EP364: A Way to Think About Transforming the Healthcare Industry, With David Muhlestein, PhD, JD

In this healthcare podcast, we’re gonna zoom out and look at the entire healthcare industry. I am very confident that you know a lot about the healthcare industry and its basic stats. It’s huge. The healthcare industry is approaching the $4 trillion mark, and it employs more people than any other industry in 47 states. Think about that momentarily. More people work in healthcare than in any other industry in every state except for Wisconsin, Indiana, and Nevada.

We could get into (but we won’t) how many of the gigantic, consolidated incumbents in the healthcare industry are either for-profits sporting very happy shareholders or investors. Then, of course, we have our “nonprofits”—especially mega-nonprofit health systems—who enjoy some pretty healthy margins while, at the same time, these health systems in general offer up some fairly embarrassing levels of charity care considering the amount of taxes they deprive their communities of.

You also are probably eminently familiar with various ways that have been cited to transform the industry. So, the usual suspects here are, of course, changing incentives—offering true value-based care contracts, for example—and then the whole creative destruction angle, wherein upstarts come in with far superior products and services, à la the whole Kodak case study or what happened to Sears and Kmart. Maybe this will happen in healthcare. Other ideas to transform the healthcare industry include employers harnessing the latent power that they have in some markets and then, of course, getting rid of middle people, for sure. Or we could go single payer, of course. That’s another suggestion/solution.

Today’s conversation is a rather holistic look at all of this. I dig into this with David Muhlestein, who is chief research and innovation officer at Health Management Association (HMA). And when I say dig in, I mean dig in. David made some very intriguing points that I had not heard before, actually—and I’ve heard a lot in my time, so that’s saying something. I’m gonna tick off a couple of them, but I don’t do them justice. So, you’ll need to listen to David explain them and give context.

First off, what’s the problem with healthcare being a $4 trillion industry in this country—I mean, almost 20% of GDP—and employing more people than any other industry in 47 of our 50 states? There are other big sectors in our economy, after all, that get lots of love. Why is big healthcare “bad” and these other sectors “good” in economic terms when we talk about employment?

That’s one thing I wanted to know. And David made a point that may be self-evident for some but is worth reiterating in all cases. The government pays for roughly half of healthcare, and from a consumer or just American standpoint, it kind of sucks. I mean, I don’t see many Insta selfies of someone rocking their brand-new insurance premium. Dollars going to healthcare or health insurance are not going to consumer goods. And that matters economically as well as retail therapy. For all you econ geeks out there, this industry offers no marginal utility.

Here’s a second interesting point: Just changing incentives might not be enough. Organizations downstream and upstream need to be on board with the spirit and objective of the incentive change. If they are not, then it’s game on for every CFO and their revenue cycle managers to finagle how to find the loophole that enables revenue maximization. Revenue maximization. Period. Revenue. The end.

Which brings me to another interesting point: Boards of directors, CEOs, people with fiduciary responsibility … they need to know thyself and consider their actual customer.

Spoiler alert: 99% of the time, that actual customer is not patients, no matter what is printed in big letters on the front door.

No change can really happen unless those who serve in the upper echelons of these businesses get really real about where their bread is buttered. Organizations are built to serve their customer, after all. So, if a patient isn’t identified as a customer, the organization at its very core is gonna have a lot of difficulty serving the patient.

So, now what? If I want my organization to move forward in a way that is more patient-centric and less financially toxic, say, what to do? Here’s thoughts after chatting with David Muhlestein. Four main steps:

1. As I just said, you gotta get your current state unemotionally understood. For reals, who is the organization built to serve? So, first step is being introspective in the harsh light of day.
2. Consider the timeline of your existential demise. Ha ha, this show is so uplifting. But unless organizations really think out 5 years, 10 years, 25 years and really internalize the existential threat, it’s going to be hard to motivate change. I see this all the time. So do you. Inertia is real. Nobody does anything until they absolutely have to.
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