In the 20th century, hospitals completed their
transformation from the hospice-like institutions of the Middle Ages, into
large, gleaming centers of advanced medical expertise and technology that save
and improve lives every day. But an unintended consequence of hospitals’
dazzling capabilities is a staggering cost burden that’s proving toxic to the
American economy.

Today, hospital care accounts for approximately 33% of the US’ $3.5 trillion annual health care expenditures, according to CMS. The drivers of hospital costs are complex and hard to tackle, including (but not limited to) market consolidation that enables price hikes, heavy administrative burdens, expensive technology and patient usage patterns.

In The Innovator’s Prescription, Clayton Christensen et al. explained another important driver of high hospital care costs: conflation under one roof of business models designed to address very different needs—such as the need for diagnosis of unique, complex conditions and experimental treatments, versus that for highly standardized services (for instance, some surgical procedures). This common phenomenon makes optimization of either business model very difficult, and thus drives up overhead costs.

One solution to this seemingly intractable
problem is to make home and community the default locations for care, where in
many circumstances it can be provided less expensively, more conveniently, and
more effectively than in a hospital. Fortunately, business model innovation
toward this end is gaining traction.

Nemours Care Connect, a pediatric telemedicine program run by Nemours Children’s Health System’s Center for Health Delivery and Innovation, is one promising example. Available in seven states, the service links patients with clinicians via smartphone or laptop, (24 hours a day, 7 days per week) for virtual consultations concerning acute, chronic and post-surgical issues. As reported by Modern Healthcare, in a peer-reviewed study of the program conducted by Nemours using data from 1,000 patient visits between 2015 and 2017, 27% of parents said that they would have taken

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