Healthcare in the United States is in a precarious position. My sense is that your friends and neighbors probably are unaware that the high-quality and readily available medical care they have enjoyed over the last 40 years is now in jeopardy. A simplistic view of our current dilemma is to describe the situation as a math problem. The expenses incurred by hospitals, health systems, and medical groups to deliver medical care are growing much more rapidly than the increases in reimbursements from health insurance companies and government payers (i.e., Medicaid and Medicare). This mismatch is driving smaller operating margins to all and resulting in negative margins to many sectors of the healthcare delivery system that we have come to rely on. As time marches on, our healthcare system risks becoming insolvent and could fail to deliver the care we have come to expect.
Much of the healthcare industry across the country experienced operational losses and negative financial performance during the COVID pandemic. Many hospitals and medical groups dipped deep into their financial reserves and are now finding themselves with inadequate resources to fund growth projects and building maintenance, as well as to repair and replace technical equipment that has defined lifespans. In the past few years, the cost of labor has gone up in almost every industry, but this is especially true for healthcare, which is a labor intense industry beset with a supply–demand mismatch in both nursing and physician workforce availability. That mismatch was further accelerated by retirements during the pandemic. Competition for nurses and a number of physician specialties that are in short supply has led to salary escalations many employers can no longer support.
Most health systems have tried to reduce expenses in a now well-worn set of interventions for healthcare: reduce the average length of hospital stays; increase clinic throughput to maximize productivity; eliminate low-margin services; improve billing and collection efficiencies; and reduce non–patient-facing administrative staff through targeted layoffs. These efforts can reduce unnecessary waste in our healthcare system, but there is also a point at which further efficiency and cost cutting will sacrifice the quality, patient experience, or outcomes we have come to expect. Alternatively, they could lead healthcare providers to limit access to services for some socioeconomically disadvantaged segments of the population that have coverage through government programs (e.g., Medicaid). Many health systems and physician practices have reached this juncture now; they are unable to further reduce expenses and find themselves unable to sustain their businesses at the current reimbursement level.
Compound this economic conundrum of inadequate funding and exhausted efficiency/productivity efforts with an aging population and an increasing burden of chronic disease in our nation, and we have a perfect storm of inadequate healthcare delivery resources at the same time we will have a growing need for medical care services. Further accelerating the arrival of this crisis will be the looming cuts to Medicaid funding and loss of insurance coverage to portions of our population that are present in the recent federal budget legislation approved by both houses of Congress.
Averting this crisis is possible, but it will take strong leadership and a willingness to make changes to long-held cultural and economic underpinnings of the current U.S. system of healthcare delivery. Simply asking for higher reimbursement from payers or more governmental support is not sustainable. Commercial businesses cannot afford higher premium costs, and increasing government spending on healthcare will only drive further inflation into the economy. Healthcare in our country already receives a disproportionate share of taxpayer dollars, and one that is a significantly larger share than other developed nations allocate to healthcare.
To build a more sustainable health system, the key drivers of excess utilization and cost in the current system of American medical care must be addressed. This will mean fundamental shifts in how, where, and what types of care are delivered to our population. These seven areas would be potentially effective domains with which to start:
Promote healthy behaviors and clinical care that reduces the burden of chronic disease in the U.S. population. We have a unique opportunity to align with a federal Department of Health leadership team that is focused on getting Americans healthy again. However, radically changing the American diet to shift away from highly processed and calorie-dense meals to foods with higher fiber content and a focus on whole grains, greens, vegetables, and fruits will be a difficult task and will require much more than a campaign slogan. Working closely with the food industry on what is available to the American consumer will be beset by partisanship and industry stakeholders who have much to lose with any change in the status quo. The medical community will need to be more aggressive in treating obesity and substance abuse and dependence. Reimbursement changes in these areas will be necessary to promote more aggressive treatment. Fortunately, we are now armed with better individual genetic information on predisposition to these conditions and a host of very effective medications in treating obesity and substance use disorders, which could change the trajectory of many lives. Going further still, in the future individual incentives may be created that financially reward improvement in health status. Imagine tax breaks or government subsidies tied to improvements in BMI, VO2Max, Presidential Fitness Test performance, or chromosome telomere length. Maybe these are outlandish ideas today, but we need to think creatively and begin to put incentives in front of the population that will actually change behavior.
Reduce expenditures directed at futile and low-value care at the end of life. One of the biggest disservices our elderly are subjected to is the over-medicalization of care at the end of life. Modern medicine is so good at high-acuity and technology-enabled care that we frequently march down that path before we ask critical questions around the value of that care. American medicine needs to better support and create norms and expectations that palliative and hospice care is the standard for those with terminal and chronically progressive illnesses. Funding for home care management to the frail elderly can prevent or replace emergency room and hospital care, will be less expensive, and is associated with higher patient satisfaction. For our Medicare population, we need a system to measure and report individual Quality Adjusted Life Years (QALY) for every high-cost treatment and high-acuity procedure. Threshold levels for QALY value need to be established and care managed within those boundaries.
Implement better coordinated and new care models for the disabled and chronically ill. Our current ambulatory clinics and high-acuity, quick throughput hospitals and ambulatory surgery centers are designed poorly for the chronically ill and disabled. Excess cost, patient inconvenience, and inappropriate utilization of physician resources occur when we try to manage the disabled without special consideration. Team-based models that focus on telemedicine and home care need to be the preferred channels. Normalizing goals of care and palliative models within these new settings of care will improve the satisfaction of both patients and caregivers, while incurring less pressure to adopt interventional and high-acuity treatments.
Reduce the redundancy and complexity of the current reimbursement system. An army of administrative and technical staff are employed on both the payer and provider sides of healthcare in our country. The complexity of coverage is poorly understood by most individuals accessing healthcare. An arcane system of higher reimbursements from commercial insurance payers to offset inadequate reimbursement from government payers invariably leads to patient selection bias on the part of providers to obtain a better mix of these various payers. Universal coverage for all U.S. citizens, with a common chargemaster and common reimbursement schedule, would greatly reduce the administrative burden on both payers and providers. AI-enabled common definitions of acuity to adjudicate whether a patient needs inpatient treatment versus ongoing observation, and coverage eligibility, likewise would reduce the administrative costs of denial management and utilization management programs for both payers and providers.
Remove reimbursement and compensation models that incentivize more care rather than better health outcomes. The current reliance on fee-for-service payment methodology needs to be replaced with monthly per-member capitation funds that utilize global healthcare budgets and targets. Physician compensation needs to be migrated away from volume incentives to salary models.
Vertically integrate hospitals, medical groups, post-acute care, and home care into systems that can receive capitated payments and are accountable for the cost and outcomes of their patients. The changes in reimbursement and compensation referred to in item No. 5 are most easily achieved when patients are assigned to accountable healthcare systems that are fully integrated. Examples of vertically integrated health systems include Kaiser, Mayo Clinic, Cleveland Clinic, and others that are large enough to receive population-level payments and then can coordinate patient care and create compensation incentives that support outcomes and experience of their patients rather than how much is done to them.
Reduce the amount of care delivered in high-cost settings and by high-cost providers. The United States is over reliant on acute care hospitals and medical centers, which tend to be the highest cost venue to receive care. By promoting home care, ambulatory surgery centers, and other outpatient venues over hospital settings we can reduce overall healthcare expenses and preserve hospital access for the highest-acuity patients. This will mean creating alternative venues for care that utilize team-based models that allow providers to work at “top of license” and will be best implemented in those vertically integrated and organized models of healthcare delivery.
It is time to begin building consensus and mobilizing the effort to create change while we are able. In-depth discernment and civil conversation without partisanship and without ego will be required to take ideas such as those listed and start crafting the foundations and economic models that can support the needed changes. Expectant waiting is not a strategy that will serve us well. It is time for the industry to acknowledge the status quo is unsustainable and lean in to the necessity of change. Respond to these ideas or offer your own. Involve yourselves in conversation wherever you are able… city, county, state, and federal. Be active in your own professional societies. Challenge your local hospital and health system governance bodies to promote the transformation that will be needed to solve healthcare’s math problem.