At first blush, it would appear that entrepreneurship is alive and well in health care. And that's true in many areas: New devices, pharmaceuticals, and surgical techniques regularly get developed and incorporated into practice. Virtually every day, there is information about a clinical study with a new way to treat sick people. Fortunes have been made from implants, surgical instruments, and artificial products. And biotechnology and medical devices are among the leading areas for venture capital funding.
But in a different sense, the health care system is starved for innovation and the entrepreneurial spirit. Medicine has innovated greatly in the therapies that are provided, but not in the way the system is organized. The situation is such that if a physician from the 1950s were magically brought back to life today, he would recognize none of the technology that a contemporary doctor uses, but he would feel quite at home in the settings in which the technology is used. Very few things in the economy are the same today as they were a half century ago, and most of those are still the same are not considered successes.
Think instead about other industries. When people want financial information, they can get it right away, day or night. Critical information is stored centrally and accessed wherever it is convenient. Purchases can be made electronically, by telephone, or in person, whichever is more convenient. Convenience and coordination are the standards for most industries - but medicine falls far short.
Look deeper and the situation becomes even more puzzling. There are examples of good care, visible like oases in the desert. The Mayo clinic in Minnesota shows that care can be coordinated. Geisinger Health System in Pennsylvania demonstrates that treatments can be systematized to improve quality. Intermountain Health Care in Utah has set up a learning health care system. In all of these settings, physicians and patients are happy. The major question is why these systems remain one-off, rather than spreading nationally.
There are two explanations for this failure of organizational innovation. The first lays the blame at the door of the government. Coordinating health care information technology requires government action, which was a decade slow in coming. Medicare payment policy favors doing more, not doing better. The federal government has recognized its failures, and is promising to do better. The stimulus bill of 2009 allocated $30 billion for health care IT, and the Affordable Care Act of 2010 allowed significant changes in the way Medicare pays for services. Thus, the landscape for a better medical system is being laid.
But that puts the ball squarely in the court of the private sector, which has not been very innovative. Will private insurers follow up on these Medicare changes to move away from volume-based payment and into value-based payment? Will hospital managers search for efficiency, or continue to manage volume? Will doctors think about care management as equally valuable as rescue of the sick? Everyone knows these changes need to occur, but change has been painfully slow.
Here, then, is the conundrum. Our best estimates suggest that medical spending is about $700 billion higher than an efficient system would generate, and the system is well on the way to imploding. At the same time, we have documented examples of good care. What we lack is the entrepreneurship needed to make the best care the norm. Will it come? I hope so - because the consequences of continuing on as we have are too awful to contemplate.
David Cutler, PhD is the Otto Eckstein Professor of Applied Economics at the Harvard Kennedy School of Government and author of Your Money or Your Life: Strong Medicine for America's Health Care System, published by Oxford University Press. Dr. Cutler served on the Council of Economic Advisers and the National Economic Council during the Clinton Administration and was the senior health care advisor to the 2008 Obama Presidential campaign.
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