Review of Health Care Will Not Reform Itself, by George Halvorson

George Halvorson is the CEO of Kaiser Permanente, the largest not-for-profit health plan and care system in the U.S., and has been a leader in the industry for over 30 years. Health Care Will Not Reform Itself is his attempt to spell out what he thinks are the key problems and most promising solutions to the health care problems we face.

For Halvorson, as the title of the book suggests, we cannot expect our health care system (which he calls a “nonsystem”) to spontaneously, organically transform to become more efficient, less expensive, and more effective. He would disagree with Christensen that disruptive innovation is acting like some invisible hand, making care more affordable and effective day by day over the long haul. The only invisible hand Halvorson sees at work in the U.S. health care nonsystem is profit…and our nonsystem is structured to reward things most folks would consider less than desirable for the country as a whole and its citizens as individuals.

This is a long quote, I know, but it sums up perfectly Halvorson’s take on the probability of the health care market correcting itself:

Think about the logistical issues involved [in health care reforming itself]. How would the current nonsystem reform itself even if it wanted to? What element or component of health care in America today could currently lead that reform?

Health care is the epitome of a nonsystem. Health care in America is comprised of hundreds of thousands of unrelated, unlinked, financially self-contained, self-focused, and self-optimizing business entities that are each set up to generate revenue and create financial success for themselves in the context and in the market model that is created by our current health care cash flow. Health care in America is a robust and growing nonsystem of immense size, scope, and scale. It is very well fed. By fees. Many fees. Fees are addictive. The infrastructure of health care in America is almost entirely funded by a steady and massive stream of fees and cash payments that have no linkage to either care quality, care efficiency, or care outcomes.

So why doesn’t the huge current infrastructure of health care in America work consistently to either improve care or reduce cost? Why would it? “Good” care or “better” care does not increase market share or economic viability for individual health care providers or for the total infrastructure of care. The actual quality of the health care product isn’t measured, quantified, compared, or even identified in any useful way, and it is rarely a factor in making health care purchasing decisions.

So there is no economic reward for improving care. “Bad” care, however, can actually be very profitable for caregivers. A serious, painful, frightening, life-threatening asthma attack can easily generate $10,000 to $30,000 in hospital and physician charges and fees. Preventing that asthma attack earns no fee at all. We get exactly what we pay for. Many treat. Few prevent.

Halvorson, pp. 2-3

Given this perspective on the problem with U.S. health care, it’s not surprising that Halvorson’s solution is to shift the structure of incentives from paying to treat to paying to prevent.

Despite how difficult shifting the incentive structure will be, Halvorson sees two potential drivers that could make the transition easier. First, “avoidable care mistakes” are responsible for roughly half a trillion dollars a year in medical costs—this is a huge savings we could gain from simply “getting less care wrong” (p.xx).

Second, 75% of health care costs come from patients with chronic conditions, and the majority of these can be controlled or contained through preventative care (p.75). Once these health care costs are shifted to providers, the benefits for preventing the costs will be shifted to them as well. When this happens, providers will begin to prioritize prevention over treatment because it will be in their financial best interest to do so.

But in order for the health care nonsystem to effectively address these quick wins, Halvorson feels that we need intervention from the government—what other entity can step up and set the vision and the goals that will rally our hundreds of thousands of independent providers to act in concert to tackle these challenges?

His approach to this is decidedly no-nonsense and execution oriented…exactly what you would expect from a successful CEO. Set goals—big goals—and then let folks figure out how they’re going to work together and as individuals to meet those goals.

For example, we could say that we’re committed to reducing hospital visits for asthma attacks by 50% in the next three years. This is a big goal, one that has big rewards. But when we commit to it, we begin to ask the right kind of questions, tactical questions, that allow us to execute:

  • How many asthmatics are there in our community?
  • How many of them regularly visit their doctors?
  • How many take their medication regularly and engage in other preventative care measures?
  • When one of them has to visit the hospital with an asthma attack, what happened?
  • Why did they have to visit the hospital?
  • What part of the preventative care chain failed?
  • How can we improve it to prevent the next attack for them, for others?

This is pretty much business leadership 101 but is almost futuristic thinking when applied to health care. It would be easy to dismiss it as naïve if Halvorson hadn’t spent thirty years in health care putting it (or at least trying to put it) into action. Whether it could be leveraged across the entire system (rather than in pockets within the system like Kaiser Permanente) remains to be seen.

Overall, this is an important read, not only because of Halvorson’s deep experience in the health care trenches, but because his CEO perspective on the issue is a good complement to the more common academic or journalistic approaches.

As always, would love to hear from folks out there who’ve read the book or have thoughts on the issue—chime in and let’s get the conversation started.

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2 Responses

  1. Clayton,

    Excellent review. I’m going to go out and pick up a copy of this book based on your review. I agree with Halvorson that government intervention is needed to reform healthcare as it is the only mechanism with the capabilities (regualtion, law and taxation) that can force the actors to change. I wonder if Halvorson would want to give up his job at Kaiser to serve in the Dept of HHS and help oversee reform?

  2. […] George Halvorson is the CEO of Kaiser Permanente, the largest not-for-profit health plan and care system in the U.S., and has been a leader in the industry for over 30 years. Health Care Will Not Reform Itself is his attempt to spell out what he thinks are the key problems and most promising solutions to the health care problems we face. For Halvorson, as the title of the book suggests, we cannot expect our health care system (which he calls a “n … Read More […]

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