Supply-side Innovations Work

In stark contrast to government-initiated, pay-for-performance initiatives that have proved sorely disappointing, Geisinger Health System in the middle of Pennsylvania's coal country is proving that supply-side health reforms actually work:

The health system devised a 90-day warranty on elective heart surgery, promising to get it right the first time, for a flat fee. If complications arise or the patient returns to the hospital, Geisinger bears the additional cost.

The venture has paid off. Heart patients have fared measurably better, and the health system has cut its bypass surgery costs by 15 percent. Today, Geisinger has extended the program to half a dozen other procedures, and initiatives…..

Standardizing bypass surgery has saved Geisinger money on ventilators, blood products and staff time. Readmissions, which can be more expensive than the original surgery, have fallen 44 percent, according to Geisinger's data.

Comments (4)

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  1. Stephen C. says:

    In a rational world (i.e., without third-party-payer bureacracies), hospitals all over the country would be doing what Geisinger is doing.

  2. Bruce says:

    Under the current system, Medicare gains and Geisinger loses from the warranty on heart surgery and on other surgeries.

    That´s why other hospitals are not doing what Geisinger has done.

    Medicare is getting low quality results because that is what it pays for and encourages.

  3. […] I have argued here and here, what is needed is a supply-side approach — one that liberates doctors rather than […]

  4. […] Geisinger Health System in central Pennsylvania. It has a warranty on certain heart surgeries and other procedures. If […]