Opportunities and imperatives

This is another installment in an on-going discussion about the Canadian health care system. An index of all the posts from both Bound by Gravity and this blog can be found here.

In Andrew's post Public/Private Health Care, he wrote:

... a private health company that provided consistently poor service would quickly gain a bad reputation, lose customers (patients), and go out of business. In our current system we have no such method of showing our displeasure - we're stuck with the government's service whether we like it or not.

I can't resist this. A word to the wise, Andrew. Don't talk about losing patients in this context. It tends to evoke a different image than the one you may have intended.

But seriously, folks. When you suggest that a private company that provided poor service would lose customers, you're making the implicit assumption that those customers have somewhere else to go. The theory is that if a private company doesn't keep its customers satisfied, it's creating an opportunity for someone else to come into the market. But while it's true that there's an opportunity, there's no imperative.

Once upon a time there was a software company that offered innovative products at reasonable prices and I was once a satisfied customer. Over the years it was quite successful and became a dominating force in its market niches. Along the way it learned the trick of buying up competitors and achieving a virtual monopoly in some of the niches it occupies.

In more recent years it's shown all the signs of the arrogance that develops when a monopoly is in private hands. Some of its products require regular updates to the data on which they rely. The company has been able to take advantage of this to bundle product upgrades with the data and to foist an unpopular subscription pricing model on its customers. So now customers are upgrading whether they need to or not and paying for the privilege. At the same time the company is gaining a reputation for buggy releases and slow response with bug fixes. It becomes the customer's problem rather than the company's, though, because free technical support is history. That, too, is available only on a subscription basis unless you get really firm (read nasty) with their service people.

Acting on a customer's behalf, I recently witnessed this company insist on being paid for a tech support call which occurred because the new version of the product wouldn't install on a version of Windows for which the company's documentation claimed full support. So the customer had paid for the upgrade and then had to pay again just to install the thing so he could use it.

There's probably a real opportunity here for someone with sufficient funds to spend in developing competing products and bringing them to market. I personally know of several people who would switch if there was an alternative available that supplied the functionality they depend on. But there is no alternative. Maybe there will be next year. Or in five years. Or maybe never because those with the money to invest in a startup see other opportunities with a better chance at success. There's nothing compelling anyone to go after this company's unhappy customers. There's no imperative.

If this company were to so annoy enough customers that they decided to go back to doing things manually, and they left in sufficient numbers to force the company out of business, it would be a serious problem for all those other customers who rely on the company's products to do their business. But it would just be too bad for them because, as I've said, there's no alternative.

If this was a health care concern, this company's poor service might pose a real dilemma for those patients affected by its poor service. To say that the company would lose their business assumes that the patients have an alternative. What if there is none? What if any competitors simply didn't have the capacity to absorb all of the offending company's business?

And if the offending company closed its doors, saying that it's just too bad for the patients wouldn't be acceptable. If no one had moved quickly enough to take advantage of the opportunity, then the government would have to step in because we, as a society, would deem it an imperative that the gap be filled. So now we'd have taxpayer dollars being spent under emergency conditions and we all know how that's liable to turn out.

As for Andrew's comment that ?we're stuck with the government's service whether we like it or not?, well, yeah, we are. We've decided that where a monopoly appears to be the right way to handle something, it's best left in the government's hands because the only thing worse is a monopoly in private hands. That's why we have anti-trust laws and regulatory bodies to inspect acquisitions and mergers to try to ensure that no company becomes too dominant in a market. History has taught us that when a private company has a monopoly, bad things happen (though I still yielded to the temptation to discuss that software company in case anyone needed a refresher course). When the government runs it, if we're unhappy with the job they're doing at least we can kick the bums out in four years and let someone else have a go at it. That's not something you can do with CEOs.

So having said all this, let's revisit one of Andrew's specific suggestions that I glossed over in my last post on the subject.

Allow more private for-profit hospitals and clinics to open up, under the condition that they respect the comprehensiveness, universality, and accessibility criteria of the Canada Health Act.

While granting that Andrew isn't suggesting that all hospitals operate on a for-profit model, I think the subject of hospitals deserves special attention here. In a large metropolitan area there is enough of a ?market? to support several hospitals. But in the small city where I live, there is only one major hospital. While specialized clinics may duplicate some services, it seems to me that the one hospital here in town has a virtual monopoly in a lot of ways. So how is competition supposed to work its magic? Wouldn't converting this facility to a for-profit model amount to putting a monopoly in private hands?

And when you combine the for-profit model with Andrew's other suggestion that facilities should be paid by procedure, i.e. on a piece-work basis rather receiving an annual budget, what happens to hospitals in rural areas where the population density is lower and the demand is even harder to predict year over year? Given a couple of years of relative good health for the surrounding population and that hospital might have to shut down. If we deem that unacceptable because it's imperative that health care capacity be available against the day when demand goes back up, are we then appealing to the government for extra funds in order to keep the doors open? So what have we gained?

As a society we've deemed it an imperative that, insofar as it's possible and practical, everyone is to have access to an equal level of care without regard to the ability to pay. While market forces bring imperatives of their own, such as controlling costs and maintaining quality, there is no imperative to enter a market or to stay in a market regardless of the opportunity that market may represent. And the imperative to maximize profit can run directly counter to the imperative to maintain capacity that may not be used at times, and may not be used at all but could be critical should the need for it arise.

Given the imperative represented by the Canada Health Act, it seems to me that we have to choose very carefully where and how we would allow market forces to operate in the health care system. We would have to monitor capacity and the demand for services to ensure that capacity doesn't drop below certain levels even if the opportunities aren't attracting anyone to take advantage of them or if maintaining the capacity deemed necessary cuts into the profit margin. We would have to ensure that services that don't represent any opportunity at all, or too little opportunity (or too high a risk) to attract a private sector supplier, would still be provided if needed. And we would have to be prepared at any time to step in if market forces aren't fulfulling the overriding imperative. I can't help but wonder if it isn't more trouble than it's worth.