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The Current State of Healthcare
An Argument For the Continued Rise of Digital Health
MobileMSK Solutions
January 19, 2023
The current state of healthcare is ripe for disruption. The commoditization of software and digital technologies is feeding into our “always-on” global culture, making brick-and-mortar institutions seem obsolete. Many people are struggling to meet their health and wellness needs with in-person appointments, especially those who belong to rural and underserved populations. In many cases, the healthcare experience is uncomfortable, inefficient, and expensive, causing people to forgo care until a crisis occurs.
National healthcare expenditures as a percentage of Gross Domestic Product (GDP) have steadily risen since the 1960s. (1) This suggests that as society progresses, it is becoming more and more expensive to attend to our health. In fact, following the current trend, well over one quarter of our net productivity will be dedicated to healthcare by the year 2050. With an estimated GDP per capita of $70,000 per year, about $18,000 per year per person will be required to provide healthcare alone. This is not sustainable.
Shifting public incentives through the Great Depression and World War II led to the establishment of the overhauled federal tax code in 1986 and commercial payment plans for healthcare. Today, the burden on commercial payers, specifically employers, to cover healthcare costs is immense. The United States Department of Labor suggests that the costs for workers’ compensation alone have approached $1 billion per week. (2) This is a shocking figure, considering workers’ compensation payments account for only a fraction of direct costs related to workplace issues of health and safety. In fact, a 2021 article published by the Kaiser Family Foundation (KFF) suggests the vast majority of large employers believe employer-sponsored healthcare coverage will be unsustainable within the next five to 10 years. (3)
The healthcare industry is also facing a growing imbalance of supply and demand. Generally, the patient population is growing, requiring more appointments and complex care. Clinical experts are leaving practice or demanding more balanced schedules that limit the availability of medical services. There are also issues of training bottlenecks, malpractice liabilities, hyper-specialization, and medical deserts.
At the provider level, consolidated health systems are accustomed to driving revenue through siloed specialty practices using a fee-for-service model. The inefficiencies of these systems are becoming alarmingly apparent as healthcare is taxed by the growing prevalence of complex diseases and workforce shortages.
Average wait times for a physician’s appointment are over 3 weeks and increasing in the United States. (4) Furthermore, in some cases, it is rare that anything can be done during this first office visit. This is simply the entry point to a frustrating cycle of delayed referrals, repeat labs and imaging, unnecessary procedures, re-routing of care, and dropout - All of which may cost a health plan 10s-of-thousands of dollars for a single episode of care.
Two major factors in the “stickiness” of healthcare inefficiencies are the cyclic nature of the economy, which is largely composed of a variable debt base, as well as the painstakingly long technology adoption lifecycle in healthcare. These factors have created a paradigm where inefficiencies are passed down the value chain from patients to providers, commercial payers, and eventually the government. Ultimately, major problems are watered down and buffered by inflationary credit. That is, until the credit base contracts.
The rapid surge in demand for healthcare during the Covid pandemic created a major source of pressure for traditional providers, which was largely passed on via higher costs for commercial payers and the government. Now, with an economic recession looming, companies are having to layoff employees to reduce costs, and providers are losing revenue to lower tier forms of reimbursement. Patients are often forced to forgo healthcare due to issues of access, equity, cost, convenience, and overall satisfaction with available services, which further contributes to insidious trends of declining population health and multimorbidity. (5)
Situations of social and economic turmoil are perfect for innovation. As providers continue to lose revenue to payers dodging the high fee-for-services model, and patients eventually pursue care for more debilitating and costly conditions, everyone is grappling for a solution. In many ways, the value-based-care ideology catalyzed by digital health innovation provides a solution.
Value-based care programs emerged as a government initiative to redefine how healthcare is reimbursed with priorities of the Triple Aim: Better care for individuals, better health for populations, and lower cost. (6) Digital health has great potential to reinforce the movement to value-based care in the broader commercial landscape without sabotaging the fee-for-service model. When implemented properly, it is an adjuvant to the current state that provides a foundation for strategic restructuring of bogged down systems.
Digital health has been recognized as an emerging solution for healthcare access, equity, cost, and convenience. Digital health solutions encourage the paradigm shift from reactive to proactive healthcare. Patients have more immediate and regular contact with health experts so critical issues are recognized and addressed in a timely manner. They only appear in the clinic when necessary or preferred to support the care delivered online. (7)
With mass adoption of digital care, traditional systems and facilities can be repurposed to reduce waste and support community-wide preventative health and well-being. Software can augment medical best practice by increasing access to care, continuity of care, and patient engagement or adherence. The ability to track and respond to patient care data in real-time opens avenues for more proactive and cost-effective service.
Not every health condition is suited for virtual care. Automated diagnosis and treatment warrants health concerns with clear criteria for urgent or advanced management. There should also be a strong cost versus benefit ratio that favors the transition to automated remote care. Health conditions addressed by cutting-edge digital health solutions should have the following qualities: They should be exceedingly common; demonstrate a large socioeconomic impact; require continuous, multidimensional care; favor relatively conservative interventions; have adequate parallels to general medicine allowing a proof-of-concept to be scaled to address the growing issues of multimorbidity and chronic disease in our society.
While the market has recognized the promise of remote healthcare solutions for quite some time, efforts to innovate in this space have been met with significant challenges. The rise and fall of over-leveraged, poorly-executed virtual care providers during the funding surge surrounding the COVID pandemic has raised doubts about the future of digital health. While digital-first hybrid models for care appear to be crossing the chasm of health tech innovation and adoption, these cut into the limited clinician workforce, further exacerbating the woes of our traditional provider infrastructure.
The status quo for healthcare innovation involves necessary, but restrictive investments in regulatory assurance and clinical robustness that impact financial viability. Totally automated diagnosis and treatment is at least 5 years away from being recognized as a serious opportunity in the digital health landscape. However, increased interest in redefining healthcare from large employers like JP Morgan, Amazon, and the largest customer in healthcare, medicaid, carry hope that another wave of innovation is on the horizon. Regardless, further changes in the regulatory atmosphere to encourage innovative startups, radical partnerships to support pilot programs with innovative technology, and new players committed to incremental, evidence-based change are needed to usher forward this movement.
Sources:
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical
https://www.osha.gov/businesscase/costs
https://www.kff.org/health-reform/press-release/vast-majority-of-large-employers-surveyed-say-broader-government-role-will-be-necessary-to-control-health-costs-and-provide-coverage-survey-finds/
https://www.medicaleconomics.com/view/telehealth-patients-rarely-needed-an-in-person-follow-up