50 ways to think about US healthcare
I was a healthcare consultant for 6 years, some reflections
How to improve US healthcare?
by Consultant's Mind | 0 comments
Complex problems do not have simple answers
There is not a simple answer. It took US healthcare 70+ years to get this fragmented, complex, political, entrenched, somewhat inequitable, and definitely exhausting place. It will take a lot of competition, collaboration, and leadership in government, private sector, non-profits, payers, providers, and patients. Basically, there is a lot of wood left to chop.
Healthcare matters
No one will deny this. If you’ve ever been sick and gotten better, medicine is magic. In 1900, the average life expectancy in the US (not a poor country then either) was 50 years old. Uh, I am 52 years old now (talk about borrowed time, right?)
Healthcare is massive
It’s 1/5 of the US economy. It is measured in the trillions of dollars (trillions with a T). $4,000,000,000,000+
If you take all of US healthcare and divide by the number of people (330 million); it’s $12K per year per person; that’s the equivalent of leasing a Mercedes for everyone in the country, every year
There are 5,600+ hospitals and thousands of other sites of care (ambulatory surgery centers, urgent care)
Healthcare is Complex
There are multiple healthcare systems running concurrently. There are private & public providers. There is Medicare for the elderly. There is Medicaid for the poor, disadvantaged. There are commercial plans for the employed or pay out-of- pocket. There is the Veterans Administration (VA) for the military and veterans. You get the point, it’s not just 1 system.
Healthcare results are variable
There is no such thing as “average” and that’s doubly true for US healthcare. We have the best care in the US (foreigners fly to the US to get care). We are also the only OECD rich country that doesn’t insure everyone. In fact, 8-10% of Americans have no healthcare insurance; they go to the emergency room as their primary care (expensive, painful).
Healthcare is changing
We are living longer and we are more likely to die of chronic illness than infectious diseases (note: Covid-19 was a big anomaly in the trend). So if you have high blood pressure, you need to eat right, exercise, take medicine, see your primary care doctor, and accountability for your health. Until now, the US system was sickcare (get sick and get fixed) vs. healthcare (proactivity managing your own health).
If interested, strongly recommend you read these two books (affiliate links):
The Healthcare Handbook, 3rd edition, Askins, Moore – This is the only book I assign for my healthcare class. Written by two physicians, it’s direct, well-documented, easy-to-read, and useful.
The Long Fix, Lee – Also written by a physician, who runs Google’s Verily health subsidiary. Well-written ideas on how we can nudge everyone to improve healthcare – government, payers, providers, patients.
Healthcare has many middlemen
If you know anyone in healthcare, ask them how much time they spend doing paperwork. There is an incredibly byzantine system of charges, lists, regulations, process, middlemen, and charting that most doctors spend 1:1 hour of paperwork for every hour they spend with patients. Pharmacy benefits managers (PBM) sit in between pharmaceutical companies and providers. The “chartmaster” is a secretive list of negotiated payment rates between providers and payers. The case mix (% of commercial payers vs. Medicare vs. Medicaid) drives the profitability of hospitals and physician groups.
how I teach / Think about healthcare
I recently ran a two day boot camp for executive MBA. This is the list of the videos and the discussions we had:
Healthcare introduction: What is your bias going into these discussions?
Current situation in US healthcare: The US spends 1/5 of the economy of healthcare, we have sub-par results
Economics of healthcare: Healthcare is not a perfect market, what are 3 reasons it’s not?
Hospitals, health systems: Hospitals & physician groups make 50% of total spending on healthcare
Fixed cost in US healthcare: Since there are high fixed costs, there are barriers to entry and exit
Shift to ambulatory care: What should a hospital CEO do with the 900,000+ inpatient beds we have in the US?
Hospital profitability: Average hospital profitability is 2-7%, depending on the case mix and the year, not great
Health insurance: Employer-based insurance started in the 1950s, but does it really make sense to do it this way
Medicare: CMS sets the standard for reimbursement rates nationally, commercial payers usually follow suit
Healthcare pricing: Since you don’t know the price until AFTER you get the service, it’s hard to be a savvy buyer
Medicare for all: During the elections, people say “let’s just have Medicare for all”, but what about the 1M people who work at commercial insurance companies (e.g., Aetna, United Healthcare, Cigna, Humana etc) are 50%+ of market•
Affordable Care Act (ACA, a.k.a., Obamacare): three-legged stool a) guarantee issue insurance (yes, even people with pre-existing conditions get covered) depends on b) community rating c) individual mandate
What is strategy: Creating a sustainable competitive advantage that helps you to ‘win’ over the long-term
Best practices: These are often freely shared among healthcare providers, and yet, not implemented fully
Strategy = tradeoffs: You cannot be all things to all people; better to focus and be great at a narrow set of things
Strategy is not planning: Planning = focusing on inputs, reducing risk, strategy = focused on results, winning
Implementing strategy: It takes a clarity (commander’s intent) and commitment (culture) to make things happen
Healthcare in the news: Huge M&A happening in provider space (Kaiser + Geisinger); what’s your opinion?
Healthcare industries: It’s a dozen different industries (pharma, provider, medical device) with varying margin %
Industry analysis: Yes, competition is more than just your rivals (think: suppliers, distributors, new entrants)
Economic moat: What are you doing to make it difficult for new entrants to steal your customers, profits?
Industry convergence: Industries are not necessarily distinct (think: UNH insurance is the largest physician employer
Intermountain healthcare: Well-known, high-quality health system is making their own generic drugs
Industry trends according to CEO: Look for gains from IT integration and clinical variance reduction
Quality: Four quality failures (over-use, under-use, mis-use, variation)
Quality: Donabedian Triad thinks of quality as a progression: 1) infrastructure 2) process 3) outcomes
Quality: Making healthcare better (NY Times article), amazing here
Quality: Joint Commission is the largest accreditation body; without their gold star = trouble
Quality: Readmissions reduction program is just 1 example of CMS programs to put more risk-sharing on providers
Quality: HCAHPS is a patient satisfaction survey which gives “voice of the patient” (good), but also can be gamed (bad)
Quality: DMAIC is Lean / Six sigma tool to D (define), M (measure), AI (analyze, improve), C (control) performance
Quality: Being Mortal is an incredible book written by Atul Gawande (affiliate link) on living a good life, ending well
Cost: Flow of funds show where the $$ for US healthcare comes from (patients) and goes (payers, providers)
Cost: Administrative costs = massive. McKinsey estimates here that $250Billion (with a B) could be saved
Cost: Critical to quality (CTQ) asks the question, “What’s truly needed and value added?” If not, don’t do it
Cost: 8 kinds of waste TIMWOODS (transportation, inventory, motion, waiting, overproducing, overprocessing, skills)
Cost: Reducing clinical variation is a huge opportunity because the “standard of care” definition varies, a lot
Cost: Consumerism has started with people “shopping around” because of higher co-pays and other incentives
Cost: Economies of scale provides the benefits of being big: financial, operational, talent, clinician, population health
Access: Americans – even those with insurance – often have to wait too-long for care. This problem is not unique to the US, look at the trouble with wait times in the UK with NHS.
Access; Rural America is 20% of population. Many critical access hospitals (under 25 beds) are often underfunded
Access: Provider capacity is a challenge (even in the US). We need to increase supply, which is not simple
Access: Telehealth adoption spiked (because we had to during the pandemic), but many obstacles remain
Access: Disruptive innovation is “less for less” which need to sounds bad, but it’s super practical and cost-savings
Access: If telemedicine is such a “no-brainer” why is Teledoc consistently unprofitable?
Access: Healthcare equity is not the same as access. Who you are, where you were born, where you live matters.
Access: The vaccines which were developed because of Covid-19 was a testament to ingenuity, power of focus
Provider well-being: Oddly, technology often makes providers’ lives more difficult & increases costs
Provider well being: We are burning out our clinicians; the system makes it difficult to care for patients = bad K
Keep learning; here are 90+ links to different resources to learn more about US healthcare
Healthcare matters and needs your help
Stay engaged, as patients, as providers, as taxpayers, as caregivers, as curious people. I am proud clinicians and the work they do for all of us. Thank you CKL and ITG.