Health care needs a better business model.
HHS reports that U.S. health care spending will surpass $10,000 per person this year, will grow almost 6% annually for the foreseeable future, and will consume over 20% of GDP by 2025. About half of our spending goes for labor costs, with health care employment remaining one of the "bright spots" in our economy. Indeed, health care jobs continued to soar even when the economy tanked in our most recent recession.
Despite that steady growth, we continue to talk about a physician shortage, especially for primary care. Medical school enrollment is at new highs, yet it is not projected to dent the demand. As a result, we're importing more physicians -- as many as 25% of U.S. physicians were born outside the U.S. -- and trying to figure out how to use more physician extenders like physician assistants. There are similar projected shortfalls for nurses, pharmacists, and other key health care workers.
One has to wonder why well-paid, high prestige jobs in a booming industry would go begging. One could look at the high costs (both time and money) for training and/or the effect of the various licensing cartels -- er, boards -- but the simple answer may be reflected in those steadily rising costs. All of those costs are revenue for someone, and no one really cares as much about slowing them as much as the people and organizations earning them do about protecting them.
E.g., it's not that we don't or won't have enough health care professionals, it's that it's just hard to keep up with the demand they help create
Last year Atul Gawande wrote about the "avalanche of unnecessary care," citing not just low-value but "no value" care that represent undue financial and other burdens on patients. Unnecessary perhaps, and in some cases even harmful, but always revenue for someone in the health care system.
Of course, now we're moving towards accountable care organizations and value-based purchasing, but to say the jury is still out on these would be to overstate the trial. The health care system has successfully weathered a wide variety of attempts to control costs over the past sixty years (e.g., ever since Medicare and Medicaid helped open the floodgates), and a betting person would have to give it the edge in these latest efforts as well.
If health care was, say, the smartphone industry, people would be thrilled with such steady revenue growth. Investors would flock to it, economists wouldn't worry much about people diverting other spending to pay for their smartphones, and smartphone purchasers would most likely be pretty happy with their new phones.
In health care, though, there is a pervasive sense we're not really getting good value for all that spending. International comparisons consistently show that, despite our vastly higher spending, our health outcomes and health status are practically third world.
The problem is that we're not buying health; we're buying medical care. Often it does help improve our health, or at least ameliorate some of our health issues, but no one in the health system is really getting paid to keep us healthy. In fact, most parties get paid only when we aren't healthy. And, for the most part, they get paid even if they don't actually make us better.
That is the mother of all perverse incentives.
We pay lip service to keeping people healthy, such as by stressing annual physicals and various preventive screenings, but the data on their efficacy is embarrassingly slim, with some evidence that the false positives -- with all their associated follow-up treatments -- may outweigh the benefits.
Even health insurers, which arguably do benefit if their members are healthy, care most about being able to accurately predict how much their costs will go up. Having their costs go up means higher revenue for them too, if they've forecast correctly. It's easier to hire better actuaries than to try to keep members healthy
Face it: the business model our health care system is built around is sick people. Whether you are a drug company, a hospital, or a doctor, repeat customers help fuel your revenue, and the sicker they are, the more that revenue is. That is not to impugn the motives of (most of) those people; they are simply responding rationally to the business model we have.
We're going to need a different business model. Dave Chase likes to remind us that, according to RWJF, clinical care only drives 20% of clinical outcomes, yet gets 90% of our spending. Social and economic factors and health behaviors account for most of what happens to our heath. Yet that care is the focus of our current business model.
We're on the wrong path.
We're going to need a business model that focuses on health, not sickness and certainly not just medical care. It needs to be a business model that earns money by its customers being healthy. As Esther Dyson recently tweeted, "best way to lower healthcare costs (not prices) is to reduce need for care bc people are healthy!"
Whether we like it or not, the new business model is probably not going to be built around the current crop of health care professionals and institutions. Hospitals can call themselves "health systems" and doctors of medicine can say they will manage our good health as well as our sickness, but there's a certain square peg/round hole aspect to these claims.
If we want a better health care system, let's start with one that doesn't constantly strive to get more doctors, more hospitals, more prescription drugs, more medical devices, but rather one that competes on how we get fewer patients -- fewer people who need care. The more customers who stay healthy, and the healthier they are, the more money to be made.
It sounds simple, but it would be a radical change.
People will still get sick. People will still get cancer and heart disease. People will still get injured. There's going to always be a need for medical care to deal with these health issues. We will need to figure out how to fairly pay for their care, without breaking the bank. But the tail shouldn't wag the dog -- as it does now.
I'm all for efforts to make our health care system deliver more value and better health, but I'm much more interested in business models that will transform it into something that truly is about health.