A national ventilator exchange could address critical shortages

A national ventilator exchange could address critical shortages
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In weeks, we will run out of the ventilators that can save the lives of critically ill COVID-19 patients who can’t breathe on their own. Across the country, doctors are rigging machines to breathe for multiple patients at once while others are trying to move critically ill patients to hospitals with available machines. As ventilator manufacturers have also stressed to elected officials, there’s another way. If the government wants to save the most lives, it must create a national ventilator exchange, and do so right away.

This may sound formidable, but it’s not insurmountable. The three key questions are:

1. Where are the ventilators now?

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2. Where should they go, and for how long?

3. How do they get there?

With elective procedures on hold indefinitely, we know there are ventilators sitting unused across the country right now — we just don’t know where and how many, so we need a nationwide registry. Every hospital in the country can document the quantity, makes and models of their machines, how many are available to treat COVID-19, and which are reserved to treat other conditions.

There is ample evidence, for example, from reallocating land or spectrum licenses, that such registries improve the efficiency and volume of transactions. As long as hospitals know they are always entitled to the number of ventilators they own and lending unused machines is voluntary, there is little reason to believe they might strategically misreport their stocks.

Getting ventilators where they are needed is also a relatively simple question of logistics, which, given the national networks operated by the U.S. Postal Service and companies such as UPS, FedEx, and Amazon, seems well within reach.

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This leaves the critical question of where the machines should go, and for how long. By combining guidance from epidemiological models with a market-based approach, we propose a rental market that, if properly structured, will not leave any participants worse off (because a hospital can always retain its current stock of ventilators) and has the potential to leave many participants better off.

Step one: use available science to estimate the number of ventilators each hospital is likely to need in the coming week (or whatever other time horizon is deemed appropriate). Second, ask each hospital to report its maximum demand for ventilators (capped by the estimates from step one), which makes and models its staff is trained to use, and its willingness to pay for ventilator use in the coming week.

A federal clearinghouse can then compile the data and identify the most efficient allocation of ventilators for the coming week. Hospitals lending their ventilators and the associated consumable supplies would receive a rental fee for each machine, where that fee is at least as large as their declared use-values. Hospitals renting ventilators pay a fee for each machine, where that fee is no greater than its declared use-values. 

Economics literature shows there are mechanisms that make bidding straightforward and ensure participation is always voluntary. At the end of each period, perhaps a few days or a week, every hospital can get back the number of ventilators that it owns.

Establishing a sophisticated exchange involving monetary transfers is not without challenges. A viable alternative could be pairs of hospitals engaging in limited-time swaps.

No money would change hands, but perhaps the government would cover the cost of transportation. Moreover, with limited-time swaps, rather than using monetary bids, prospective recipients of ventilators could bid based on the length of time for which lenders will get additional ventilators down the line.

Of course, if there are not enough ventilators to go around, we face terrible ethical dilemmas, either with or without a rental market. But if we have enough, and they are just in the wrong places, then a short-term rental market is exactly the thing that could get us out of such dilemmas.

For this model to be effective, it’s imperative to act now. If our government moves quickly to pool our resources and combine the best ideas of health care professionals, market design economists, and logistics specialists, we could do a lot of good in this time of unprecedented challenges.

Simon Loertscher is a professor of economics at the University of Melbourne. Leslie M. Marx is a professor of economics at Duke University’s Fuqua School of Business.