Health Care Operations: A Conversation with Dr. Chris Lee


Professor Chris P. Lee is currently Assistant Professor of Operations and Information Management at the University of Pennsylvania’s Wharton School where he has won several awards for his teaching. Chris served in analyst and VP roles in Canada’s CIBC and the BMO Group as well as Silicon Valley’s WellNet Inc. (now part of The Health Central Network). Chris was nominated and awarded by the Institute for Management Science and Operations Research (INFORMS) three times, and is also a co-investigator on a $4.4 million United States Department of Defense research project. We had the chance to talk to Chris about the operations of health care, where we fall short, and what we’re doing right.

ZocDoc: This is a question we’ve asked before, but before we

talk about the problems in the American health care system, let’s talk about its strengths. What are we doing right?

Lee: In some sense what we’re doing right is that we’re incenting the private sector to come up with a lot of innovations. And not only medical innovations in the form of new medicine and treatment devices, but IT innovations, and ZocDoc is one of those companies that provides solutions that are not necessarily available in other health care systems. So I think the reason that we have this slew of innovations constantly in the Uni ted States is the result of us having a market-based health care system. That is certainly one of the things we’re doing right. By several different metrics, people in the United States have access to much more advanced technologies and forms of treatment than citizens of other countries in the Western world.

ZocDoc: So if we didn’t have a market-based system in place, these innovations wouldn’t happen?

Lee: Surely. For instance – and I don’t want to name specific countries – but there are countries that follow a socialized approach to medicine where the physician pay, for instance, is dictated by some government board. And government, as a large purchaser of medicines and medical devices, gets to essentially set prices for those things. A lot of times what that does is it wipes out the incentives for both physicians and pharmaceutical devices and providers to continue to innovate because in order to support that kind of research and innovation, these entities need to make a profit. And having the government replace these market mechanisms can lead to a shortage of incentives to keep these innovations from being developed.

ZocDoc: So universal health care can be damaging?

Lee: I don’t want to make a sweeping statement about universal health care being bad, or market-based health care being good, but what I’m trying to say is that the US health care system does have some very strong things going for it.

ZocDoc: Do electronic health records and universal health care go hand in hand? How important are electronic health records?

Lee: I think it makes a tremendous impact in that a lot of expenditures that we incur in this country do not make it to the delivery of care. So much of the money is spent on the administration of health care; getting approvals from your insurance company, hospitals trying to set up the billing of their claims. All those things actually constitute a really big chunk of our health care expenditures. A nationalized, unified, electronic medical record system will go a long way in terms of reducing those transaction costs. In the United States we spend more money on hospitals trying to overbill insurance companies and insurance companies trying to fight those claims than it would cost us to put all the uninsured in this country on health insurance, or so suggested by economist Paul Krugman in a New York Times article, and that is a really sad state of affairs.

ZocDoc: You’ve written about John Rawls before. Can you talk about how we should interpret his argument of society defending the weakest?

Lee: A typical interpretation of John Rawls’s argument is that a society is fair if the society channels its resources to the poorest segment of the population. What that also means in terms of cost effectiveness is that you’re pumping money into sometimes the severely ill, the elderly – where the marginal benefit of a dollar spent on medicine is not necessarily high, compared to other segments of the population. In some sense, there are different forms of fairness that one could define, John Rawls’s approach being one of them. Whenever you talk about the allocation of resources you’re almost always making a tradeoff. If you decide that the resources should go to society’s most severely ill and the elderly, then the tradeoff is we’re not necessarily getting the best bang for our buck. On the other hand, if we as a society decide we are going to demand our best bang for the buck, we may end up removing resources that are currently given to the severely ill and the elderly. So there’s always a tradeoff. Currently there is no consistent and broadly agreed upon benchmark as to how society’s health care resources are to be allocated between different segments of the population.

ZocDoc: Should we have one?

Lee: Well, that’s the thing. Can we possibly develop a rule of thumb that allows us to make these decisions in a way that are completely non-contestable and agreed upon by everybody? As we speak, there isn’t a clear way around this. That’s what makes these policy decisions difficult – that there are people on both sides of the fence, and it’s always about making tradeoffs and compromises.

ZocDoc: Who should be deciding policy? What role does the government play?

Lee: The government shouldn’t play the role of the adjudicator. What the government should do is provide a forum where people’s opinions and ideas are heard. I think what is troublesome in the United States right now is that the general public understands very little about how the health care system in this country works. We all like to think that we understand it, but the fact of the matter is we don’t. And a lot of times, because of the lack of understanding, a lot of issues get overly simplified – for example, the issues presented by the uninsured. President Obama is saying a lot about reforming health care and providing health insurance to the people who are currently uninsured, but there are people who oppose the idea of providing insurance to the uninsured. They interpret it as a form of taking away money from the wealthy to feed the poor. But what people don’t understand is that the issue of the uninsured will ultimately affect all of us, directly or indirectly.

I don’t know if you’re familiar with the statistics of the situations in emergency rooms around the country: Right now if you were to go to an emergency room in a large metropolitan area, the average wait will be several hours. I’m talking about anywhere between 4 to 8 hours in situations. And several hours a day, emergency rooms are actually turning away patients because they don’t have the capacity. And one of the reasons why emergency rooms are so crowded across the country is that we have a large population of uninsured people. The uninsured, because they don’t have timely access to primary care, end up not seeking care early enough, and ultimately become admitted to the hospital through the emergency room. So the crowding-out situation in emergency rooms can, to some degree, be attributed to the large population of uninsured people in this country. If we can alleviate the situation for the uninsured by at least providing some basic form of care, that eliminates the crowding-out of emergency rooms and benefits the rest of us who have insurance. So I guess what I’m trying to say is the issue here is not quite as simplistic as people would portray it.

ZocDoc: So how can we provide basic care to the uninsured?

Lee: I can’t claim to have a solution to that. But one thing we can do at the very least is we might make sure that the hospitals do not overcharge the uninsured. Right now the situation is that if you go into the hospital for the same condition, if you’re uninsured, you are charged anywhere between 2 to 4 times more than a person who has insurance. So at the end of the day, we have to make sure the uninsured are paying something closer to parity with the rest of us. Insurance in this country is linked to employment, so the uninsured tend to be the unemployed, and they have to pay more if they need care. I think not of all of us would think that is fair.

ZocDoc: The issues presented by the uninsured are not the only issues we don’t know enough about. Let’s talk about cost effectiveness.

Lee: Americans at the margin spend more money for every quality-adjusted year of life gained than citizens of other countries. Phrased differently, we don’t use our health care budget quite as effectively. How did we come to this? There are a number of different reasons. For one, Americans have a far greater propensity to want to consume expensive forms of medicine, and a lot of that is because we’re protected by health insurance, both public and private. And the fact that we’re protected by health insurance does sometimes lead to overuse of medicine. On top of that, malpractice lawsuits are quite rampant in the United States. And not only do we have a lot of these lawsuits, but the reward amounts are creeping up all the time. I was just speaking to somebody who is a neurosurgeon here at the University of Pennsylvania, and his group practice is paying about $170,000 in annual malpractice insurance premiums for him. Because of the rampant malpractice lawsuits, physicians and physician practice groups are paying a lot of malpractice premiums and all of those costs ultimately get absorbed by the end payers of all this – the consumers. So that’s another reason why Americans don’t necessarily observe the best cost effectiveness as compared to the health care that we get. And the fact that because of fear of becoming sued, physicians practice what is known as defensive medicine. Often times they prescribe medically unnecessary procedures or medicines just so that they can be sure at the end of the day, they’ve got all their grounds covered. They don’t want to leave themselves vulnerable for lawsuits.

ZocDoc: How much does defensive medicine contribute to health care spending, and why are we letting this happen?

Lee: The issue with medicine is patients do not have the knowledge about their underlying disease conditions. They rely on physicians to tell them what they need. Patients are in no position to challenge what is prescribed for them. It has been estimated that at least 1% of our health care spending is attributed to defensive medicine. Now that in and of itself might not sound like a lot, but the reality with health care is that there are a lot of little bits and pieces that add up to our overall health care spending. Defensive medicine is one of them.

ZocDoc: Doctor visits and defensive medicine aside, how much of the responsibility for a patient’s health is actually belongs to the patient? Shouldn’t we be eating better and exercising more, at the very least?

Lee: Several studies have shown that lifestyle and other factors related to diet and exercise have tremendous impact on our long-term health and health care costs – up to low thousands of dollars per person per year for certain groups within the population. The fact that most of us are protected by health insurance leaves us very little incentive to take care of ourselves, as we falsely believe we are not responsible for the costs. And a large chunk of our national expenditures every year could have been avoided if people had started to take the responsibility for their own health. As we speak, a lot of large organizations – I’m talking about Fortune 500 corporations, Fortune 100 corporations – are troubled by the enormous amounts of money they are paying out in the form of health insurance for employees. Costs keep rising at double digit rates every year. So companies are trying to provide incentives for their employees to take their health into their own hands. Companies will actually provide their employees cash vouchers if they go to the gym, or if they eat healthy. I know that in a recent year IBM was paying over $100 million a year in incentives to get their employees to stay healthy, to quit smoking, to exercise, and to go to the gym.

ZocDoc: So is that a genius idea or unnecessary spending?

Lee: $100 million might sound like a lot of money, but if they end up saving more in terms of health insurance, then that seems to be an innovative approach. But on the other hand, this is a very pessimistic approach, and one cannot help but feel that this is something that could have been avoided if people will learn to take care of themselves. Hospitals, public health authorities, and other institutions in the health care system could have spent more of their efforts on preventative health and informing people about the dramatic impact that living healthy can do to their health. Educating people costs money, but I think that what we will find is that not educating people will end up costing us more.