Anyone following the business news lately knows that it is a poor investment strategy to put all of one's money in a single company. It is better to maintain a balanced portfolio containing many investments to spread out the risk of losing money.

In finance theory, this principle is known as "portfolio management" and is based on the Nobel Prize winning (1990) work of Harry M. Markowitz, from the City University of New York, on the foundations of portfolio analysis.

Someone following the Nobelist's guideposts but forging a track of his own is John F.P. Bridges, recently appointed assistant professor in the Division of Health Services Research in the Department of Epidemiology and Biostatistics in the School of Medicine at CWRU.

A health economist, Bridges applies portfolio management concepts to various aspects of health care management and research. He holds his doctorate from the City University of New York where he studied health economics and finance theory. Prior to joining the medical school, he lectured at the Weatherhead School of Management.

"Portfolio theory may be a beneficial theoretical contribution in the discipline of epidemiology as it highlights the importance of risk management in medical decision-making," Bridges said. "Namely, we should not only try to maximize the benefits associated with an intervention, but we should minimize the risk (variance) associated with the intervention. Furthermore, my research has shown that randomized control trials, normally the gold standard of medical evaluation, do not measure many important variables needed to apply portfolio theory in health care."

"For example, it is important to know the correlation between all the interventions to accurately measure the variance (risk) of a portfolio of interventions," he added. "Furthermore, it is very important to know if there are any synergies, both positive and negative, between the interventions."

In addition, Bridges said portfolio theory may be beneficial in the economic management of research funds in medicine.

"For example, research into the pathology of smallpox may not be as rewarding as predicted if there is not the basic public health infrastructure to deliver any findings to actual care that the community receives," he said.

"Finally, portfolio theory also may be beneficial in changing the focus of medical ethics away from patient-doctor relationships, towards more of a macro-oriented purchaser-provider relationship. This would stress that a fixed healthcare budget has to spend across a 'portfolio' of patients, and that tradeoffs have to be made across patients.

"Such an approach is very important when one considers the limited federal expenditures on national health care programs such as Medicare and Medicaid. One has to realize that the 'opportunity costs' of a new treatment program is not just the amount of money that is used in the delivery of that care, but the foregone benefits of using those resources elsewhere.

"For example, if the government wants to initiate a new prevention program that costs $100 million and will save 1,000 lives, then it must be able to find existing programs that cost $100 million, but that save less than 1,000 lives," he continued. "Unless this is possible, then the new program is not a good investment, unless, of course, the budget can be exapnded."

While such principles have been considered in other countries, such as the UK, there has been little discussion of them in the United States.

Bridges' previous research has focused on using portfolio theory in the evaluation of health care interventions and in the management services provided under prospective payment systems. Currently, his research examines the roles that portfolio management can play in other areas of health care provision and research.

In addition to his doctorate, Bridges holds a master's degree (honors first class) in economics from the University of Sydney and a bachelor's in economics with honors from Australian National University (ANU). He has tutored at St. John's College and Sancta Sophia College, both at the University of Sydney, and at ANU.

Among his awards are the American Statistics Association Best Student Paper in Health Policy Statistics, 2001; City University of New York Robert E. Gilleece Fellowship, 1999-2002; and NSW Health Masters of Economics Scholarship, University of Sydney, 1998.