What the Health? — A brief look at the health care industry in the US
With the current US health care system transitioning from a fee-for-service (FFS) to a value-based care (VBC) business model, industry leaders are looking for innovative ways to create a healthy and sustainable community.
What is the health care industry?
The health care industry is a collection of companies within different sectors: pharmaceuticals, insurance, equipment, & health care facilities (hospitals, labs, nursing homes, etc). Each sector provides goods and services to treat patients with curative, preventative, rehabilitative, and palliative care. Essentially anything that keeps you alive and healthy falls under the umbrella of the health care system.
Magnitude & Economic Impact
It is one of the largest growth industries in the entire world, with projections upwards of about 20 percent of the US gross domestic product (GDP), earning it a valuation of 11.9 trillion dollars (globally). According to the Bureau of Labor Statistics, employment of healthcare occupations is projected to grow 14 percent from 2018 to 2028, much faster than the average for all occupations, adding about 1.9 million new jobs. With the median age of a baby boomer being roughly 64, the large projected growth is mainly due to an aging population, leading to a greater demand of health care services.
Opportunity for Disruption
Over the past few years, large investments have been made into the digitization of health care in the United States. Medtech offers a convenient and personalized approach for physicians to streamline their processes and provide patients with better care. Take virtual reality for example, which is now being utilized by surgeons to rehearse intricate surgical operations. Choosing to opt for a more digital experience means health care providers are saving a significant amount of time and money (more on this in a bit) per patient visit.
Cost of Care
The United States spends more on health care than any other country, with costs approaching 18% of the GDP, roughly equating to 3.5 trillion dollars. A new study, published this week in JAMA, finds that roughly 20 percent to 25 percent of American health care spending is wasteful, citing high administrative costs as the largest (but not the only) reason for the estimated 760 billion dollars down the drain.
Fee-for-Service vs Value-Based Care
In a fee-for-service model, primary health care professionals get paid per person per visit. This means that there is more money to be made as patient volume increases. According to a report by consulting giant Bain & Company, more than 70% of physicians prefer a fee-for-service model even though they recognize that it is more expensive. Proponents of a value-based care system say that it is designed to curb spiraling costs and improve the quality of care. Under a value-based model, a person who shows up at an emergency room or a doctor’s office becomes an expense rather than a source of revenue, providing incentives for physicians to keep people out of the office. Many physicians are not convinced that value-based models will have a significant impact at driving costs down nor improving care.
Takeaway
Despite the heavy costs, the health care industry is not showing any signs of slowing down anytime soon. Ripe for disruption, leaders are finding revolutionary ways of transforming the future of healthcare.
