Mar

Finding opportunity in health care: unpack and substitute

Dave on March 12th, 2009

Truly scary graph.

www.visualizingeconomics.com

To me, this trend is exhibit A for why we have to pursue health care reform sooner rather than later. To solve the problem and create a sustainable health care system for the future, we need to unpack the sources of the increases. I heard a statistic once (hope it’s right!) that in the 1950s, we spent $500 on health care per person per year. Now we spend $5,000. Adjusted for inflation? I don’t know. But think about it: all the new procedures, treatments, prescriptions.

And the medical revolution is just getting started.

Rationing is a dirty word in health care, but look at that graph and tell me how we crack this nut without applying an 80/20 mentality to what we fund and what we don’t.

And note that we’re at about $2.3 trillion — about 16% of GDP and climbing.

This is the kind of “turbulence” where entrepreneurial opportunity resides. To find it though, segmenting costs by funding source doesn’t tell us much. Instead, what are we spending money on? Where are the big expenditures ripe for innovation and process efficiency? Where can innovators substitute more cost-effective substitute products and processes?

To that end, there’s a article today about Wal-mart entering the market with a high-volume, low-cost scheme to sell electronic medical records to the millions of small physician offices that are now paper-based.

For entrepreneurs looking for opportunities, I recommend learning a bit about the vision of strategy gurus Michael Porter and Elizabeth Teisberg to apply innovation and “volume-based competition” to develop highly efficient, cost-effective treatment protocols for the most common and expensive medical conditions. Diabetes, for example. Two resources for those who want to learn more:

Review of their 2006 book Redefining Health Care: Creating Volume-Based Competition on Results

Link to Porter and Teisberg’s resource-rich Web site

To bring this back to recessioneering, find the greatest pain points for suppliers, patients, and payers, and go from there.