Tuesday, November 14, 2006

What would Say say?

The French economist Jean Baptiste Say is famous among economists for Say's Law, which essentially states that supply creates its own demand. When I was taught Say's law in school, it was positioned from the start as a discredited theory that was important to a fringe element, but otherwise largely dismissed by John Maynard Keynes and others in the mainstream of neoclassical economists. Today's article in the New York Times about gastroenterologists made me think that Say's Law, while maybe not generally applicable, might be alive and well in certain sectors of the economy. Health care delivery, for example.

The article describes how gastroenterologists might soon face a crisis as technological advances in imaging technology may make virtual colonoscopies preferable over actual colonscopies. Since colonoscopies are performed by gastroenterologists and virtual colonscopies by radiologists, this could represent a signficant shift of patient traffic away from gastroenterologists.

In a well-functioning market, this trend would, over time, foster decreases in the supply of gastroenterologists. The Times article suggests that this won't be the case, however, because gastroenterologists will find something else to do to make up for the lost income, such as performing other types of procedures. Thus, while the number of colonscopies performed may go down, they will be replaced by other types of gastroenterology procedures. As one physician noted in the article, "We have a lot of organs. The esophagus, the stomach, the small bowel, the liver, the pancreas. I think we've got a lot to do."

This phenomenon is not unique to gastroenterologists. Dr. Jack Wennberg and his colleagues at Dartmouth have made a cottage industry of showing how regional variations in medical practice are directly linked to the relative supply of specialists who perform the practice. Certain regions have more C-sections not because they have more high-risk pregnancies, but rather, because there are more ob/gyn's in the area. The ghost of Say lives on.

Of course, Say's Law doesn't apply everywhere. Purveyors of health IT have implicitly applied Say's Law in the past, but with disasterous consequences. About 20 years ago the CHINs (community health information networks) adopted this Kevin Costner view of economics ("if you build it, they will come") and as a result none of them are still standing. A number of the "RHIOs" out there today may suffer the same fate. We've found in our MAeHC pilot projects that the demand for HIE products and services is actually multi-dimensional and complex. While results delivery and basic electronic data exchange are minimum requirements, applications like electronic referrals tracking, quality data aggregation, and forms routing are also important to physicians. HIEs that launch without deep consideration of what physicians are actually demanding do so at their own peril.

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