Wednesday, August 10, 2011

Healthcare is Different

I'm often asked why healthcare has been slow to automate its processes compared to other industries such as the airlines, shipping/logistics, or the financial services industry.

Many clinicians say that healthcare is different.

I'm going to be a bit controversial in this post and agree that healthcare has unique challenges that make it more difficult to automate than other industries.

Here's an inventory of the issues

1.  Flow of funds - Hospitals and professionals are seldom paid by their customer.   Payment usually comes from an intermediary such as the government or insurance payer.  Thus, healthcare IT resources are focused on back office systems that facilitate communications between providers and payers rather than innovative retail workflows such as those found at the Apple Store.

2. Hiring and training the workforce - Important members of the workforce, the physicians delivering care, are seldom employed by the hospital.   This is rare if not non-existent in any other industry.  It's as if Toyota built a factory that anyone can use but does not hire or train the workers who build cars.   If someone wanted to create a Toyota with wings and an outboard motor, they would have the freedom to do it.

3. Negotiating Price - Reimbursement no longer is based on a price schedule hospitals and professionals can control.   It is based on a prospective payment model such as DRGs that someone else designs and dictates.   Where else in the US do prices get dictated to a firm?

4. Establishing referral relationships - We cannot market services to those who control our patient flow due to Stark anti-kickback regulations.   In other industries, you can build relationships, offer special incentives, and arrange mutually beneficial deals to develop your referral business.   In health care, it's illegal even when unilaterally funding an action would make things easier for both parties and the patient.

5. Standardizing the product - In most industries, the product or service can be standardized to improve efficiency and quality.   In health care, every person is chemically, structurally, and emotionally unique.   What works for one person may or may not work for another.   In this environment, it is difficult to standardize and personalize care in parallel.

6. Choosing the customer - In most other industries, you can chose with whom you do business.    Not so in health care.   If you have an emergency department, you must provide treatment even if the customer has no means to pay.

7. Compliance - Data flows in healthcare in increasingly regulated.    What other business, including the IRS, is required to produce, on-demand, a three year look back of everyone who accessed your information within their firm.

As I noted in my recent post about the Burden of Compliance  "the more complex a health system becomes, the more difficult it becomes to find any system design that has a higher fitness."

We are successfully automating healthcare workflows, motivated by HITECH incentives and the requirements of healthcare reform.   The 7 characteristics above have required vendors to create full featured software applications and organizations to create complex rollout/funding models that take time.  By 2015 we will be there and I will be proud of all we've accomplished, given that the constraints on the healthcare industry are truly different than industries which have been earlier adopters of technology.


Bob Abrahamson said...

Healthcare is different. Which is why pursuing - at least honestly exploring - a public option may make sense. When you look at the 7 differences, the reality is that the Public (the gov't) is already largely intertwined in healthcare. Because it is for the common good - the Community. This is not necessarily an evil thing (socialism is bad, etc, etc) - and shouldn't be a political thing - but a human thing (we form into groups/sociiety to improve our lot in life.)

Davis Liu, MD said...

Hi Dr. Halamka:

Healthcare does have a lot of challenges including compliance, regulatory, and reimbursement issues that make it uniquely challenged as you point out. Would disagree a little bit on a couple of points. Doctors are increasingly looking to become employees of hospitals and large multispecialty groups. Standardizing product is possible depending on specific diagnoses and where scientific and medical understanding are at the level of detail where workflows and treatment can be put into protocols.

Also liked your cameo in the Year of the iPad video.

Davis Liu, MD
Author of Stay Healthy, Live Longer, Spend Wisely: Making Intelligent Choices in America's Healthcare System
(available in hardcover, Kindle, and iPad / iBooks)
Twitter: davisliumd

gemstest said...

Good list. Health informatics is different and difficult. I'd add that a major source of difficulty is a 'political' dimension, present to a greater degree than other industries.

The sources of this difficulty are varied, but one of the sources was described nearly 50 years ago, in a paper called 'Good organisational reasons for bad clincal records' by Harold Garfinkel. Not online unfortunately, but some details here

Grahame Grieve said...

Some of these reasons are specific to US practices - but they are just replaced by other idiosyncratic practices in other countries

T. Sullivan, MD said...


..nice blog, but you forgot to mention another important reason healthcare is so different. Making a mistake has much more severe consequences in healthcare than any other profession or business. In addition, practicing "defensive medicine" has much more impact on costs than most people are willing to admit. In the opinion of some thought leaders, the law profession has helped to destroy the medical and healthcare profession in the US. That is by no means an excuse for we physicians to avoid the proactive, appropriate enforcment of professional and ethical guidelines own our own. In any case, keep up the good work!!!
Tom Sullivan, MD

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Donald Green MD said...

Not only is healthcare different it is a "commodity" that defies any marketplace principle. This was clearly explained by Kenneth Arrow, Harvard economist, in a treatise dealing with the nature of healthcare:

Chris Keller said...

Great summary of the healthcare industry. I agree with Dr. Liu that to a certain degree treatment can be standardized. Data intelligence and analytical tools now allow clinicians to gather data from across the continuum of care allowing them to analyze optimal care of patients within a care process with the same severity.

Best care, can then be clinically identified measured and standardized.

Thanks for the nice read.

Doug Robinson said...

As to point number three, since I have programmed systems in both the health and dairy industries, I find the compensation plans are much alike. Talk to your local dairy farmer and see how he derives his compensation. Same as the local doctor.

Mark Graban said...

As a former manufacturing guy who is now in healthcare, let me maybe reframe #2 a bit. Toyota would never build an assembly line without properly training workers.

But, very frequently, healthcare organizations put in new software without putting in the proper time and money investment into training. And then they wonder why people don't use the software properly or why they hate it.

Manufacturing beats healthcare in that regard. Yes, healthcare is different... and it's not always better.

You can standardize the way doctors use software without interfering in how they practice medicine, right?