To weigh interests, business schools teach a simple method: ask two dichotomous questions and plot the answers on a 2 X 2 square. Along one side, are the responses to the effect of the action on customers as either Good or Bad. On the other, the same consideration is made, this time regarding the effect of an action on the business itself. Answering these two questions allows quick analysis of whether a project should be pursued, weighed, or rejected. The resulting grid is reminiscent of the Punnet Square. Homozygous recessive is akin to the elusive win-win, while the Heterozygotes fall in the more common grey areas.
While you wouldn’t always think so, MBAs prefer projects which are good for both the customer and the business. However, the MBA doesn't shy away from actions which are unfavorable to one of the two parties so long as the actions are strategic and maximize the long term value of the firm. Mixed responses to the two questions introduced above lead the MBA to consider options, with an eye for the long run, the MBA attempts to maximize profits without losing its best customers.
"Promotions" are actions which benefit the customer more than any harm done to the business. When judged correctly, promotions have a high transaction value even though they may be unfavorable to the business. Groupon capitalizes on this strategy by helping business to generate awareness and goodwill. The business shares with customers the majority of the value it creates. Actions which benefit the customer but aren't necessarily good for the business accumulate Goodwill. Later, the business will have an opportunity to take actions which favor the business at the expense of the customer.
A recent example of cashing in on Goodwill is Netflix upsetting customers by raising its rates and enacting separate billing for postal delivery of DVDs and streaming video. Undoubtedly analysts demonstrated the move is good for Netflix, despite the fact that customers will be lost. Clearly, those customers who stick it out receive less value now that the same product carries a higher price. In the future, greater customer value may return if many more movies are available to stream. Should that happen, customers who are satisfied by streaming alone might discontinue postal DVD delivery, a choice they would otherwise not give much thought to without separate billing. Since the cost to Netflix is greater to ship a DVD than to stream a movie, Netflix will benefit when consumers change their behavior. By billing separately, Netflix encourages customers to drop DVD delivery so that in the future Netflix might discontinue its postal service with less guilt. Despite the fact that customers don’t benefit by this path, the decision supports Netflix’s long term goal to yet again revolutionize the way we watch movies at home.
Should physicians give in to perverse incentives, they breach their fiduciary duty to patients. Whether motivated by greed or the practice of defensive medicine, these actions increase the cost of care without adding value. On the other hand, an action which is not in the best interest of the physician and benefits the patient should be taken. Indeed, a criteria of a profession is to only take actions which benefit the customer. Currently, many hospitals are run by CEOs who approach decisions as an MBA would. To maintain service, and ensure it stands for future generations, physicians must be mindful of when actions harm the business. On average, most decisions the Physician CEO makes would need to benefit the business. However the MBA's approach could be simplified by omitting any option that is not good for patients:
Do physicians really have a fiduciary duty to patients? The four pillars of ethics for physicians includes autonomy, beneficence, non maleficence, and justice, but does that include an ethical duty to managing the finances of their patients with extreme loyalty?
ReplyDeleteI agree generally with the idea that healthcare organizations will more frequently make decisions in the best interest of patients with a physician (or nurse or anyone else whose primary background is in patient care) at the helm. I also think that this matrix can potentially add value by forcing decision-makers to consider the impact of their choices on patient care, rather than solely focusing on the financial consequences to their organization.
ReplyDeleteHowever, if not used carefully it might also have the effect of artificially simplifying a decision in the user's mind - and thus causing inadvertent harm. It seems that this could most readily happen if the user chose to consider the effects of a decision on one sub-group of patients while forgetting to consider others. For example, a decision that leads a hospital to devote more resources toward charitable care might seem to fall clearly into the "Good for Patients" category. However, that same decision might also lead to a shortage of beds, and thus denial of care to other patients whose illnesses are more critical (and who therefore, in a sense, are in greater "need" of the hospitals care). For that subset of patients, it would be hard to say that they have not been harmed by the same decision... not actively or intentionally, but merely because the matrix tool was used improperly. Due to the complexity and inter-connectivity of any healthcare organization, rare is the decision that will not have ripple effects on many different subsets of patients.
This is not to say that the type of decision matrix shown above is not valuable... on the contrary, it is often extraordinarily helpful to distill a complex decision down to its essence. My point is merely that, as with any other tool, the user must learn how to wield it properly before applying it. At the end of medical school, we don't just hand scalpels to newly minted MD's and set them loose in the OR untrained and unsupervised. Residency is a long, methodical process with the end goal of producing physicians who are competent at patient care. In similar fashion, we need to continue our efforts to educate ourselves and our peers about the principles of quality improvement, and about the arsenal of tools at our disposal. Ultimately, the goal is for we physicians to be as proficient at healing our healthcare system as we are at healing our patients.
@Zane: In the broadest sense, a fiduciary duty is simply a requirement to keep a client's best interest ahead of your own. While it is true that a fiduciary duty is most commonly used in the law, or to manage property, I believe it can also be used in medicine. For example, the decision to order a test - As a fiduciary, the doctor would ask: is it medically indicated? even if it's not, would the patient receive valuable peace of mind? could needless testing complicate the patient's insurance situation? Thus, when the doctor owns the equipment to conduct a test, the fiduciary duty keeps the patient's interest ahead of the physician's interest.
ReplyDeleteThanks for the law tip Charla. Yeah, I would tend to agree that ideally doctors should have a fiduciary responsibility to their patients, but that in reality most doctors do not put it in their top priorities. We are not trained to know the prices of drugs, tests, and treatment, we are trained to provide the best care possible. Efficiency seems to be more of an afterthought than a driving force in decision making; in fact, discussion of the necessity of extra tests and treatment is generally shied away upon.
ReplyDelete@Zane. Good points. Maybe the cost issue shouldn't be thought of as efficiency though. If patients don't fill the prescription, the drug has no efficacy. Comparative effectiveness studies could demonstrate the added utility of a more expensive drug. Without them, ethics might suggest that cost is the more important consideration towards achieving results. Currently though, the benefit to society and the patient that a doctor fights with insurers over a high cost drug is often dubious.
ReplyDelete