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So last night I happened to be at a cookie party. It was pretty fun, and there were lots of good treats. One nice thing was that I got to talk to some old friends.

One of my friends that I hadn't seen in a while who always has strong opinions made a case that managed care organizations, particularly HMOs, have the potential to stifle medical innovation. The data that he used to support his theory was that areas in which there are high levels of managed care, there are less MRI machines, and even if there is an MRI machine in such a region, it will be under-utilized.

I didn't really follow this argument at the time, but now I think I understand why he feels this is irrefutable evidence. It is not the managed care organization that pays for the installation or maintenance of MRI machines directly. It is the medical institution that subsidizes these costs, and it only recoups its investment when the machine is utilized. In the meantime the maintenance bill continues to come. Thus, if the machine is under-utilized because the managed care organizations are generally unwilling to pay for costly procedures, it sets up a feedback loop. The less the machine is utilized, the more expensive individual uses become, which makes it less likely in the future that the managed care organization will approve such uses.

If you were running a for-profit hospital, would you invest in an MRI knowing that this feedback loop exists? Why develop new procedures and new technologies if no one is willing to pay for them? Are we saying that we only want cost-effective innovations, or do we want the highest level of care possible?