Medical Check-Ups and Annual Audits: What if Your Doctor Reported Like Your Accountant?

Now being the winter of our discontent, the political scene in American is dominated by the rancorous wrangling over health care and insurance reform legislation.

In that context, I was exchanging notes with my friend the insurance industry risk-manager, over our recent annual physicals, and fell to musing about the comparability of a financial statement audit and a personal physician’s examination.  

Raise the question of personal health around a table of the reasonably responsible. The “organ recitals” of those surveyed will include familiarity with their own particular concerns – whether blood pressure, good and bad cholesterol levels, resting pulse, bone density, or hormone levels.

To achieve that awareness, on a periodic and routine basis, patients are poked and prodded and invaded in various intrusive and unpleasant ways – they give up samples of fluids and tissue for laboratory scrutiny, and they are screened and hitched and wired to exotic and expensive diagnostic machinery

The population of the diligent will also be subjected to inquiry by their doctors about their major behavioral risks – does their personal “control structure” include taking their medications, watching their cocktail intake, wearing their seatbelts, and avoiding handguns.

And then they receive several pages of detailed results, calibrated to standard norms of tolerance, and a briefing on what their trends are and what they might need in aide of maintaining or improving their well being.

Suppose instead, along with a bill whose magnitude is itself a threat to good health, the physician delivers this report:

“We’ve done a number of tests, the scope and results of which you don’t have, and we chose not to do a number of other, unspecified procedures.

“We’re not sure, but we think you’re unlikely to die of natural causes any time soon.

“Thanks -- we’ll see you next year. Be sure to pay on the way out. And have a nice day.”

Unacceptable – even with the multiple dysfunctionalities that render American health care an embarrassment among the world’s developed countries.

Does an audit report convey anything more about the health of a corporate body?

A company’s management may be well informed or sclerotic. Its products and strategies may be world-class, or senescent. It may be the equivalent of a gold-medal athlete, but with a malign and life-threatening growth lurking or metastasized. 

But the only available opinion is that, within the tolerance of undisclosed measures of materiality, its financial health is generally fair.

Does the company need the corporate equivalent of a slimming regime of diet and exercise? Are prescriptions indicated to bring the basic operational chemistry within tolerable limits? Something surgically targeted like joint replacement or a major arterial by-pass? Radical intervention or experimental drugs?

At the cost of millions of dollars, no such diagnosis is on offer – but only a single anodyne page, in the same language handed out once a year to every other patient who passes through the annual audit clinic.

An auditor’s report tells less about a public company’s health than a doctor’s report tells about an individual – in scope, detail and precision. And if investors and other financial information users are not happy, they are doing nothing to make their dissatisfactions effectively known.

It may be, as Mary Poppins puts it, that “a spoonful of sugar makes the medicine go down.” But in the audit environment, patients are getting only sweets and placebos – and still paying for the dubious privilege.

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Comments

[J.D. Kern]

Hmmm. My doctor doesn't ask me about handguns, but perhaps he thinks that's a low-likelihood combination with a middle-aged suburban accountant? What is it you do for a living? Evidently professors live a much more dangerous life than I had previously thought.

[Jim]

Thanks JD. In fact the statistics are pretty nasty, as to the escalated likelihood of becoming a victim of fatal violence, by living in a household that keeps handguns. And since it's one of the non-trivial health threats that is in fact manageable, why not? As for the opportunity to act ahead of time, think of the sad futility in the the local tv news coverage of a suburban homicide: "But he was such a quiet kind of guy..."

[Brent]

"What basis do you have for your handgun statement? Has the research been properly peer reviewed? I would think a professor would be willing to support his conclusions with more than anecdotal evidence. The simple fact is you are less likely to be a victim of violent crime if you have a handgun (see John Lott's research)."

Thanks Brent -- this discussion would have to take place elsewhere, gun-related issues probably being the second most divisive issue in the American discourse. Would that the dialog on the assurance franchise generated a fraction of the interest -- Jim

[Alvaro Sedlacek]

LOL and becoming sadder for agreeing with the comments.