Sunk Costs Are Sinking Healthcare

Peter Drucker is often credited with the famous expression "culture eats strategy for breakfast" (or lunch).  In other words, you can have all the visionaries you want, brainstorm the greatest ideas ever, and develop very snazzy Powerpoints, but if the people responsible for making the strategy actually happen either don't know how to -- or simply don't want to -- carry it out, well, forget about it.

Dr. Brent James, the Vice President and Chief Quality Officer for Intermountain Healthcare, goes Professor Drucker one step further: "If culture eats strategy for breakfast, then infrastructure eats culture for lunch."

As NEJM Catalyst explained, "In other words, infrastructure lays the foundation for culture."

Infrastructure in organizations dictates much of how things get done in them.  It enables most of the organization's tasks.  It is essential.

However, infrastructure also often defines what people in organizations think can be done, perhaps even what should be done.  Much of this is implicit rather than explicit.  People don't always recognize how their underlying infrastructure shapes their perceptions of not only the existing but also the possible.

This is a problem for health care.

We have hospitals, so we must try to fill them; not only that, we need to make them even bigger.  We have scanners, so we must use them.  We have new drugs or new devices, which are all-too-often at best only marginally better than existing ones, so we must start giving to patients.  We develop new surgical procedures, so we compete on who can start doing the most of them the soonest, not always even pausing to ask if those surgeries are necessary or appropriate for all the people who end up getting them.

We have funding mechanisms that don't work well even for the people who have access to them, so of course we try to give access to them to more people.  We have health plan designs that no one really understands, so we keep making them even more complicated (anyone know what a Tier 4 non-network drug is, or why there is such a thing?).  We have bills that can at most charitably be described as incomprehensible, so we're adding more procedures and more codes to make them moreso. 

We have EHRs that everyone hates and many think actually interferes with patient care, but we rush to extend them.  We have billing systems and claims processing systems that are in a figurative arms race against each other, the former seeking to enhance revenue while the latter tries to impede those efforts, even at the price of impacting people's care, so we keep pouring more money into each.

We buy up hospitals and medical practices in the name of integration and/or efficiency, even though there is precious little evidence that such consolidation does anything except to raise costs.  The infrastructure just gets bigger and more bureaucratic. 

 We spend over $3 trillion a year on our health care system, as wildly inefficient as it is and as much wasted care as it delivers, and yet we're putting ever more into the infrastructure that supports it. 

There is in economics something called the "sunk cost fallacy."  This comes when people or organizations continue behaviors mainly because they've already invested so much in them -- whether that investment are dollars, time, or effort. 

The more of any that are "spent" on something, the more reluctant people are to admit that perhaps it is time to stop such spending. 

Sound familiar when thinking of health care?

People think we're spending too much on health care and on health insurance.  Clinicians are frustrated with their administrative burdens, and admit that there's significant overtreatment.  Politicians on both sides argue that the existing system isn't working, but neither offer any fundamental changes to it.

Yes, spending on health care technology is booming.  Yes, there are plenty of health care start-ups who ostensibly seek to "disrupt" the health care system.  But, are they remaking our health care system? 

No, the existing health care infrastructure is eating their breakfast, lunch, and dinner.

I'm as big a believer in technology and innovation as anyone.  I believe that, at some point, the health care system will get disrupted, in ways that we're not thinking enough about and that can lead to healthier lives, at lower costs (not just lower rates of increase),. 

But our sunk costs about how we think about health care are limiting us.  Our existing infrastructure is so large and so complex that the prospect of truly getting rid of major portions of it is too daunting for almost any innovator.

After all, with $3 trillion in play and known inefficiencies, it is much easier to make money -- and to get investors -- if an innovator can figure out how they can make just some small part of it just somewhat better, and keep a sliver of all that spending for themselves. 

Imagining and implementing a whole new infrastructure is a lot harder, and a lot riskier.

The analogy is already overused, but still instructive: Uber and AirBnb didn't reinvent their industries by pouring money into the existing infrastructure of the taxi and hotel businesses, respectively.  They imagined a whole new business with a distinct (and less capital-intensive) infrastructure. 

So forgive me if I don't get excited when, say, UPMC invests $2b into new hospitals, Epic is switching to CHRs, or Roche is putting $11b into R&D.  I don't expect to see new paradigms for our health care system to come out of that kind of spending, nor do I think my health care is going to get any less expensive.  Or that I'll become any healthier.

Done right, infrastructure can, indeed, help "cure" health care, as Enmi Kendall and Anya Schiess wrote earlier this year.  Done right, changing the culture within health care will make it possible for us to change the system and its infrastructure.  But neither one of those is easy and neither is a given to happen. 

The first step in digging oneself out of a hole is to realize that you are sunk in it.