Forgotten Consumers: The History of Medicine as a Marketplace

| January 31, 2010

The health system is yearning to be a freer market. 

The history of modern health begins with medical care as a freely available ‘consumer good’ that was regulated by a royal decree. Now we have come full circle. The system is straining under its own weight and lack of flexibility.

Consumers will continue to subvert the shackles of paternalism and prove the market-skeptics wrong. If we hope to prevent health from absorbing our GDP, we must be open to innovation.

The history of medical exceptionalism began in the Anglo-Saxon world when Henry VIII, King of England, granted a charter to the London College of Physicians in 1518. With this affirmation, this early incarnation of the medical fraternity was able to disenfranchise apothecaries (pharmacists of old) who were competing for their business. For the next 100 years the apothecaries fought to be recognised as genuine healthcare practitioners. (See this article for a nice exposition of a similar evolution of medicine in 19th and 20th century America).                                                    

How this ‘division’ affected the ordinary citizen I don´t know. One can only guess that the arguments used to support this royal change were similar to the medical fraternity´s mantra today that ‘quality care begins and ends with us’ (don’t trust the non-doctors).
 
Ironcially, pharmacists are still fighting for more ‘recognition’ and patients (or consumers if you endorse market logic) are still disenfranchised by the lack of competition. For example, we won’t allow pharmacists to give vaccinations in Australia. Therefore, what could be a 5 minute trip to a drug-store for a $10 jab is usually a one hour wait and a $50 bill.
Since the formal division of doctors, pharmacists and grocers 500 years ago we have witnessed ongoing turf wars and are now witnessing a reemergence of doctor/pharmacy/supermarket partnerships. Pharmacists separated from the Grocers Company in 1617, which may have helped them regain credibility as health practitioners. But now, in order to make pharmacy more accessible, many countries allow pharmacies to be just another part of the super-market.

That’s what we as consumers want. We seek medicine and pharmaceuticals in much the same way as we buy groceries. We expect service, expertise and quality. But while grocers have evolved from boutique spice sellers into large efficient and intricate machines, medicine continues to be a largely disparate affair.

 
Medicine has large barriers to market entry and exit which reduces competition and increases costs. While posturing to care for the patient, medicine cares little for the consumer. Consider that you can fairly easily estimate the cost of catering for a 3-day seminar but generally have little idea what a 3-day stay in hospital is likely to cost. Most doctors would struggle to tell you approximate costs for some medical proceedures.

The effect of this patient/consumer bipolarity is that while we arguably have quality in health care, we lack the efficiency and value-for-money of other modern industries. I believe we need a little more concern for the market consumer.

 
Many contemporaries find the language of consumerism disturbing when applied to the doctor-patient relationship. Yet the economic basics of any service-industry or market are the same. By ignoring these basics, we risk economic failure in health care. Unfortunately, most of us think, without good reason, that the doctor-patient and general health culture is unique and should not be subject to the same market forces we expect elsewhere.
 
Doctors are often the first ones to argue their uniqueness. But it is a very self-serving argument in my view (I say this as a doctor-in-training). Medical specialists are particularly adept at manipulating regulation to preserve their market share – having done so for centuries now. 

Most medical and surgical specialties date from 100-200 years ago. There are various theories about how specialties emerged. One theory is that as knowledge of organ-specific pathology accelerated in the late 18th century, so did the need to dedicate ones’ practice to a single organ. Thus, for example, the Ophthalmological Society of the United Kingdom was founded in 1880. Urbanisation and the ability to concentrate large groups of patients into one service type was another factor. The first eye hospital, for example, is said to have opened around 1804 in England.
 

This specialisation may have been exactly what medicine needed, and still needs in some form, to enhance unique knowledge and skills. But in the modern day, many specialist services could easily be performed by a variety of lesser qualified (and lesser paid) professionals.
 
Worldwide, the trend has been for all doctors to resist the presence of ‘lesser’ technicians. Their typical claim is that quality and safety will be compromised by the presence of these upstarts. There’s rarely any evidence to prove this. In fact, many specialists are happy to use non-medical professionals and technicians to do their work when it helps them turn a bigger profit. For example, many ophthalmologists use numerous technicians, trained in their surgeries, to do much of their work and increase throughput. But only one person walks away with most of the money as only the opthalmologist can make government or insurance claims for their work. Everyone else is peripheral.

It is interesting to note that general practice, or primary care, is still regarded as a lesser form of medicine by my colleagues (even if we no longer explicitly say so). This is despite the clear benefits primary care has given our health system and consumers. Indeed,  only recently were general practitioners recognised as specialists in their own right. General practice continues to struggle to attract interest from medical graduates because it does not offer the well-protected income streams specialists have created for themselves. 

Recognising the history and characteristics of our health system structure, I think it is obvious that it is an anathema to health innovation and the real cause of our current woes.

The simple ‘market-reality’ today is that if a new group of health service providers wishes to offer a niche service, they can’t simply register a business and start to sell as in any other industry. They must overcome significant barriers to enter the market. For the past year, the government has been struggling to pass legislation to allow nurse practitioners to operate as health care providers independent of doctors. The Australian Medical Association continues to claim that this is against the best interest of patients despite have little evidence to support this view. In fact, nurse practitioners have been a boon for many other countries. Doctors continue to be the exception.

 
Expanding and diversifying the health professionals in our market is just one aspect of creating better medical service through innovation and competition. In neoclassical economics, a perfectly competitive market has several distinguishing characteristics including; infinite supply and demand, zero entry barriers to market and no exit barriers, perfect information for all participants, costless transactions, similar product availability and a desire to profit. In practice, if we want to allow health to evolve, innovate and improve, we would not only allow more health professionals with diverse skill sets to treat patients, we would radically increase the information we give consumers and the number of providers and options for treatment.

I argue that this is what consumers are seeking to do already. They want more information. They want to be able to quickly decide where they go for what treatment, and they want to be able to change their mind quickly. We doctors, and the governments we have in our pockets, are preventing the consumer from getting what they truly desire. We see no need to tell consumers what we will charge. We give them few options. We are the barriers to evolution and efficiency because we believe, with little evidence and 500 years of a superiority complex, that only we can truly provide good health care.

 
No doubt, many readers will point to perceived market failure in the US health system or personal experiences that go against the liberalisation of health system regulations. In practice, however, we all behave as consumers when it comes to health care and the US health system is arguably less free-market than our own. These are themes I hope to explore in a subsequent post.

 
 
 
Gabriel James is a medical student and director of health technology startup company PeriAqua. He has a background in biotech research and development, health and youth leadership education, aid projects and pharmaceuticals. His long-term goal is to encourage novel approaches to health care using the latest technology and management concepts. He previously blogged as Future Health Analyst (www.aushealth.wordpress.com).

 

 

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