Innovation

Innovation

July 6, 2023

6 minutes

Phil Gibbs

The more we improve, innovate, and transform the delivery of healthcare, the more the cost of healthcare seems to go up. While perhaps better left unsaid, it is hard for those of us who have spent much of our careers trying to improve healthcare to wonder if there is a cause-and-effect relationship between our efforts and the rising cost.

From a personal perspective, in the 1990’s I was involved in a pioneering improvement initiative in a large, Nashville-based, for-profit hospital system, as well as an initiative that led to the formation of a prominent, Boston-based, institute dedicated to the improvement of healthcare. Both initiatives could be considered very successful, and both the hospital system and institute continue to thrive today.

According to CMS, in 1990 the cost per person for healthcare was $2,835 and represented 12% of GDP. The numbers were not acceptable and needed to be improved. Our work was important.

The numbers were not acceptable and needed to be improved. Our

work was important.

Continuing the personal story, in the late 1990’s and 2000’s, I was involved with the launch of one of the first companies to use the internet to address administrative costs in healthcare, which were estimated to be as high as 30%. Starting with streamlining access to eligibility data, Passport Health Communications was effective in improving administrative efficiency and was acquired by Experian for $850M. Another success story.

**However, according to CMS, in 2000 the cost per person for healthcare had risen to $4,845 and represented 13% of GDP. The numbers were going in the wrong direction.**

The investment in innovation and transformation has only accelerated since the 2000’s. VC’s and private equity have poured billions into healthcare innovation. Entrepreneur centers, accelerators, incubators, and venture studios have launched thousands of digital health companies promising to change how we access and experience healthcare. And industry giants have formed internal innovation and transformation groups and created large funds that invest in innovation, while tech and retail titans like Google, Apple, Amazon, Walmart, and Best Buy have joined the healthcare digital transformation movement.

But again, according to CMS, in 2021 the cost per person for healthcare had risen to $12,914 and 18% of GDP. And in 2031 it is projected to be $20,425 and 20% of GDP. (HealthAffairs, June 14, 2023). **That is one in every five dollars spent in this country will be spent on healthcare. **This is not a healthcare problem—it is a healthcare innovation and transformation problem.

This is not a healthcare problem—it is a healthcare innovation and transformation problem.

The people working to deliver healthcare on the front lines are working in systems and with technology we have designed and created for them. It is easy to blame the government and payers for a financial model that is not aligned, and that is certainly a root cause of many of the problems. But all of us operate in environments that are less than ideal and must make improvements within the boundaries we control.

Obviously, there are no easy answers, but we cannot just keep doing what we have always done—we all know how that plays out. Like the internet a few years ago, some hold hope that AI will be the breakthrough that finally improves the delivery of care while reducing cost. And many are betting their futures on value-based care. Complex technology and policy solutions have and continue to offer great hope, but the data speaks for itself. Sometimes simple is more compelling than complex. So, could it be that a simple math equation offers insight into the challenge we are facing?

Minus x Minus = Plus

(- 1) x (- 1) = + 1

If “Minus” in the equation represents the implementation of a single point solution that saves time and cost in a part of the care delivery process, and “Plus” represents increased cost and complexity of the entire care delivery system, then it follows that when we multiply point solutions by other point solutions, even when each point solution individually improves care and reduces cost, the result is increased cost and complexity of the system. That is what simple math says and is consistent with the data trend over the years.

While certainly not accounting for all the increased cost and complexity, perhaps a simple change in the equation will lead to improved care and reduced cost. Instead of increasing the overall cost and complexity of the system through a myriad of point solutions, what if we were able to "add" these individual efficiencies together?

Minus + Minus = Minus

(- 1) + (- 1) = - 2

Simply changing the equation by substituting addition for multiplication totally changes the outcome. It is reasonable to expect that multiplying uncoordinated point solutions by uncoordinated point solutions can in fact result in increased cost and complexity. However, it is also reasonable to expect that an integrated approach to adding point solutions together at a system versus process level can result in improved care and reduced cost.

Using systems theory terminology, we have described classic optimization of individual parts of a system while suboptimizing the system. The goal should be to optimize the system. Both math—multiplication and addition—and science—systems theory—provide guidance on the path we should be following.

So how does the healthcare innovation and transformation industry move from multiplication to addition--from system suboptimization to system optimization? While the math and science are clear, the execution is a little more complex. There are three criteria that stand out as requirements for any solution:

**A System vs. Point Solution**– If a cause of the continuing increase in healthcare cost and complexity is the proliferation or multiplication of point solutions, you cannot solve the problem with another point solution. The solution must be at a level that is capable of creating integrated system solutions.**Collaboration**- Collaboration is not new in healthcare. Mayo Clinic has a storied history of surgeons visiting and observing innovations in surgery. The Nashville healthcare community, where I live, is recognized around the country for how the players know each other and work together. It is a close community. Associations and conferences

support the exchange of information and collaboration. However, we must be clear that these resources have not moved us beyond point solutions at a level capable of creating the results we desire.**Technology**– The path to identifying integrated system solutions must include the adoption of technology, particularly AI, to identify combinations of solutions that have the greatest likelihood of moving the needle in healthcare.

The rapid multiplication of point solutions is at least partially responsible for the healthcare innovation and transformation industry’s less than satisfying report card over the last several years. Collaboration among the players is necessary but insufficient. Technology to support the identifications of integrated solutions is critical.

One in five dollars spent in the economy is a magnet for investment.

While many entities will address this opportunity over the coming years—one in five dollars spent in the economy is a magnet for investment—the Care Transformation Studio is being launched to address this challenge, to create a system for collaboration, and to provide technology-enabled decision support.

**We invite your participation and appreciate your comments and feedback on how we can do our job better. We have a lot to learn. We do recognize the enormity of the task and welcome the challenge.**