American Healthcare in Crisis: NOBODY is losing. Except you.
American Healthcare is in crisis and in need of reform. Everybody agrees on this, even if the direction of such reform is in dispute, and therefore a Washington agenda is still missing. In the US, we spend twice as much as the average OECD country in healthcare per capita, yet we have the lowest life expectancy and highest suicide rates among 11 comparable OECD nations; we have the highest chronic disease burden and an obesity rate that is two times higher than the OECD average; we have fewer physician visits than peers in most countries; and we have the the highest number of hospitalizations from preventable causes and the highest rate of avoidable deaths. Procedures such as knee and hip replacement are 2 to 3 times more expensive than in comparable nations. Something is wrong, but what is it? The COVID pandemic, of course, emphasized some of these weaknesses, and I decided that instead of digging into single-use device reprocessing again, this month, I want to take a look at the past year or so and see what we can learn about the weaknesses of US healthcare in a time of crisis.
With US healthcare under tremendous pressure, one or more of the institutions that play a role in the healthcare system must be losing out. We have an integrated healthcare system consisting of medical providers (hospitals), suppliers (pharma, device manufacturers, capital assets, and others), and payers (insurance companies and government agencies). I took a look at how these healthcare system components have fared since February of last year, before the pandemic hit: Some of these institutions must have paid dearly for the crisis.
First off, I looked at the 7 largest publicly traded US healthcare insurance companies representing 50% of the market. Since the beginning of the pandemic, these companies grew in stock value by an average of 60% between February 2020 and May 2021. That is almost as much as they grew in the four years leading up to the Pandemic combined… Since the beginning of the Pandemic, average operating income has grown by 23%... Clearly, the pandemic made many of us change behavior that reduced the instance of claims, such as less driving, etc. But if anybody can afford to pay for improvements in healthcare, it is the insurance sector. There is a tremendous lack of transparency about and variability in rates paid for procedures and medical visits that needs to be brought to the surface and cleaned up.
There is a tremendous lack of transparency about and variability in rates paid for procedures and medical visits that needs to be brought to the surface and cleaned up.
Next – the suppliers. The top 5 suppliers of medical devices grew their stock value by more than 30% during the pandemic months between February 2020 and May 2021, again, equivalent to the entire growth achieved in the four years prior to the pandemic. Operating income grew by more than 16% during the pandemic as well. They – also – didn’t suffer during the pandemic and show very healthy double-digit growth year over year. So who is losing all this money won by suppliers and payers in the US healthcare system? Clearly the providers:
I took a look at publicly traded hospital systems in the US. There were lots of articles published almost every day in 2020 about how hospitals are getting KILLED by the pandemic: Profitable procedures are down, costly care is up. This must be who’s paying for the weaknesses of our healthcare system. But no! Between the 7 top publicly traded hospital systems, stock value was UP 73% during the pandemic months from February 2020 to May 2021. Operating income was up more than 33% in the same period. The providers did better than anybody else!!
Between the 7 top publicly traded hospital systems, stock value was UP 73% during the pandemic months from February 2020 to May 2021.
OK, this may not be the case for smaller, rural hospitals without the scale or the wherewithal to create efficient and effective patient care practices or rapidly change with a challenging healthcare environment. However, many hospitals outside of the bigger hospital systems quickly pivoted during COVID, shut down whole departments and furloughing staff (avoiding unnecessary costs) and started making money on COVID testing and treatments. And the $175 billion allocated for grants to health care providers in the Coronavirus Aid, Relief, and Economic Security (CARES) Act made a difference too, although I would argue that it in some cases, it simply enabled inefficient hospitals to remain inefficient.
So who is paying for the faults of American healthcare? Who suffered financially during the pandemic? It seems like everybody in the healthcare system is doing just dandy. The only ones paying for overly expensive, poor healthcare in the US is YOU: The taxpayer that funded the CARES act, the patient receiving poor care and ending up with an impossibly large bill, the insurance holder with no insight into what is paid for what, and the hospital staff who gets furloughed during crisis, only to be asked to work twice as hard to secure hospital profitability in a post-pandemic scenario where demand for elective procedures are/will be booming.
When the healthcare system does well at the cost of the end-users, it is because the system has created a complex that completely lacks transparency and accountability. It has become self-governed, balanced and sustained by the guaranteed profitability of all the system participants.
When the healthcare system does well at the cost of the end-users, it is because the system has created a complex that completely lacks transparency and accountability.
When Dwight D. Eisenhower described the term the Military Industrial Complex in his Farewell Address to the Nation on January 17, 1961, he described the military system in terms that may seem familiar. He spoke of a system of suppliers, providers and payers that functioned great, because it had become well integrated and immensely powerful. However, he reminded the audience that if unchecked, this system presented a massive challenge to the well-being of Americans. Eisenhower was a staunch Republican, and he wasn’t talking about the malice of capitalism or anything like that. He was simply pointing out that when an industrial coalition is formed that is massively successful and influential, it is necessary for the government and the people to be able to check it and redirect it if needed. From Eisenhower’s speech - I substituted a few healthcare terms for military terms - : “We must never let the weight of this combination endanger our health or economic well-being. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial, payer and insurance provider machinery of American healthcare with our fiscally responsible methods and healthcare goals so that quality and financial sustainability in healthcare may prosper together.”
In the US, we spend twice as much on healthcare for worse quality – compared with other similar countries. That is not acceptable. The healthcare system does not redirect itself, because each participant is doing immensely well. Eisenhower’s suggestion is that public watchdogs, government agencies and the administration step in and demands transparency and accountability for achievement of clear goals that benefit the American public. The pandemic experience has taught us that without this, the industry always wins while the patient always loses.