Nov-Dec 2007 Table of Contents

OPINION

Baumol's Disease



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Health care in general may suffer from an incurable disease. (Are you surprised?)

Fam Pract Manag. 2007 Nov-Dec;14(10):10-11.

Not a day goes by in my practice that I do not encounter Baumol's disease. This is not some obscure ailment you might find in a medical textbook; rather, it is an economic malady. Baumol's cost disease, first described by economists William J. Baumol and William G. Bowen in 1966, affects labor-intensive industries that are relatively untouched by the technological innovations that increase productivity in other sectors.1 Baumol's favorite example was the production of a Mozart string quartet; it still takes four musicians as much time to play a string quartet as it did in Mozart's time. Similarly, a college professor giving a one-hour PowerPoint lecture does not convey information to his students appreciably faster than a lecturer from 50 years earlier using a slide projector or a chalkboard. A waiter in a restaurant serves patrons no faster than a waiter from a century ago. And much of the work done by health care professionals is similarly “afflicted” with Baumol's disease.

In contrast, the productivity of automobile manufacturing, for instance, has grown tremendously over the decades thanks to advances in technology. According to the Bureau of Labor Statistics, productivity in the industry increased by 66 percent from 1995 to 2005.2

One pair of hands, one pair of eyes

In 1950, the average member of the American Academy of General Practice saw 25 patients per day in the office.3 That is about the number of patients today's average family physician sees in a day. The underlying factors of “production,” namely, taking a history and performing a physical examination, have not been affected by technical progress. Likewise, a half-century of tremendous advances in the science and technology of medicine has done essentially nothing to increase the speed with which a nurse can change a bandage. The reason is that the labor or service in question is the product, as Jay R. Jackson, MD, notes: “The distressing trend about medicine today is that cognitive skills learned over many years, with rapid pattern recognition and astute clinical decision making, are disproportionately underproductive by comparison to the rest of the economy. … Medicine, for all the discussion about innovation and redesign, still remains a profession – one patient, one pair of hands, and one pair of eyes at a time.”4

The “virulence” of Baumol's cost disease obviously varies with how technically or procedurally oriented a medical specialty is. A radiologist, for example, might significantly increase his productivity with a teleradiology system that precludes the need to travel between hospitals or by the acquisition of a faster computed tomography scanner. A family physician, in contrast, will complete a routine physical no faster with an electronic stethoscope or a later model otoscope. The inherency of human interaction in primary care medicine renders the practice particularly susceptible to Baumol's disease.

Is cost increase inevitable?

The causes of the rise of health care costs are numerous and complex, and we should avoid the temptation to look for a single, simple explanation. Nevertheless, the fact that primary care productivity is refractory to advances in technology may partly explain why recent attempts to contain health care costs through the consolidation of physician practices into larger groups or through managed care schemes have failed to achieve their goal. This may also serve as a warning not to raise our hopes too high that the current crop of health care cost palliatives such as pay for performance, nationalized health care or consumer-driven health care will work any better. The unpleasant fact is that rising health care costs may be, in the words of Baumol himself, “an inevitable and ineradicable part of a developed economy. The attempt to do anything about it may be as foolhardy as it is impossible.”5

The outlook is not entirely without hope. Electronic health records, if properly implemented, may offer a significant, if not revolutionary, improvement in health care productivity. Other “treatments” for Baumol's disease, such as employing midlevel providers who are paid a fraction of a doctor's income to supplement or substitute for doctors in various settings, may be less palatable to physicians. Limiting the number of problems addressed in a given office visit or the amount of time allotted for a given office visit would almost certainly result in a greater number of visits per unit time per physician, but this would produce only the illusion of increased efficiency. Diagnoses would be delayed, and the number of office visits would increase to offset the abbreviation of patient encounters; both of these results would tend to increase costs. The harsh reality may be that there is no ceiling on how high health care expenditures can climb other than the ability and willingness of government, private insurance and individuals to pay for it.

All of the remedies proposed to stem the rising costs of health care are predicated on an assumption that may not be true: that there is some sort of solution. While hopefully this is the case, it is difficult to imagine a technological advance, managerial reorganization or change in policy that would allow doctors to provide primary care that is humane and scientifically valid much faster than it is provided now or, for that matter, was provided a century ago. The fact that the practice of medicine seems to be somewhat ossified, changing only grudgingly in the face of the industrial revolution and information age that have transformed other areas of human endeavor, is at once distressing and reassuring. It's distressing in that the continual increase in health care costs seems to be so intractable, reassuring in that the practice of medicine remains an intrinsically human art and not a mere business. Barring some unforeseen cure for Baumol's disease, this dichotomy of distress and reassurance, as well as rising health care costs, may be with us indefinitely.

Dr. Newbell is a family physician in private practice in Hazel Green, Ala. Author disclosure: nothing to disclose.

Send comments to fpmedit@aafp.org.

1. Heilbrun J. Baumol's cost disease. In: R Towse, ed. A Handbook of Cultural Economics. Cheltenham, Glostershire, UK: Edward Elgar Publishing Ltd; 2003:91–101.

2. US Department of Labor. Bureau of Labor Statistics data. Available at http://data.bls.gov/cgi-bin/surveymost?ip. Accessed Oct. 3, 2007.

3. Cahal MF. Report from the managing publisher. GP. July 1950:7.

4. Jackson JR. Is technology displacing the art of medicine? Physician Exec. March/April2004:46–50.

5. Baumol WJ. Do health care costs matter? New Republic. Nov. 22, 1993:16–18.

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