Time Capsule: GM and Intel are Right: Healthcare Is Too Expensive, but Technology Alone Can’t Fix It

I wrote weekly editorials for a boutique industry newsletter for several years, anxious for both audience and income. I learned a lot about coming up with ideas for the weekly grind, trying to be simultaneously opinionated and entertaining in a few hundred words, and not sleeping much because I was working all the time. They’re fun to read as a look back at what was important then (and often still important now).

I wrote this piece in October 2006.

GM and Intel are Right: Healthcare Is Too Expensive, but Technology Alone Can’t Fix It
By Mr. HIStalk

Big-company CEOs have healthcare on their minds. I know that because they keep insulting us in the national media. We’re too expensive and we underutilize technology, they say. In fact, it’s our fault that jobs are moving offshore, not their own corporate greed or inefficiency.

My first reaction: who do they think they are? We’re getting lectures on innovation, productivity, and cost control from GM? If I wanted that kind of advice, I’d go to Toyota.

Quibbles aside, they’re right. Healthcare cost increases have to stop eventually. Most US job growth since 2001 was in healthcare, and that’s not something to be proud of. We’re leaving an expensive mess for our children to clean up just as Baby Boomers suck the system dry with healthcare demands. If GM doesn’t like it today, they’ll hate it tomorrow, unless they’re watching from China or India.

Businesses want to force computers on us, dragging us kicking and screaming out of the dark ages. Unfortunately, software doesn’t automatically bring increased productivity and lower cost. If it did, we’d be using it already. Think of all of those hospital dollars spent on Microsoft Office and Windows, which were supposed to have made us stunningly more effective, but instead gave employees something to screw around with instead of working.

I’d like to think that computerization can really reduce costs, but I haven’t seen that happen anywhere so far. Showcase sites keep buying the latest and greatest, but the correlation to bottom line and quality outcomes is murky at best. Where’s the average 100-300 bed hospital that has seen its overall costs drop 30% because of software? You’d know them, because every other hospital in their town would be out of business.

Hospitals can cut expenses in three ways, all of them at their local level. They can manage labor, which is by far their largest expense. They can go after the utilization and the cost of drugs and supplies. They can control physician practice variation. I’m glad I said “can” instead of “do” because, for various reasons, these things don’t happen. Software can only do so much.

I’m glad much of our recent IT investment relates to patient safety and outcomes. I hope electronic medical records really do become a standard, with all the information sharing that the RHIO people keep yapping about.

But when it comes to drastic cost reductions driven solely by buying and implementing software, I’d say that’s wishful thinking. There’s a lot of work to be done fixing the system and its underlying misaligned incentives before we try to automate it. No business became a world-beater just by installing SAP, even if they weren’t one of those that went bankrupt trying.

I do see a ray of hope in being called out by big-company CEOs. As hard as it is to have change forced on you, that’s the only way it will happen. I work in a hospital, but I’m also the occasional patient and medical and insurance bill-payer. When wearing those hats, I’m just as mad and frustrated with the system as those CEOs and I bet you are, too.

Healthcare is too expensive, too bureaucratic, and too unimpressive in benefits delivered compared to its horrendous cost. I’m pretty sure fixing it will require more talents than a software guy like me can offer, even if GM and Intel believe otherwise.