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Moral Hazard, Imperfect Commitment…and Dentistry

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Could moral hazard and imperfect commitment arise from increased availability of dentists?

 

Terms such as moral hazard and imperfect commitment are often associated with the finance and insurance industry. But they can also be associated with the business of dentistry.

 

It appears since I have graduated that all we seem to hear about is the ‘oversupply’ of dentists – whether it’s in India, Australia, or my home country, the U.K – and how bad it is for the dentists wanting to find work. With my studying of economics I have given this broad-reaching topic much thought, and it has inspired a few articles such as this one. But first, what is moral hazard and imperfect commitment? Moral hazard, as defined by Begg et al.1arises when ‘…the adoption of a set of rules that would be ideal under perfect information then fosters unwelcome behavior because it is too costly subsequently to monitor individual behavior.’ This will be illustrated shortly with an example. Imperfect commitment, on the other hand, is basically what it says on the tin: for example, concerning the financial crash of 2007, if governments say they will be tough in the future (attempting to scare bankers into more sensible behavior today), but fail to keep this promise by bailing out banks when it comes to the crunch, then tough words today are really empty threats regarding future outcomes1.

 

Moving from the U.K to Australia I have noticed distinct differences in attendance patterns of patients, and although healthcare systems are not the same, part of me is wondering if increased availability of dentists are a contributing factor. This comes in two parts: the total number of dentists has increased (in part due to new dental schools being built, increased student intake in existing schools and previous overseas migration schemes)2,3,4,5; and the extended opening hours of surgeries. When I was doing my work experience before I decided to apply for dental school, it was unheard of a practice opening at weekends, or after hours on a regular basis. In fact, I knew of many practices who closed early on Fridays; no wonder it was such a popular career choice! A lot can happen in five years. Now most practices offer appointments at weekends as well as before and after office hours, at least in metropolitan cities in Australia. The question is, when you know a service is available pretty much at any time, does this reduce the incentive to keep appointments because you know you can get another appointment very easily, at the time you want, without having to wait too long?

 

In my opinion, the new surgery conditions in dentistry, particularly in metropolitan Australian areas, contribute to unhealthy attendance behavior of patients. Take the example provided by Begg et al1. You are sitting in a café and suddenly realize you’ve left your car unlocked. Do you rush outside, abandoning your coffee to go and lock your car? Not if you know the car is fully insured against theft. If the act of insuring changes the odds, then we have the problem of moral hazard, whereby the informed individual (the insured) has an incentive to engage in risky behavior (by not making the effort to minimize the chance of having their car stolen). This is why insurance companies insure your car or house only up to a certain percentage, so you have the incentive to minimize the chance of an adverse event from happening.

Photo by Eder Pozo Pérez on Unsplash
unsplash-logoEder Pozo Pérez

Regarding dental appointments, a few scenarios are evident. Firstly, for patients who are more likely to be symptomatic attenders, extended opening hours do nothing to help change this behavior, and reinforce the fact that it is not a challenge to be seen in an emergency. They can simply ring around for a dentist who is open for an immediate appointment, and they are likely to have more than one choice. This behavior is unhealthy on an individual level, as most causes of dental pain can be identified and prevented with regular dental maintenance. Of course, there will be trauma and other emergency cases, which people almost always cannot anticipate, but an emergency appointment due to pain from a decayed tooth need not have been an emergency if it was not left until it caused the pain. Hence, preventative attendance is not encouraged.

 

Second, for appointments that have been booked in advance, if a patient knows that there is a not a long waiting list – either because there are extended surgery hours or they know from experience when they make an appointment they can be seen the same day / in a few days / early the next week – then one of two situations arise. Either patients have more of an incentive to put off booking their appointments: “I’ll do it next week,” “I’ll book when I’m back from holiday,” et cetera, et cetera, because they know if they call to book then they won’t have to wait long. Why is this bad? Well, people can (and do) forget; life and any other appointments get in the way, especially if they’re told they need four fillings and they are in no pain. Sure, they know deep down if they don’t get the fillings at some stage in the future they risk having a bad toothache, or even worse risk needing more expensive or traumatic treatment, or risk losing the tooth altogether. If you know your doctor / dentist / specialist gets booked up in advance then there is a greater incentive to book your next appointment when checking-out of your current appointment. You book a day / time you know you’re most likely to be free, or far enough in advance that you can request work for the time off. If you know you can ring or walk in and ask for an appointment and be offered it immediately, why bother booking in advance?

 

Additionally, this lack of scarcity and abundance in availability can be the tipping-point in the decision of whether a client chooses to cancel an appointment last-minute or not. This is further compounded by imperfect commitment on the practice’s side. I have worked in practices that have policies on the number of late cancellations or failed attendances a patient has. For instance, patients may be given ‘three strikes:’ the first failed attendance or late cancellation (within 24 hours of their scheduled appointment) would be given a warning, and this would be for the second time also; and perhaps some consultation with the patient to determine the reasons for their cancellation, and if the practice can help. After, or on the third occasion, either a deposit would need to be taken for future appointments or they would be required to go somewhere else altogether. However, these policies were never implemented, and those late cancellations and no-shows were allowed to go on and on, wasting valuable surgery time and denying others those appointment slots.

Photo by Hanny-Naibaho Unsplash

The above points are overarching principles. Of course there are the nitty-gritty details about attendance patterns related to barriers involving time, cost, and fear, amongst others. But there is no doubt that certain policies and environmental factors will influence decision making and thus attendance by patients. Professors Richard H. Thaler and Cass R. Sunstein make the overwhelming case for this in their iconic book, Nudge. The authors put forward that accessibility and salience are closely related to availability6. Coming back to booking appointments, if you already have experienced toothache, and have had an emergency appointment for a dressing today, you are much more likely to book a follow-up appointment for further treatment than if you have had no pain today and need to book in for treatment to prevent pain. From numerous observations and mini-experiments, I’ve found that the age-old marketing principle of scarcity certainly has relevance with appointment bookings, also.

 

Of course, there will be people who disagree with me, and I accept everyone will have their own experiences, wholly different to mine. It wasn’t that long ago that offering weekend and evening appointments was a ‘stand-out’ feature of a practice, but now it is the norm. I say what I have said because I have been in practices with scanty appointment books which have not been improved, but worsened by offering more hours, and failing to implement cancellation policies. And I’m sure others will have had similar experiences. I’d love to hear other thoughts on this, especially what you think is the future of dental office hours. Please comment below.

 

References:

 

  1. Begg, D., Vernasca, G., Fischer, S., & Dornbusch, R. (2014) Economics. (11thEd) McGraw-Hill Education, Berkshire, UK, pp 275-276, 438

 

  1. Preiss, B. (12.01.2013) Many dentists, but not enough holes [accessed at: https://www.smh.com.au/national/many-dentists-but-not-enough-holes-20130111-2clas.htmlon 21.06.2018]

 

  1. Editor of Bite Magazine [no name] ‘The dental workforce fights for its life’ 16.11.2015 [accessed at: https://bitemagazine.com.au/the-dental-workforce-fights-for-its-life/on 21.06./18]

 

  1. Editor of Bite Magazine [no name] ‘The future of dentistry’ 27.09.17 [accessed at: https://bitemagazine.com.au/the-future-of-dentistry/on 21.06.18]

 

  1. Editor of Bite Magazine [no name] ‘HWA report confirms oversupply of dentists’ 15.01.2015 [accessed at: https://bitemagazine.com.au/hwa-report-confirms-oversupply-dentists/on 21.06.18]

 

  1. Thaler, R.H. & Sunstein, C.R. (2009) Nudge: Improving Decisions About Health, Wealth and Happiness. Penguin Books, U.S.A. Pp 25, 100-101

 

 

Mental Accounting and Dentistry

mental-accountingAs illustrated by Richard Thaler’s example of a trip to the movies,  weighing up the decision whether to do something or not is not fully captured by the financial outlay. It also depends on the alternative uses of that time and money.

Mental Accounting and Dental Treatment

In dentistry, when patients are given a treatment plan with cost estimates, they will be performing some aspects of mental accounting. That holiday was something they had been really looking forward to, but now a crown is presented for $1600AUD, the deliberation of choosing between what is wanted and what is required can be rather distressing.

I have always been a firm believer in that people do not want to pay for what is needed. Utility bills are an example, as is car tax, vehicle registration, and of course, dental work (aside from elective, cosmetic procedures). Do you not agree you would rather WANT to pay for that little black dress you’ve had your eye on ASOS.com for a while for the Christmas Party as opposed to a filling on a tooth that at the moment is not causing any distress? Often when faced with a bill – expected or unexpected – there can be sometimes a mild sense of being a victim of an iniquitous expedient.

Those who pre-empt that they will require a large financial outlay for a fair amount of work should therefore be more committed to a treatment plan once presented based on this theory. But sometimes, again, the amount and length of visits required can be an equal, sometimes more important factor than the money.

shopping

Is Cost Always Viewed as a Loss?

An other important factor is when do we feel cost is a loss? A personal example was when I paid approximately $6000 in lawyer’s fees to leave a job where I had been given a financial incentive to stay with the company. At the time, I was prepared to give everything back in return for my freedom, but I didn’t have to return any of the money, only pay the lawyer who helped me break my contract. So why, in retrospect, do I feel the fees were a ‘loss’ to me and think about how I would be better for having that $6000 back in my pocket?

Similarly, someone who is about to pay $10,000 for a cosmetic medical procedure may not be seeing this as a loss, but thinking about all the benefits such as self-confidence, sex appeal etc from the procedure.

Mental accounting can also be held partly responsible in explaining why people fail to attend appointments: Joshua’s AFL match is more pressing than a dental checkup.

How we think of items and experiences in terms of gains and losses can greatly influence our happiness.

Change Your Mental Accountant For Increased Happiness

If you resent paying your tax bill every year because you see it as a loss of money there are a few things you can do. Some are practical, others are a change of mindset. One of the more obvious practical actions is to immediately set up a standing order of a fixed percentage of your salary after you have been paid to another bank account, away from daily transactions so it was never in your current account to start with. If the aforementioned practical method is unavailable to you, you will feel more positive if:

  • You think of all the things government taxes pay for which you may take for granted: garbage disposal, road network upgrades (plenty in Melbourne), garbage disposal,  – if they were gone life would deteriorate rapidly.
  • You practice non-attachment, or aparigraha, if referring to yogic philosophy; to become less attached to your money. As the famous saying goes, money is what money does.
  • You re-frame your ‘loss thoughts’ to gain thoughts – for example, instead of thinking of the money “lost” from your wages / bank balance when paying a utility bill, first acknowledge this thought, then re-think in terms of what you are gaining, think beyond the price. For example, “$100 is a small price to pay this quarter for my electricity. I use it for almost everything, for working on my computer, changing my devices, for my washing machine, lighting, cooking…” There is nothing like an uninvited power-cut to humbly remind us how much we’re dependent on our Western luxuries.

happy-arms-lifted

To summarise, looking beyond the face value of things can help us feel less resentful, less cheated, and most importantly, happier. Change your traditional dollar-obsessed mental accountant for a more philosophical and meaningful one and see the difference. Like a long-term employee, your traditional accountant may not want to go without a fight, but it’s time to make room in your mind for fresh talent.

Is cost always a loss?

money_hands_cigaretteIntroduction

Reading Richard H. Thaler’s ‘Misbehaving‘ inspired me to think further on when cost is a loss, and my own experiences, particularly in dental practice. Why is it some things we part money for we view as a gain and others a loss? For example, when you buy a $100 coat most people would view that as a gain (of the item). When you pay your $100 electricity bill, often people are not fond of paying utilities and see it as money ‘gone’ or a ‘loss’. Similarly, if you decided you wanted a cosmetic medical procedure for $10,000, would you view this the same way as needing to pay a surgeon the same amount for an unexpected but necessary medical intervention (e.g, removal of your extremely painful appendix)? If you are like the majority of people I have spoken to on this matter, you are most likely to view the ‘necessary’ cost as a loss rather than a gain.

Why do we see some things as a loss and not others?

I attribute this primarily to two main factors. Firstly, as in the words of Daniel Kahneman, we often succumb to the ‘what you see is all there is’ phenomenon [WYSIATI]. I.e. we focus on superficiality, only that we immediately see. Going back to the electricity bill, we see the money that we could have spent on a haircut / new outfit etc., the $100 that we’d prefer to see in our wallets.  Instead we should think about what we are getting for our outlay: electricity is a modern day luxury we have all become accustomed to and when we think a bit beyond the surface, without it it would almost be impossible to carry out our day to day tasks and businesses as we know it. If it was dark in the morning and your lights didn’t work what would you do? Our businesses are so technologically reliant an electrical failure usually has catastrophic consequences.

Another example is when we are charged for an ‘admin fee’. We don’t see the work that goes behind a transaction that may incur an administration fee because processes have become so efficient that we provide an input and we almost immediately receive an output.. Even if we have strong evidence to assume the process may be mostly computer based, the fee may account for the maintenance of the database, due diligence checking or equivalent processes.

Secondly, the unpredictability of  life’s events mean that when faced with an unexpected cost we have not budgeted for it. My old boss once told me “there are two types of people. Those who wait for a fire to start, then put it out, and those who prevent the fire. I like to prevent the fire.” I also aspire to be the latter.  Sure, you don’t know when and if your appendix might ruin your romantic weekend getaway, but you can save a little each month for a rainy day. With bills, there is often the option of paying monthly a fixed amount, which allows for better financial planning (though, again speaking to colleagues about this, some people do not like this option in case they have difficulty recouping costs if they have overpaid).

Dental costs as a loss

This section* in Thaler’s book resonated with me as when I present patients with costs of dental treatment, I can see it (unless it is elective, cosmetic treatment) as being viewed as a loss. I have had patients several times say to me “oh but I was going to book a holiday” or similar. Being honest, I also resent paying registration fees and indemnity fees, so I was hoping by writing this article and meditating on the concept I could hopefully adopt healthier attitudes towards life’s costs and help others to do the same.

So what can we do to view the parting of cash as a gain instead of a loss?

Here are some suggestions on how to do so:

  • Think beyond what is presented. Think of three things you will get from your cost. These may be abstract concepts such as relief from worry / peace of mind, relief of pain, less inconvenience, in addition to material gains or benefits
  • Think of those people who do not have what you have. For example, running water, advanced medical care (even if it is at a cost to you)
  • Expanding on the above, take the ‘first world problem’ approach where applicable
  • Accept and move on. Will resenting having to pay your vehicle tax stop you from paying it? No, because without it you can’t drive and it is a fact of life everyone has to pay their vehicle tax. If we don’t dwell and resent we won’t be wasting our energy and we’ll feel better and more positive as a result!

I would love to hear from you if you have encountered similar reactions to myself presenting dental treatment, whatever line of work you’re in. Add in the comments section below!

 

Sources / Inspiration:

Richard H Thaler (2015) Misbehaving The Making of Behavioural Economics, Penguin Books, Great Britain. *Chapter 7: ‘Bargains and Rip-Offs’

Daniel Kahneman (2011) Thinking, Fast and Slow, Penguin Books, Great Britain. Chapter 7, pg 85: ‘A machine for jumping to conclusions’

The yoga pose I do every day – and why you should too

HalasanaThe pose I do every day without fail is Halasana or Plough Pose. I tend to find my way into this asana at the same time each day – in the evening – a good way to start a regular yoga practice, whether physical or meditational, is to try and find a time to yourself daily which is consistent.  Why is Halasana the yoga pose I do every day?

  1. Inversions help sleep – rolling myself into Halasana before I go to bed is a great way to bring on the zzzzzs…
  2. Halasana targets several areas I like to loosen up at once: hamstrings, neck, shoulders and thoracic spine. All of these will have been contracting strongly thought my working day. As a dentist, the neck, shoulders and back are all prone to being overworked, being held in a static position for the majority of the time. I tend to get tight hamstrings from cycling to work, and running and walking. The beauty of Halasana is it thoroughly allows release of tension in multiple areas.
  3. This yoga asana encourages deep breathing and allows you to confront anxiety. This acceptance of discomfort, and allowing the body to settle through it is the basis of mindfulness. Research has shown even accepting pain can reduce it’s severity.
  4. It is easy to move into another lovely inversion, Karnapidasana (ear squeezing pose), where the knees bend so they are beside the ears, and a gentle bind with the hands helps to keep them there and block out any distracting sounds.
  5. It is a pose that can easily be modified with props, should the need arise:
  • Bolsters, blocks or blankets can be placed under the feet
  • The practitioner can lie on a folded up blanket to create a step-down at the point where your thorax becomes your neck, reducing pressure which can lead to anxiety
  • The feet can be pressed against a wall (sometimes requires several attempts or a partner to obtain ideal positioning)
  • The feet can also rest and / or reach for an alternative platform such as a chair or low bed

Depending on how I’m feeling I usually like to hold the pose for several minutes, allowing myself to settle into the at first restricted breathing and savour the subsiding of the breath.

When first entering this pose you will feel a mixture of lengthening and discomfort due to the intense pressure on the neck, and increased intra-abdominal pressure which can restrict the breathing, caused by flexion of the hips. The longer you stay in the pose, the less this discomfort bothers you and the breathing settles. Sometimes, if I feel particularly restricted, I like to take the feet shoulder-width apart to create a small space between the legs which can make it seem like I can take in more fresh air.

Click here to have a look in more detail about how Halasana deploys its benefits.