Big Yellow Taxi

I introduced this analogy at a Pediatric Grand Rounds on Population Health Management and Payment Innovation, as a way to conceptualize the changing role for providers in the evolving health care environment.  My grandfather was a cab driver in New York City in the 1940s and 50s.  He and most other drivers at the time were owner-operators.  Although there were some regulations around fares, etc., he was more or less on his own – he paid for his gas, insurance, upkeep, etc., and whatever he had left after paying expenses he kept.  What regulation there was, was enforced by the requirement for a medallion (of which there were a limited supply) in order to operate legally.  Within the constraints of government regulations, though, they set their own practice.  They could pick the neighborhoods they operated in, the hours they worked, the routes they drove.

How is this relevant to healthcare?  The medallion was the equivalent of a medical license (of which there are also, in practice, a limited supply), and he was in essence a solo practitioner.  Sometimes cabs would come together into a cooperative of several owner-operators, sort of like a group practice, but still controlled by the drivers themselves.

As the costs of obtaining a medallion and operating the cab (e.g., fuel prices) go up, it gets harder for an individual driver to make a living as an owner-operator.  Moreover, the system itself is inefficient and wasteful.  Lots of drivers want to be in the nicer neighborhoods where the tips are better; fewer want to drive long routes out of town with no way to recoup the time for the return trip.  Cabs circle around waiting for people who need a ride, wasting gas.  There is no way to efficiently match the size of the vehicle with the number of people in a party: a group of 6 might have to wait some time for a large enough car to come by.  So a system of leased cabs, managed by a cab company, evolved.  The company had a phone line, so people in need of a ride can call.  A dispatcher sends the closest, most appropriate size vehicle.  When the rider pays her fare, it actually goes to the cab company, not to the driver.  The driver gets a fee (he’s essentially an employee), the company pays the expenses (including not only the vehicle operating costs but also the salaries for the dispatchers), and keeps whatever is left as profit.  The company, not the individual driver, sets the guidelines about where and when the cab goes.  And a company that does a good job of minimizing costs benefits financially.  They will do that by paying as little as possible for a unit of service (cheaper insurance, less expensive gas, decreasing payments to the drivers), and by eliminating waste (e.g., not having drivers circling around, sending the right cab to the right place at the right time).

This is where the health care system is heading.  We are moving away from managing the medical care of an individual to managing the health of a population.  As specialists, we have been like the owner-operator cab drivers of my grandfather’s era.  We are used to focusing on providing a service to an individual patient and getting paid for that service, according to our own preferences and individual guidelines.  In the future, providers (and I use that term to include not only physicians but also hospitals) will be like the drivers in a cab company.  Payment will not go directly to the provider, it will go to the health manager (e.g., an ACO).  Like the cab company, this manager will use “dispatchers” to direct the right care to the right place at the right time.  Payment to providers will not be the usual fee-for-service: it may be a salary, or some modified payment for services but with shared risk or shared savings.  And of course, the health manager will attempt to minimize costs by pressuring payments to providers and eliminating unnecessary utilization.

Sounds bleak?  What provider in her right mind wants to be a cab driver working for a large company, being told what to do by a dispatcher?!  The hope lies in shifting our thinking from being an individual provider to being part of a system.  I, myself, might just drive the cab, but I have to be a fully-participating member of the company, with a voice and a stake in figuring out the dispatching protocols, minimizing variation and waste, and sharing in the profit (and risk) of doing a good (or bad) job.  In an era when health spending needs to come down from unsustainable levels, those who are only providers can only lose, in the form of lower reimbursement for fewer services.  But those who also participate in the function of managing the fleet can reap the benefits and thrive.  That doesn’t mean that someone who is now an allergist or a surgeon will stop doing what he or she does.  A cab company doesn’t survive without the cabs and great drivers.  It does mean that we need to figure out how to operate in the larger system, how to work with the managers and payers and primary care providers (and most of all, the riders) to reduce costs, provide a better service, and improve health.

One more note.  As first noted in a 1960 article by Theodore Levitt in the Harvard Business Review, railroads largely went bankrupt because they saw themselves as being in the railroad business, rather than in the transportation business.  As cars and buses flourished, demand for rail services went down.  We not only have to make the shift from being cab drivers to being a cab company, we need to be a transportation company.  Or, in our terms, we need to shift from being providers to being managers, and not just medical managers but healthcare (or better, health) managers.  When alternatives to hospitals spread, we’ll be better poised to bring our expertise to whatever those alternatives are.

“Don’t it always seem to go

You don’t know what you’ve got ‘til it’s gone…”

One Response to Big Yellow Taxi

  1. Mary Beth Petersen says:

    Marc, Your comment about railroads reminded me about a subsequent success story in the transportation business. When trucks were transported across the country on railroad beds, both the trucking and railroad companies thrived. I wonder how that example of collaboration might relate to health care? MBP

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