Hawkins v. McGee and the Costs of Healthcare

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7 Responses

  1. Patrick says:

    Wouldn’t this just result in doctors refusing to treat the patients most in need of medical care?

  2. jimbino says:

    A big problem in charging/paying by outcome is that the medical consumer has no idea of what is a proper outcome. Some things are easy: no iatrogenic/nosocomial infection.

    But what about “Small incision, minimal scarring, pain-free, restored mobility, etc” expectations?

  3. Civ Pro King says:

    “We pay for services rather than outcomes. This creates an incentive for providers to create a system structured around providing expensive procedures rather than providing positive health outcomes.” Not neccesarily so, but if this is indeed the case, it is because medical doctors are more incentivized to practice defensive medicine… hence more procedures… et cetera.

    By the way, have you been to the doctor recently?

  4. Ken says:

    I think there is a general presumption in the fulfillment of a contract that *if* the contractor has not made an absurd promise, then his risk is that he has underestimated his cost to deliver. When I was in the software business, I always knew I could produce the programs the customer wanted, or I would not even try to negotiate a price. I had to estimate my cost, add a margin of safety for unexpected problems, add a margin for overhead and profit, and hope that my resultant price would be low enough to win me the work. And if I had underestimated? Then I simply had to bite the bullet and keep my programmers working until they finished.

    Medicine doesn’t fit that model. The doctor can’t keep his promise to deliver the cure simply by overrunning his buget, working longer or harder. There is an element of chance that is *inseparable* from the nature of the work. In that regard, it’s very much like sports. The law of large numbers ensures that performers who work harder have more success *on average,* but no individual outcome is guaranteed to follow the law of large numbers.

    BTW, a side observation on the “absurd promise” in my first sentence–a patient who has unrealistic expectations is just as silly as a software customer who has unrealistic expectations. Sillier, in fact, because his medical expectations may not be fulfillable, while my customer’s expectations were merely more expensive than he realized.

  5. Frank says:

    You may find these articles of interest:

    Haavi Morreim, “High-Deductible Health Plans: New Twists on Old Challenges from Tort and Contract,” 59 VAND. 1. REv. 1207, 1249-50 (2006).


    Mark A. Hall, “The Legal and Historical Foundations of Patients as Medical Consumers,” at

  6. Nate Oman says:

    Patrick: This contract would result in a diminished market for a lot of services. This, however, is the point. If the agency cost and incentive story about health care costs is right, then there are a lot of very expensive procedures that we are performing right now that aren’t providing much in the way of medical benefits. A big market in such services is not such a grand thing. What a fee for outcome contract would do is to price medical effectiveness. The more effective the treatment, then lower would be the price. The price mechanism would then help to allocate health care spending more efficiently.

  7. medlaw says:

    I think what you are discussing in a roundabout way is holistic medicine. By that term I do not mean alternative medicine but, rather, treating the whole person to hopefully foster greater health and wellness that prevents future illness. The thought being that this method is cheaper than treating illness on an ad hoc basis is most health care providers currently due in the American system.