter cup of manufacturing, and two tablespoons of airline policies and procedures and expect to produce well-integrated patient care.

No matter how good each of the individual ingredients that go into preparing a meal are, if the components are not mixed in the appropriate combinations and proportions, the result is more likely to prove stomach churning than appetizing. The fact that the IOM report cites multiple different industries suggests that no single one has gotten everything right, and this in turn suggests that each industry may face its own distinctive challenges and opportunities. This is certainly true for health care.

Even more problematic is the assumption that health care can and should be treated as an industry. An industry is defined as a sector of economic activity. If a product or type of work can be bought or sold in the marketplace, or if its inputs and outputs can be measured in dollars, we can consider it part of an industry. On this basis, we are often told that the health care industry represents 18% of the U.S. economy, over $2.5 trillion.

Billionaire investor Warren Buffet recently referred to health care as a "tapeworm" in the digestive tract of the US economy. He was alluding to the fact rapidly rising health care costs are forcing US employers to spend so much money on health care for their employees that US industries are placed at an ever-growing disadvantage compared to competitors in other nations where health care costs are lower. From an economic point of view, doctors, nurses, and hospitals resemble parasites.

Yet the industrial metaphor has its own Achilles heels. For one thing, the practice of medicine is not primarily an economic activity, and measuring its inputs and outputs in terms of dollars and cents provides a narrow and superficial view of what really goes in doctors' offices and hospitals. Despite economists' best efforts to tally up in economic terms the costs and benefits of care, many of the most important things taking place between doctors and patients never get evaluated.

Consider a recent encounter between a doctor and a patient. The patient presented complaining of low back pain. The doctor could have ordered an expensive MRI exam and recommended an even more expensive surgical procedure. Or the doctor could have told the patient that such symptoms generally resolve on their own over a matter of weeks, and instead recommended rest, over-the-counter pain relievers, and later, a weight-loss and exercise regimen.

The long-term outcomes would probably have been more or less the same in either case. In a few months, the patient would have been pain-free. In fact, the patient who lost weight and built up muscle strength might have been less likely to experience a recurrence of back pain. From the standpoint of the IOM report, choosing the first clinical pathway, which is much more expensive and produces no real benefit, would appear wasteful. Yet even the second option is not necessarily the best.

As thoughtful physicians know, looking at medicine from such a simplified perspective can prove misleading, at times seriously so. In this case, it turns out that the patient's real problem was not low back pain at all. In fact, the patient had lost his job in the economic downturn and was having increasing difficulty making ends meet, which in turn was increasing friction in his marriage. The low back pain was a symptom of a far more complex problem that the patient needed help with.

To someone appraising medicine with a stopwatch and a cash register, such time may seem wasted, but patients and families know better.

Looking at health care from the perspective of an economist, the most appropriate course of action for physicians would be to determine whether their patients have a condition for which diagnostic testing, drugs, or surgery are indicated. If the answer is yes, the physician should choose the course of evaluation and treatment that provides the best balance of benefit over cost, while avoiding errors that result in additional suffering or downstream costs.

But what if the answer is no? What if the patient is not suffering from a diagnosable condition for which a prescription can be written? What if the patient's troubles are rooted in psychological, social, or even spiritual aspects of life for which medicine has no clearly established tests or therapies? Should the physician refrain from becoming involved, in an effort to boost efficiency and lower costs? Why should the physician "waste" time or money tending to such issues?

Of course, the truth runs even deeper than this. Even when a patient does seek medical attention for a clearly defined condition for which expensive tests, medicines, or surgeries are indicated, psychological, social, and spiritual dimensions of suffering are almost always involved. If we evaluate medical practice solely by whether or not physicians are following clinical pathways favored by industrial analysis, we will omit more than we capture about how physicians care for patients.

This contrast was well-captured in the 1991 film The Doctor, starring William Hurt. Dr. Jack MacKee is a very successful surgeon who is "all business" with his patients, as well as his own family. Then he is diagnosed with throat cancer and is referred to a specialist whose bedside manner is a carbon copy of his own. Eventually, he learns the hard way the error of his ways, and begins practicing and teaching medicine in a way that puts the humanity of patients first.

No one contests that contemporary health care is more expensive than it needs to be. Without doubt, we can reduce the harms we inflict on patients and improve the benefits they derive from our care. Experts in economics and industry may have important contributions to make in this regard. But we must never allow the relationships between health professionals and their patients to be completely subsumed under rubric of a "health care industry."

Medicine is about more than delivering tests and medicines as efficiently as possible. It is about caring for human beings. In the sense that money changes hands, medicine can be likened to an industry. But in the sense that medicine is founded on communication and relationships, it more closely resembles marriage, parenthood, or friendship. Good doctors care for their patients, and great doctors care for them in a way that no industrial analysis can ever adequately encompass.

How many of us would say that an encounter with a bank, a manufacturer, or an airline changed our lives? Medicine is different from these other industries, because being cared for by a great health professional can and does catalyze such changes. Dishwashers and hotel rooms are commodities that can be bought and sold on the open market, but the relationships that develop between patients and physicians have an ineluctably priceless dimension.

What from an industrial point of view looks like wasted time can turn out, from a human point of view, to be time spectacularly well spent. For example, a physician may take the extra time necessary to discern what is really going on in a patient's life, or to educate and counsel a patient facing a life-altering diagnosis. To someone appraising medicine with a stopwatch and a cash register, such time may seem wasted, but patients and families know better.


From a strictly economic point of view, it might be possible to reduce the average length of doctor-patient interactions from 20 minutes to 15 minutes, and from 15 minutes to 12 minutes. This would enable each doctor to see 5 patients per hour instead of 3. But doing so might require doctors to stop listening to and caring for their patients. It might make good economic sense, but it does not make good medical sense. An efficient doctor is not always a good doctor.

To those who do not peer deeply, increasing throughput may look like a reduction in waste. But patients are not merely broken mechanisms. They are also suffering human beings. This means that the industrial assembly line approach to medicine is inherently limited. If we are to care for human beings, we must heed the words of Abraham Heschel: "In order to care for a human being, we must first become a human being." No health care reform that fails to put humanity first will suffice.

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