Healthcare Trend Leader –Healthcare 3.0

Genesis of Consumer-driven healthcare? 

As our inaugural healthcare “blog” I wanted to provide some insights, thoughts and observations for fellow healthcare executives as well as those interested in health, medicine and wellness on several emerging and converging trends.

A brief history of modern healthcare provides us with some glimpse into how the future of healthcare will evolve in the coming decades ahead, especially Consumer-driven healthcare.  I have been blessed to have literally grown up in the healthcare industry and can give witness to nearly 50 years of its transformation from a local “cottage industry” to a rapidly growing world-wide sector of most nations and in the United States representing 15% of the GNP and $2 Trillion.

I was born and grew up in Washington, DC, while my parents owned and operated a healthcare consulting firm first in the 1950s and then another in the 1960s.  My “window to the healthcare world” was upfront and unique as I watched hospitals changed from being reimbursed on a “cost plus” basis by the Medicare Act of 1965 which simply described “hospitals treating sick patients, adding up all the medical cost and sending the bill to the Medicare” for reimbursement regardless of the cost or the length the patient stayed in the hospitals. It was this system and Hill-Burton that Congress enacted that provided a “chicken (or hospital) in every pot” hospital financing approach. During this time, new hospitals were built in every small township, patients were ecstatic to have a medical facility close to home and legislators were re-elected for delivering “the goods”.  There were more than 7,000 hospitals in 1981, very few outpatient clinics and physicians providing “house calls” were a gone by period decades ago.

Beginning in 1982, Diagnosis Related Groups or DRGs were implemented by Medicare to control cost in hospitals and categorize each patients diagnosis or sickness into 400 types divided by the major organ functions i.e., heart, bones, etc., But equally important each DRG had a corresponding “reimbursement” a hospital would be paid regardless on how long the patient stayed in the hospital or the cost involved.  As an example in the pre-DRG era, Aunt Millie would be admitted into the hospital for gallbladder surgery on Friday spend the weekend “enjoying” the sights and sounds of the hospital, then have here surgery Monday and be discharge home Thursday after being in the hospital for nearly a week. The hospital would send the $8,000 bill for cost of the surgery to Medicare for reimbursement.  In the DRG world, Aunt Millie would not be admitted into the hospital until Monday, have her surgery and be discharged three days later.  The DRG payment for gallbladder surgery would be $3,000 and the hospital would be paid that amount only.  If the hospital could treat her for less then $3,000 it made a “profit” if it didn’t it had a “loss”. 

The result of this new financing system for hospitals resulted in thousands of hospitals closing across the US.  No longer could small community hospitals afford to operate alone given the high overhead cost, or they merged with larger regional health systems or national for-profit (NYSE) and not-for-profit hospital systems.  Hospitals “pushed out” their services toward the community by establishing adjacent or freestanding surgery centers since they could provide services at a lower cost. I would argue, this was the genesis for the “consumerism” in healthcare.  As hospitals decreased in numbers outpatient centers, walk-in centers, “doc-in-the-box” clinics and home care exploded in growth.  Hospitals have become intensive care centers treating only the most sick and needing the high level of medical treatment and technology.

Today if Aunt Millie were in fairly good health, she would visit a surgery center perhaps owned by the hospital or her surgeon or health plan or private investors, have gallbladder surgery as an outpatient, rest for a few hours and be sent home with home care follow-up. The cost would be a fraction of what it cost 20 years earlier.  She would be a happy consumer, however, Aunt Millie’s nephew, Adam, the next generation would not only expect this type of healthcare experience, but would demand much much more as we march toward “Healthcare 3.0”… 

Michael Ryan, MHA, FACHE is healthcare thought leader and Chairman www.execimpactgroup based in San Francisco. He has served as editor and columnist of several healthcare articles, journals and publications including Editor-In-Chief of The Ryan Advisory Newsletter for Healthcare Governing Boards based in Washington, DC from 1986-2000. He has served as a hospital CEO within the largest health systems in the United States including www.ascensionhealth.org, www.hcahealthcare.com and www.fmolhs.org. Michael served as president of the American Hospital Association www.aha.org (AHA)’s Southwest Society of Healthcare Strategy and Market Development serving Louisiana, Arkansas, Oklahoma and Texas. He previously was a founding board member and president of the AHA’s Capital Area Society for Healthcare Marketing and Planning in Washington, DC. Since 1982 he has been active in the healthcare technology as a healthcare executive and creator and host of a weekly “live” interactive forum for healthcare CEOs and executives internationally for America Online www.aol.com. He is founder of HealthOnline and recognized as a Silicon Valley 100 member www.stonebrick.com/influencer100.html. He serves on the Bay Area Healthcare Executive and the California Association of Healthcare Leaders board of directors. He is a Fellow of the American College of Healthcare Executives www.ache.org and was founding board member of Ache.org