In 1980, industry healthcare planners imagined a system where the centerpiece was a hospital in every community and a complement of physicians. Demand forecasting was fairly straightforward: based on the population’s growth and age, the need was 4 beds per thousand and 140 docs per 100,000, give or take a few.
In 1996, the Dartmouth Center for the Evaluative Clinical Sciences published the Dartmouth Atlas on Health Care quantifying variability in the intensity of services provided Medicare enrollees in each U.S. zip code. They defined 306 hospital referral regions (HRRs) that remain today as the basis for regulation of our healthcare system.
In the same timeframe (1980-2000), the ratio of doctors per 100,000 doubled as the number of medical schools increased from 75 to 126 leading health planners (Graduate Medical Education National Advisory Council) to predict a surplus of 70,000. Meanwhile, demand for hospital beds edged down slightly to 3.5/1000—the result of managed care efforts in certain parts of the country.
Today, we operate 2.4 beds per thousand and have 265 physicians per 100,000. But the bigger story is the widespread variability in the volume, costs and quality of care across our communities. Across the 306 HRRs, bed supply ranges almost 250%; physician supply even more and costs as much as 400%.
For almost 40 years, we’ve operated the U.S. health system based on an underlying assumption that all healthcare is local. We’ve presumed that except in rare circumstances, patients stayed home for the care they need. But that’s changing.
Three trends are converging that are changing how we think of the markets we serve:
Virtual care: Goldman Sachs forecasts virtual care will be a $20 billion industry by 2020 as employers and insurers adopt lower cost options to local medicine. Investor-funded companies (American Well, Teladoc, 2nd.MD, Carena, Health Integrated, MD Live, et al) offer distance medicine that is convenient and less costly. 78% of consumers say they would be receptive to receiving care virtually (Carenet Healthcare Services) though only 14% of hospitals offer digital tools and only 23% offer telemedicine (Kaufman Hall). And funding for digital health is robust: per RockHealth, start-ups have attracted $18 billion in the last four years, with most applications targeting mechanisms whereby consumers can make better choices about the care they receive, where, from whom and at what cost.
Destination Hubs: Historically, individuals left their community when facing a complex diagnosis based on a referral from a trusted local clinician. For cancer, Hutchinson, Dana Farber, Memorial Sloan Kettering, Mayo, MD Anderson, Moffit and others were prominent. For hearts, Cleveland Clinic, New York Presbyterian, Mayo, Mass General, Duke, Northwestern, Brigham and Women’s and others attracted referrals. Most of these set-up referral management programs to accommodate out of town patients, offering lodging and other forms of assistance. But destination hubs have expanded beyond those that cater to physician referrals. Each of these is a business model that makes a big bet that consumers will leave their community for care elsewhere:
Founded in 1988, Cancer Treatment Centers of America (CTSA) operates inpatient and outpatient facilities in 5 markets. Its national ads promote its integrative clinical model and patient-friendly approach to diagnosing and treating the full continuum of cancers. On its website, patient satisfaction scores for each patient cohort are reported with scores averaging above 95%.
Founded in 2005, Laser Spine Institute operates surgery centers in 7 markets and advertises nationally. It offers a free MRI and requires candidates for their minimally invasive procedures to stay within 15 miles of their surgery center one day after the procedure for post-op follow-up. Per its website, the company has performed 75,000 procedures: 60% for patients who live outside its markets.
Large employers like Boeing, Wal-Mart, Lowe’s, Whole Foods are contracting directly with hospitals out of their local markets. Though only 3% of employers contract directly today, the National Business Group on Health estimates activity will increase as health costs escalate in coming years.
And medical tourism remains a factor: According to Patients beyond Borders, 1.4 million U.S. adults traveled outside the U.S. for medical care last year. The Joint Commission International accredits 458 hospitals off-shore that perform elective surgical procedures as 30% of the
So, destination hubs are no longer limited to tertiary care providers in urban settings.
Affordability: One in five Americans under the age of 65 say they are having problems paying their medical bills and 2 million will declare bankruptcy due to medical debt this year (Nerd Wallet). As prices charged by U.S. providers. Reported by the Federal Reserve last November, household debt hit an all-time high last year increasing 16% since the summer of 2013. Student loan, medical and mortgage debt are the culprits. As households face higher deductibles, affordable options will be on their radar. Out-of-market healthcare services offered at a lower price by a reputable provider will be attractive. And the entry of Amazon-JPMorgan-Berkshire Hathaway into the fray of employer benefits and health cost containment promises to spark increased consideration of new models and strategies.
The bottom line is this: healthcare is no longer about competition between insurers, physicians and hospitals operating in a relatively confined hospital referral region. It’s about health facilities and services offered by parties that bet local consumers will respond favorably to their pitches.
The reality is that consumers are finding alternatives to local care: some to obtain services they can’t get at home and many for care they think better, cheaper or easier to access elsewhere.
For the least fortunate in our communities, staying at home for care is reality. For others, out of town options are expanding.
Strategies that presume all healthcare is local are bound to the same fate as Borders, Blockbuster and 10,000 other retailers who’ve ceased operations in the past decade as their markets changed (National Retail Federation). They recognized the retail apocalypse too late to respond.
So, at best, some healthcare is local, but not all.
Paul
Categories: Uncategorized
With the healthcare industry moving from fee-based to value-based care, healthcare providers are adapting to digital solutions to drive better patient care. Digitization in healthcare is growing at an exponential rate. Solutions like patient referral management, chronic care management, care management will be of help to provide quality care to patients.
Paul – saw the headline and said “finally” – someone discussing the reality of consumer centric 21st century healthcare. Or as I sometimes say, 21st century healthcare is ”wherever the consumer engages in care”.
Then I got to the comments;)
Patient engagement has always challenged what medicine can achieve. If the patient doesn’t do what the doc says – the best medicine can not deliver results. So why would we discourage any health consumer from proactively managing their health or their condition wherever / however / whenever they choose? Ask a millennial about their primary care physician. You’ll probably get a blank stare – what is a PCP? Healthcare in this generation is largely delivered in retail or urgent care clinics and direct to a specialist if necessary.
In 2000, after numerous visits to multiple physicians my 8 yr old son was diagnosed with Alveolar Rhabdomyosarcoma. I believe the stats at that time – he was one of 50 cases diagnosed each year in the U.S. We thought the world of our pediatrician, but the fact that she had not previously encountered his condition we never saw as “her limitation”. Just the cold hard reality of thousands of patients/doc and 24 hours in the day. During his treatment at Johns Hopkins we met many families that drove 5+ hours for care. (I can assure you, they were not the “jet-set”. They were simply terrified parents that would have traveled anywhere to help their child.)
We have only scratched the surface of innovation in healthcare/care delivery. We can stick our heads in the sand and say, the best care is locally delivered by a knowledgeable physician (given all he/she has read, studied or encountered) or we can embrace a technology enabled world that is becoming borderless. Alternatives for care delivery and health management are becoming more consumer friendly, engaging, convenient ….and thus likely to be utilized by individuals. (Which will improve outcomes – isn’t that the end goal?) I guess I’m in the bullish camp that believes the best care is yet to come!
What a load of codswallop!
Weren’t you the guy who predicted that American medical tourism would almost octuple from 750k visits in 2007 to six million overseas visits in 2010? http://www.coa.org/docs/DeloitteStudyMedicalTourism_111209_web.pdf
What happened?
When you actually look at what people do, they basically cross one border (Mexico?). Having been a medical tourist recently, I can tell you that the recovery is really a bitch when you are thousands of miles from the initial site of care and your care team. It is not all it’s cracked up to be.
Agree that a lot of exciting investments are being made in digital health. All that seems to be missing are profits, and a sustainable business model for rewarding all the app development. How many of the enterprises you cited are cash flowing?
Maybe you will be more successful than the rest of us getting any real data on how many people are actually using Wal-Mart’s Centers of Excellence. Wal-Mart made its network members sign non-disclosures about their actual volumes. Wonder why?
Agree with the other commenters. You ought to know better than to cite CTCA as a successful business. They are a quack driven enterprise preying on the desperate. Really wonder how much of the surgery the Laser Spine folks do is really necessary. Doesn’t matter in retail-o-topia, I guess.
Time to breathe actual oxygen and look for some real numbers.
The vast majority of health care will be local. The super rich will be able to jet set around finding the Disney hip replacement or the best smoothie bar in any cancer center. Telemedicine will allow anyone to have the most trivial and inconsequential illnesses treated immediately, amplifying needless care. The rest of humanity will be in narrow networks, ACOs, or under resourced.
How about a new definition of “HEALTH” as a basis to focus our thoughts about healthcare? Here’s my own contemporary definition.
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A person’s daily expression of life-long survival that is: ENDOWED BY the person’s unique capabilities at birth as augmented by an innate temperament and baseline homeostasis; NURTURED BY the person’s Family with support from a Extended Family and Neighborhood Network to enhance the person’s eventual Personal Survival Plan; MATURED BY the daily occurrence of Disruptive Processes as mitigated by the person’s Extended Family; and SUSTAINED BY the person’s Family Traditions and the Common Good of their community until the person’s innate temperament and baseline homeostasis become insufficient for the person’s survival from the irreversible adverse effects of Disruptive Processes during the person’s life-time.
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With this view of healthcare, a person’s HEALTH is always local and the origins of its healthcare for the effects of Disruptive Events should eventually begin through “medical TRIAGE” offered by the person’s Primary Physician. This relationship promotes HEALTH most effectively and efficiently when characterized by a high level of Social Capital.
The option to travel for health care is definitely for the money’d set. The fight to save rural hospitals shows that again the marginalized in this country get crap for health care options.
I too am skeptical of the Cancer Treatment Centers of America. Their ads are slick (too slick) and they sell the assumption that – “We can save you when everyone else can’t.” My take is they drain whatever is left of your insurance coverage. Contrast that to Shriners and St. Judes that sells – “We’ll treat you when others won’t.”
“In the same timeframe (1980-2000), the ratio of doctors per 100,000 doubled as the number of medical schools increased from 75 to 126”
“Today, we operate 2.4 beds per thousand and have 265 physicians per 100,000.”
And we wonder why health care costs have skyrocketed. Every doctor created is a profit center expectation – and we get no healthier.
Has something changed with Cancer Treatment Centers of America? They have had such a checkered reputation that I am surprised that anyone on a reputable blog would use them as a good example.
More broadly, the number of people who are willing and able to travel very far remains pretty limited. If you work and talk with real live patients you understand this. When you have a couple in their mid to late 70s, it is difficult to leave your home to go elsewhere. Families with young kids need help watching them. Heck, I have had patients refuse to go to the “city” hospital because that wold be too much drive time and the spouse couldn’t get home in time to care for the dog. We live an hour away from one of the best pediatric hospitals in the country, and i have to argue with parents when I tell them their child is too sick to be taken care of at one of our facilities.
I think that for the 3%-5% (my guesstimate) of people who are willing and able to travel, there are a lot more options, and specialization within networks mean a bit more travel, but unless we see a big cultural change, I don’t see this as that big of a deal.
Steve