Why the U.S. Healthcare System is not Broken

Ordinarily I blog about healthcare IT topics. However, having worked extensively in healthcare for the last 12 years, I have been an active participant in the healthcare discussion, both as a business executive who had to make decisions about health insurance coverage, and as a consultant working with provider clinics and hospitals. 

So this blog is about the U.S. healthcare system.

In the business executive role, I have had many discussions with other executives who have struggled with employee health insurance. Most executives that I know do not object to providing employee benefits such as paying health insurance premiums, but they do object to the seemingly uncontrollable healthcare cost increases and also their direct involvement in making decisions for healthcare coverage that intimately affect the lives of employees and their dependents. 

In my role as a consultant actively involved in working with provider institutions, I have heard no shortage of opinions on the current state of U.S. healthcare - as well as its future - from players ranging from billing clerks to hospital CEOs. In addition to being on the front lines and working directly in the industry, these employees and their dependents are also insurance beneficiaries, plus many of them in the executive ranks are responsible for making the aforementioned decisions regarding healthcare benefits for their employees.

In these discussions, and in the dialogue in the last few years involving healthcare reform, many people have opined that the U.S. healthcare system is broken.   

While I understand the concept of what’s being expressed, the statement is technically incorrect.

It’s not healthcare, it’s sick-care

The way things currently work in the United States, if you are sick, you go to the doctor, and when you are well you don’t. Under our current fee-for-service payment model, there has to be a procedure, a test, a surgery, or a prescription for a doctor to receive payment, either from an insurance company or from Medicare or Medicaid. If a provider cannot assign a code to services performed, then there will be no reimbursement. Indeed, for this very reason there is incredible effort expended by business office staff on billing and coding issues. 

Healthcare expenditures comprise roughly one-sixth of the U.S. GDP, which is the largest single sector of our economy. Yet in one of the greatest ironies imaginable, the two major players in the relationship - providers and patients - generally do not directly have the ability to understand or control costs.

In this greatest component of the U.S. economy, the consumer (patient) does not directly pay for the services, and sometimes does not even know what the fees are going to be, and the provider (doctor or hospital) usually does not set the rates. A third party - the payer - has much more control over fees and costs than the entity that delivers the service, or the consumer who receives the services.    

There have been many efforts to promote “preventative medicine,” but those efforts have primarily driven by insurance companies and self-insured employers as cost-containment efforts, not really focused on better health. And since very few preventative measures have billing codes associated with them, providers have little financial incentive to actually provide any services outside of the current catalog of approved procedures.

And for providers, the more services are prescribed and more procedures are performed, the higher the top-line income. Most of the incentives do not favor health and wellness, they favor services being performed.

Even the Affordable Care Act, which is frequently referred to under the general heading of healthcare reform, is actually no such thing. It is health payment reform, not healthcare reform.

It’s also not a system

As a formally trained engineer, the word “system” has special meaning that implies an overall design, with inherent principles such as control, component parts, and rules that can be modeled, controlled and replicated. 

Healthcare in the United States generally has none of these attributes. It is still largely a cottage industry, with many providers and clinics doing things completely on their own in isolation, and with a great deal of duplication and inefficiency. 

I favor free-market principles, allowing for innovation and competition to operate with a minimum of burdensome regulations. However, in virtually all other U.S. industries, such as banking, transportation, and even retail, there are necessary systems in place that govern overall processes and procedures.  Healthcare has many procedures and regulations, but defining them as a system is a stretch. 

Many thought leaders have said that healthcare is too important and too complicated to leave to the free market, and that the principles wouldn’t work anyway. One need only look at those healthcare procedures that have been subject to competitive free-market principles, where innovation and competition have driven down prices and increased quality and availability - and a great example of that is eye surgery, which used to be costly, complex and frequently fraught with complications.  Today the cost of Lasik surgery and similar procedures are a fraction of what they used to cost, and the outcomes are significantly better.

New care-delivery models, including accountable care organizations and the Patient-Centered Medical Home concept, are attempting to address the issues of sick care, transforming it to an approach based more on patient wellness.

The Triple Aim: What the real focus needs to be

The Institute for Healthcare Improvement has defined the principles that are appropriate guiding principles for reforming and improving our healthcare system*:

1. Improving the patient experience of care (including quality and satisfaction);

2. Improving the health of populations; and

3. Reducing the per capita cost of healthcare.

If you review and ponder on these principles, they represent a framework for success and improvement in wellness care. 

*It’s still hard to get away from that terminology…