SM: How would you adjust national policy to drive more efficiency based business versus a cost plus system?
JB: We need to align the physician and the hospital so that the smartest group of people in healthcare can be aligned with care. We need to eliminate regulations which prevent hospitals from incenting their caregivers to provide better results. This would give better outcomes at a substantially reduced cost.
SM: You are effectively talking about a performance based system.
JB: Yes. They get paid for the efficient application of resources and for keeping their patients well.
SM: What should happen in regards to out of control litigation?
JB: At the end of the day I don’t think that gets solved on the Federal level, the states need to come in and cap liabilities. These are unaffordable cost which will fundamentally bankrupt the US. We are printing excess capital today to even pay for it. The government runs out of money for Medicare by 2014. Medicare Part B, which is the drug benefit, is an $8 trillion liability. If these costs are not dealt with today they are going to bankrupt the government.
SM: Is the healthcare crisis solvable?
JB: The healthcare crisis is imminently solvable. I am confident that with the right incentives we will produce massive surpluses in healthcare. There is enough money to take care of people in the US. We need to streamline and engage our smartest people in the system. Physicians are completely disenfranchised from the process today because they are sequestered by professional fees only.
SM: As an outsider when I look at the business of healthcare I see a conflict of interest. The alignments of incentive structures are all wrong. It is illogical and contradictory in a capitalistic healthcare system.
JB: If you read Adam Smith’s ‘Wealth of Nations’ he points out that specialization of economies and services is what drives efficiencies. That has completely failed in healthcare because every hospital tries to be everything to everyone.
We should not have hospitals in the same communities doing the same things. We need regional hospital specializations. Who cares if you have to drive an extra 15 minutes to get the best orthopedic care? Here, because of cost plus infrastructure, we repeat the same drill over and over again and spend the same capital over and over again all so a hospital can say they are comprehensive in their services. We have flown in the face of what logical economic principle tells us to do.
There is no transparency, people who use the services have no idea what the costs are before and after. There is no specialization and division of labor so that the most efficient things can be done. We took doctors, who are natural entrepreneurs, and we asked them to be referees. They don’t get to play.
SM: Which results in a Chinese menu of mediocre services as opposed to excellent care in specific areas.
JB: That is correct. The best care in the world still exists in US hospitals but it exists at an enormous price. It can be done much better. The winners in all of this have been the lobbyist of special interest groups. They have received mountains of money to keep this industry defined by its chaos. They created it and they maintained it. It does not make sense that the US purchases 10 times more pharmaceuticals than the rest of the world combined yet pays the highest prices in the world. American buys 10 times more medical devices than the rest of the world and pays the highest prices in the world. That makes no sense at all.
SM: I have enjoyed your story.