POLICY/QUALITY/HOSPITALS: Keynsian reporting trumps Smith-ian invisibilty

Michael Cannon at Cato picks up on David Leonhardt’s NYT article about error/process reporting in hospitals and suggests that there’s no need for regulation, as the market is getting us there already.

Hmm… methinks Michael underestimates what one economist he does approve of suggests identifies as a major problem. People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices” He may think that this has only been going on since 2002 or thereabouts but Codman was trying and failing to get transparency in hospitals in 1910! If we’re going to wait for the industry to really do this by itself to respond to Smith’s invisible hand, then as an economist Michael probably doesn’t have quite such a high regard for once said, in the long run, we are all dead!. Codman certainly has been pushing up daisies for a more than 60 years.

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  1. Cannon managed to get both the economics and the article wrong. The NYTimes piece did not “point out that the market is moving to fix that problem without government direction.” Instead, it referred explicitly to the Pennsylvania mandates and nowhere suggested that the pressure to report was coming from the market rather than regulators/legislators.
    And for good reason, because it would be stupid to ignore the initiatives in New York, Massachusetts, Pennsylvania and a host of other states on hospital reporting. It would also be stupid to ignore CMS’s new mandates on transparency, and the threat of new mandates to come from federal and state government.
    And to the extent that pressure is coming from “the market” rather than government, it is coming primarily from stakeholders other than hospitals (payers and purchasers).
    Final point: payers, purchasers and public interest groups often lobby the government to improve provider quality data when the realize they can’t be as effective using “the market” alone. Government does not act sui generis, but in conjunction with stakeholders in the market.