The rising cost of health care continues to threaten our nation's financial stability. Despite recent slowing in the rate of growth, health care spending still stands at 17.4 percent of GDP — 48 percent greater than that of the next highest-spending developed country. And health care spending will be 19.8 percent of GDP by 2020, and 22 percent of GDP by 2038, according to government forecasts.
This level of spending is undermining the economy today and is even more ominous for the future. As health care spending continues to grow, society will face increasingly unpalatable choices, including further increases in consumers' out-of-pocket expenses and continued cutbacks in government spending for core services.
To head off this scenario, our nation needs to reduce health care spending to a level that makes a significant difference to both the viability of our health care system and the stability of our national economy. The relative spending level may not be that of Western Europe — about 11 percent of GDP — but clearly must be less than 17.4 percent and with a growth rate far below historical norms.
This degree of change in the cost structure of health care cannot be accomplished by nibbling around the edges. It requires complete reassessment and reworking of our outmoded health care system, with a focus on retooling the basic assets of the system.
Redeploying Health Care Resources
The chassis of our health care system — its physical assets and infrastructure — was constructed for another time. Since World War II, we have built and operated a health care apparatus designed around an inpatientcentric model. The physical assets are expensive, they are distributed with little regard for avoiding duplication or ensuring equal access, and their very presence stimulates utilization of expensive inpatient care.
But now, the inpatient era is ending. Inpatient volume is declining, outpatient requirements are rising, and there is near-unanimous agreement among economists and policymakers that payment systems need to reward providers for keeping patients out of hospitals.
Yet, we still have the apparatus of the inpatient business model. It's not unlike trying to deliver cellular phone service using the infrastructure of the fixed-line telephone.
Now we face the challenge of rightsizing this apparatus and infrastructure for the outpatientcentric business model. This change will require a complete reassessment and redeployment of resources. A six-hospital system with 50 outpatient locations now may need only three hospitals but 100 outpatient locations. The provider mix will need to support more prevention and primary care, and will need to incorporate more physician extenders. And patient interactions will need to take place in the least expensive setting possible, including at the patient's home and virtually.
The forces driving this rightsizing are unstoppable. Now, as a society, we need to pay serious attention to how the change takes place.
Taking Responsibility as Health Care Providers
I believe that this rightsizing is primarily the responsibility of the health care industry. It would be a mistake for health care leaders to cede this responsibility to the federal and state governments, which have not demonstrated the political will nor the intellectual subtlety to make these kinds of tough choices.
Health care leaders should not wait for market forces alone to accomplish this transition. At some point, market forces would indeed deliver a health care system that is much more efficient than the one we have now. However, those forces would naturally gravitate toward high-volume and relatively high-reimbursement opportunities, leaving the nation vulnerable to geographic challenges to adequate access to care. Deliberate planning by strong and influential providers will be required to create a system of care that is cost-effective and also provides appropriate access to care for all patients, regardless of location.
Individual health care organizations will have to assess their portfolios of services rigorously and be willing to change them significantly to fit with the outpatient business model and ensure that sufficient volume is available to deliver high-quality care.
And nationally, leaders will need to tackle the challenge of ensuring the availability of needed community-based services in all regions of the country.
This planning will require active involvement of all stakeholders — hospitals, health systems, physicians, payers, employers, government and consumers. The resulting changes in management and organizational structure will at times be painful to execute. Yet, health care leaders have a responsibility to the nation and to future generations to take responsibility for rightsizing the health care infrastructure, moving to the outpatient business model and doing it in a way that best serves our national economy and our communities.
Kenneth Kaufman is chair, Kaufman Hall, headquartered in Skokie, Ill.
