So what’s it going to be: Jobs or lower healthcare costs?

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lisa_suennen

The U.S. Bureau of Labor Statistics came out with its June jobs report last week and, consistent with usual trends, healthcare jobs are booming. In June 2013 there were approximately 20,000 new healthcare jobs in the U.S., ¾ of which were in the ambulatory care sector and ¼ of which were in hospitals. Healthcare jobs represented 10% of all new jobs created this month.

The June growth in healthcare jobs matches up to the average 19,000 new healthcare jobs we have seen created in each of the prior months of 2013 and the 12% job growth we have seen over the last five years. In a country where new jobs are viewed as even better than baseball, apple pie and mom herself, these new jobs should elicit a huge round of applause, or at least a stadium style wave, right?

Or should they?

Change the channel and a different set of policy makers, employers and industry experts will tell you that the only way to save our economy from ruin is to cut healthcare costs. Cutting healthcare costs means making the people who work within the system vastly more efficient, eliminating unnecessary medical care (and thus reducing the labor that goes along with it), and helping empower consumers to do things for themselves, including taking a more active role in reducing their own demand for healthcare services and, in some cases, doing at home what they might previously have used the healthcare system to do (e.g., diagnostics, home care, etc). Yet if we succeed in achieving any or all of these three clear goals of current health care system improvement, then by definition fewer people should be needed to do them. In other words, we would need fewer healthcare jobs. And while that would be great for those focused on reducing healthcare costs, or at least healthcare inflation, it's not going to make for a very happy jobs report. So what's it going to be: more jobs or lower healthcare costs? Whoever said "you can have it all" must have been from the marketing department, not finance. Everywhere on earth employers know that the fastest way to improve profitability is to get greater amounts of work done with the same or fewer numbers of people, yet in healthcare we have not quite got the message. For every healthcare IT entrepreneur building an analytics tool to reduce unnecessary care or expand the number of patients one caregiver can treat, there is a hospital cutting a ribbon on a new wing. And of course, one should never forget that one person's cost-savings is another person's revenue. I was speaking with a health system CEO recently who shall remain nameless so he doesn't get killed in his sleep by his own fundraising department and I said to him, "You do realize that if your system is going to contribute to improved system efficiency and remain profitable in the new healthcare world order of capitation you are going to have to burn down at least half of those buildings and figure out how to become an ambulatory care organization, right?" He didn’t even stop to sob before telling me that he knew this well but it was a hard cycle to break because communities depend on those hospital jobs. Often hospitals are the largest employer in a town, particularly a smallish town where there are few other employment options. Make those hospitals smaller and more efficient, empower consumers and adopt advanced efficiency-creating technology and you might put your whole neighborhood out of a job. I hate that when that happens. Granted, healthcare is a more personal and person-intensive field of work than, say, manufacturing or farming or retail. Dr. Bob Kocher points out in a 2011 NEJM article about healthcare non-productivity that 56% of U.S. healthcare costs are directly related to labor. But we all know that if we are honest with ourselves we could do more with better technology and fewer humans. Despite rampant rhetoric to the contrary, I am one of more than a few people who believe we do not have a doctor shortage, but a dispersion of doctors problem. There are lots of them in large urban areas and too few in rural areas. But that doesn't mean minting more doctors actually solves that problem unless you march the new guys at gunpoint to Peoria and Bakersfield and Flint. They tend not to willingly go along with this approach. The real solution to lack of access to physicians–both primary and specialty care types–is figuring out how to use technology to transport doctors or equivalent skills to where they are needed or to use nurses and pharmacists and others who are already here and well-trained to offload the work. This “load-leveling” of work is often used in other industries to handle the peaks and valleys of supply and demand but our healthcare system is designed and regulated to prevent market efficiency. Doctors can’t practice across state lines and telemedicine is barely covered. Clinicians who might be perfectly capable of performing certain clinical tasks are not allowed to legally do so in many states. Guess what gay couples who want to get married and nurse practitioners who want to prescribe medicine without physician involvement have in common? They can each legally accomplish their goal in exactly 13 states. Seems to me that a little national legal consistency would be a plus on both of these fronts. But instead we erect legal barriers to accessible, efficient patient care and work hard to keep them standing; in so doing we layer unnecessary cost onto a healthcare system that might just take up 100% of the national budget if we keep at it. And thank God we create these barriers and nurture these inefficiencies or we wouldn't be creating enough jobs to fuel the economic recovery that is so hampered by our inefficient healthcare system. In his NEJM article, Bob Kocher cites a McKinsey Global Institute study that says that for the United States to return to full employment, as many as 22.5 million jobs would need to be created, with 5.2 million, or 23%, in the health care sector. In other words, make healthcare more efficient and we blow our job creation plan. Let a million healthcare jobs bloom and we will have built a healthcare cost monster that will crush us for sure. Did I just blow your mind? Does your head hurt like mine does? I recommend that you take two shots of tequila and call me in the morning. If you're not all on the train to Flint, Michigan, perhaps one of my doctor friends could authorize that prescription?

This post first ran July 8, 2013 on The Health Care Blog

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Lisa Suennen

By Lisa Suennen Psilos Group

Lisa Suennen is Managing Partner at Venture Valkyrie Consulting, LLC, a consulting firm providing advisory services to companies, organizations and private equity firms in the healthcare field. Additionally, Lisa is a Senior Advisor to Psilos Group, a healthcare-focused venture capital and growth equity firm that focuses on the healthcare information technology, healthcare services and medical device sectors. Lisa was a co-founder of Psilos Group and a Partner at the firm from 1998-2014. Prior to Psilos, Lisa was at Merit Behavioral Care (formerly American Biodyne, Inc), an $800mm behavioral healthcare company where she held various senior executive roles from its early start-up days through exit.
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1 comments
Scott
Scott

Seriously, we need to spend this much to create jobs? Strange how the Economy works, if the money isn't spent on health care, it will get spend somewhere else (perhaps infrastructure) which might actually benefit the community.  Instead we spend vastly more than any other country (61% more than the second place country) and for what, mediocre results?  We rank in the low 20's in most measures of quality of health care, including infant mortality.  At some point we have to ask ourselves, why are we spending this much for the results we are getting?  Is it so Dr's can get rich quicker like Lawyers and Venture Capitalists?  This hardly seems to be a winning argument....

No one wants to close small hospitals, but at the same time we know when we are getting gouged for the treatment we are getting.  I would venture to guess, if I stood on a street corner and sold bandages and over the counter medicine after a hurricane in New Jersey, at prices commonly charged in emergency room, I would quickly be arrested for charging more than 10% of the normal store price as defined by the states gouging laws.  Yet this is what we face every time we walk into any type of medical practice.  Supplies marked up by multiples of 100%.  There is nothing wrong with saying there is room for improvement in Health Care, perhaps the overwhelming demand by so called experts might actually be for a reason.
Sure, laws have to change, it needs to be easier to move around in the profession, but that has no bearing on whether it is prudent to spend close to 18% of the entire GDP on Health Care.  But when we see countries spending 10% of GDP or less, and living longer and healthier, we, at the very least, have to commit to doing better.