Copying what works to reduce healthcare costs

If, as a country, we cared about improving the ratio of quality to costs in our healthcare system, why wouldn’t we:

  • Look for examples of things that already “work”, either in the USA or abroad; and
  • copy them?

In a post yesterday that got me thinking, John Goodman makes the point that:

  • there are real examples out there of individuals who have found ways to dramatically change the cost/quality ratio of healthcare (he gives interesting examples); but that
  • we are not doing a good job of systematically looking for such examples and then trying to replicate and scale them.

It is well worth reading the full article.

While depressing, it makes you realize there are probably some exciting opportunities out there that are not being exploited as yet.

Disease through the eyes of an accountant

There has been a lot written recently about how some diseases cost the healthcare system more than others, and the fact that some patients (the sick ones and the old ones) cost more than others. I wanted to learn more about which clinical conditions are the big contributors to our national healthcare bill. So, for the purposes of this post I pretended I was an accountant, responsible for thinking about where to save money in the USA’s health budget. Here is what I learned.

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My interest in this topic is part of my quest to identify new opportunities that I believe will arise as a result of turmoil and reshaping of the healthcare landscape over the coming decade (more on this topic here). It’s not that I think there is anything especially surprising or worrying about the fact that healthcare expenditures flow more to some diseases and patients than to others. To me that seems only to be expected. However, I do believe there is going to be increasing pressure to reduce costs, and that the logical places to look for new opportunity are where lots of money is presently being spent.  [Read more…]

Managed care returns?

My last post on healthcare costs looked at how hospital and professional healthcare costs were held flat during the nineties. In todays WSJ, an article asserts this was due largely to managed care, and goes on to describe in some detail how managed care is “returning”, although of course in a much better form.

Here is how things seem to be unfolding to me. [Read more…]

Best outcomes or most cost effective healthcare?

I have been thinking for a while now that one of the problems with the dialog about improving the US healthcare system is that we have done a poor job of articulating what we want to accomplish.

Do we want healthcare with the best possible outcomes? Or do we want healthcare that represents the optimal allocation of some amount of money that as a society we consider affordable (I think of this as the most cost-effective healthcare)?

This post is about how to frame these questions so we can have a rational discussion and debate. Here is my illustration of costs and quality in healthcare. [Read more…]

Customer service in healthcare

Great post by Lisa Suennen this week on the two different worlds of acute disease care and aesthetic medicine. It reminds us that there are really two quite distinct worlds in the US healthcare universe:

  • the world of aesthetic medicine (various elective dermatological procedures; cosmetic surgery, LASIK, and the like), in which by and large patients pay their own bills; and in which customer service is an important competitive advantage for the clinician; and
  • the world of conventional, acute-care medicine (and primary care), in which patients believe they should have to pay nothing (they expect insurance to cover everything); and in which “customer service” is a foreign concept.

Reading Lisa’s post stimulated these additional thoughts. [Read more…]

Top healthcare cost categories

This post examines the size of the different components that make up the total $2.6 Trillion National Healthcare Expenditures (NHE) of the USA. It also looks at the different growth rates of the components.

This is the third installment in our series on US healthcare costs. For background to this project, which is all about identifying fertile opportunity spaces resulting from runaway healthcare costs, see the introduction; the first installment; and second installment of the series.

Components of $2.6 Trillion US National Healthcare Expenditure (2010)

NHE components as percentage of NHE

The chart above depicts the $2.6 Trillion of US National Healthcare Expenditures in 2010 by category (1). These top 5 categories comprise the majority of this expenditure (74% of the total):

  • Hospital expenditures (31%);
  • Physician and Clinical expenditures (20%);
  • Prescription Drug expenditures (10%);
  • Administration & total Net Cost of Health Insurance expenditures (7%); and
  • Nursing Care Facilities and Continuing Care Retirement Communities (5%).

[Read more…]

Eating the seed-corn of healthcare

In the prior post in this series, I concluded that controlling healthcare cost growth was about reducing the differential growth rate of NHEPC (compared to GDP per capita) by a couple of percent per year. This made me want to dig deeper into the question of what exactly is NHEPC (National Healthcare Expenditures Per Capita)? I learned some intriguing things.

The topic of this post is the inexorable decline over time in the fraction of our healthcare costs allocated to the bucket called “Investment”. [Read more…]

Healthcare cost growth analysis (1)

As explained in this prior post, I am working on a project to identify fertile opportunity spaces resulting from runaway healthcare costs. Here is the first installment of my investigation, my first steps to understanding the healthcare cost curves. (For details of data sources see the references at the bottom.)

Typical media depiction of healthcare costs

Here is the typical “scary graph” we have all seen in the media. The basic data comes from the US government (1). It shows “runaway cost growth” and more significantly, it shows healthcare costs approaching 20% of GDP. Yikes! [Read more…]

Runaway healthcare costs create opportunities

We all know US healthcare costs are growing at a rate most consider unsustainable. If you accept the premise that a lot of time and attention will be focused over the next decade on ways to improve healthcare quality and reduce costs (or perhaps reduce costs without reducing quality?), then there are likely to be some big changes in a very large industry, and that is likely to open up some opportunities for energetic entrepreneurs who can think a little ahead of the curve.

Well, at any rate that is the thesis of a project I am working on. I am going to be spending some time digging into this topic. The end goal is to see if we can figure out some promising areas for entrepreneurial focus. But first, we need to explore the facts a bit deeper. I am going to be capturing some of the initial results in a series of posts here, as I think they may be useful to a broader audience. The first question I am going to explore is “Just where is all that money going, and why are costs growing so fast?”.

If you are interested in getting involved with this project, helping, sharing ideas, or getting access to later portions of the work, please let me know by signing up here.

The healthcare cost series

  1. Healthcare cost growth analysis (1)
  2. Eating the seed-corn of healthcare?
  3. Top healthcare cost categories
  4. Hospitals “bent the cost curve” in the 90’s.
  5. Will Managed care return?
  6. Who pays for US healthcare?
  7. Disease through the eyes of an accountant (which diseases cost most)
  8. Disease economics drill down (top clinical conditions)
  9. Disease economics details: heart disease (coming)
  10. Disease economics details: asthma (coming)
  11. Disease economics details: back pain (coming)
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