Customization

You are currently browsing articles tagged Customization.

Custom-made vs. ready-to-wear treatments

June 3, 2008 in Physician Compensation, Supply of Medical Services | Permalink

When you are sick and need a doctor, you need hope that you are given the best care possible. Most people assume that doctors will tailor their treatments to the individual patient needs. However, a paper by Frank and Zeckhauser (JHE 2007) explain that this may not be the case. The authors claim that there are four costs which may preclude physicians customizing treatments to individual patients.

  • Communication costs: Whenever a physician prescribes a treatment outside of standard protocol, they will have to explain why they are doing this to the patient and this takes time. With patients armed with more information from direct-to-consumer advertising and the internet, communication costs have increased over time.
  • Cognition costs: The authors claim that using brain power (cognition) has costs and there may be increasing marginal costs of cognition use. Thus, physicians may use heuristics to simplify the decision-making process.
  • Coordination costs: As more and more physicians specialize, communication between physicians is increasingly important. Using standardized, less customized medical treatments makes communication between physicians regarding patient treatment much easier.
  • Capability costs: Some doctors are trained to perform certain techniques. If a superior technique is developed, the physician may still decide to use the “old” technique since they have mastered the “old” technique and do not know how to preform the new, superior technique.

It is likely that customization of treatment varies significantly by treatment. For instance, in my “Operating on Commission” paper I find significant differences in surgery rates based on how physicians are compensated by insurance companies. Since this is a significant medical and financial decision by the doctor, one would expect there to be more customization than in other areas, since the benefits to surgery are so large relative to the costs outlined above.

The authors ennumerate how customization will vary accross patients as follows:

  1. little is known about a patient and their responsiveness to various treatments
  2. treatment is expected to be short-lived
  3. there is little difference in the impact of different treatments on patients

On the other hand, Grand and Zeckhauser look at whether or not there is “norm-following behavior” in the length of office visits and physician prescribing behavior. They use data from the 2004 NAMCS and the Quality Improvement in Depression study. They find that physicians do customize treatment more for chronically ill patients than for patients with acute illnesses. Physicians do tend to spend more time in office visits with new patients, but the time spent with the patients does not vary by illness type or severity. Thus, the administrative and communication costs that new patients impose and not medical necessity seem to be dictating how the length of a visit varies. These results are similar to the ones found in Glied and Zivin (2002).

Thus, the authors conclude that some customization of prescribing practices and prescribing behavior does occur, but this behavior is not based on clinical factors.

Tags: , ,

Custom-made versus ready-to-wear treatment

May 29, 2008 in Pharmaceuticals, Physician Compensation, Supply of Medical Services | Permalink

Many patients have an idealized view that physicians customize their treatments for each individual patient.  For instance, do physicians tailor prescription dosage based on individual characteristics and responses over time, or will they simple prescribe the standard dosage?

A paper by Frank and Zeckhuaser (JHE 2007) find that norm-following behavior (rather than patient-by-patient customization) is very prevalent.  The authors claim that there are 4 reasons why a physician would strictly adhere to a professional norm rather than customizing their treatments to maximize the quality of care for each individual patient.

  1. Communication costs. In order to prescribe treatment outside of the norm, the physician must communicate their reasons for doing this to the patient.  If patients have preconceived notions of how they want to be treated, physicians may have to expend significant effort to convince the patient that this individualized treatment is the best way to proceed.
  2. Cognition costs. As every person knows, exerting mental effort is costly.  Physicians can cut down on the cost of diagnosis by using heuristics.  These shortcuts may not be optimal for every patient, but they generally “do a reasonable job for a broad array of cases” and also cut down on the physicians mental computing costs.
  3. Coordination costs.  Physicians often have to work with other physicians.  The more physicians customize their treatment, the more difficult it is to communicate this alteration in care levels with specialists and thus more difficult to coordinate care.
  4. Capability costs.  Physicians are trained in certain treatments.  If a new, better treatment comes along, the physician has a choice of either 1) doing the old treatment, 2) learning the new treatment poorly and performing the new treatment, or 3) learning the new treatment well and performing the new treatment.  Choice (3) may be optimal from the patient’s point of view, but for the physician it may involve significant fixed costs involved in acquiring the human capital necessary to preform the new procedure.  If the physician decides not to incur the cost to learn the new technique well, it may in fact be optimal to choose option (1) over option (2) and thus old techniques will persist.

While these four costs will push physicians towards following norms, superior patient outcomes may compel doctors to customize their care.

Results

Frank and Zeckhuaser use data from the 2004 NAMCS to determine whether or not physicians customize the length of the patient visit or prescribing behavior.  The authors find that customization in prescribing behavior occurs most frequently for patients with chronic conditions.  This is likely because altering the “standard” treatment has more benefit for ‘repeat-visit’ patients than those with simply an acute illness.  However, race, gender, number of physician visits and insurance type do not affect prescribing behavior.

Regarding length of the office visit, the most important factor is whether or not the patient is a new patient.  Individuals who were self-pay had shorter visits while those with had Medicare insurance had longer visits, but these results were fairly small in magnitude.  Twenty-eight percent of the differences in the length of an office visit was due to physician specific factors.

Overall, the evidence shows that physicians often follow norms rather than customize care.  Also, it seems that the manner in which physicians are paid has no bearing on how they treat patients.  However, this is likely due to the fact that 1) it is very difficult to customize visit length especially when physicians are dealing with eleven managed care contracts on average [see other evidence in "Time Allocation" post on Tai-Seale et al. (2007) or the "Doctors Behave" post on Glied and Zivin (2002)], and 2) physicians do not receive compensation for pharmaceuticals and thus have no financial incentive to tailor treatment to patients based on their individual insurance.

My “Operating on Commission” paper does find that physicians tailor surgery treatment based on how they are compensated, but this is likely because 1) these are high margin procedures where it is worth the physicians time to find out how they are being paid, and 2) unlike pharmaceuticals, the surgeon is the one who receives the compensation directly.

Tags: , , , ,