• Chart of the day: Complexity and health care

    From William Rouse (PDF) and h/t to Richard Vaughn:

    Figure [2] summarizes an assessment of the complexity of five markets. Note that the complexity of health care is assessed to be 27 bits. This means that determining which nodes (i.e., enterprises) are involved in any particular health care transaction would require on the order of 1 billion binary questions. Thus it would be an enormous task to determine the state of the overall health care system.

    Notice the ratios of consumer complexity to total complexity in Figure 2. Even though the retail market is the most complex market, the consumer only has to address a small portion of this complexity. The retail industry has been quite successful in managing the complexity of bringing a rich variety of products and services to market without consumers having to be concerned about how this cornucopia arrives on store shelves—or online outlets.

    The telecom industry has the worst ratio, as anyone who has tried to call for vendor technical support for a laptop can attest. As a consumer, you need to know much more than you want to know about the hardware and software inside your laptop. A substantial portion of innovations being pursued in this market are aimed at significantly reducing the complexity experienced by consumers. We expect that those who are most successful at reducing consumer complexity will be the winners in this rapidly changing market.

    The idea of consumer-directed health care, however, is going in the opposite direction in that it increases complexity for consumers, and possibly for clinicians. Using other markets as benchmarks, we would expect this push to fail, or at least to have limited success. Thus the goal should be to increase the complexity of health care where it can be managed in order to reduce complexity for patients, their families, physicians, nurses, and other clinicians.

    I can’t vouch for (because I didn’t dig into) the methods that give rise to the complexity estimates, such as the 27 bits for health care mentioned above. You can find the details here (PDF).

    One additional consideration is the cost of a complexity-induced mistake in each sector. The cost of a consumer making a poor choice of cell phone or plan is of a different order of that of making a poor choice of health care treatment. One way we manage telecom’s complexity is learning from experience. There’s a good chance you won’t make the same bad choice twice. How many times do you get to choose where to have heart surgery?


    • One way to reduce complexity in health care is through consolidation and integration; indeed, that is the current health care policy. Now, with many different, unrelated, and relatively small providers (economists call it fragmentation), consumers are faced with a wide array of choices, choices which must be made with little information regarding the alternatives. If all providers in a region, physicians, hospitals, clinics, etc., were consolidated and integrated into one big health care network, the array of choices would be reduced to one. Would that be good for consumers? Would that be good for health care? I devote much of my time either avoiding consolidation and integration or giving in to it: my work will be done when the last independent provider in my region gives in and joins the regional health care network. Years into the future experts will look back to the days before consolidation and integration is complete, to the days of the dreaded fragmentation, and will ask themselves “what were we thinking?”

    • It’s an interesting chart, but it (and Austin’s comment) ignores that despite the ‘complexity’ of consumers making choices in health care, many nevertheless do manage to do so with little apparent difficulty or harm. Today I wrote up medical tourism (see , which doesn’t seem to have boggled the people involved too seriously.

      This appears to be a case of “I don’t care whether it works in the real world, just let me figure out if it works in theory.”

    • I realise that the wording is from the original paper, but the usual usage of bits is that if there are 27 bits, then there are ONLY 27 binary choices.
      There are however approximately 100 million possible combinations.

    • GP’s could play the roll to reduce complexity for the consumers like retailers do, if the knew there patients would pay directly.