Health Care Reform – Going Beyond Cost Reduction to Improve Value

Health care is the delivery of services, products and technologies for the prevention, diagnosis and treatment of disease and injury. It includes a broad range of activities, from basic resuscitation to complex rehabilitation and life-saving interventions. It consists of the services offered by physicians, hospitals, community organizations and other providers. It also encompasses the activities of non-providers, such as pharmaceutical companies, insurance brokers and equipment manufacturers. It is the most expensive service industry in our economy. The costs are driven by the need to provide access to medical technology and services not covered by traditional insurance, but the real drivers are rising rates of chronic diseases (such as diabetes and heart disease), increasing demand for care, and the growing number of individuals who need it.

There are many different definitions of health care, ranging from the most expansive to the most narrow. The wide variation in definitions reflects the political and ideological battles that rage in the country. Some people believe that healthcare is a right that government must provide, while others think that we should let the free market work its magic. Still others, a healthy minority of the population, believe that they don’t have a right to healthcare but that it works best as a marketplace in which insurers, hospitals and doctors compete for business.

Whether we agree with the goals of those who support universal healthcare or those who favor private insurance and marketplace competition, there is widespread agreement that our current system is broken. Many people are paying more than they can afford and getting less than they need. The patient-physician healing relationship has been distorted by third parties such as government, employers and third party payers. The resulting chaos, bureaucracy and lack of accountability has created an expensive, inefficient, frustrating healthcare system with few positive outcomes.

A new approach is needed. It must go beyond cost reduction to improve value. The first step is to change how clinicians are organized to better serve patients. This requires moving from today’s siloed organization by department and discrete service to an integrated practice unit (IPU) model where physicians and other clinical professionals are grouped around the patient and their medical condition. This will allow providers to measure, and then respond to, true value.

Finally, we must focus on the big issues that drive high-cost healthcare spending. For example, investing more in preventive services could reduce the prevalence of chronic diseases that drive costs and avoidable deaths. It could also lower or at least defer future high-cost healthcare spending, and perhaps even prevent a major economic crisis in the near future.

As the industry shifts to a value-based paradigm, those providers that embrace this change will succeed in the marketplace. Those that fail to move forward will find themselves being left behind. This is a moment of opportunity for the entire industry. Those who rise to the challenge will see their reputations, and revenue streams, grow. Those that do not will face an uncertain and challenging future.

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