Japanese housing, Doctors, and what happens when you dispose of something valuable

There was a very interesting Freakonomics podcast I listened to today, discussing the Japanese housing market.

In Japan, it is fairly routine for houses to have a half-life of 30 years, and when a house is purchased, the owner often demolishes the old home and builds a new one.  There are some historical reasons for this (e.g., many homes needed to be rebuilt after bombings in World War 2, high frequency of earthquakes), but regardless of the reason, Japan is unique in that homes are treated as a disposable property.  Therefore, unlike the United States or other wealthy nations, Japanese homes depreciate in value after they are built.

This leads to a huge drag on the economy, and has contributed to economic stagnation in Japan over the past 20 years.  The economics of this are pretty simple- when you take something that has a high intrinsic value, but treat it like it is disposable, you are wasting money.  The money that is being spent rebuilding perfectly fine homes is NOT being used elsewhere.  There is an opportunity-cost loss.

This is not true in the United States, and it is something we do better than Japan.  When people buy a home in the United States, they maintain it.  They go to Home Depot and improve it.  The home gains in value.  They realize it would be frankly insane to bulldoze something worth a million dollars or more.

Japan was able to do fine when companies like Toyota were thriving, but they were doing so in SPITE of their cavalier attitude to disposing of homes, and once the rest of economy was stagnating, those losses were hard to recover.

Bottom line: it is not in a society's best interest to treat something of real intrinsic value as disposable.

This reminds me of a consulting problem one of my MBA friends was telling me about, working for the United States Army.  He was consulted to figure to calculate "how much is one infantry man overseas worth?"  This was important for overseas missions, because the support costs for a soldier are very expensive- building bases, you need things like cooks, child care for families, gas to ship everyone and their equipment overseas, etc.  I think it worked out to about $1 million per infantryman, which was a sufficient justification for the Army.  If something is worth $1 million, it's worth spending money to build an appropriate support structure.

So .... listening to this podcast, and thinking about the question about infantryman, it made me think "how much is a physician worth?"

It's very clear to me that the societal trend is "not very much."  That's a mistake we are currently making in the United States, treating physicians like disposable resources, similar to the way Japan treats homes, and it's a very expensive mistake.  Some examples to that come to mind:

1. Valuing MBAs more than MDs.  If you look at the leadership of most hospital organizations, they have MBAs in the leadership positions, and they give the main decision-making capacity to the MBAs.  I love MBAs, and they have their role, but when non-physicians make health care decisions, they tend to neglect important patient care issues.  I'd be ok with, and support, perhaps a 60%:40% split in MD-to-MBA leadership in health care.  I don't know what the actual numbers are, but I'd guess that the current split if probably closer to 95% MBAs or other administrators, and a very small amount of MD influence.

Same things are true for most national health care panels.  For things like the Affordable Care Act, physician input in minimal.  There may be a token physician on a panel of 15 people, but most of the decision-making capacity goes to people representing pharma, the hospital administrators, electronic health records, or policy makers.

2. Treating MDs as employee worker bees, rather than as valued talent.  A colleague of mine relayed a story where the head physician of a large physician group was mediating a conflict between one his best physicians and their practice administrator, and the head physician commented that the practice administrator was the "person who did the most for the practice."  The physician predictably left the practice, and the head physician did not realize how offensive it was to de-value the work being done by the physicians in the group.  He viewed the administrator as the person who "got stuff done", and the physicians were merely the worker bees churning out widgets.  As a patient, do you want to be cared for by an organization who views you as a widget?  Unfortunately, these stories are common.

Similarly, one of my physician colleagues belongs to a Rotary organization, and has noted how it's a wonderful opportunity for thought leaders to gather, which gives them an opportunity to think about big picture issues, develop a vision, and implement tactics as their businesses evolve.  He noted that there are thought leaders from most industries other than medicine, but not that many physicians, and in particular very few employed physicians.   The physicians who belong are private-practice owners, so they are coming in the capacity as business owners, rather than as physicians per se.

Do you see what is happening?

In industries other than medicine, it is recognized that the people with the most education and the most experience also bring value to their organizations when they are given the freedom to think about the big picture, mingle with like-minded colleagues, and develop as human beings.

Current forces in place, however, are treating physicians like interchangeable parts, whose role is mainly to push buttons.  I don't mean that metaphorically- physicians are literally being paid to push buttons.  There are requirements from CMS (the Centers for Medicare and Medicaid Services, which is the Voldemort behind all negative changes in healthcare) that physicians need to push buttons that verify they are using their Electronic Health Record in a "meaningful way."  These are called "Meaningful Use" requirements.

It's time consuming, exhausting, and soul sucking.

My colleague Brian White has put it well- "Medicine, in its purest form, is a closed door with a patient and doctor talking to one another."  Anything that gets in the way ..... well, it gets in the way.

So, how much is a doctor worth?

I don't know.  I'd like to think that we have value, in many ways, comparable to that of an infantryman, which is $1 million.  It may actually be much higher ....

As a thought experiment- take someone you knew growing up who was in the top 5% of your high school class.  Have them go to a good college, and have them spend 4 years in a hard major, with challenging elective classes, working hard enough to get a GPA of 3.6 or higher, and using their discretionary time volunteering, doing research, and studying for the MCAT.

Then have them spend ANOTHER four years taking harder classes, in a pool of similarly competitive people, with their entire lives dedicated to medical school.  Add in the cost of not earning any money (.... and keep in mind these were very good students, so they'd typically get good jobs out of college), not saving for retirement, and all the opportunity cost associated with them not entering the work force.  Add in the cost to their social life- delaying marriage, having kids.  THEN add in about $200,000 of debt, assuming they don't already have debt from college.

Then add in ANOTHER 3-6 years of residency training.  Factor in another 3-6 years of opportunity cost loss in delay in entering the work force, the societal cost in having a very smart and talented subset of people delaying family/kids/planting roots, and the interest on the $200,000 of debt they are not yet able to pay off.  Take into account the opportunity cost loss that, had they gone into a field other than medicine, this is when they would have been rising through the ranks, getting promoted, and developing professionally.

Then add in ANOTHER year of fellowship training for the most talented and ambitious subset of these physicians.

At this point- how much value does that person have?  One way to think about it- a schoolteacher, nurse, and physical therapist all have lots of value, right?  At this point, you have a training time that is equal to all three of those professions combined, except that you are starting with a group that had a more stringent set of baseline requirements as an entry point.

All of that .... and that's before they even start their career.

So, it wise to treat that as a disposable commodity?  What is the cost to society when, for example, a physician decides to retire early because they are frustrated with compliance with CMS?  What is the cost to an organization when a physician walks way from their practice because they feel undervalued?  What is the cost to you as a patient when someone chooses a career in finance instead of medicine?

The United States simply can't afford the cost of treating physicians the way the Japanese treat homes.  Physicians have value, and systems built on undervaluing things with true intrinsic value cannot sustain the opportunity-cost loss in the long term.  It's like taking a beautiful 12-year-old home and bulldozing it because you want a new layout.  It's better to focus on upkeep, improvements, and appreciating what you have.

In search of a better way:

We here at Lake Washington Sports & Spine think that there is a better way.  All of the societal forces that are in place that devalue the importance of a physician- that's simply not the way we do business.

Everything we do here is built from our vision- "helping our patients be the best possible version of themselves every day, using the musculoskeletal system as a guide."

Why do we keep our billing and coding person Natalie in house?  Because it provides a better experience for the patient.

Why do provide information about exercise on our blog?  Because it provides a better experience for the patient.

We value our physicians, not just because we are the owners, but because we believe that if we value EVERYONE on the team, it allows us to provide a better experience for the patient.