One of the great humdingers in the current debate over healthcare reform is the duplicitous role of technology in increasing costs. Sophisticated medical technologies save thousands of lives every year, giving us scans that spot tumors early and devices that keep our hearts beating and our blood flowing.
But these miracle technologies come with a paradox. In nearly every sector of the economy, technology drives costs down - just as your digital camera gets cheaper and better every year, so technology drives down the cost of manufacturing, the cost of retailing, the cost of research. But for some reason, in healthcare, technology has the opposite effect; it doesn't cut costs, it raises them. In fact, medical technologies - from CT scans to stents to biologics - are a significant factor in the 10% annual growth rate of healthcare spending, a rate that's nearly triple the pace of inflation. (Overall, the US is now estimated to spend a stunning $2.7 trillion on healthcare in 2010.)
This was made clear once again last week, when a Massachusetts state audit found that healthcare costs rose 20% from 2006 to 2008, largely because of new imaging technologies. The single largest increase was for digital mammography, a new - and expensive - way to screen for breast cancer.
What's going on here? Why can't technology work its magic in healthcare, the way it does in the rest of the economy?
The answer boils down to what's called "scale" - the notion that technology, thanks to Moore's law and other exponential improvements, gets progressively cheaper, better and thus more accessible. Cheaper and faster chips, sensors and storage mean that digital technology is constantly scaling up and out, touching the lives of more people. These improvements in cost and power are the democratizing force that has propelled GPS from a military technology to a cellphone feature, and they're what helps Apple convince us to buy a new iPod every 18 months. Scalability is the secret sauce of the digital revolution.
Except in healthcare. In healthcare, technologies that scale are suspiciously hard to find. There's no lack of technology, it's just that they don't seem to get cheaper and better at the same exponential rate as in the rest of the universe. This is especially strange because CT scans and pacemakers - to take two frequently blamed cost-generators - rely on the same digital technologies that are getting cheaper outside of healthcare.
There are a couple reasons for this. For one thing, there's far too little price transparency in the medical technology market. Without an open marketplace of prices and services, it's difficult for hospitals and clinics to know whether there's a better deal elsewhere, and manufacturers can keep costs high. Secondly and perhaps more significantly, medical technologies still tend to rely on an expert class to actually deploy the technology. GPS may have turned us all into amateur navigators, but CT scans haven't turned us into hobbyist radiologists. Those highly trained and expensive experts are still needed to actually put the technology to work, making it impossible to entirely automate a process. The result is that technology stays expensive to use, and costs keep going up.
At long last, though, that's changing, and scalable technologies are coming to healthcare. But there's a twist: instead of coming from your doctor or hospital, they're going straight to consumers. Digital monitoring tools like the Nike+ system, which uses a little accelerometer sensor in your running shoe, let people make more informed choices and pursue better health behaviors. And new online decision tools like LifeMath.net, a project of Harvard University's Laboratory for Quantitative Medicine, take advantage of cheap processing power to crunch data into personalized medical recommendations, making it far more relevant than generic advice (and thus much more likely to result in lasting change, addressing what doctors call "the compliance problem"). These and other tools use technology for what it's good at. They put the tools directly in our hands, and get us engaged in our health before we need the expertise of specialists.
In the world of insurance and care providers, some folks already understand this, and are way ahead of Washington policy makers in tapping cheap technologies to improve healthcare. In Hawaii, Kaiser Permanente has started a pilot project that churn through its database of patient data to predict which patients might need which tests - and then sends individuals email alerts suggesting they come in for a test or checkup. It's the same sort of technology that Netflix uses to recommend movies. And the Cleveland Clinic has teamed up with Microsoft to bring self-monitoring tools to patients managing chronic diseases, successfully engaging them in better health behaviors without expensive visits to the hospital.
In the last century, medical technologies ably did their part to extend the life expectancy of the average American to nearly 80 years. It's time to reassess how we deploy technology in healthcare, and put the digital revolution to work not just for our entertainment, but for our health, too.
Thomas Goetz is the executive editor of Wired Magazine, and author of the new book The Decision Tree: Taking Control of Your Health in the New Era of Personalized Medicine.
Follow Thomas Goetz on Twitter: www.twitter.com/tgoetz
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What can be worse about medical devices, is the extreme concern over liability, which pretty much prevents scaling, or even COTS (commercial off the shelf) sharing in order to scale. Obviously there is a big difference between the failure of a consumer GPS, a corporate jets instrument approach system, and a pacer, or PET scanner...otoh if a hiker gets lost in adverse conditions, loss of life is still possible if their GPS fails.
I like the concept of going outside the gatekeepers... but once that occurs, then the patient needs to fully understand that in doing so, they are accepting much greater responsibility. Ie false positives or false negatives which lead to delay in seeking care and resulting injury is the patients problem... otherwise regulatory and liability issues will put things right back the way things currently are.
"In healthcare, technologies that scale are suspiciously hard to find. There's no lack of technology, it's just that they don't seem to get cheaper and better at the same exponential rate as in the rest of the universe."
A 16 slice CT scanner cost over $1 million 5 years ago. They now routinely sell at $300k to 400k. Newer high end machines may cost more, but they offer new clinical capabilities (e.g. CT angiography) . Contrary to the article's assertions, there is intense price competition between vendors and transparency in the medical device market. Prices are reported and published by groups like MD Buyline. Hospitals purchase equipment through Group Purchasing Organizations which drive down price through volume purchases.
The cost of healthcare from medical devices is going up because of utilization. Doctors are referring more patients for CT exams because they are so useful for diagnosis. Patients request such exams and reimbursement policy set by the government encourages use. Lastly, the FDA is racheting up regulation on medical imaging technology which is hiking up cost of deployment.
The standard for what people disseminate as informed opinion is scary. Why not ask someone with knowledge of the industry to comment rather than get non-experts to spout off garbage.
And what you describe as the benign effects of greater utilization - "CT exams...are so useful for diagnosis" - is better described in health economics as "physician-induced care" - the phenomenon that doctors and hospitals tend to use whatever technology is available, *regardless* of actual need. It's a prime reason that radiology clinics have become a *profit center* for hospitals, and that CT scanners have spread so widely - because they lead to all sorts of new tests that just happen to make a lot of money.
Who pays? Us, via our higher insurance premiums.
See:
http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/
The market itself for medical devices is quite transparent and competitive. It does not seem so to you because you are not a participant in the market. Vendors are forced to discount heavily especially in competitive bids. In addition, customers have pricing and deal information from sources like MD Buyline, where hospitals and clinics report what they paid for their systems. They even report their quotes. Many hospitals buy equipment through group purchasing organizations, which squeeze vendors through bulk purchases. As a result, prices on equipment typically drop >20% per year from competition and obsolesence. As technology ages (like 16 slice CT) it becomes commoditized and margins become razor thin. The assertion that there is a lack of transparency or implication that medical device companies are able to collude to obscure prices is from customers is simply not true and smacks of making vendors the boogeyman in healthcare.
While physician use of CT has expanded dramatically this is because of increased access (more hospitals can afford them now) and because there are increasing indications for use. Those indications receive reimbursements from insurers, which recognize its value (otherwise they won't reimburse). While there is definitely overuse especially in ERs due to CYA, I can assure you that to bureaucratically restrict doctors' use of this tool will be a cure worse than the disease.
Lastly, there are natural curbs to the use of CT. 1) Doctors cannot prescribe them willy nilly as diagnostic value must be greater than the radiation risks to the patient, 2)physicians don't profit from referrals, 3) CMS is going to respond to increased utilization by cutting reimbursements.