The Castonguay report

The ongoing debate surrounding health care in industrialized economies did not spare Québec. My home province is facing growing health expenditure well beyond the growth of its GDP : the former has grown at 6%, while the latter has recently grown at around 4%. From 1980 to 2007, health expenditures have grown from 30.6% of the overall budget to 44.3% (see report referred to below). It is estimated that this proportion could reach almost 50% over the next decade if nothing is done.

Quebec's population faces a high tax rate, and many feel we do not get what we pay for. There might be no free lunch, but this one is especially expensive! This situation has led the province's government to formulate various reforms over the last 2 decades, and ordering multiple reports has resulted, sadly, in minimal changes to face the trend of increasing health expenditures (HE). Today, the "father of health insurance" in Québec (RAMQ), Claude Castonguay, and the Task Force on the Funding of the Health System, have published the awaited report "En avoir pour notre argent" ("Getting our money's worth").

It was, obviously, a much required exercise. Taxes can't be increased much beyond their actual level for Quebecers to be happy. Moreover, it is difficult to limit the availability of medical interventions, even with rigorous economic evaluations . Such evaluations limit the opportunity for patients to choose their preferred options, it can be subjective (thresholds are often subjective... how much is a life worth? QALY vs ageism?), and is ultimately political as lobby groups can pressure governments to change their minds (Herceptin) or challenge them in court (Aricept and other Alzheimer's drugs). And incentivizing intelligent and imaginative people is not always straightforward and can produce unforeseen results...

As a society, however, we still need to take serious actions to ensure the survival of our health care system in Québec. The "Castonguay report" is a move in the right direction, as it shows a profound understanding of the issues at stake. Moreover, the objectives and principles described in the report are right. Unfortunately, the main propositions and recommendations aimed at improving access are inappropriate, and I disagree with the report conclusions on these matters. Note that the vice-president of the Task Force, Michel Venne, has also expressed a dissident position. I'll summarize the key points of the report first, and will provide a critical analysis in my next blog.

If you are lazy, you may prefer to listen to Mr. Castonguay : Français or English

• Values on which the report is based :
  
  • Universality
    
  • Solidarity
    
  • Equity
    
  • Efficacy
    
  • Responsibility (accountability)
    
  • Freedom and choice
    
• Stakeholders involved and what they should aim for :
  
  • Citizens : responsible
    
  • Medical profession : right service to the right patient at the right time
    
  • Health managers : guardians of efficiency
    
  • Lobby groups : need for them to give the government some flexibility
    
  • Government : need to be coherent
    
  • Private sector : increasing role (it is currently virtually absent)
    
• Quantitative limit : adjust the growth rate in health expenditures to GDP growth.
  
• Qualitative limit : restrict public coverage and define priorities through a systematic review of public coverage è suggest a permanent, credible and legitimate mechanism : "L'institut national d'excellence en santé" (NICE equivalent)
  
• Service delivery : the right service by the right professional
  
• Focus on prevention and primary health care
  

From these objectives, the task force has come to 4 major propositions to improve access to healthcare

• Transparent relationships with affiliate medical clinics
  
• A well delimited extension of medical practice to the private healthcare sector
  
• Increase the possibility for patients to contract health insurance
  
• Increase the use of hospital assets, by giving access to private healthcare to public hospitals' resources
  

According to the report, the focus of the Ministry of Health should be to regulate and evaluate the health care system regularly from different perspectives (stewardship role)

• Clinical
  
• Economical
  
• Patient satisfaction
  
• Transparent and publicly available
  

Other themes are also discussed :

• Specificities of the ageing population (ch 8) : 6 propositions
  
  • Support to live at home despite decreasing autonomy levels
    
  • Ensure universality of professional services at home
    
  • Admissibility to a tax credit through a revenue test
    
  • Nursing home operations è concession to the "appropriate resource"
    
• Improved utilisation of pharmaceutical treatments (ch9) : 2 elements
  
  • Cost effectiveness
    
    • Reinforce the rules of the "exceptional medication"
      
    • Create a unique organism to evaluate : "L'institut national d'excellence en santé"
      
  • Improved financing rules for the Medication Insurance Scheme : each beneficiary group should finance their costs
    
• Governance (ch 10) : 4 principles (with 2 as bonuses)
  
  • Distinguish the Ministry of Health from service providers : stewardship role
    
  • The regional agencies should translate the ministerial orientations è strategic implementation
    
  • Increase autonomy and accountability of service providers
    
  • The health care system should be based on rights and obligations of every stakeholders (contractual engagements)
    
  • Every regional agency (administrative entity similar to the NHS trusts) and hospital should have a board composed of independent members (competent and paid)
    
  • Involve citizens
    
  • Monitor performance
    
• Resource allocation (ch 11)
  
  • Abandon historic budgets è services will be bought
    
• Service provision (ch12)
  
  • Promote efficiency and dynamism
    
  • everyone should have access to a family physician by 2013
    
    • registered clinic will have the right to charge annual fees to registered patients
      
• Create "L'institut national d'excellence en santé" (ch 13)
  
• Develop the IT infrastructure to serve the patient and the manager (ch14)
  
  • "Dossier de Santé du Québec"
    
  • Opt-out approach
    
• Financing : promote a durable financing mechanism for the long term
  
  • Durable and diversified revenue sources (ch 15)
    
    • For the portion corresponding to GDP growth : general taxation revenue (solidarity through fiscality)
      
    • For the portion above the GDP growth : a Stabilisation fund dedicated to health care and modulated based on :
      
      • Fiscality (solidarity) è a portion of TVQ (sales tax)
        
      • Service utilisation (individual responsibility) è deductible
        
    • Over ≈10 years, the task force estimates that HE growth will be reduced to GDP growth
      
  • Other sources
    
    • Eliminate accessory fees in primary care
      
    • Regulate (negotiate) accessory fees in specialist care
      
    • Rationalization and payment of services (?)
      
  • Health account (ch 16) is explored
    
    • The ministry should produce its annual health account for review in Parliamentary Commission
      
• Legal context : the Canada Health Act would require some changes.
  

TBC...

Think lean

For the course "Managing people and healthcare", which is (kind of) a revelation from the clinician's perspective, we went to Kingston Hospital to investigate process redesign in healthcare. After going through doubts concerning what to address (the topic is quite vast...), and contacting the trust's STD clinic (just ask how Carole ended up being asked if she needed a Chlamydia screen...), we got into lean thinking and its various tool. It is a quite simple concept behind the success of Toyota, and the aim of lean thinking is to create an organizational culture that identify and eliminate waste wherever it occurs in business processes. While it has been developed for the manufacturing sector, it can be applied to the service industry, and healthcare is no exception. As a clinician, inefficient pathways of care (read business processes) drive me crazy, and that's what brought me to this health management course.

Many tools are available to "get lean", and a fast and (almost) easy way to produce changes is rapid improvement events. It is quite easy to understand for key stakeholders and simple to implement. I'm already dreaming of applying it to our inventory management in Québec (CHUL)

If you too want to eliminate waste from your processes (whatever they are...), I'd recommend the excellent report "Going lean in the NHS" published by the NHS Institute for Innovation and Improvement (you will need to register). You could also go for the original book or just have a look at this brief video... If you're lazy!

Staples.co.uk - Office supplies with FREE next day delivery

This work by
Stéphane Lemire is licensed under a
Creative Commons Attribution-Non-Commercial-Share Alike 2.0 UK: England & Wales License.

There is no such thing as a free lunch

It's been a while since the last blog entry, but it doesn't mean nothing happened. With our syndicate group at Imperial, we invested a lot in conducting an analysis of the Chilean health system, and you may want to have a look at it. Later this year, I'll also release our analysis of the Clostridium difficile outbreaks at the Maidstone NHS Trust.

The holiday season was quite busy, as I got back to Canada to celebrate with family and friends and prepared for the exams period, and had to come back this week for family reasons.

But now everything has settled, and the positive of all this time spent in airports is that I gathered a lot of material to write about.

One of the articles I read is from SmartMoney, the Wall Street Journal Magazine. It discussed the marketing of branded pharmaceuticals : "Peddling pills", as they say. It got me back to my roots, and reminded me of the reflection group we once started during my medical training to discuss the impact of pharmaceutical marketing on medical practice. The "GRRIP", as we used to call it, for "groupe de reflection sur les relations avec l'industrie pharmaceutique(1)". The focus of the article is in the US, but similar conditions prevail in many industrialized countries such as Canada and the UK.

Of course, the drugs-sales reps are important in bridging a gap in medical education by providing data on the newest (and more expensive, branded) drugs. They also provide hands-on explanation and demonstration of their product, which can be important to build the physician confidence to discuss how-to-use issues with patient. For example, asthma drugs are often delivered by inhalers, which are different from one to another, and may require demonstrations not made available in the medical literature.

However, it is unclear that this information is delivered in an unbiased and cost-effective manner. In the absence of direct comparative data between 2 branded drugs(2), the choice of which medication will be prescribed often depends on personal beliefs. Although such beliefs usually have a scientific foundation, there is no clear rule, and it opens the door to choice based on the best commercial pitch(3).

The techniques and numbers involved are astonishing. Over their professional lifetime, some doctors will receive the equivalent of more than $US 1 million from pharmaceutical companies(4). Conferences, consulting fees, continuing medical education and research funding are all accepted ways of marketing drugs to doctors. Drug-sales reps also provide samples aimed at building brand recognition, and in the US also provide vouchers to reduce patients co-payments. Various gifts (branded pens, clocks, prescription pads, etc) are also offered.

The impact of such marketing efforts is well documented. Even though doctors believe they are not influenced(5), numerous studies have shown that marketing efforts produce their desired outcomes : increase the prescription of the marketed drug(6). Also, social psychologists have clearly shown that receiving small gifts from someone triggers the need to reciprocate(7). However, the extent to which pharmaceutical marketing penetrates medical practice is debated. One PhRMA(8) representative cited in the article pretend the drugs-sales reps have no influence on prescription behaviour. Doctors won't admit they are influenced by pharmaceutical marketing. Nevertheless, billions of dollars are invested in pharmaceutical marketing. If there is no impact, shareholders should worry that their capital is used for such an unrewarding activity... Moreover, many academic medical centers in the US now prohibit drug-sales reps access to clinical areas. And at least one group of physicians, No Free Lunch, has emerged to educate about the need for doctors to stay independent.

After considering SID previously, and now reviewing the almost universal endorsement by doctors of the pharmaceutical industry marketing techniques, at a time where health care spending is booming and the need for cost containment imperative, policy-makers will need to review the structure and nature of the incentive system in health care. Because the question is not whether "how we should stop doctors for being so selfish(9)", but how can we incentivize them effectively to reduce overall health care costs. And we should try to take into account the potential impact of any measure on future innovation. As research is costly and risky, we might end-up with reduced incentive to develop new drug-based treatments.

Notes

1-Group for reflection on the relations with the pharmaceutical industry

2-It is often the case that randomized controlled trials for the newest medications do not compare similar competitors, but the newest vs the oldest drugs.

3-Drug-sales reps commercial pitches are often anchored in scientific information. Pharmaceutical companies invest large sums in research with a marketing focus.

4-Ethical guidelines forbids the acceptance of cash from drug sales reps, and the pharmaceutical

5-Am J Med 2001;110:551

6-Chest 1992;102:270; JAMA 1994;271:684; JAMA 1997;278:1745; JAMA 2002;287:612;

7-Discussed in more details in the SmartMoney article

8-Pharmaceutical research and manufacturers of America; the pharmaceutical industry trade group has issued voluntary guidelines to minimize excesses.

9-Which they are not in general. They actually behave like most economical agents, being responsive to incentives.

Staples.co.uk - Office supplies with FREE next day delivery

This work by
Stéphane Lemire is licensed under a
Creative Commons Attribution-Non-Commercial-Share Alike 2.0 UK: England & Wales License.

Stick and carrot policy-making for an effective benefits claim procedure

The British government announced, on 19^th November, a change of policy regarding disabled workers. Following this change in policy and the introduction of a new assessment procedure in 2008, fewer people will qualify to receive disability benefits, and these citizens will be expected to seek work. For the British government, which spends more than £7 billion to provide a minimum wage to disabled workers annually, the measure will definitely be cost saving. It would also help fill in thee 660 000 job vacancies available in the UK. In doing so, the policy change supported by Work and Pension Secretary Peter Hain assumes that providing support and assistance when disabled people return to work will create opportunities and transform lives by focusing on work and creating motivation, self-confidence and social development.

The main idea behind this change in attitude is to focus on what people can do instead of assessing what they can't do. While I totally agree with the concept as a way to empower disabled people, unfortunately, I believe that the nature of the assessment and the associated (lack of) incentives will lead to (another) failure.

As I suggest, a major problem is the nature of the assessment. According to Peter Hain, the assessment will focus on the way modern work is delivered through computers, mouse and keyboards instead of the usual "physical strain" criteria. Although the particular elements tested have been changed, the assessment still focuses on the physical nature of work. However, for 2006-07, £2 billion was paid for mental health complaints, as it has doubled over the past decade and now represent 40% of the total claims. The nature of these diseases is mostly intangible, almost ethereal in many cases. Benefits are paid to those suffering from depressive episodes, anxiety disorders, reaction to severe stress, malaise and fatigue, dizziness and giddiness. These disabled workers can probably use a computer, but the intangible nature of their disease will never be caught by any test based on the physical component of health.

In such a system, the major incentive perceived by the (non-)beneficiary is the refusal of their benefits claim, based on irrelevant criteria, and the non-recognition of their disease as real, although intangible, and impacting their lives. Indirectly, the incentive becomes the need to work, in order to survive economically. No matter how strong the support, how could this lead to the "motivation", "confidence" and "social development" promised by Mr. Hain and needed to go back to work? There is a lack of readily available incentive in this assumption, and there lies the failure. And we even don't take into account the consequences of this refusal on the healing process, which necessitates the recognition of disease as a key feature, and its potential for increasing future (and permanent) claims.

Considering these factors, I would propose a multi-step approach to the benefits policy, where the economies are realized not strictly from reducing admissibility, but from the gradual return to work of beneficiary in a realistic time frame agreed upon by the beneficiary, his physician and the civil servants, and thus providing realistic incentives to return to work : clear and realistic therapeutic goals, clear and realistic therapeutic targets and achievements, and clear and realistic economic benefits from gradually going back to work, as the healing process is going on and tailored to individual needs.

Supplier-induced demand : part 2

This is the second part of an essay I submitted on supplier-induced demand.

Studies on the impact of changes in remuneration schemes

Another method used by economists to support SID and reported by Labelle (Labelle, Stoddart et al. 1994) focuses on the impact of changes in methods of remuneration on utilisation. International comparisons also provide support for SID, as fee-for-services leads to increased expenditures as compared to capitation
(Gerdtham and Jönsson 2000). However, a major problem regarding interpretation in these contexts is the numerous concomitant factors which are not taken into account and could replace SID as the explanation for this change. Since the 1960s, we have seen an ever growing pharmaceutical, technological and sociological revolution. These concomitant changes in medical practice drive demand on their own (Gerdtham and Jönsson 2000), and could explain any increase in utilisation whenever they happen concomitantly with changes in the method of remuneration.

Statistical considerations

It is beyond the scope of this article to address in detail the statistical criticisms of individual studies, but they remain a matter of debate (Labelle, Stoddart et al. 1994). After 30 years of modelling, the absence of any consensus on both the concept of SID and its statistical backing is revealing of its intangible nature. Considering every element mentioned so far, it seems clear that SID is not sustainable as a concept. Moreover, the demonstration of the potential for "supplier-induce pregnancies" is revealing of the flaws of SID models and supporting statistical tools (Dranove and Wehner 1994).

SID in view of the asymmetry of information

The effect of asymmetry of information is another perspective from which researchers have studied SID to confirm it, as reported by Labelle (Labelle, Stoddart et al. 1994), and they are based on the assumption that doctors take advantage financially from their agency relationship with patients. However, from another perspective and refuting this assumption of SID models, it is known that availability of information to patients is a key driver of demand for use by the patient, while the quantity consumed is not modulated by the supplier once the patient has decided to use health services (Kenkel 1990).

In conclusion, the existence of SID is still debatable, but no matter if SID exists, or whatever its extent, there is no doubt from common sense that doctors respond to incentives. Rather than focusing on debating the best model to support SID, efforts should focus on researching how to best incentivise doctors in order to provide practical support for policy makers [(Hadley, Holahan et al. 1979) reported in (Labelle, Stoddart et al. 1994)], without necessarily focusing on financial gain. There is a lot more than money and leisure time trade-offs in the doctor-patient relationship.

References

(2007). "Oxford Advanced Learner's Dictionary." Retrieved 7th November 2007, 2007, from http://www.oup.com/oald-bin/web_getald7index1a.pl.

Calman, S. K. (2005). "Medical Professionalism." Retrieved 7th November 2007, from http://www.rcplondon.ac.uk/wp/medprof/medprof_prog_050506.asp#calman.

Carlsen, F. and J. Grytten (2000). "Consumer satisfaction and supplier induced demand." Journal of Health Economics 19(5): 731-753.

Dolan, P. and J. Olsen (2002). Distributing health care : economic and ethical issues, Oxford University Press.

Dranove, D. and P. Wehner (1994). "Physician induced demand for childbirth." Journal of Health Economics 13: 61-73.

Feldman, R. and F. Sloan (1988). Competition among physicians revisited. Competition in the health care sector : ten years later. W. Greenberg. Curham, Duke University Press.

Folland, S., A. Goodman, et al. (2007). The physician's practice. The economics of health and healthcare, Pearson Prentice Hall 313-330.

Gerdtham, U. and B. Jönsson (2000). International comparisons of health expenditure : theory, data and econometric analysis. Handbook of health economics, Elsevier science. 1: 12-53.

Grytten, J. and R. Sorensen (1995). "Supplier Inducement in a public health care system." Journal of Health Economics 14: 207-229.

Grytten, J. and R. Sorensen (2001). "Type of contract and supplier-induced demand for primary physicians in Norway." Journal of Health Economics 20(3): 379-393.

Hadley, J., J. Holahan, et al. (1979). "Can fee-for-service reimbursement coexist with demand creation?" Inquiry 16: 247-58.

Kenkel, D. (1990). "Consumer health information and the demand for medical care." The Review of Economics and Statistics 72(4): 587-595.

Labelle, R., G. Stoddart, et al. (1994). "A re-examination of the meaning and importance of supplier-induced demand." Journal of Health Economics 13: 347-368.

Richardson, J. and S. Peacock (2006). "Supplier-Induced demand : reconsidering the theories and new australian evidence." Applied Health Economics and Health Policy 5(2): 87-98.

Sorensen, R. and J. Grytten (1999). "Competition and supplier induced demand in a health care system with fixed fees." Health Economics 8: 497-508.

Staples.co.uk - Office supplies with FREE next day delivery

This work by
Stéphane Lemire is licensed under a
Creative Commons Attribution-Non-Commercial-Share Alike 2.0 UK: England & Wales License.

Supplier-Induced demand : part 1

Health Economics is a fascinating topic, but I just can’t understand the concepts and models from a clinical perspective. A good example of this difficulty is the theory of supplier-induced demand, and here I explore this hypothesis from a clinical perspective and in view of recent data not supporting this controversial concept. This is the first part of an essay I submitted for the applied microeconomics course, and I’ll publish the second part next week.

Drawing on evidence, discuss the proposition that doctors induce demand for health care

Supplier-induced demand (SID) as a theory of physician behaviour has been the source of abundant controversies in the field of health economics (Labelle, Stoddart et al. 1994). The main issue underlying SID is the dual role of the doctor as both agent to the patient and supplier of health services, in view of an asymmetry of information in the doctor-patient relationship (Folland, Goodman et al. 2007). This has led economists to ask if doctors use this agency relationship to their own financial advantage by recommending and providing health services that the patient would have refused if well informed (Dolan and Olsen 2002; Folland, Goodman et al. 2007). I will use this definition to analyze the literature relating to SID, using clinical insight and other relevant aspects not taken into account by most models, in order to broaden the perspective and nuance the proposition.

Roles of the doctor

"The aim of medicine is to assist in the process of healing. [...] Doctors do this by providing care, relieving suffering, promoting health, preventing illness and disease."
(Calman 2005). From this conception of the role of doctors, which incorporates crucial aspects of medical care and doctor's utility not assumed in most models, it seems less appealing to support SID.

I also wish to characterize the clinical decision making process as another nuance to SID. Clinicians rely on their clinical judgment, based on experience and knowledge, to derive a probable diagnosis. This process is bound by uncertainty, which is balanced by a proportionate amount of testing to reduce this uncertainty in order to make sound therapeutic suggestions. The quantity of services required will vary between clinicians and will very often depend on the patient's ability to communicate information about his condition. This might be a substrate for increasing the utilisation of health services, but it is then the essence of the doctor's roles and shouldn't be called inducement as such in view of the actual definition used.

Empirical evidence against SID

Many studies from Norway [(Grytten and Sorensen 1995) (Sorensen and Grytten 1999)
(Grytten and Sorensen 2001)] and elsewhere have contributed to the literature on the non-existence of SID. Most of these more recent studies use non-aggregated data as opposed to previous studies, and this is more relevant to the study of physician behaviour considering the specifications of the SID model.

Studies on the effect of physician supply

Labelle (Labelle, Stoddart et al. 1994) has reviewed the literature on SID extensively, and one method to study SID is to analyse the effect of physician supply.

First, supply can be correlated to use of health services, but a major problem is the assumption that demand will necessarily shift down after an increase in supply, resulting in lower price. This situation does not hold in the context of excess demand. Obviously, in such a context, supply will be limited, and the optimal utilisation of services to fulfil inelastic needs unavailable. When supply of doctor increases in this context, the observed increase in utilisation is by no mean induced, but is in fact a response to prior unmet excess demand. Observations in Québec's public health care system support this explanation: a third of patients don't have a GP, waiting times are long for any specialist care, and health care professionals feel the pressure from unmet demand. It is predicted that the announced increase in medical school admissions in response to excess demand will lead to an increase in demand, but not because of inducement. As an assumption, many SID models do not recognize excess demand, and a more cautious approach seems warranted. Also of interest from this perspective is the positive impact of improved physician supply on customer satisfaction as a proxy for patient utility (Carlsen and Grytten 2000). The detection of any sign of inducement would condemn such desirable increases under conditions of excess demand, and SID is thus unsatisfactory as an acceptable model.

Second, studies on the impact of supply on physician utility assume that income is the only source of utility, but there are many powerful utility determinants for the average physician : patient satisfaction, the sense of duty towards patients and society, relieving suffering, professional achievement. They all have a profound impact on the quantity of health care delivery and take part in the trade-offs of daily practice, and not taking them into account alters the relevance of SID models. Another source of (dis-)utility in this regard is the litigation risks associated with medicine. If detrimental outcomes is important in refining the concept of SID (Labelle, Stoddart et al. 1994), and considering that most people and doctors are risk averse, doctors wouldn't risk detrimental outcomes in patients under their care for the sake of increasing demand. Interestingly, they would be more risk averse the more greedy and self-interested they are, because of the higher probability of an unfavourable judgment if they were to appear in court for unjustified interventions gone bad. Again, basic assumptions of the inducement models are inaccurate, and invalidate any conclusions they draw.

Third, as an alternative to SID in explaining any increase in fees following increased supply, a model taking into account the capacity to increase the quality of health services in the context of increased competition can justify higher price [(Feldman and Sloan 1988) as reported in (Folland, Goodman et al. 2007)]. Consequently, inducement is not a necessary explanation for the response to increases in supply.

References

(2007). "Oxford Advanced Learner's Dictionary." Retrieved 7th November 2007, 2007, from http://www.oup.com/oald-bin/web_getald7index1a.pl.

Calman, S. K. (2005). "Medical Professionalism." Retrieved 7th November 2007, from http://www.rcplondon.ac.uk/wp/medprof/medprof_prog_050506.asp#calman.

Carlsen, F. and J. Grytten (2000). "Consumer satisfaction and supplier induced demand." Journal of Health Economics
19(5): 731-753.

Dolan, P. and J. Olsen (2002). Distributing health care : economic and ethical issues, Oxford University Press.

Dranove, D. and P. Wehner (1994). "Physician induced demand for childbirth." Journal of Health Economics
13: 61-73.

Feldman, R. and F. Sloan (1988). Competition among physicians revisited. Competition in the health care sector : ten years later. W. Greenberg. Curham, Duke University Press.

Folland, S., A. Goodman, et al. (2007). The physician's practice. The economics of health and healthcare, Pearson Prentice Hall

313-330.

Gerdtham, U. and B. Jönsson (2000). International comparisons of health expenditure : theory, data and econometric analysis. Handbook of health economics, Elsevier science. 1: 12-53.

Grytten, J. and R. Sorensen (1995). "Supplier Inducement in a public health care system." Journal of Health Economics
14: 207-229.

Grytten, J. and R. Sorensen (2001). "Type of contract and supplier-induced demand for primary physicians in Norway." Journal of Health Economics
20(3): 379-393.

Hadley, J., J. Holahan, et al. (1979). "Can fee-for-service reimbursement coexist with demand creation?" Inquiry
16: 247-58.

Kenkel, D. (1990). "Consumer health information and the demand for medical care." The Review of Economics and Statistics
72(4): 587-595.

Labelle, R., G. Stoddart, et al. (1994). "A re-examination of the meaning and importance of supplier-induced demand." Journal of Health Economics
13: 347-368.

Richardson, J. and S. Peacock (2006). "Supplier-Induced demand : reconsidering the theories and new australian evidence." Applied Health Economics and Health Policy
5(2): 87-98.

Sorensen, R. and J. Grytten (1999). "Competition and supplier induced demand in a health care system with fixed fees." Health Economics
8: 497-508.

=====================================

For those who would like to see my notes, from now on, I'll post them on webCT in the IHM exchange section we created. Sorry if you are from outside imperial!

Staples.co.uk - Office supplies with FREE next day delivery


This work by
Stéphane Lemire is licensed under a
Creative Commons Attribution-Non-Commercial-Share Alike 2.0 UK: England & Wales License.

Corporate Social Responsibility : genuine altruism?

Last week we were asked to discuss the extent to which corporations pursue Corporate Social Responsibility strategies for primarily their own benefit. It was a useful exercise for practicing my writing abilities, but also the start of a reflexion. I'm glad to share in this blog. It is a short introduction, and the ideas could be explored further...

=======================

Corporate Social responsibility (CSR), according to Mallen Baker, “is about how companies manage the business processes to produce an overall positive impact on society”. CPR may be seen as an exclusively genuine form of business altruism, a mean of giving back to society. However, as most businesses are producers of goods or services aiming for profit maximization, spending money on charities or social development of communities wouldn't make sense to most shareholders. Shareholders objections are tempered by the direct benefits the company derives from philanthropic and socially responsible activities to a major extent, and 3 key issues will be raised here to support that.

First, most charitable donations are subject to tax exemptions. As donations may represent millions of dollars, tax savings for the company can be substantial. Some companies will not make such donations if, for various reasons, they will not be eligible to tax exemption. By way of illustration, Warren Buffett mentions this in the 1981 annual report[1] of Berkshire Hathaway. He says the company will not deliver its donations program during years when they won't result in a tax exemption. Hence, it is clear that the main reason why they create such a program is for the company's own benefit.

Second, social responsibility may increase brand awareness and recognition on different fronts. This can be illustrated using Medtronic, a world leader in medical technology, as an example. It organized the Medtronic Global Heroes, a marathon for patients with medical devices. Such an event, sponsored by the company, signals and support the company's mission : “Alleviating pain. Restoring health. Extending life.” and is highly publicized in media. This gives visibility to the company, and it is certainly in the company's best interest to do so.

Finally, CSR can contribute to business performance or competitiveness. For example, when a company reviews its business processes to improve its energy efficiency to reduce it's carbon emissions and act as a good corporate citizen, it gains directly from these measures. It directly impacts the company as the energy bill is reduced, and most companies will do this only when the marginal benefits exceed the marginal costs.

In conclusion, corporations pursue CSR strategies for primarily their own benefit. The tax exemptions associated with donations to charities, the visibility they gain from sponsoring social and community events, and the improvements they derive from improved performance are three areas where it can be shown. Hopefuly, it does not exclude any genuine altruism...

[1] From the french translation of “The essays of Warren Buffett : lesson for Corporate America” by Lawrence Cunningham

Staples.co.uk - Office supplies with FREE next day delivery

This work by
Stéphane Lemire is licensed under a
Creative Commons Attribution-Non-Commercial-Share Alike 2.0 UK: England & Wales License.