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Is it so unprofitable to provide perfect service? Consider your grocery store example... The incentives of hospitals are much more complex than those of grocer

Is it so unprofitable to provide perfect service? Consider your grocery store example... The incentives of hospitals are much more complex than those of grocery stores, because of how different their business is. One of their major customers, for all patients, is the government -- which rewards some things and not others. Unlike the grocery store, then, the hospitals have to be quite attentive not only to the experience of people coming the door but the metagame of quality measures -- what the government thinks the experience of those people is. The article hints at a reasonable solution, which is for the government to include surplus capacity as part of their incentive structure.

LorenPechtel 2y ago
The basic problem is that demand is unpredictable. From a patient care perspective you overprovision so that pretty much any surge doesn't exceed capacity. But note that the cost to the hospital is pretty much based on what they provision for, not what they actually do. You're not paying the hospital the big bucks for actually doing, you're paying for the capacity to do it. From a profit perspective you overprovision only to the point where the marginal value drops to zero, a point far below the peak of a surge. Unless mandated otherwise no business provisions to the biggest surges.
- solidsnack9000 2y ago
  Then it should be mandated; but that's not really a public versus private issue. It would have to be mandated in the public context, as well.
  - LorenPechtel 2y ago
    Agreed, it needs to be mandated. The healthcare companies fight tooth and nail against any such mandates, though, and usually get no more than a slap on the wrist even if there are rules. I think public is worse than private in this regard, it's a lot easier to change the definition of acceptable than it is to fund what really should be done.

LorenPechtel 2y ago

The basic problem is that demand is unpredictable. From a patient care perspective you overprovision so that pretty much any surge doesn't exceed capacity. But note that the cost to the hospital is pretty much based on what they provision for, not what they actually do. You're not paying the hospital the big bucks for actually doing, you're paying for the capacity to do it. From a profit perspective you overprovision only to the point where the marginal value drops to zero, a point far below the peak of a surge. Unless mandated otherwise no business provisions to the biggest surges.

solidsnack9000 2y ago
Then it should be mandated; but that's not really a public versus private issue. It would have to be mandated in the public context, as well.
- LorenPechtel 2y ago
  Agreed, it needs to be mandated. The healthcare companies fight tooth and nail against any such mandates, though, and usually get no more than a slap on the wrist even if there are rules. I think public is worse than private in this regard, it's a lot easier to change the definition of acceptable than it is to fund what really should be done.