The American healthcare system, an intricate web of providers, insurers, patients, and employers, has failed to improve meaningfully, despite decades of medical discovery and technological advancement, but has also become increasingly expensive. Why?

To answer that question, HBHI invited James B. Rebitzer and Robert S. Rebitzer, twin brothers and authors of "Why Not Better and Cheaper?" to share their perspectives on why the existing healthcare system struggles to deliver better quality at lower prices, despite abounding technological innovations.

Robert S. Rebitzer advises health systems, academic medical centers, health insurers, government, and philanthropies on ways to improve the quality and lower the cost of healthcare. He is a senior advisor at Manatt Health and a Distinguished Career Institute Fellow at Stanford University. James B. Rebitzer is the Peter and Deborah Wexler Professor at Boston University's Questrom School of Business where he was founding chair of the department of Markets, Public Policy, and Law.

Together with HBHI's own Dr. Emilia Simeonova and Dr. Mario Macis, the authors explored the causes for (and potential solutions to) the chronic issues plaguing the healthcare industry.

  1. The current incentive system is broken. One reason that new and effective medical interventions are not being implemented is because there is no financial incentive to do so. As a result, less effective (but more costly) interventions dominate the market. “How come healthcare doesn't get better and cheaper, like the cell phones we carry in our pockets? And our answer is that it's too easy to make money with low value innovations, and too hard to make money with innovations that reduce cost,” said Robert.
  2. A system of fragmented payers disincentivizes change. The authors both described the issue of “common agency,” in which no single actor in the market wants to invest in transformative changes that would also benefit their competitors. In such a market, only entities like the federal government and large self-insured employers are willing to incur the costs of major change.
  3. Innovation should be a bellwether of progress. “We believe that a healthy healthcare system should regularly produce innovations that increase value for patients and for society.” By this metric, American health care has stagnated in progress.
  4. Employers, not health insurers, are the most likely to drive near-term innovation. “If you want to create change in healthcare, don't start with the commercial insurance companies. They are cautious, they're tentative, and they tend to be consequently slow moving,” said Robert. “Start with large, self-insured employers. They have a much greater appetite for change, and they're willing to move faster.”
  5. Switchover disruptions threaten profits. Unless they see their position under massive threat, providers are reluctant to adopt disruptive innovations that would slow down their current operations. “If you're an entrenched incumbent with a lot of market power, then what you're disrupting are highly profitable operations. So the entrenched incumbents will tend to be slower to adopt these new innovations, like electronic records, unless they see their monopoly position being threatened and eroded,” James said.
  6. Professional and social norms themselves can oppose innovation. Norms are powerful motivators and health practitioners are deeply tied to their existing ways of working. One example is physicians’ resistance to “minute clinics,” offering convenient care for minor, common illnesses but operating outside the traditional structure of physician practices. “Norms have a very different logic than financial incentives,” said James. “They can work in places where financial incentives break down, but they can work for good or for ill, and we have to pay a lot of attention to the kinds of norms and the kinds of professional narratives that providers tell.”
  7. Technological advancement itself won’t solve the larger issues. Until the perverse incentives of the patent system are addressed, no amount of new medical technology will make health care better or cheaper. “It’s important to be thinking in terms of all the dimensions: the incentives, the norms, switchover disruptions, and competition, and not simply look at the ‘gee, whiz’ factor because we live in a time of remarkable discovery,” James said. “And discovery is not enough.”
  8. Business students and medical professionals need to work together. The problems facing American health care are a combination of both, and future solutions will also demand a combination of both skill sets. “We need to teach business grads the skills required to work with medical professionals, and the art of working with and managing alongside health practitioners,” said Robert. “It’s something that we don't teach people in business school, and if you can't figure that out, you can't get anything done.”

This conversation is part of the Hopkins Business of Health Initiative’s Conversations on the Business of Health, a series of one-hour webinars that engage leaders in business and academia to explore questions such as:

  • Should companies invest in their employees’ health?
  • Are companies responsible for the health consequences of their products?
  • Will artificial intelligence actually advance health?
  • How can business offer healthcare in novel settings?

Moderated by faculty members and jointly hosted by the Bloomberg School of Public Health, the Carey Business School, the School of Nursing, and the School of Medicine, these events are open to all. Learn more here.