Ari Friedman, JAMA, ICU Economic Incentives

Ari Friedman, JAMA, ICU Economic Incentives

Writing in the Journal of the American Medical Association, LDI Fellow Ari Friedman, argues against the point of an earlier article that suggests the establishment of ICU bed quotas as a way to control ICU costs.

That earlier piece's authors noted that at $80 billion a year, overall U.S. ICU costs constitute 3% of all health care spending. It said that, "The apparent influence of ICU bed supply on ICU bed utilization brings forward the
Ari Friedman
LDI Fellow Ari Friedman

concern of demand elasticity in the ICU, the notion that ICU beds create their own demand."

Reducing beds
"By decreasing ICU bed supply," they continued, "health care costs could be reduced not only by preventing unnecessary ICU use but also by reducing the overall cost of hospital care."

In his rebuttal, Friedman, an MD/PhD student in the Wharton School's Health Care Management and Economics Department, argues that, "Whether supplier-induced demand or normal demand drives ICU use, it remains questionable whether beds are the cause of high utilization rather than a symptom. It is more likely that underlying high demand for ICU services causes both construction of many beds and the filling of those beds."

Changing the pricing system
"Therefore," he continues, "the fault lies with a pricing system that does not differentiate sufficiently between patients who benefit more than the cost and those who do not. If necessary, paying less for inappropriate patients and more for appropriate patients would shift use away from less sick patients, causing more appropriate ICU usage without resorting to potentially harmful bed quotas."