The cost of health care administration: Mobile phones as a public-private partnership model

Nearly everyone has a cell phone. Many customers want innovations in their phones, but competing technology companies must make their phones work together. How does that happen? Through a public-private partnership that uses a standard-setting organization to oversee the latest developments. That is another example that could apply to the administrative costs and burdens of the U.S. health care system, said Kevin Schulman, MD, MBA, an internal medicine physician and professor of medicine at Stanford University.

Medical Economics: Another business precedent that could apply to health care: cellular phones, where tech companies balance innovation and standardization

Kevin Schulman, MD, MBA: A couple other public-private partnerships, a really interesting one is related to mobile phones. So we sell a billion mobile phones a year, and so the only way to sell a billion of any product is, it has to be totally standardized. But none of us want to spend $1,000 for the same phone as last year, and so they have to innovate as well. They have to standardize and innovate, which is a really interesting set of challenges. And the way the phone market does that is through something called standard-settings organizations. So your phone's a whole bunch of different components. All year, those component manufacturers are innovating to try and come up with a new and improved phone modem or whatever their piece of technology is. And then the industry literally sits down once a year and has everyone present their ideas and then picks a winner. And if they pick your idea, then you get royalties from everybody else, and we use your idea. If you're using someone else's idea, you pay royalties, but you still get to use their technology and then we move forward. So, you know, that's a really interesting model of a public-private partnership. The Federal Trade Commission sits on some of those standards setting organizations to make sure it's not monopolistic in terms of what the royalty rates are, but that's a public-private partnership model.