When it comes to service organizations, an investment approach such as private equity can sometimes lead to problems, if personal time is an important component of final product. All the more so in healthcare, should patients need individualized attention for successful outcomes. How might we respond, if and when profit gains result in less personal time with patients in particular?
For example, a recent NBER working paper, "Does private equity investment in healthcare benefit patients?" highlights the issue of patient neglect. In the abstract, the researchers note how
Our estimates show that PE ownership increases the short-term mortality of Medicare patients by 10%, implying 20,150 lives lost due to PE ownership over our twelve-year sample period. This is accompanied by declines in other areas of patient well-being, such as lower mobility, while taxpayer spending per patient episode increases by 11%.
An article from Vox further elaborates:
The researchers studied patients who stayed at a skilled nursing facility after an acute episode at a hospital, looking at deaths that fell within the 90-day period after they left the nursing home. They found that going to a private equity-owned nursing home increased mortality for patients by 10 percent against the overall average.
As it turns out, the result was more pronounced for patients who were relatively healthier, since sicker patients benefited from time based regiments deemed too necessary for targeted reductions. Whereas other services appeared more amenable to time adjustments. So private equity changes
include a reduction in staffing, which prior research has found is the most important factor in quality of care. Overall staffing shrinks by 1.4 percent, the study found, but more directly, private equity acquisitions lead to cuts in the number of hours that front-line nurses spend per day providing basic services to patients. Those services, such as bed turning or infection prevention aren't medically intrusive, but they can be critical to health outcomes.
The researchers noted an increase in the use of psychotics which could have substituted for personalized care as well. This study is certainly getting attention, for instance Matthew Yglesias referenced it as an example of meritocracy issues in a recent post. He stresses how smart people may be inclined to do "bad things":
Why do private equity takeovers kill so many people? It's not because the Wall Street boys are dimwitted. Their job is to look for companies that, for whatever reason, are not managed in a way that maximizes shareholder value...There's a lot more you could say about this story looking specifically at the lens of nursing home operations. But I'm interested in meritocracy. And the point here is that things can go awry not despite, but because smart people are in charge.
Indeed, it is easy to frame the unfortunate circumstance of nursing homes as a morality play, and there are countless other time relevant service examples which can be told in similar fashion. However, getting caught in these stories, instead of finding positive ways to respond, ultimately depresses us all.
Why not try a more dispassionate view in the form of a total equilibrium perspective? Money cannot be expected to accomplish all things equally well, for everyone involved. More specifically, unsettling things will occur when money occasionally fails in its coordination tasks for time based services generation. Again, I can't stress enough that money is problematic when it is expected to remain the sole representation of economic value. For that matter, should we elect to create valid service markets for a full range of personal time potential, people would gain more opportunities to meet the needs of their loved ones, when existing organizational capacity does prove inadequate. And family members would not have to shoulder the entire load of caring for loved ones (outside the time limits of today's services institutions), once community members can freely participate in local platforms for services generation.
By no means would time arbitrage supplant existing meritocracies and their associative hierarchies. Rather, horizontally aligned communities would work alongside meritocratic organizations, meanwhile reinforcing the positives which merit based hierarchies do hold.
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