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Attention Walmart Shoppers: Don't Look for Health Care Answers Here

04/21/2015 11:55 am ET | Updated Jun 21, 2015

Recently, there have been an increasing number of articles asking why healthcare can't be more like other industries. Authors question why health care doesn't emulate the automation in manufacturing, the safety improvements in aerospace, or the declining price points in computer sales. This columnist is also part of the media chorus on the issue. I've written numerous articles about how health care desperately needs to apply lessons learned from aerospace and defense by leveraging systems integration, high fidelity simulation, and data mining technologies to improve the quality and reduce the overall cost of care.

While it's important to outline the similarities between health care and other industries, it's equally important to note their differences and the reasons technology transitions may not be as easy as initially thought. One major difference is that health care in the United States is not based on a free-market economic model.

Free-market health care is a model in which the elements of care are provided without high levels of government regulation and oversight. Proponents believe this approach increases health care quality while reducing overall costs. They argue that systems like single-payer health care lead to longer wait times for care, higher overall costs, and greater waste and inefficiencies.

While not advocating for or against the free-market model, it seems important to understand how the current model factors into the inability of the health care industry to efficiently transition technologies and best practices into the clinical environment.

While researching this article, I had the pleasure of meeting Dr. Darren Sommer, Chief Medical Officer of the Optimized Care Network. Sommer brings an interesting health care perspective through multiple lenses. In addition to holding degrees in medicine, public health, and business, he served as a Brigade Surgeon for the 82nd Airborne Division, and has worked at the executive level for several commercial health care organizations. I asked Sommer to help explain this free-market concept in layman terms.

In American health care, demand outstrips supply. Sommer explains, "If I told you that your family physician has a sign on his or her door that says, 'Sorry, not accepting new patients,' you probably wouldn't be too surprised. But if I told you your local pizza shop has a sign saying, 'Sorry, not accepting new customers,' you would be stunned." In a free market, successful companies generally find new ways of capitalizing on high demand by creating innovative solutions to capture new revenues. The health care market has made only marginal changes to its health care delivery model to make it more innovative. Recent examples include surgery centers, urgent care (walk-in) clinics, and freestanding emergency rooms. However these "innovative" businesses deliver care in very much the same way, but in a different setting. Finding new ways to deliver more efficient care, and then opening up the market to all consumers, would likely better serve both the health care industry and its customers.

"Another factor is that most Americans are not directly paying for their own health care," explains Sommer. Most care payments are indirect in nature, coming through insurance premium payments and copayments. An interesting article in the Journal of the American Medical Association (JAMA), detailed patients' insensitivity to the actual costs of the health care services they consume. When asked for the most important factor in choosing a new car purchase, consumers generally say fuel efficiency. In essence, their answer reflects the financial impact their choice will have on their life. When patients are asked what they really want from their health care, the priority that ranks the lowest is the real cost of health care services. Patients place much higher value on the results -- they simply want to get better. Their sensitivity to cost only changes when they bear some of those expenditures. This disconnect between quantity of services and cost leads to over-utilization and cost shifting, which, in turn, adds to the rising costs of health care.

Even if one could fix the apparent disconnect between individual care and costs, there's also a societal stigma associated with linking the two. When a loved one needs bypass surgery, one generally doesn't go to the newspaper and clip coupons to get the best discount.

In addition, the costs for health care are just too high compared to care provided in other countries. The truly discouraging part of that statement is that most organizations don't even know what the true costs are. Ask your family doctor if he or she knows what the actual cost of a 30-minute office appointment will be. The answer will likely be something to the effect of "I don't know" or "ask my office manager." If you do get an answer, it will be in terms of what their office bills for the service -- not what it costs to facilitate and conduct the exam. This issue isn't limited to solo practitioners. Most hospital CFOs have no idea what the cost is for a 30-minute ER visit, or a standard appendectomy. Having the ability to operationally "connect the dots" is a main reason why businesses succeed in competitive markets. Walmart, for example, would never have become a retail giant operating 11,000 stores without closely monitoring its costs in an effort to maximize margins. The same is true for such companies as Amazon, General Electric, and McDonald's, all who maintain their competitive advantage by continually seeking to improve their operations and supply chain management while minimizing costs.

The argument for a free-market model is that if we really want to incentivize the health care industry to invest in more efficient delivery models, safer practices, and lower prices, we need a concerted effort to transition our health care system to look and act more like a free market. Sommer explains, "When patients are more responsible for how their health care dollars are spent, they should be more sensitive to the costs and more discerning in their choices. More focus should be placed on preventive care and its impact on the consumer's bottom line. Health care providers should have to compete with better care at lower costs in order to attract those patients to their businesses."

Critics of the free-market approach believe that running health care as an unregulated commodity will lead to an unfair and inefficient system in which poorer individuals will be unable to afford appropriate levels of care.

As we've seen in the recent battles over the Affordable Care Act, the answers are not obvious and both sides seem to be entrenched in their positions. However, most would agree that the status quo is simply not sustainable and that health care needs to take advantage of the technologies and best practices from other industries in order to survive. The battle over how this transition will happen as well as what market models will eventually emerge seems likely to continue for the foreseeable future.

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