How Low Productivity Cost You $25,000
Chicago Booth’s Chad Syverson talks about what’s happened to US productivity.
How Low Productivity Cost You $25,000The US federal government has pushed manufacturers to ramp up the supply of mechanical ventilators for COVID-19 patients. But Chicago Booth’s Dan Adelman points out that pivoting from making cars to making ventilators is not a simple transition, and producing defect-free ventilators at a large scale could take time. Instead, he says, we should focus on making the best use of the ventilators we do have by making sure they’re in the right place at the right time.
The problem with producing ventilators in such a quick timeframe is that you’re asking manufacturing plants that make products that are very different from ventilators, in particular automobiles, and supply chains that are configured to supply parts for automobiles to suddenly turn on a dime and start producing ventilators.
In a typical manufacturing environment, retooling and reconfiguring manufacturing lines is a really arduous task. It takes a lot of engineering effort, a lot of testing, and it’s just unclear whether or not enough production capacity could be built in really just a short time, a week or two weeks or something like that.
Not only that, but when you build manufacturing plants, it’s not like you just start producing ventilators. You’ve got to go through a series of very rigorous quality-control checks to ensure quality. And these ventilators are not simple devices. They’re very sophisticated devices where you can control the flow of oxygen very carefully and whatnot, and so I would very seriously worry about relying on the manufacturers in the US to so quickly put together a production process that’s able to produce defect-free, usable ventilators. In fact, you know, what might happen in the worst case is you could have ventilators that go out into the field, and they might fail on a patient in the middle of the night because it didn’t go through all the right quality assurance processes that we would normally undertake. And so if it fails in the middle of the night, the patient dies.
So I think we need another plan other than just relying on manufacturers. It’s great that they’re doing that, but I think we need another plan to make use of the ventilators that do exist. The idea is that there’s ventilators all around the country. And it might be the case that even in aggregate, we have enough ventilators, but the problem is they’re in the wrong place at the wrong time.
If all states were peaking at the same moment and needed at the same moment the maximum number of ventilators, we’re not going to have enough. But the way this pandemic is evolving is that different states will peak at different times, and so after New York peaks, it’ll kind of move along different parts of the country. And as that happens, ventilators become less in need in some parts of the country and more in need in other parts of the country, and they could be moved.
However, in order to do that you need to have states agree to exchange ventilators. But this would require a massive logistical effort on the part of our government, the federal government, and likely the Army, which is used to moving military equipment, tanks and things on the battlefield in real time for where they’re needed. It’s a similar kind of problem where you really need to be able to move ventilators, in this case, around the country to where they’re needed. But in order to do this you need good optimization and good logistical tools to help plan it out.
To figure out what the benefit of doing this is, you’ve got to have a model of demand, and so you need to have a forecast of how the pandemic is going to evolve over time. And, in particular, what you need is a forecast of new ICU admissions. We estimate that roughly 80 percent or so of admissions to the intensive care unit will require mechanical ventilation, and based on that assumption and other assumptions like the length of time that patients need to be on ventilators and whatnot, you can then put all this together along with the supply of ventilators across the country, if you’ve got access to those numbers, and you can put them all into an optimization model that then figures out how to move the ventilators around to maximize the number of lives saved.
Now all of this is very much contingent on the assumptions you bring in. And so there are many, many forecasting models out there now, and the one that I chose to use is, in fact, the one that the federal government is using for its planning. My forecasts come from the Institute for Health Metrics and Evaluation from the University of Washington, and they have these three scenarios: there’s the expected trajectory; there’s a lower bound, which is like a best-case scenario; and then there’s an upper bound, which represents the worst-case scenario.
Starting from that, you can then figure out what effect they provide in their data forecast of new ICU admissions. And from that you can build a model, in this case of three different scenarios of what the demand will be for ventilators over time, state by state.
In the upper-bound scenario, the worst-case scenario, I estimate that without the national stockpile ventilators being used, we could lose about 80,000 to 83,000 lives. With the best-case scenario, without the national stockpile, just where the states are all acting independently, we could lose about 8,000 lives due to there not being a mechanical ventilator.
From there, you then have to consider different scenarios. The most likely scenario, based on the way the federal government’s operating now, is that they’re basically just giving their national stockpile allocated to locations. It’s unclear whether or not there’s plans for them to actually be moved once they’re in position.
If you allocate the national stockpile ventilators as a one-time allocation to states and then they’re not moved around, there’s obviously substantial benefit from doing that based on an estimate of 8,900 ventilators in the stockpile. And it’s unclear exactly how many there are. I estimate that you could save about 5,500 lives in the best-case scenario, and you could save up to 14,000 lives just by doing a one-time allocation of the national stockpile.
But once you allow the ventilators to circulate in exchanges between states, you can get substantially more benefits. So in the best-case scenario, in the lower bound of the forecast for demand, you can save approximately another 1,500 to 2,000 lives just by allowing these exchanges of the ventilators across the states. And in this worst-case scenario, the upper bound of the forecast, you could save as many as about 14,000 additional lives by just allowing the ventilators to circulate. So that’s a pretty wide range.
Now, of course, all this is contingent on the forecast that you’re using, but it’s also contingent on the estimate of supply that you have, and for that there’s not really great information about how many ventilators each state has. There was a study done in 2010 that’s in the published literature that breaks it down based on a survey of how many ventilators each state has in its possession, so I’m using those estimates for the number of ventilators. These are full-featured ventilators, and I’m subtracting off the ventilators that need to be used for other patients in the ICU. It’s not like during this time other patients don’t need them, and so in reality, in terms of the number of ventilators in the country, there may be quite a bit more.
There are other kinds of ventilators. I’m only looking at full-featured mechanical ventilators, which would represent sort of the American standard of care for how we would treat these patients. But there may be other kinds of ventilators that could be retrofitted, older ventilators that can be brought back into use, and it’s unclear what those numbers are, how many of them we have. Presumably, hopefully, the federal government would have that. Certainly the states, hopefully, would have that information.
The other thing, which is really important, is how are you going to get the states to actually exchange ventilators? When I’ve talked to some people, the response that I’ve gotten is that no one’s going to let you move their ventilators. States are kind of in a position where they’re hoarding their ventilators in anticipation of this peak coming. There’s uncertainty around how big the peak is going to be, and so it’s not a real easy matter for states to actually release these ventilators right now.
I also consider the situation where states freely exchange ventilators even before the peak, and this is logistically a bit more challenging because the idea is you would have to have a state predict, with reasonably good accuracy, what its peak is going to look like, ship out their ventilators, and if they ship out ventilators they’ll need later at their peak, they’re going to need to make sure they get them back. And that’s problematic.
But there also might be a situation where even in the worst-case scenario, some states have far more ventilators than they need anyway. They have things to spare. In either case, in this second run of the model, I actually allow the ventilators to move anytime, and once you do that, the number of lives you can save in addition to the original estimates is many, many more thousands of people.
Chicago Booth’s Chad Syverson talks about what’s happened to US productivity.
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