There has never been more talk of innovation and disappointment in the future than of the healthcare industry. AngelList shows nearly thousand startups alone in the Digital Health Room and VCs invested $ 3.5 billion in digital health startups in the first half of 2017 according to Rock Healths industry analysis. There are dozens of health innovation conferences being held each year in the United States where attendees chatted, chatted and chatted about this or that "innovation".

All this innovation has done practically nothing the only worst problem of modern American health care: it costs. Health care in the United States has never been so expensive. The United States spends about $ 3.5 trillion a year on health care expenditures an increase of 12,300% since 1960. During this period, health spending increased from 5% of US GDP to about 17.5%. GDP .

Despite these expenses, the Americans' age-adjusted death rate has fallen virtually annually since 1980 . It is not surprising that the life expectancy of Americans – one of the most typical measures for measuring the health and well-being of a country – has dropped in 2017 for the second year in a row .

It is Juicero innovation the finest. We pay more, much more than we used to, and yet our results have never been worse.

This is the problem known as "cost sickness" – the rapidly rising cost of basic human services such as healthcare, housing, education, construction and infrastructure. It's a problem that plagues industrialized countries, but especially in the United States. Scott Alexander blogging at Slate Star Codex wrote a masterful summary of the problem a year ago worth reading as this pattern seems to emerge in all these industries [196592002] It However, it is one thing to identify the pattern, and it is another to uncover the reasons why the cost has gone up 123x in just a few decades. The striking answer is that there is no clear answer: industries like construction and healthcare are simply too complicated to simply respond to the issue of cost-related illness. There are literally all the answers and none of them at the same time.

Political circles are beginning to understand that costs are the fundamental challenge to improving America's human services and infrastructure. The compromises required in American medicine – providing better care or providing more care to more people – would be simply idle if the total cost of health was 9% of GDP instead of 17.5% – the median percentage in the OECD Group of Industrialized Countries .

Call me cynical, but after talking with dozens of Digital Health start-ups in recent years, this basic fact seems to be so rarely registered with the founders. Entrepreneurs are trying to digitize medical records or improve the efficiency of operating theaters through better analytics or to develop a new (and expensive!) Robotic medical device. These innovations are important, but they are a bit like changing the deckchairs on the Titanic to try to size the ship properly: actions way too small to make a difference.

Fortunately, this issue is being addressed by startup boss. One startup is Avant-garde Health which publicly announced a $ 4 million seed round this week, led by General Catalyst, Tectonic Ventures and Founders Collective (the round was closed in the middle of last year) [19659002] I talked with Derek Haas, the founder and CEO of the company, who for the past couple of years has been totally immersed in the challenges of controlling the rampant cost illness in American hospitals.

If you ask yourself What is one of the main reasons for cost-related illnesses in health care probably starts with the fact that few hospitals and providers know what their costs are other than aggregated numbers. We can emoji a facepalm, but the reality is that it's really difficult to do that kind of analysis with existing management systems.

The company's solution is a technique called " activity-based costing " and apply it to the healthcare industry. The idea is to assign all the expenses of an organization to exactly the activity that caused these costs. In the health sector, the avant-garde uses "timed" costs to allocate costs to the treatment. The goal, Haas explained, is "to understand for each patient what care is being provided, who has provided the care, and how long has it taken to provide that care."

For example, any healthcare professional seeing a doctor The surgical patient must allocate his or her exact time to this patient so that the true cost of the surgery can be calculated and analyzed. A nurse who spends 20 minutes in the room must assign the patient one-third of her hourly rate.

Now, this type of calculation can sound like a stroke of luck for a MBA or a patient's worst nightmare (not to mention the vendors who need to input their time cards). However, Haas data from recent years shows that the trade-off between supply quality and cost often does not have to be made. "What we often observe is that most of the cost and provision of care is the care volume," he explained. In other words, surgeons who perform more surgeries both have more experience – improving outcomes – while reducing the cost of each surgery by amortizing their income on more patients.

In addition to volume, standardized treatment is also crucial. "When you look at organizations that have more standardization in the way they care, these organizations get better results and are often more cost-effective," said Haas.

For example, the avant-garde worked with Penn State Hershey Medical Center to improve the efficiency of Total Hip Arthroplasty surgery (ie, a hip prosthesis). The hospital found that different surgeons used different hip components at different rates, increasing the total cost of care for the surgery. With improved analytics and medical education, the hospital was able to save $ 842 per operation, with minimal changes in outcomes.

Today, the avant-garde focuses on collecting and analyzing only cost data. However, the long-term goal is to tailor these costs to actual patient outcomes so that administrators can understand when additional expenses help and when they do not. "People often make decisions based on perceived quality rather than actual outcomes," Haas said. Better results can help hospitals to get better treatment at a lower cost.

Avantgarde is not a panacea for our health care costs. But it is a step in the right direction. By quantifying aspects of healthcare that are now obscure, management has the tools to make the right decisions on behalf of patients and payers.

This is in many ways the story of cost-related diseases in every industry. What looks like a compromise can often be rewritten as a win-win situation. Saving infrastructure costs can mean suddenly that you do not have to choose between three subway lines, but all must do. All of a sudden, we do not have to choose between new technology in classrooms and lower class sizes. And we do not have to choose between restricting treatment and insuring more people. For founders who are thinking about making a difference, there's a trillion-dollar idea here.

Selected Image: DANIEL LEAL-OLIVAS / AFP / Getty Images



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