ShareHealthcare is a significant portion of the US economy currently and as the baby boom generation grows older is likely to become an even larger portion of the economy. Healthcare spending is already increasing more rapidly than other costs, for the federal government, state governments, companies, and individuals. Those costs will accelerate as demand for healthcare services grows and as Democrats and Republicans respond to an aging citizenry.
Despite the heavy costs imposed by the Food and Drug Administration on drug discovery, the US has the most innovation in finding new treatments and procedures for diseases and ailments, so much so that the rest of the world relies upon US innovation to a great degree.
However, the US has not innovated enough on accurately diagnosing ailments and commodotizing the treatments for such ailments. Diagnosis is often done by a doctor (expensive), whose skills at diagnosis can vary significantly (which is not well understood by the patient), in a hospital (so the patient is paying for a huge physical plant but may have access to more costly testing equipment).
It’s difficult if not impossible for a patient to know the error rate of a particular doctor at diagnosing ailments. Even once properly diagnosed, there is not much visibility by the patient on the pricing or costs of a treatment.
What should be done to fix the system? Clayton Christensen, a rather famous professor at Harvard Business School, author of the Innovator’s Dilemma and a variety of other rather insightful business books, gave a very interesting interview with the NY Times on this subject. Here are some excerpts:
Q. The nation’s medical system is regularly offering increasingly advanced procedures and treatments. Isn’t that a good thing?
A. If you look at the progress that today’s hospitals and the medical profession have made, they continue to push the leading edge of what’s very difficult to do. But that’s a very different dimension of performance improvement than the one that makes more people better off, and that is making it affordable and accessible. In other industries, whenever affordability and accessibility have come, it has not come from making mainframe computers better but rather from commoditizing mainframes so that average people with average money can have access to high-quality computing, meaning personal computers. It came from disruptive technology rather than improvements on the existing system. Michael Dell could assemble one of these things in his dorm room.
Q. What’s the relevance to health care?
A. In health care, rather than replicating the expensive expertise of Mount Sinai Medical Center or Mass General Hospital or replicating the expensive expertise of doctors, we have to commoditize their expertise. That comes through the precise ability to diagnose the diseases that people have. Our ability to diagnose the diseases is moving ahead at a breathtaking pace, but regulation and reimbursement are trapping the delivery of rules-based medicine in high-cost business models.
Q. An example of what you mean?
A. A hundred years ago, there was a big disease that nobody understood and was often fatal, called consumption. Little by little, medical science began to unpack that symptomatic description, which was that your lungs filled up with gunk and you died. The reason we couldn’t cure it was that what we thought was a single disease was a whole bunch of different diseases. You had tuberculosis there, at least three types, and you had pneumonia. We thought it was all one disease. So the care had to be left with doctors because they were the ones with the training and the judgment, but once you could precisely diagnose the cause of the disease, you could then develop a cure. It was so rules-based that you didn’t need a doctor any longer. Today a technician can diagnose those diseases and a nurse can treat them.
Q. Are you saying doctors rather than the pharmaceutical industry are the root cause of what’s gone wrong?
A. The pharmaceutical industry has been focused on therapy, not diagnosis. The medical profession has simply accepted that many of these diseases are well-diagnosed, when in fact they aren’t. As a consequence, we haven’t moved the health care profession into a world where nurses can provide diagnosis and care. Regulation is keeping the treatment in expensive hospitals when in fact much lower cost-delivery models are available.
Q. Wouldn’t your solution require a dramatically different regulatory environment?
A. It differs state by state. In Massachusetts, nurses cannot write prescriptions. But in Minnesota, nurse practitioners can. So there has emerged in Minnesota a clinic called the MinuteClinic. These clinics operate in Target stores and CVS drugstores. They are staffed only by nurse practitioners. There’s a big sign on the door that says, “We treat these 16 rules-based disorders.” They include strep throat, pink eye, urinary tract infection, earaches and sinus infections.
These are things for which very unambiguous, “go, no-go” tests exist. You’re in and out in 15 minutes or it’s free, and it’s a $39 flat fee. These things are just booming because high-quality health care at that level is defined by convenience and accessibility. That’s a commoditization of the expertise. To have those same disorders treated in Massachusetts, you’ve got to go to a regular doctor, go through a long wait in their office, you go in and see the doctor for two minutes. He says, “You have an earache,” which you knew already, and then they charge you $150.
Q. Aren’t the pharmaceutical companies also profiting?
A. They are. But in general, pharmaceutical breakthroughs that involve a precise diagnosis of a disease and an effective therapy save the system a tremendous amount of money even though the drugs may appear to be high-cost.
Q. There are many other players in the system, including hospitals and insurance companies. What’s your prescription for them?
A. The whole system is broken. It will take a major overhaul to unlock it. Forgive me by talking by analogy, but when color TV was first invented by RCA, nobody would broadcast in color because nobody had color TVs and nobody would buy color TVs because nobody was broadcasting in color. They just couldn’t make the system come together until David Sarnoff, who ran RCA, bought NBC. By integrating across the whole system, he made it all happen.
The current health care system is divided into buckets. You have the insurers, the employers who put up the money, the providers such as doctors and nurses, and the hospitals. Because they exist as independent companies, they can each improve themselves, but they can’t re-architect the system in the way that it needs to be changed.
There are two health care systems in the West, Intermountain Health Care in Utah and Kaiser Permanente in California, that are in fact integrated across each of those pieces of the system. They are far ahead of the rest of the world in bringing rules-based diagnosis and therapy in cost-effective business models to their patients.
And here is the complete interview: http://www.nytimes.com/2006/12/31/jobs/31advi.html?ref=yourmoney&pagewanted=all
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