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It is not

between parties.15 It would be very costly for

the corporation would reward hands-on eval-

uation.

a wealthy individual or large firm to contract

unreasonable

A corporate model of health care would set

with several highly specialized but indepen-

to think that

standards for its employees. Rather than leave

dent lawyers and accountants. Thus the mar-

delivering health

the quality of care to the whim of the individ-

kets for legal and accounting services are

ual doctor, the corporation would try to make

dominated by corporate providers that can

care effectively,

sure that all of its employees use state-of-the-

hire, coordinate, and monitor the services of

particularly for

art methods and share best practices.

those specialists.

complex patients,

A corporation would standardize proce-

In medicine, transaction costs include the

dures and treatment plans, such as inten-

costs of soliciting input, sharing informa-

could require a

sivists' use of checklists, using corporate

tion, and coordinating treatment among

corporate model

guidelines. With procedures that are stan-

multiple clinicians, often across space and

dardized and rationalized, it would pay to

time. Thus it is not unreasonable to think

of organization.

deploy information technology to support

that delivering health care effectively, partic-

those procedures, thus reducing costs and

ularly for complex patients, could require a

preventing errors.

corporate model of organization. Just as

In a corporate setting, a doctor would not

most homes today are built by large regional

have a business or administrative function.

companies, the typical health care provider

The doctor would not worry about what is

might turn out to be a corporate entity.

billable and what is not. Instead, the doctor's

Perhaps large national corporations would

job would be to serve patients according to

dominate the health care industry. However, it

corporate standards. The doctor would be

would seem more likely that, as with home

paid a salary, with increases, bonuses, and

building, no major dominant national firm

other incentives that take into account direct

would emerge. Small firms would compete

observation of the doctor as well as patient

alongside large regional companies. Solo prac-

satisfaction and peer evaluations.

titioners could continue to serve consumers

A corporate compensation system would be

with less complicated needs, as with legal and

administered by onsite managers, rather than

accounting services.

by remote control. Doctors and other employ-

Health care companies could straighten

ees would be paid on the basis of how well they

out lines of accountability and provide coor-

execute corporate policy and meet the needs of

dinated care. For complex patients, the cor-

patients, not on the basis of how well they fill

poration would assign a project manager.

out forms to game the system of fee-for-service

The project manager would bring to bear

medicine as administered by insurance compa-

whatever resources are appropriate for meet-

nies or government bureaucrats.

ing the patient's needs.

Because many patients present unique

A patient-focused corporate provider

challenges, however, doctors likely would have

would not waste skilled craftsmen through

discretion to deviate from guidelines based on

failure to coordinate their work. If the

their judgment about a particular patient.

patient's needs are best served by a team, then

Management could take the outcomes of such

the corporation would train its personnel to

cases into account when deciding on compen-

work in teams.

sation. A doctor whose deviations help to

A corporation would develop compensa-

improve outcomes could receive a higher

tion systems that align the incentives of its

bonus than a doctor who simply follows

employees with the interests of its customers,

guidelines or a doctor whose deviations pro-

the patients. If team behavior is valuable to

the patient, then the compensation system

duce inferior results.

would reward team behavior. If hands-on

The Veterans Administration and Kaiser

evaluation of the patient is more helpful

Permanente, both of which have been praised

by observers,16 exhibit some components of

than sending the patient for an MRI, then

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