Counterpoint

In Part 1, I explained – again – the fallacy of “value-based care” as an effective policy to bend healthcare’s cost curve and suggested that health economy stakeholders are running out of time to promote patently fallacious ideas to “innovate” and “transform” healthcare. 

Two weeks ago, I shared those same sentiments in a presentation to a group of friends, colleagues and mentors whom I have met over the past 35 years. I was a member of the group for almost 15 years, but I resigned my membership in 2017 because of my frustration that most were, in the words of the Apostle James, “hearers” and not “doers.” In my presentation, I said exactly that and told the attendees that I hoped my remarks angered them enough to provoke them to change the healthcare system instead of merely talking about it.

Why? Because the current arc of the U.S. healthcare system is not sustainable.

Neither is this.

This is inexplicable.

And this is inexcusable.

All those things result from this.

And that explains this.

The Federal government’s track record of innovation is mixed, marked both by numerous revolutionary technological developments and many notable failures, like the launch of the HealthCare.gov website. In 2023, the Congressional Budget Office (CBO) succinctly summarized the track record of the CMS Innovation Center: 

“CBO previously estimated that CMMI’s activities would reduce net federal spending but now estimates that they increased that spending during the first 10 years of the center’s operation and will continue to do so in its second decade.”¹ 

On the other hand, CMS is quite adept at something completely unimaginative: price controls. CMS’s first implementation of price controls, Diagnosis Related Groups (DRGs), succeeded in reducing spending for several years.

Similarly, the Balanced Budget Act of 1997 (BBA 1997), which expanded the prospective payment system on which DRGs were based, also briefly succeeded in reducing costs. 

Beginning January 1, 2026, CMS’s Transforming Episode Accountability Model (TEAM) initiative, which is essentially a DRG over a longer time period, becomes mandatory for hospitals in 188 CBSAs.  

If past is prologue, TEAM will meaningfully impact hospitals like DRGs and BBA 1997, although hospitals will not understand the impact until 2027. When hospitals get squeezed, so will every other health economy stakeholder.

If you are reading this post, then you are probably a health economy stakeholder, in which case you should take a moment to ignore what I call “the tyranny of the urgent” in your business and focus on what Dr. Martin Luther King, Jr. called “the fierce urgency of now.”  

The American public, both the individual citizens and their elected representatives, are, like Howard Beale in Network, “mad as hell.” The question for you is how long until they decide that they are “human beings” whose “life has value” and “are not going to take this anymore.” 

At some point, change is coming to the U.S. healthcare system. The only question is whether you, your colleagues and your peers are going to make it happen or have it happen to you. As Dr. King said,

“We are now faced with the fact, my friends, that tomorrow is today. We are confronted with the fierce urgency of now. In this unfolding conundrum of life and history, there is such a thing as being too late. Procrastination is still the thief of time. Life often leaves us standing bare, naked, and dejected with a lost opportunity. The tide in the affairs of men does not remain at flood -- it ebbs. We may cry out desperately for time to pause in her passage, but time is adamant to every plea and rushes on. Over the bleached bones and jumbled residues of numerous civilizations are written the pathetic words, ‘Too late.’”²  

The title of Dr. King’s speech was “Beyond Vietnam: A Time to Break Silence.” Similarly, it is time for health economy stakeholders to break silence – and then to break the septic nature of the status quo that has the U.S. healthcare system on the brink of collapse. Dr. King explained the power of the status quo more eloquently:   

“Nor does the human spirit move without great difficulty against all the apathy of conformist thought within one’s own bosom and in the surrounding world. Moreover, when the issues at hand seem as perplexing as they often do in the case of this dreadful conflict, we are always on the verge of being mesmerized by uncertainty. But we must move on.”³ 

Like Dr. King, I am writing this because “my conscience leaves me no other choice.” All the value-based care programs and narrow networks and innovation conferences in the world will not save the U.S. healthcare system from systemic failure, although more than a few people will continue to enrich themselves promoting such sophisms, a daily reminder of the “waste” in the healthcare system.  

If you are unaware that meaningful change is coming to the U.S. healthcare system, then you are not paying attention. Likewise, if you are unaware that price controls are the most logical policy approach to control prices, then you are a poor student of history.  

If you are unwilling to implement meaningful change to benefit your customers, you might consider doing it out of self-interest. As General Eric Shinseki notes, “if you don’t like change, you’ll like irrelevance even less.”  

The first step in meaningful change is metanoia, a Greek word commonly translated as “repent” but whose original meaning is “to change, to turn, to think differently.”⁴ To avoid price controls, every health economy stakeholder must think differently about their business model.

For all the discussion about “healthcare consumerism,” few health economy stakeholders focus on the most powerful force in consumerism: value for money. Value in healthcare is like any other commodity, product or service, the combination of what you receive in exchange for what you paid and the likelihood that you will want it again. The elements of healthcare value include price, quality, efficiency, effectiveness, outcomes, process, experience and brand perception. 

As a result, developing truly consumer-focused strategies in healthcare requires a dynamic definition of value for money that depends on the type of product or service being delivered, the complexity of the product or service and the relative and comparative price of that product or service, as well as the relative and comparative price of substitute goods. 

Health economy stakeholders can deliver value for money to the customer in one of three ways:

• Better than average quality at a price at or near the median market rate  
• Average quality at a price that is below the median market rate  
• Better than average quality at a price that is below the median market rate  

There is no value for money proposition in offering worse than average quality at any rate, especially one that is higher than the median market rate.

If you have not discussed this with your board, you should. If you are scared to share it with your board, I will gladly be the messenger. Why? Because “my conscience leaves me no other choice.” I know that the U.S. healthcare system is much more like England’s National Health Service (NHS) than most health economy stakeholders realize. I also know that Americans will hate the parts of the NHS that are, for now, lacking.

Will you initiate transformational – and painful – change, or will you wait until it is too late?