This morning, I was enlightened by Andy Kessler's article today in Technology Review, which explains why "the medical industry has a vested interest in inefficiency." No other industry remains entrenched with paper-based processes, and willfully denies itself the cost-savings and market-expansion potential inherent in capturing process data in real-time and mining that data for intelligence. I find it chilling that I have more real-time production data and analytical reporting on our warehouse picking operations than is available to hospitals about their patient treatments and outcomes. I have, at my fingertips, a complete audit trail of a sofa as it moves through the company and to the consumer. The medical profession cannot track the similar movement of a patient through his or her treatments, even within a single hospital. How can that be? Kessler explains:
The reason lies neither with cost nor with inadequate technology. Rather, the health-care industry's reluctance to digitize its records is rooted in a desire to keep medicine's lucrative business model hidden. Dangling $19 billion in front of a $2.4 trillion industry is not nearly enough to get it to reveal the financial secrets that electronic health records are likely to uncover--and upon which its huge profits depend. In those medical records lie the ugly truth about the business of medicine: sickness is profitable. The greater the number of treatments, procedures, and hospital stays, the larger the profit. There is little incentive for doctors and hospitals to identify or reduce wasteful spending in medicine.
What we do follows from the outcomes we seek. Health-care's current targeted outcome is profiting from sickness. If the industry's targeted outcome was health, it could be a robust industry fearless of competition either private or public. This change in objectives would align the industry with its consumers and all of its partners, including the federal government.
Contributing to the fear about oncoming changes to the industry must be the perception of value along the entire channel. The threat of single-payer is essentially no different from the threat of disintermediation which was precipitated in the 90's by the powerful Dell direct-selling model. Experience should have taught us that the close evaluation of a value stream does not necessarily lead to disintermediation; rather, it should force the intermediary players to bring unique value to the channel. In supply chain, this has caused wholesalers and retailers to do more than aggregate product and increase margin, which in turn has resulted in these intermediary players bringing value that the manufacturer cannot provide and for which the consumer is willing to pay. Health-care, feeling threatened, should take note: the marketplace is willing to pay for the value you create and no longer willing to pay you to take profit from our illness.
Update: 24 July 2009- Updated link to Kessler article; the original had elapsed. See TR's July/Aug issue for the article. It's a great magazine and worth picking up.
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2 comments:
From your keyboard to Congress' ears. One question we all need to ask is how we got here. IMHO one of the big problems with the American health care industry is that it continues to be allowed to call itself that, an industry, a market participant, responding to market forces. In fact, the health care environment is not really a market animal. The participants - the customers - are not willing participants in most cases where it matters. The knowledge differential between supplier and consumer is profound and in most cases absolute, making the 'product' a kind of sealed box, the contents of which the consumer has little or no control over and little or no opportunity for comparison shopping. Hospitals, insurance companies, and doctors too, have all the incentive in the world to make what they do seem like hocus-pocus to the rest of us mere mortals. The less we know, the more they make. This is not so much market behavior, I think, as behavior typical of nineteenth century monopolies.
Thanks for the thought provoking post.
The problem with electronic records is relatively straight forward. Contrary to "hiding" items which increase the cost of medicine is the risk that centralized electronic records may increase the risk of identity and data theft. The use of such records also has patient medical records being placed outside out the normal doctor-patient relationship for purposes for which a patient--or a doctor--may not fully authorize. If the data flow is limited, the centralization is of no value. IF the data flow is unlimited, personal identifying infomation, along with sensitive medical conditions, will be disturbed.
Might it not be a good idea to take a look how the 16% of medical expenses in GDP is being spent, identify the wastes in the current spending, propose remedies to the waste, and then see what results. As far as I know, medicine is governed by economics and not a Great Speckled Bird.
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