Health care costs should not bankrupt America or any other country. How can we keep that from happening?

We need to be a lot smarter about both how we buy care and how we produce care.

We need an industrial revolution for health care that will use computerized care support and the most current medical science to provide best care to our patients. We definitely need team care.

Nearly 80 percent of our care costs come from patients with chronic conditions and co-morbidities — multiple diseases.

These costs can be reduced by making care better.

If we deliver care well, we can cut the complications from chronic disease by half, and we can cut the costs of care significantly at the same time. If we then do the right things to improve health — influencing healthier activity levels and healthy eating choices — we can cut the rate of new diabetes and new heart disease patients in half.

We know what needs to be done. We have the tools that need to be used. What we have not had is the business model to buy the kinds of care that will produce those results.

In a nutshell, we need to buy care by the package and not by the piece. The piecework, fee-for-service, unit-based payment model we use inherently inhibits and cripples process improvement efforts.


Because in a piecemeal payment model, any fee-based care site who improves processes to improve outcomes loses money. We need a model that rewards improving care — not one that incents pure volumes of care and perverse outcomes for care.

The basic truth is this —

If you buy asthma care by the piece, each asthma attack generates a rich flow of cash for all piecework caregivers. If you buy asthma care by the package, by contrast, each asthma attack creates expense and not revenue — so those care sites paid as a package can reengineer processes to improve asthma care to the point where the number of asthma attacks is cut in half.

Better care. Less money.

We need to become much smarter purchasers of care, and when we do that, the infrastructure of care delivery will become more effective and more affordable.

The alternative to re-engineering care is to let health care costs destroy many national economies.

Let’s not stay on that path.

Health care governors at Davos need to look at those issues.

Solutions are possible, but they won’t happen without guidance.

By Kaiser Permanente Chairman and CEO George Halvorson 

Pictured: A radiologist examines X-rays of a patient at the Ambroise Pare hospital in Marseille, southern France, April 8, 2008. REUTERS/Jean-Paul Pelissier