special article
by Amir Mian, MD, MBA
Department of Pediatric Oncology, UAMS, Little Rock, Ark.
Market Forces and Evolving US Health Care
System: Economics and Winds of Change
The health care industry in the U.S. is undergoing
significant transformation. To an extent, this is a
response to macroeconomic and resulting market
forces. Despite being the highest spender on
health care ($3.7 trillion in 2018), the U.S. lags
behind most developed countries in key quality
clinical outcomes. 1-3 Unfortunately, politicization
during the last several decades and overzealous,
competing special interest groups have stalled
legislation. This has resulted in our failure to
develop long-term comprehensive health care
policies that address unique demographic population
needs and respond to current market forces.
Despite legislative inertia, many intrinsic and
extrinsic macroeconomic market forces in this
capital driven economy are impacting growth and
affecting the direction of the health care industry.
Collectively, these forces will play a pivotal role
in transforming health care as we know it today.
The traditional Fee-For-Service (FFS) reimbursement
model is evolving towards Pay-For-Performance
(PFP). This model, which over time had
encouraged overutilization and, to an extent, contributed
to total health care cost, is responding to
market needs. The simultaneous shortage of primary
care providers and a lack of meaningful financial
incentives for added emphasis on preventative
care is also leading the transition towards
PFP model. The absence of incentives to strive
towards uniformly accepted, meaningful quality
outcomes and a minimal recognition of adverse
long-term impacts of social determinants of
health (including adverse childhood experiences)
are thought to contribute towards low health care
equity in the U.S. To an extent, the culture that
lacks adequate emphasis on patient accountability
also contributes to enormous chronic disease
burden. Unfortunately, overtime, this aspect has
added to a significantly higher burden of chronic
diseases within specific population segments and
increased the total cost. 1 It is hoped that soon,
market-driven changes in reimbursement model,
incentivized awareness, and added emphasis on
population health will drive this transition from
FFS to PFP model.
To cut costs while retaining their market share,
hospitals are merging and consolidating. Horizontal
consolidations have led to the evolution of
health care systems. In addition, the traditional
clinical practice model is in decline and evolving
from solo or small physician groups towards
either contractors or employees of health care
systems. This is a fundamental change in operating
model, relieving physicians from administrative
burden of running practices and dealing
with complex regulations. To continue to control
their supply chain and create competitive
advantage, various stakeholders in health care
(e.g., hospitals, pharmacies, and bio-medical/
drug manufacturing) are also exploring vertical
consolidations. For example, the pharmaceutical
chain CVS is strategically evolving and targeting
the retail market segment by expanding into delivery
of primary- and urgent-care needs at the
retail level (Minute Clinics); in addition, groups of
select hospital systems are cautiously expanding
into drug manufacturing (e.g., Civica) to ensure
the supply of uninterrupted generic drugs at low
cost and the decreased overall cost of delivery of
clinical care.
Patient consumerism is a powerful, intrinsic market
force that is changing expectations and demanding
added value with a positive health care
experience. Today’s patients are well connected
on social media and equipped with knowledge;
as such, they are now active partners with their
physicians in making health care decisions. The
active consumerism that other service industries
experienced during the last 15-20 years has now
reached health care – something providers and
payers cannot ignore. Patients today demand
high-quality care, price transparency, and comparable
outcomes. In a choice-driven, competitive
market, we find that clinical outcomes, patient
experience, and satisfaction are pivotal for
every practice. To a significant extent, this active
consumerism is driven by easy access to data
and advances in information technology. On the
health care delivery side, sophisticated analytics,
generation of Big Data, and improvements
in learning algorithms is leading to adoption of
artificial intelligence and machine learning. It is
expected that this will not only enhance care and
delivery processes, but also improve overall safety,
improve efficiency in health care system, and
augment physicians at the bed side. Other than
uniformly adopting electronic medical records
(EMR), compared to other industries, medicine
and health care in general has significantly lagged
in adopting technological advances, especially in
information technology. With active consumerism
and transformative technological advances,
these market forces have also paved the way to
increased accountability and price transparency.
The pharmaceutical industry is being scrutinized
for fair drug pricing, and hospitals are expected to
be transparent with medical billing. The retail cost
of drugs is very high in the U.S. and, when combined
with increased demand and high utilization,
this factor significantly adds up towards an
enormous per capita health care cost ($11,212 in
2018) that is almost double than most comparable
developed economies.
These inherent market needs and resultant forces
offer unique opportunities for entrepreneurs to
experiment with technological advances and offer
unique products and creative services. For example,
for their combined 1.2 million employees,
Amazon, Berkshire Heathway, and JP Morgan
have joined to form a health care consortium that
is poised to be an impactful player and a market
disruptor. The resultant enterprise, Heaven, aims
to create a health care system that is efficient and
value-based and that delivers quality outcomes at
a fraction of the current cost.
The biggest economy in the world, the U.S.
spends almost 18% of its gross domestic prod-
30 • The Journal of the Arkansas Medical Society www.ArkMed.org