Well, we’re alive. Despite the possibility that the world would pass its “use by” date on Saturday, everyone I have checked with is still here. At 6:00 pm on May 21st, 2011, the official time scheduled for the Rapture, I was using my last few moments to crack open peanuts at the Giants v. A’s baseball game (Tim Lincecum pitched a full game shut out—maybe it should have been called the Freakkkture?). Years from now, when we think back on this day, will people be asking each other, “where were you when nothing happened?”
To be honest, I assumed the whole Rapture thing was the Republican’s insidious plot to kill off Obamacare once and for all. And yet, since it didn’t work out as planned, maybe it was actually a Democrat plot.
One thing’s for sure: our current healthcare system is definitely reaching the so-called end of days. There is no way our economy can sustain the ongoing inflation it has been experiencing. Healthcare cost the country $2.5 trillion in 2009 but is expected to hit $4.5 trillion by 2019, according to the Altarum Institute. The healthcare sector has, over the past several years, grown significantly faster than the core inflation rate. It represented 17.6% of GDP in 2009; and is expected to rise to nearly 20% of GDP by 2019 if left unchecked. For the American family the story is quite dire. In 2010, it cost over $18,000 for healthcare for a family of four, double what it cost in 2002, according to the Milliman Medical Index. The average employee personally paid $8,008 out-of-pocket for his family’s healthcare in 2010, up from $3,634 in 2002. FYI, the average family of four spends around $9000 a year on food, so the race is on to determine whether we can afford to eat or treat over the long haul.
The healthcare system must change to survive and, whaddya know, it seems to actually be happening. The impetus for “why now?” may be the discourse and focused energy of the Patient Protection and Affordable Care Act (PPACA), but I think it’s much simpler: good old-fashioned financial desperation. Because healthcare costs are inflating 3 times faster than core inflation, business, government and individuals have finally seen a vision of their futures, and that vision is telling them they better try something new or the future is going to look like a whole lot like that Rapture thing. No one wants to get to Judgment Day and find out they are spending so much of their corporate profits or personal disposable income on healthcare that they can’t afford a memorable last meal.
It seems to me that there are signs all around us right now that the times, they are a’changing, whether or not PPACA is the cause, effect, or just a coincidence of timing. In the last couple of months I have seen the following eyebrow-raising headlines:
- Blue Cross to Link Hospital Pay to Performance (about Wellpoint’s new system of giving hospitals annual payment increases only if they score well on the insurer’s new quality formula, which is based 55 percent on patients’ medical outcomes, 35 percent on patient safety measures and 10 percent on patient satisfaction)
- Arizona Proposes Medicaid Fat Fee (about the State of AZ charging obese Medicaid beneficiaries $50 each for failing to lose weight when directed to do so by their physician)
- CABG and Medical Therapy Perform Equally Well in Patients With Heart Failure (about a study showing that coronary artery bypass surgery (CABG) is no more effective than drug therapy at preventing death in patients with heart disease, and, given the rising importance of comparative effectiveness, how some physicians are urging that CABG should no longer be the default intervention since it is also much more expensive)
- Vermont Steps Closer To Single-Payer Health Care (about the State of Vermont’s Governor signing a bill to separate Vermont from the PPACA rules to institute single-payer healthcare in that state as a cost-savings measure)
- Healthcare IT Spending To Reach $40 Billion (about a report that estimates that the U.S market for healthcare IT hardware, software, and services is expected to grow 24% annually for several years)
Honestly, I can’t imagine any of these headlines appearing in the mainstream media 10 years ago, or even 3 years ago in many instances. Up until the last year or two most of these ideas were spoken of only in theory or hushed tones. Once in a while there were itty-bitty pilot projects looking into some of these ideas on a practical basis, but few in the healthcare field would have said, “yes, these things will happen and they will become the rule, not the exception.”
Not that long ago, if you told a roomful of healthcare executives that governments would fine fat people, that physicians would be lecturing each other over comparative effectiveness; that insurance carriers would aggressively follow through on pay-for-performance; and that States would effectively secede from federal regulatory oversight to save healthcare dollars, they would probably smile and tell you, “Yeah, right.” Today if you assert that these things are going to happen in a big way, those same healthcare executives would likely say, “Duh.”
Three years ago if you told a roomful of venture capitalists that healthcare IT would boom like the Internet once did, they would have laughed you out of the room. Today they are trying to figure out how to get in on the action.
As a member of a healthcare investment firm that has long been preaching “gotta save money in the healthcare system or we are all gonna die,” it is both great and weird to see everyone getting on board. We used to be considered “quaint”—I actually had another VC call me that once when I explained that our philosophy of investing in companies was to find those that simultaneously improve quality and reduce healthcare costs. “How quaint, “ she actually said. This happened during my first few months of working in the field and I remember thinking, “Uh oh, I wonder if my old job is still available.”
It’s taken a while (13 years), but vindication is ours. Now everyone is singing that song and thank goodness. If we, as an industry, as healthcare consumers and as a nation, don’t start basing our healthcare decisions on whether real value is received for every dollar spent, we might soon start wishing we would suddenly disappear to another dimension at 6:00pm on a Saturday afternoon. The alternative won’t be pretty.