Joe Flower Explains Healthcare Economics In 5 Minutes

a little econ 101 right let's just take the big look at it first rule of economics people do what you pay them to do second rule of economics people do exactly what you pay them to do they really notice what it is I'm sure that all of you know exactly what could get you fired with some detail and you know exactly what you could do in your jobs to really advance in your jobs get better at it make sure of a promotion make sure they keep you on you're very very clear on that well so is that everyone in the healthcare system so are the doctors the nurses the hospital's the device manufacturers the pharmaceutical manufacturers they are very clear and what we're paying them to do if we're not getting the results that we want is because we're not clear what we're paying them to do so let's look at healthcare econ 101 now traditional economics you start with a buyer and a seller I want to buy a rug I go to the marketplace there's all these guys selling rugs I Haegele with them if his price is too high as quality's too low I go to this guy over here we come to some kind of agreement right no problem so the market is is kind of this is what people talk about a free market wares kind of self-leveling we arrive at what the actual value of that rug is in this market at this time well what happens in when you have a insurance supported fee-for-service system so it actually names what we're paying them for when I go to a restaurant am i paying someone to fry things or to put ice in them or no I'm paying for a meal I don't care what they do back there to prepare it a lot of money I don't know how they do it but I'm paying for a meal this this is not what we're doing paying fee-for-service and what happens in that fee-for-service system well the first thing is the buyer gets split into the the entity that's paying for it becomes different from whoever it is that's choosing it we're we're saying yes we need an MRI here we need a new hip when you is not the person who is actually paying for that insurance supportive fee-for-service system but there's something there's another complication who's doing the choosing it's the patient and the provider together my doctor and I are doing the choosing and someone else is paying for it or at least paying for most of it but there's another complication of this and watch this the seller is also the provider so the doctor is also a Salesman in the sense of they are selling their time they're doing fee-for-service and they're helping me make the choices so the usual feedback loops of a free-market system are not there a lot of these changes we're seeing in the insurance system are attempts to put at least some of that feedback loop back in so that the person making the decision have at least some of the payment they have to do some of the payment themselves so that we begin to make rational economic decisions instead of just making them up out of thin air with the advice of the people who actually are going to do the service force so it's a very complicated problem we try to control costs the entire time we've been in health care for 30 years and I started about the time that they began trying to do various cost controls and basically these cost controls have not worked there is no evidence that we have controlled costs at all over all these years so what cost control is look like over those many years has been various lots of different ways of controlling unit costs we will only pay you so much to see a patient we will only pay you so much for this drug what happens suppose you're selling TVs what happens if the market dictates in some way that the the amount you can charge them as TV is depressed you can't charge as much what are you gonna do more sell more going to make it up on volume what's the other thing you're going to do you're going to upsell you ma'am do not look like the type of person who could use a mere TV you need a home entertainment system five-sided sound you know we got we got base cabinets the size of a minibus for you you know and you go out you paid like fifty eight hundred dollars for this huge thing does that sound like something we've done in health care now many of the new things that we can do that we couldn't do 20-30 years ago are very helpful but not all of them some of them or not and we don't really have a mechanism in place for saying what is helpful and what's not so as we move into this new healthcare economics what we're going to see more and more is an attempt of control system costs now think about that the executives of the companies that you work in the healthcare executives are being asked to do something they have no experience in doing they have no training in it they barely know what it means and they have difficulty seeing their way from where they said that they could do this controlling system costs

Channel: Joe Flower

Views: 52,406

Rating: 4.8104267 out of 5

Keywords: healthcare, health, care, economics, futurist, speaker, keynote, Joe Flower

Id: 4Ry1AkbxRQU

Length: 5min 39sec (339 seconds)

Published: Wed Jan 05 2011