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The Problem With Software Companies
By: Baseline Scenario   Tuesday, July 14, 2009 12:32 PM

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Phillip Longman has an article on health care information systems with the provocative title, "Code Red: How software companies could screw up Obama’s health care reform" (hat tip Ezra Klein).

The argument of the article goes something like this. One, the health care cost problem is largely caused by overtreatment. Two, the answer is software: "Almost all experts agree that in order to begin to deal with these problems, the health care industry must step into the twenty-first century and become computerized." Three, software implementation projects can go horribly, horribly wrong. Four, the solution is open-source software.

I have no argument with point one. And I agree wholeheartedly with point three. Anecdotally (but I have seen a lot of anecdotes), the median large-scale corporate software project goes way over budget, is delivered years late, is just barely functional enough to allow the executives involved to claim they delivered something, and is hated by everyone involved. But I’m not sold on points two and four.

On point two, I’d like to see some evidence, or at least an argument, that computerization actually leads to less overtreatment. I can buy that it reduces errors, and that it reduces the costs of delivering health care a tiny bit. But to help with the health care cost problem, software would have to somehow cause physicians to prescribe less of the sorts of tests and procedures that drive up costs in this country. And there I think that incentives (the more procedures you do, the more money you make) win out over technology any day.

On point four, Longman gives a standard argument for why open source software is good and "proprietary" software is bad. He contrasts Midland Memorial Hospital, which installed an open-source system developed at the VA and had great results (although there is no mention that overtreatment was actually reduced), with Children’s Hospital of Pittsburgh, which installed a proprietary system and had catastrophic results. But then he jumps ahead to his conclusion: "While many factors were no doubt at work, among the most crucial was a difference in the software installed by the two institutions," and he focuses on the fact that one was open-source and the other was not.

I am a huge believer that some software is great and some software sucks. However, Longman believes two things I do not believe. First, while good software is an important ingredient of a successful project, it is only one ingredient among many.


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