Friday, May 15, 2009

Innovation and Cost Cutting in Healthcare.

It’s about time! For years now the healthcare industry in the US has been suffering form a sub-competitive market. Demand for services, medicine, doctors, cures… and the list goes on… has far outpaced the availability of these, and in consequence has led to yearly price increases which double or triple the rate of inflation.

Now, I’m not saying that I agree with the new administration’s ‘socialization’ approach, however, the fact that over regulation has made it nearly impossible for new players to enter the market, and forcing family doctors, who will spend most of their lives prescribing Tylenol and antibiotics, to spend 8 years in school just to do that, it’s about time government take a new approach to make these services, not only more affordable, but more abundant.

Needless to say, whether government starts regulating costs or they open the gates to allow greater competition, the current players will have to find new ways to keep their bottom lines healthy. Not only at the research level, but at the operational level these companies and service providers will have to get better in light of the new rules that will likely impact the industry.

The ‘medicine’ that these players will need heavy doses of will be “innovation”. However, this innovation will have to come with different rules governing the market. The lack of competition has allowed these players to forget what the words ‘frugal’ and ‘efficient’ mean. The entire system will be under cost pressure to meet the new reality, and they will no longer be able to throw unlimited amounts of money and resources to “find the cure”.

All processes in this supply chain will need scrutiny and most providers will come to realize that not only the ideas from their scientists and doctors will have to be taken into account, but the ideas from the nurses, bill collectors, shop floor operators, call centers, ER staff, insurance companies, orderlies, and perhaps even the customers will need to be considered and addressed.

1 comment:

  1. Your statement "... lack of competition..." about the healthcare industry (social program, actually) says it all. Regulation, and government in general, is antithetical to choice and the concept of a "market." Competition is the natural result of free choice and a genuinely democratic society.

    Innovation requires the elevation of value, which cannot occur through an entropic process; energy, whether intellectual or physical, must be input to the system to elevate value to a higher level. That energy is the response to healthy competitive survival pressures.

    Unfortunately, given the presence of an innovation-squelching FDA, an AMA to monopolize the profession, and government-connected companies living off Medicare and throwing money at DC to keep things that way, healthcare is more of a Fascist realm than a bona fide industry.

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