It's getting scary.

We are facing, before the end of this decade, a bifurcated future. The way things are going now—with the economy wheezing, doctors bailing, chronic disease rising fast, boomers sliding out of the Viagra years into the Depends years, reimbursements getting squeezed ever tighter, Medicaid sputtering on fumes, and 30 million or more new people soon swarming our doors with insurance cards—we're in serious trouble, unless we pull a rabbit out of a hat real soon.

If we just muddle along, the best we can hope is that "trouble" will look like horrifying gridlock, no options, no exit. That would be the good outcome. The bad outcome would be the destruction by strangulation of all these great institutions, the utter collapse of our ability to serve this society with real medicine, real healing, real help.

The good news? There is a hat and it has a rabbit in it.

Here at Imagine What If, we survey health care and its environment all the time: talking to, brain-picking and consulting with major employers, health care vendors, hospital systems, entrepreneurs, creative start-ups, doctors, big health plans. In this survey, we have picked up an encouraging pattern, one that grows increasingly solid with passing months—so encouraging that we have posted a detailed special report on it on our website,

Here's what I am seeing: There are things popping up across health care, here and there—particular programs, business models, experiments—that lead me to believe there is a way out. The way out leads not just to survival, but actually to better health care for everyone. It leads not just to a drop in inflation, a "bending of the cost curve," but to a substantial drop in the cost of health care.

The path out of our dilemma is not simple or fast. It is complex and difficult and will take years to build, yet it is absolutely workable. It already is being done.

There are five parts to the strategic toolkit necessary to get on this path. You need all five, and you need only these five. They are both necessary and sufficient to the task. They are interdependent; each of these five strategic tools needs the support of the other four.

Five Strategic Tools

1. Explode the business model. The majority of health care is delivered under one business model: the insurance-supported, fee-for-service model. As I explored in my last column, "The Problem with Free Market Health Care" this model makes it hard for the seller to deliver value to the buyer, and for the buyer to find value.

New business models are popping up month by month: retail care, urgent care, free clinics (yes, that's a business model with a positive ROI), online medicine, "concierge" medicine, on-site primary-care clinics for employees, fee-based disease management and specialty clinics with bundled products, all of which, in one way or another, route around the dominant model.

Most hospitals over the decades have been far too insistent on avoiding any business-model adventurism, any experiments to see what might actually make them some money beyond just begging for higher reimbursements and trying to get more patients in one door and out the other. This single-focused strategy has helped lead the industry to its current financial straits, making it strongly dependent on a few large payers.

It is possible, and usually necessary, to mix multiple business models within one institution. It is neither necessary nor usually possible for everything in an institution to get out of the insurance-based fee-for-service system. Rather, a balance of different revenue streams helps shape an institution to better serve multiple types of customers.

2. Integrate. One way or another, hospitals and doctors need to work together more cohesively. They need to be on the same team clinically, administratively and financially.

There are multiple ways to get the docs on the team. We don't all have to be Mayo, Kaiser, Virginia Mason, Group Health of Puget Sound or Geisinger. Anything that seriously does not fit the culture of a good portion of the physicians in your area will not work. You can integrate more closely with docs in a number of ways: through joint ventures in specific areas like backs, cardio or urgent care; through a properly conceived and run physician-hospital organization (PHO); by helping physicians digitize their practices; by putting nurses in their practices to track chronic patients; or by hiring specific specialists in key areas and buying specific primary-care practices.

It is neither necessary nor necessarily helpful to get all the docs to work in one big team in the same way. It depends on the business model, and we need multiple disparate business models.

3. Share risk. Risk and rewards drive behavior. If players in a system are not doing what you think they should to make the system work well, chances are they are not being rewarded, or put at knowing risk, in a way that matches their effect on the system.

A patient who over-uses the system has no financial risk. Patients' costs don't change whether they use it or not. Patients who underuse the system do not see how they are hurting themselves. A health care system that does its best to drive maximum use of the system, getting the most bodies into scanners and beds and surgical suites, is not at risk for the health of those patients, and is given incentives only for doing stuff to them. Balancing risk appropriately across the system allows the system to drive itself toward value.

Ways of sharing risk more appropriately across health care are cropping up swiftly. Intelligently designed high-deductible health plans matched with health savings accounts and the right set of incentives are proving to be a workable way for the consumer to accept some financial risk. A fully capitated system like Kaiser, of course, transfers most of the financial risk to the system (though even Kaiser has introduced deductibles and co-pays on most plans).

But there are many other ways to take on appropriate risk. Bundling, with published prices, is a way to take on risk. The system is saying, "We are willing to take the risk that we can deliver an uncomplicated birth as one package for this price." Warranties are another way. The system is saying, "We are willing to take the risk that we can deliver quality on demand." "Mini-caps," such as diabetes-care subscriptions, transfer risk. The system is saying, "We are willing to take the risk that we can deliver all the services you need for a set price—because if we do it right, we can actually drive down the cost of those services."

There is no need, and it may not even be helpful, for fully capitated risk to become the single model for health care. Such monolithic models tend to transfer all the risk to the providers, or to the government, and they have no traction with which to drive toward value. Taking on some risk, in ways and in areas in which that risk can be managed intelligently, exposes providers to the discipline of the market.

4. Build from primary care upward. Every health care system worldwide that delivers care better and cheaper than the U.S. system has a stronger primary-care sector. This is by design. Specifics in the policies of other governments support the primary physician.

Our primary physicians have been left to languish. Here are some numbers. The difference in income between primary-care physicians (PCPs) and specialists is huge. The average PCP earns 55 percent of that of the average specialist, and a mere 30 percent of what, for instance, an orthopedic surgeon earns. Only 27 percent of PCPs describe their practice as robust and satisfactory. PCPs are flocking to sign on with hospitals, and hospital employment is rapidly becoming the norm, with 40 percent of active PCPs estimated to be on hospital payrolls by 2012.

Every year medical schools produce fewer doctors who elect to go into primary care, at the very time when demographic shifts and the reform act mean we are facing a massive shortage of primary-care docs. But the money, relatively poor as it is, is not actually the main thing turning docs away from primary care. It's the burden of the work.

The key rubric for supporting primary care is the medical home, but the medical home can come in many forms, funded many different ways. Can we find ways to pay doctors to do what we most want them to do? Do they use registries aggressively to track their patients? Are they operating in a team environment, with everyone doing most of their work "at the top of their license"? Are they evidence-based, measurable without the "measurability overhead" burden?

5. Rebuild the production system constantly. Health care is a production system, a massive one with high demands and expectations, huge and exacting transfers of information and material, meticulous manufacturing and processing needs and, until recently, almost no introspection about processes.

In most health care, even now, we do things the way we do them because that's the way we've always done them, or that's the way it's convenient for this or that doctor, or for thousands of other reasons that have little or nothing to do with "that's the most efficient, effective way to get this done. We know because we have tried other ways and measured the result—and we're still looking for better ways." Why is this a quote? Health care, in its core processes, is enormously wasteful, simply because most of its processes in most of its environments never really have been studied and improved.

A whole array of tools—lean management, the theory of constraints, benchmarking, six-sigma process quality, checklists, continuous performance improvement—have been tested and refined in other industries, and are beginning to gain a foothold in health care. Their successes, when applied diligently and enthusiastically over time, have been remarkable and measurable.

The Payoff

The core problem in health care is pretty neatly expressed by the fact that I can say to the customer, "If you did these five things, you would be in better health," but I cannot say to them, "If you did these five things, you would get better health care for less." In most of health care, the customers can't find value, don't know how to, and don't get rewarded in any way if they do find it. There are no real products to compare, no real prices that relate to how good the product is and no real useful measurement. To a great extent, this applies just as well to the customer's representatives in shopping for value (the employers, the health plans and the government).

These five strategic tools (and the similar toolkits I am laying out for health plans, physicians and physician groups, and employers) are about how we in health care create real value (cost per benefit), prove the value through real measurement, present it to the customer in packages from which they can pick and choose, take our lumps in the marketplace, and constantly improve through competition.

People say, "But what about those darn patients/health plans/employers (Pick your villain.)?" What about them? Health care is a complex adaptive system with all players at static local optima in a "Nash equilibrium." Translated, that means: (1) All players feel helpless to change anything about their situation without being punished and feel it's everyone else's fault; and (2) any player who changes, changes the incentives and forces acting on every other player. If the providers shift their strategies, they change the rules of the game, and suddenly everyone is looking for a new way to get this thing done. Now's the time.

Joe Flower is a health-care futurist, speaker and founder of Imagine What If, a service of the education firm The Change Project Inc. Flower is also a regular contributor to H&HN Weekly and a member of Health Forum's Forum Faculty Speaker Service.

The opinions expressed by authors do not necessarily reflect the policy of Health Forum Inc. or the American Hospital Association.