Monday, August 02, 2010

Value,quality,rent seeking -Does value equal quality/cost

I suspect we will be hearing more and more about paying for "quality" since the recess appointment of Dr. Donald Berwick to be the head of CMS. His views on central planning of medical care are the subject of much discussion. The following is a lightly re-edited version of a commentary I wrote several years ago on "measuring" quality and value.

Dr. RobertWachter, Professor of Medicine at UCSF , tells us that "value=quality/cost" and we have a moral obligation to "solve" equations for various clinical services. I reference his comments in the ACP observer as he replies to a letter to the editor commenting on the interview he gave discussing the overseas out-sourcing of medical services.(ACP Observer,July/August/2006 pg4) Dr. Wachter says in part:

Health care will be judged by its value: i.e.quality/cost...It is immoral not to seek ways to provide high quality care at more affordable costs"

It seems to me that this "equation" presupposes an intrinsic theory of value in which value is considered to be something that can be objectively measured and is an intrinsic property of a good or service much like the specific gravity of a liquid or the density of a compound.

Since the Austrian School of economics popularized the subjective theory of value most mainstream economists reject the intrinsic value theory.

The same service may be more or less valued by a given person as her circumstances and desires change. No two individuals need value the same thing to the same degree though they may.Value to most economists is not an intrinsic measurable number but rather value is subjective and is in "the eye of the beholder". Thomas Sowell ( pg 51,Knowledge and Decisions,Basic Books, 1966) puts it this way:

"Value being ultimately subjective, it varies not only from person to person but from time to time with the same person, and varies according to how much of the given good he already has."

Advocates of the subjective value theory would argue that to define value with the above equation is to erroneously claim that value (or in this case "quality" which along with "cost" determines "value") is an objectively measured entity. Are the medical quality experts( as best I can tell this is a self proclaimed designation) who are able to or claim to be able devise means to measure quality merely substituting their preferences-dressed up as objective measurements-for the value judgments of others?

Wachter continues saying:

"Patients, payers and policy makers now expect us to tap into actual clinical data to assess a physician's quality of care.I suspect once we truly figure out how to do that..."

I take this to mean that exactly how to measure the quality of care has not yet been "figured out". Somehow, I think that compliance with guidelines and adherence to protocols will play a big role in this-it has so far- and I doubt if patients will be asked what it is they value. I agree that payers and policy makers want quality data to use as a cost containment tool, the gatekeeper concept now largely abandoned, but patients want a physician who will spend time with them,care about their problem and be more interested in doing what the doc and patients agree on as the right course for that person and not adherence to some guideline that the patient has probably never heard of and does not take the particulars of his situation into account.

I believe "quality" which is now the main rhetorical tool of the cost-containment movement has become a classic bait-and-switch term. Everyone, docs and patients alike,would naturally say we want to give/receive good care or "quality" care. But the quality guidelines so often turn out to be what some self-appointed quality guru, committee or task force says is an quality indicator and are often no more than simplistic, easy-to-count, check-off list items, some of which may have counterproductive or harmful effects.

I have no doubt there are many well-intentioned physicians working hard to improve medical care- if you will improve quality- but much of the quality movement and arguably its major motive force is to contain costs.


The movement to contain costs derives from so much of medical care being paid for with other people's money. We are not instructed about the moral imperative of providing high quality legal services, or haircuts or home repairs at more affordable costs because the people who use these services pay for them themselves.

Some may rejoice in the passage of Obama care as a golden opportunity to improve the quality of medical care while the more cynical think of the legislation with unparalleled power placed in the hands of various governmental agencies as the mother of all opportunities for what economists call rent seeking in which various interested parties ( now known a stake holders) seek special privilege.

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