American Healthcare: The Emperor Is Naked

So off went the Emperor in procession under his splendid canopy. Everyone in the streets and the windows said, “Oh, how fine are the Emperor’s new clothes! Don’t they fit him to perfection?…

“But he hasn’t got anything on,” a little child said.   – Hans Christian Anderson, The Emperor’s New Clothes, 1837

Roy Smythe–(Forbes)–The overwhelming majority of healthcare providers and administrators I know are working hard to relieve suffering, and extend meaningful life.

That being said, I am going to let you in on a big secret: The American healthcare delivery structure, where these caring individuals work, is not what you think it is, and isn’t cloaked in the figurative garments that you think you see.

As in Hans Christian Anderson’s short story, you think you see a system that is focused on improving health, recovery from illness and the promotion of long, productive lives – because you desperately want and perhaps need to see those things. However, the primary goal of the health care delivery enterprise is the generation of revenue, not health. And so here’s the deal, the emperor isn’t wearing the clothes that you believe you see.

The emperor is naked.

In his 2013 TEDMED talk, entitled “What’s Wrong with Profit in Healthcare?” Jonathan Bush suggested that entrepreneurs can change health care. I fully agree, but he also said that it was possible, “by allowing the market to swirl out around us, to define a frontier that is quite beautiful,” and that is simply wrong.

The “open market” approach to health care among the incumbent providers, with revenue generation as its primary goal, has led to many consequences that are in fact fairly ugly.

An open-heart surgery program that performs around fifty cases per year can be profitable, and many programs in smaller hospitals around the country are working at these volumes. However, research suggests that the number of cases that an individual cardiac surgeon needs to perform yearly to be proficient is three times this.

In 2008, the city of Chicago had five heart transplant programs operating simultaneously – the results of which were discussed by the Chicago Tribune’s Judith Graham:

“Policy experts debate the value of competition in health care, and in this case competition appears to have backfired, leaving local heart transplant centers operating below capacity.”

In both of these cases, cost-effectiveness and outcomes are compromised, because there is a strong relationship between volume, better quality and lower cost in complex care. In addition, every one of these programs has millions of dollars in overhead costs (doctors, support personnel, technology). The added financial burden of redundant health care overheads in this country has never been fully calculated, but it is big, and passed on to you. As a conservative estimate, we could use the numbers from a 2012 Institutes of Medicine study that estimates $400 billion in unnecessary services, combined with excess administrative costs.

Do you believe that decisions made every day to develop programs such as these, or comparable ones in other specialty areas (stroke, bariatric surgery, imaging, etc.) are made because the organizers feel they will be doing it better than – or even as well as others – in regard to clinical outcomes?  No – it is because there is money to be made.

Conversely, revenue as the primary driver of the health care market has also led to a lack of adequate care in rural and less affluent urban areas of our country where the opportunity for profit is lower.

I agree with Nobel Laureate economist Paul Krugman, when he said, “…health care just doesn’t work as a standard market story.” When market forces are in play, and the goal is the generation of revenue, you don’t get more health – you get more overall system cost, lower quality and less equity.

Competition is one of the things that makes this country great, and I have nothing against profit or merit-based rewards. However, revenue is not our product in health care – health is our product.

Accordingly, I believe we can harness the power of the market, but clinical outcomes need to be the things for which we compete.  Perhaps then you will see innovation, but innovation directed at outcomes, not revenue generation.  You may then see fewer billboards promoting surgical robots, open MRI scanners and other bright shiny objects, and perhaps more that say things such as, “come here and you will objectively have a better chance of living longer, and healthier.”

Like many, I have been trying for years to conjure up the best alchemy to transform the base metal of American health care.  What dawned on me recently is that no matter what people like me do or write, nothing is going to happen until the general public sees the emperor literally “exposed,” and thusly reacts.

At the end of Anderson’s story, once the child speaks the truth, the others around him begin to whisper to one another his words, and eventually the “whole town cried out at last… But he hasn’t got anything on!

Please, start whispering.

Roy Smythe is a Forbes contributor and the Chief Medical Officer for Valence Health, a Chicago-based health care consulting, services and operating company that seeks to facilitate the ability of providers of care to manage medical and financial risk.