Healthcare excels at monetizing treatment. Keeping people healthy is not part of the industry’s business equation. This economic disconnection lies at the heart of America’s health crisis. It explains why the United States spends twice as much per capita on healthcare as other wealthy countries but achieves poorer health outcomes.
Vitalic Health, powered by HFMA, has an opportunity to help address this disconnection. By reengineering healthcare’s economics, Vitalic can help build a system that rewards better health as much as, or more than, effective treatments. Getting there requires systemic disruption and reinvention of current industry practices. This quest to build a new American healthcare system is not for the faint of heart.
A just cause meets broken economics
Vitalic’s origins precede its name. In May 2021, after an intense companywide strategic review, HFMA embraced cost effectiveness of health (CEoH) as a defining mission. This shift positioned the Association to focus beyond the financing and payment of healthcare transactions. It was a bold decision with far-reaching significance.
I joined the HFMA board in June 2022. The idea of CEoH (referring to health versus healthcare) got my blood stirring. While essential, healthcare is only one component of health. I was thrilled to join an organization that embraced this core truth. I subsequently chaired HFMA’s industrywide “Healthy Futures” task force to consider strategies for institutionalizing CEoH.
In economics, a situation described as a tragedy of the commons occurs when individual actors share a public good, such as a grazing field, and deplete its value through overuse. Healthcare reverses the equation. The industry underinvests in the public good of healthier populations because its incumbents cannot realize a financial return on such pro-health investments.
Consider a health system that invests in chronic disease management. Patients avoid hospitalization. Employers gain healthier workers. Insurers spend less on treatment. Yet despite this possibility of great outcomes, health systems don’t invest sufficiently in chronic disease management because they lose money when they do.
Likewise, insurers hesitate to fund pro-health services because the benefits to members (such as healthier populations, less chronic disease and lower acute care spending) come long after coverage ends. Today’s insurer pays; tomorrow’s insurer benefits.
For both providers and payers, rational economic decisions trigger catastrophic results. Our healthcare system’s perverse financial incentives stymie better population health.
Proven strategies and programs to improve health exist. The economic arrangements required to fund them do not. Realizing this, HFMA’s Healthy Futures task force explored economic practices that would reward both payers and providers for investing in pro-health activities. Vitalic emerged to translate this knowledge into actionable solutions.
When better is still broken
Healthcare leaders have spent decades pursuing performance improvement. Efforts to improve care coordination, simplify claims processes and make treatment more efficient can deliver real benefits. But while such efforts improve care delivery and coordination, they do not and cannot prevent unnecessary or avoidable care interventions.
A fundamentally broken system remains broken even when it becomes more efficient at doing the wrong things. Faster payment and optimized revenue collection do little to make sustained investments in health financially attractive. By contrast, a high-functioning system that prevents disease and promotes health creates healthier, happier and more productive communities.
It’s not enough for industry incumbents to admire the problem. Articulation alone accomplishes little. Instead, our industry must shift investment and accountability toward whole-person health. Absent this, it will endlessly improve its machinery while perpetuating a sick-care system. An industry organized to monetize treatment will find new ways to monetize treatment. In contrast, one organized to promote health will find ways to monetize well-being.
Fixing healthcare will take a village
With Vitalic, HFMA provides a credible starting point. The Association’s members, predominantly representing hospitals and health systems, understand how money moves through the healthcare system and how contractual details shape organizational behavior.
Yet to succeed, Vitalic must extend its reach beyond hospitals and health systems.
Payers, employers, suppliers, patients and governments must help shape Vitalic’s priorities, investments and implementation. Participation comes with strings. Nothing is off the table. All sectors must accept that their practices merit scrutiny, investigation and adjustment. Business practices that impede better health at lower cost must disappear. Industrywide transformation cannot occur when incumbents have veto power over reforms.
Overcoming healthcare’s reversed tragedy of the commons requires a holistic approach to allocating capital, distributing risk, rewarding performance and measuring success. Vitalic’s power lies in its ability to reinvent payment models and business practices that promote pro-health investment and decentralized service delivery. As this occurs, healthcare enterprises will contribute far more to the nation’s vitality than they do today.
Value rules
Vitalic’s mandate expands beyond medical delivery. Health improves or declines where people live, learn, work, play and age. Community-based investments that improve health will dispense their benefits expansively. Health improvement is the rising tide that lifts all boats. Vitalic can help identify which investments promote well-being and measure their returns.
Vitalic’s path to glory will not be easy. Expect enthusiastic applause and determined resistance. Healthcare Inc. (encompassing entrenched interests spanning payers, providers, suppliers and intermediaries) knows how to endorse transformation while protecting revenue streams. Too many healthcare leaders celebrate affordability at conferences and pursue revenue maximization back home.
Some incumbent resistance is well-intentioned and beneficial. Most resistance, however, only protects self-serving financial arrangements. Vitalic must accommodate the former and overcome the latter. Otherwise, institutional self-interest will swallow and dilute Vitalic’s mission.
Failure is not an option. More of the same treatment-centric approach will generate more of the same dismal results:
- More chronic disease
- More spending to treat chronic conditions
- A population that is sicker, less productive, less equitable and less happy
Who wants that for the future of our nation?
A new world for healthcare
Disruption and reinvention are the marketplace’s way of clearing away the old to make room for the new. Not all existing companies will make it to healthcare’s promised land. Performance matters. Good intentions alone cannot repair broken economics, much less transform the largest industry ever created by human beings. Market fitness comes at a price even as it creates societal value.
At the tip of the transformation spear, Vitalic must advance affordable health and care services irrespective of the collateral damage inflicted upon sub-optimal businesses. This may sound punitive, particularly to incumbents on the losing end of market disruption. Over the long term, however, markets bend toward value creation. Healthcare’s capacity for innovation makes value-creation possible. Healthcare’s proclivity for waste and profiteering makes value-creation necessary.
Making healthcare blossom
Healthcare’s next big idea embraces Ben Franklin’s time-tested axiom: “An ounce of prevention is worth a pound of cure.” By investing in the long-term health of its people, the United States can spend less treating disease.
Pain always accompanies progress. Tension engenders creativity. Elizabeth Appell, writing in 1979 as Lassie Benton, poetically captures transformation’s simultaneous agony and ecstasy:
And the day came when the risk to remain tight in a bud was more painful than the risk it took to blossom.
Healthcare has reached a critical state. Patients, families and employers are demanding better, more affordable, integrated and accessible services. Old playbooks cannot address their concerns. For incumbents, holding tight to traditional business practices is a losing proposition. Their pain in remaining closed to transformation is far greater than the risks of embracing it.
Vitalic, with its health-first orientation, embodies healthcare’s next big idea. Its scope encompasses the health of the entire nation. As its vision becomes reality, Vitalic and other like-minded pursuits will boost individual well-being, enrich communities and turbocharge national productivity. Vitalic is a bridge to America’s future.
Healthcare exists to serve people. It’s time to roll up our sleeves and together make healthcare blossom.
