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Tag: payment models

Health Care: An Alternate Economic Universe

In July, 2012, the US economy produced roughly the same volume of goods and services as it did five years earlier with five million fewer workers. Yet, during the first four years of the recession (May 2007 to May 2011), the US health system, despite slowing or declining utilization, added 1.149 million workers. Key sectors, specifically hospitals and physician offices, grew their workforces despite declining admissions and office visit volume. (Employment data in this post comes from the Bureau of Labor Statistics’ (BLS) National 4-digit NAICS Industry-Specific Estimates from May 2007 and May 2011.)

Compared to the rest of the economy, health care seems to exist in an alternate economic universe. This would be good news, rather than a problem, if we were not borrowing roughly half of every dollar of general revenue the federal government is spending on health care and if employers were not robbing their workers of wage increases to fund their health benefits.

Hospitals and physician offices saw declines in their core activity in the past few years. Hospital admissions have been flat the past five years, and have shrunk the past two. Even hospital outpatient volume growth has subsided into the low single digits, only partially offsetting the lost admissions. Yet hospital employment rose by over 220,000 workers, or 4.4 percent from mid-2007 to mid-2011.
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Nimble Medicine

In a piece for the New Yorker, Dr. Atul Gawande outlined how, early in the 1900s, more than forty per cent of household income went to paying for food and food production consumed roughly half the workforce. Beginning in Texas, a wide array of new methods of food production were tested. After many pilots, tests and information dissemination, food now accounts for 8% of household budgets and 2% of the workforce. As a wide array of small innovations ultimately led to the transformation of farming, so too is a rapidly building wave of innovative new care and payment models leading to similar breakthroughs in healthcare. I call this Nimble Medicine.

Until recently, attempting a new care or payment model meant long planning and development cycles. The cost and complexity of testing new models prevented many from being tried. Even today, the leading HealthIT vendor is known to charge $100 million and up for its software. Amazingly, they require three months of training before they even let people administer the software.

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