When Will The Healthcare Dam Burst?

Last week I enjoyed a family camping trip with my wife and two children. We marveled at Nature's simple intricacy and took on a few moderately challenging hikes. During one hike we stopped by a local dam. Not particularly large, this earthen dam did its job and also provided a beautiful addition to the landscape. I could not help but wonder, however, where the weak points in the dam were or what changes were necessary to maintain the dam or even how long the dam would last... a decade, century, two centuries, a millenium? The dam would not be there at some point either through conscious planning or natural phenomena.

It then crossed my mind that I am probably in the minority of folks who think about such things instead of just enjoying the moment. I find myself in a similar situation professionally where I often ponder the challenges facing the US healthcare system and find myself wondering where the weak points are or what changes are necessary to maintain the system and how long the current system will last before there is an irreversible catastrophic failure.

There are quite a few weak points in the current US healthcare system; however, most people focus on one... Costs. Let's start there.

Costs

Before digging into the costs for the US healthcare system, we need to understand that our healthcare system is essentially a "closed" system. When we speak of the over $3 Trillion dollars spent annually on healthcare in the US, there is a definitive set of categories for which payments are made (and tracked as "healthcare" in publications like Health, United States, 2015):

Healthcare Expenditures

• Hospital care
• Physician and clinical services
• Other professional services
• Dental services
• Other health, residential, and personal care
• Home health care
• Nursing care facilities and continuing care retirement communities
• Prescription drugs
• Durable medical equipment
• Other nondurable medical products
• Government administration
• Net cost of health insurance
• Government public health activities
• Research
• Structures and equipment

Healthcare Payers

The sources of funding to pay the more than $3 Trillion annually for "healthcare" are:

• Out-of-pocket payments (i.e., by the patient)
• Health Insurance (e.g., Private payers, Medicare, Medicaid, CHIP)
• Other Insurance (e.g., Veteran's Administration, Department of Defense)
• Third Parties (e.g., worksite health care, other private revenues, workers’ compensation, general assistance, maternal and child health, other state and local programs, school health, etc.).

A "Closed" System

With the exception of Out-of-pocket payments (by the patient), payers will cover only those items appropriately submitted for payment by hospitals, physicians, other clinical services, dental services, home health care, etc. Every clinician agrees that proper nutrition greatly impacts health (though there is less agreement on what is "proper nutrition") yet groceries are not a healthcare cost. There is growing evidence of the health benefits from "mindfulness" exercises like Yoga and Tai Chi but those classes are also not covered. And the list of health determinants not included in "healthcare" goes on: social work, transportation, friendship, employment, finances, housing....

How closed is the US healthcare system? Let's consider data from the CDC's Table 94. National health expenditures, average annual percent change, and percent distribution, by type of expenditure: United States, selected years 1960-2014. Overall, the same categories account for all of the "healthcare" spend in 1960 and 2014, with fairly minimal changes of percentage distribution within the system over those five decades, as the chart below shows.

While the way we think of "healthcare" hasn't changed much in the past 50+ years and the components that make up the "healthcare" in this closed system remain fairly stagnant (e.g., hospitals, physicians, prescriptions, etc.) the impact of the "healthcare" system on the rest of the Nation is considerable.

The costs of healthcare have been outpacing inflation for decades and continue to grow as a percentage of the US Gross Domestic Product (GDP), meaning other items get fewer resources each year while healthcare continues to grow. Since 1980 there has been a marked increase in how much of its GDP the US spends on healthcare versus other developed nations.

This dramatic increase in the dollars available to the US healthcare system (through larger share of the GDP) since the 1980's has "lifted all boats" in this closed system. Though the makeup of the now +$3 Trillion "healthcare" system hasn't changed since 1960 and the percentage distribution of spend among those components has also been stagnant, the sheer volume of dollars tells another story (also from CDC's Table 94):

Even adjusting for inflation and demographic changes, 33% spent on hospitals of the $27.2 Billion healthcare spend in 1960 is very different than the 32.1% of spent on hospitals in 2014 of the $3.03 Trillion healthcare spend in 2014.

Outcomes

It would be understandable that costs increase if the outcomes were better but that is not the case.

The US spends more and gets less in "healthcare" than other developed nations. This borne out in a number of studies:

The Commonwealth Fund's study Mirror, Mirror on the Wall, 2014 Update: How the U.S. Health Care System Compares Internationally,

The Kaiser Family Foundation's finding that On several indicators of healthcare quality, the U.S. falls short,

The OECD's Health at a Glance 2015: How does the United States compare?

Again, while celebrating the advances made in "clinical care" in the past five decades we cannot be afraid to challenge the currently closed (and incomplete) US "healthcare" system. 

Health

The World Health Organization (WHO) has a pretty simple definition of health: Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.

Physicians go to "medical" school... not "health" school. They are trained to use evidence-based medicine to make treatment decisions and help people recover from a disease or infirmity. The American Association of Colleges of Osteopathic Medicine presents this in its Overview of the Four Year Curriculum. This is really and truly valuable... but incomplete. A practicing physician is simply not equipped (or traditionally expected) to understand, diagnose, and treat a patient's mental and social well-being. Rearranging what dollars flow to physicians vs. prescription drugs vs. home health and so on will have no more impact than rearranging deck chairs on the sinking Titanic. We must open the currently closed "healthcare" system. 

Rearranging what dollars flow to physicians vs. prescription drugs vs. home health and so on will have no more impact than rearranging deck chairs on the sinking Titanic.

An Open System Approach

Michael Porter is a luminary in business strategy. I have used his Five Forces model on so many occasions to help develop and review business plans. When Porter released his book, Redefining Health Care: Creating Value-Based Competition on Results, I bought it looking forward to his insights on how to transform healthcare. Where I expected new entrants, threat of substitutes, increased bargaining power for consumers and suppliers I found instead integration of practices and care delivery, bundled payments, cost metrics, etc. Even a brilliant strategist like Porter fell victim to the same closed system thinking that has plagued the US "healthcare" system for decades.

Using Porter's own Five Forces model in an open system for healthcare, I expect to see a Threat of New Entrants into clinical care (e.g., more retail clinics, more concierge) as well as Substitute Products and Services (e.g., Social Determinants of Health, Complementary Therapies), especially those Substitute Products and Services that better address chronic diseases (which account for 86% of our healthcare spend) than medical interventions alone.

Also we should remember that the "patient" does not want to be a "patient" (with the possible exception of something like "elective" surgery). We need to find mechanisms that help consumers not only bargain with the "healthcare" industry (e.g., price transparency) but, better yet, avoid becoming or remaining patients where possible. There is no better population for this than those with chronic diseases, most of whom need more help with non-clinical health determinants (e.g., smoking cessation, lifestyle change, housing, etc.). The answer is NOT more integrated care delivery among hospitals, primary care, and specialists but real coordination among all the health determinants for a consumer (which requires a whole new skillset).

The answer is NOT more integrated care delivery among hospitals, primary care, and specialists but real coordination among all the health determinants for a consumer (which requires a whole new skillset).

Summary

It would be disquieting to know that the dam on which I stood during our hike was treated as a "closed system" that was allowed to grow through decades of silt deposits and other hazards just because the dam had not burst in the last 50 years.

The healthcare challenges today are vastly different than 1960, with far more incidence of lifestyle diseases like Type II diabetes, COPD, cancer, and heart disease. It is not fair to those who have invested in clinical careers to force them into treatment situations where medical care contributes only a fraction of what is required. It makes no sense for a closed "healthcare" system to limit consumer access to Substitutes and New Entrants that provide better healthcare because it pays only for things recognized as healthcare decades ago, especially in the face of mounting evidence that supports better results and few adverse reactions. It is time to give consumers a say over their health through open data for pricing and outcomes across all healthcare therapies as well as more options for paying for such (e.g., Health Savings Accounts).

I so enjoy the possibilities for improving healthcare and openly invite those who want to work toward that better day to connect with me.

Be Well!

-Tim

Tim Perry, MPA, MS, CPHIMS, PCMH CCE, CISSP is a visionary Chief Information Officer who has a deep passion for transforming and improving healthcare. Tim is blessed with a wonderful wife and two inspiring children. Tim has practiced Tai Chi (Taiji Chuan) for over 15 years and enjoys cooking wholesome (and easy) meals.

Other Articles by Tim

Clinical Care ≠ Healthcare

Can You Handle the Truth about Healthcare?

Bending the Healthcare Cost Curve