Revealed Preference – Insights from Government, Healthcare, and Sports

I have written in the past about government budgets as seen through the eyes of people who have studied government and political science. The budget serves as a written calculation that enumerates the government’s priorities. In economics terms, we might call this revealed preference, where the government puts a dollar figure down next to the things that candidates and political leaders said was important. The dollar figure they put next to an educational program, a defense program, or towards a new Veteran’s Administration Hospital reveals just how much they actually care about that thing. If we elect a whole set of candidates who promised to improve our local school buildings, but then budget only a tiny new amount of money toward school maintenance while offering a big tax break to financial institutions, their real preferences have been revealed, and they didn’t match what was in their campaign message.

 

I wanted to present a detailed example of government budgeting and revealed preference to set up an observation that comes from Dave Chase in his book The Opioid Crisis Wake-Up Call: Health Care is Stealing the American Dream. Here’s How We Take it Back. Chase was working in the healthcare industry as a revenue cycle consultant, what he describes as someone who helps hospitals with, “generating as a big a bill possible, getting it out as fast as possible, and getting paid as quickly as possible.” After the loss of a close friend, whose encounter with the healthcare system at a young age was incredibly financially costly, Chase saw behind the hospital curtain, and was shaken by the revealed preferences that he uncovered.

 

“Despite breakthrough technologies that could improve patient outcomes, that’s not what hospital wanted to buy. All they wanted were systems tuned to game every reimbursement opportunity the industry had to offer.”

 

I don’t want to say that all hospitals are evil and that hospital management only wants to maximize the money they get out of their patients at every encounter. However, Chase’s quote reveals that the goals of being a financially solvent hospital or healthcare system serving the needs of patients can be displaced by the goal of profit or increased margins. The financial side of a hospital is important – you don’t want your hospital to go under and leave people without medical care – but if the hospital is advertising itself as an organization that puts patient’s first, then its actions should support that messaging. Revealed preference shouldn’t show us that patient care and outcomes fall far behind maximizing profit.

 

Chase was so shaken by the observation in his quote that he left the healthcare field altogether. When revealed preference shows us something hypocritical about the space we are in, whether it is government, healthcare, or even sports, it creates cynicism and drives away the talented innovators who are needed for making the world and field a better place. Chase argues that the revealed preference that he uncovered, increasing hospital margins/profits, was actually damaging to the health and well-being of Americans, and not just in a financial way. If we are in a leadership position, if we are part of the team that makes decisions between the public goal and the internal goal of the organizations we are a part of, we should be asking what our actions and decisions reveal about our preferences. In healthcare, are we really just chasing the dollar, or are we trying to help people live longer and better lives? In government, are we really trying to serve people well, or are we just trying to get really good at following the rules so that we don’t get called in front of a legislative committee? In sports, are we really focused on the game and improving the experiences of athletes and fans, or are we again just maximizing the dollars we get from butts in seats and eyeballs on tvs? The bet I’m willing to make, one that I think Chase would make as well, is that our real preferences will be revealed to the people who interact with our organizations, and in the long-run, if the revealed preference is not what we advertise, people will know, and our organization will lose trust, lose customers, lose talent, and will ultimately fail.

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