Well, THERE'S Yer Problem!

I was going to dive back into my walkthrough of the McKinsey. But as I was looking through the report, the following struck my eye. It was contained in the section on outpatient costs, which we discussed the last time. It turns out that hospitals, in this study, earn their highest profit margins on elective outpatient procedures. This is illustrated by the following graph, drawn from the report:



What I find appalling is what's in the blue box. This is typical financial analyst-speak. There'd be no surprise in seeing this language applied to, say, Proctor and Gamble's Latin American product mix, or the margins on luxury vs. commodity audio equipment. Markets and margins are being assessed for their profitability, presumably so business leaders can make sensible decisions about how to sell things so as to increase their profit. We understand that the concern here is almost entirely with profit -- not with whether folks in Costa Rica actually need strawberry-scented detergent. Strawberry-scented detergent seems like a typical excess of capitalism: perhaps a sad waste of resources, but in theory the marketplace can vote, and no obvious immediate harm comes from a bunch of marketers plotting to flood Belize with handi-wipes. OK, harm probably does come from it eventually, but we accept the profit-first thinking as an essential hallmark of market economies in consumer goods.

But how is it possible that a culture exists in which it is remotely acceptable, REMOTELY, to assess components of our health-care system by these profit-first measures? How is it possible that anyone, anywhere, for whatever reason, should assess a hospital's care mix not for the beneficial effects it produces, or how it fits into our overall health care cost picture, but simply on which classes of care make the most money? In this world, emergency room patients aren't just emergency room patients, they're Repeat Business Opportunities (RBOs, as we call them over in the conference rooms of market-driven America). And a report like the one above is guaranteed to provoke thinking in the hospital boardroom as to how we can increase the number and profitability of outpatient procedures we do. Effort will be put towards this end. Marketing dollars will be spent.

If we have Bank of America financial analysts getting involved in the discussion over what kind of care hospitals should provide, we have a big problem.