American Healthcare Industrial Revolution

Robert Bond | ACODatabase.com 1 | P a g e

January 2012

ACODatabase.com Connecting the Accountable Care Community

American Healthcare Industrial Revolution

by Robert Bond

Breakthroughs in information technology, telecommunications, and medical science have set the stage for a dramatic transformation of healthcare. The realities of large numbers of aging, chronically ill people will spark a crisis that will galvanize public opinion and lead to rapid change. Here’s what you should know regarding challenges and opportunities in the new landscape.

The American Demographic Crisis

War. Financial Crisis. Terrorism. History has proven that crisis is a powerful transformative force of

American society. Why is this? At the individual level, human nature is resistant to change. Traumatic

experience creates an impetus for change – consider the events which led to change in your own life. At

the federal government level, the founding fathers intentionally created a political system which

gridlocks in the absence of popular consensus. As examples, consider Pearl Harbor and the launch of

Sputnik as crisis events which galvanized public opinion, spurred tremendous action, and led to the rise

of the United States as a global power.

Crisis can also result from demographic and technology trends. We can think of these trends as tectonic

plates which define the fault lines beneath American society. As the plates move about, pressure builds

up around a fault line until it breaks leading to an accelerated transformation of the landscape. Rapidly

rising life expectancies and advances in medical technology in the mid 20th century led created a new

landscape in American society we can label as “people living into old age.” In the early 21st century,

demographics and technology trends are once again creating the conditions for a major fault line break

which will result in a new landscape we can label as “large numbers of chronically ill people living into

old age.”

We are experiencing the tremors which characteristically precede a major fault line break. The United

States government, as are most western governments, is grappling with the realities of an aging society.

The financial crisis of 2008 and trouble in the eurozone have made raw the underlying fault line. Simply

put, the existing infrastructure (e.g., care delivery and reimbursement system) is incapable of supporting

the demographic realities of an aging society. Because resistance to change is the natural state of

humans and gridlock is hardwired into American government, we are witnessing various factions


attempt to craft a solution by working around the edges. The Obama health reform bill was such a

piecemeal attempt. The Obama health reform bill created some of the conditions for healthcare

transformation (e.g., CMS innovation center, Medicare shared savings); however, true transformation

will not take place until some broadly experienced crisis arrives. We suggest this crisis will emerge in

the next five years (2012-2017) as pressure around the federal and state budgets builds to the breaking

point and leaves policy makers with little choice but to face the situation head on.

Healthcare Transformation –The Road Ahead

Consider that every great societal transformation in human history has been preceded by breakthroughs

in technology and ideology. The industrial revolution. European global colonization and decolonization.

The rise of American global hegemony. Like a giant jigsaw puzzle, the picture is unclear at first and

becomes clearer with each piece put in place. What does road ahead for healthcare transformation look

like? To answer that question, we turn to history as our guide.

In the early 1700s, textiles were principally manufactured in private homes by individuals or small

groups. Quality varied greatly amongst producers and even from batch to batch from the same

producer. In contrast, modern day textile manufacturing is performed on a massive scale and produces

a mind-staggering array of goods in almost any desired pattern, color, or style. Quality and costs are

measured metrics and empower both consumers and producers to make informed decisions. Consider

the similarities between the practice of modern healthcare and the pre-industrial revolution textile

industry. A large volume of outpatient care today is delivered by individual or small groups of

physicians1. The quality of care varies from physician to physician and even from patient to patient.

Mass Production as Our Roadmap

The vast majority of goods created in the modern world are mass produced – our houses, cars,

appliances, clothes, and food. Mass production makes it possible for a vast array of goods to be

accessible and affordable to millions and millions of people. Economies of scale and innovation have

been powerful forces driving down per unit production costs and creating uniform standards of quality.

Let’s take a breather for a moment. It is easy to walk over the last couple of sentences. Take a look

around you and ponder for a moment the impact that mass production has had on your life and the life

of your family. Modern society and life as we know it would not be possible without mass production.

Contrast the world of goods with the world of services. The service economy spans many sectors

including government, healthcare, education, legal services, and consulting. While the majority of the

world of goods transitioned long ago to large scale mass production, the world of services is dominated

by output generated by individuals or small groups. Similar to the textiles industry prior to the industrial

revolution, quality and cost vary between service producers and even between “batches” of service

output.

In the healthcare world, some argue that healthcare is too complex for the application of large scale

production techniques. The logic of the argument follows that each patient presents a unique set of

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comorbidities and genetic factors making individual customization the only way possible for diagnosis

and treatment. Consider that there is another factor at play here which the very approach physicians

use to treat patients. The majority of physicians in the US are trained to follow a hypothesis-driven

problem solving approach which often requires multiple iterations to generate an effective diagnosis

and treatment. There are numerous challenges with the hypothesis-driven problem solving approach.

The capability of each physician varies depending on his/her personal experience, education, and traits.

Each patient presents symptoms differently depending on an array of factors including comorbidities

present, education level, and communication capabilities. Each patient responds differently to

treatment based on his/her genetic makeup, patient compliance, and social-economic factors. Finally,

physicians are humans and are influenced by all the things humans are influenced by including time

pressure to see patients, state of mind, and personally held beliefs.

We are not suggesting that the hypothesis-driven problem solving approach is wrong or bad; to the

contrary, it is an approach that has proven effective for many patients. However, we believe that the

stage is set for a transformation. In recent years, the world has witnessed breathtaking breakthroughs

in genomics, information technology, telecommunications technology, and other areas and has created

the conditions for a fundamental paradigm shift for the practice of medicine. It is a paradigm shift from

art to precision science. And it is this shift to precision science that provides the foundation for the

industrial revolution of healthcare.

Precision Science is the Foundation of Economies of Scale

What do we mean by precision science? To illustrate this distinction, let’s contrast the textile industry

pre and post industrial revolution. In the pre industrial revolution textile industry, the quality of output

depended heavily on the skills and abilities of the individual craftsman. The techniques and principles

for the trade were passed from individual to individual through informal apprenticeship and on the job

training. In the post industrial revolution textile industry, the causal relationships between input and

output are precisely defined allowing these relationships to be codified and embedded in the processes

and machines used to create output. Techniques which leverage economies of scale can then be

applied as the knowledge of these causal relationships is used to improve existing production and to

quickly bring additional production capacity online. In addition, knowledge of the causal relationships

between input and output provides an access for innovative business models which can dramatically

improve quality and reduce costs.


If you are a physician, you might be feeling a bit queasy at this point. Let us assure you that the need for

good physicians isn’t going away anytime soon. However, it is worthwhile to understand the trends so

you can prepare yourself for what lies ahead.

Back to the Future for Healthcare

In concrete terms, how will the future of healthcare look? We can gain a sense of the future by looking

back at the past, specifically the industrial revolution, as our guide. What were the factors which

enabled the transformation of other industries? At a macro level, there are five major factors which

are: metrics, information technology, human resources management, operations design, and business

model design. Diagnostics is a key conceptual term in healthcare and we add this as a sixth factor.

We can use these factors as the basic building blocks upon which we can create a transformed

healthcare system. There are many areas for exploration here and we detail these in other articles.


Below, we provide a summary table as a concise overview of the six factors.

Healthcare Transformation – A New Possibility

Let’s step back for a minute and answer a fundamental question – why do we care? Why should we

invest billions of dollars and massive numbers of man hours to transforming healthcare? To answer this

question we want to identify the most probable future. It is abundantly clear that the current state of

our healthcare system is not working. If we maintain the status quo, costs will continue to rise, many

people with chronic illness will suffer, and our economy will be negatively affected. In addition, many

physicians and policy makers are experiencing a sense of resignation and cynicism given the collective

memories of managed care lurking in the background. The question we invite you to ask yourself is the

future we want? Resignation. Cynicism. Large numbers of chronically ill people. An underperforming

economy. Our answer is resoundingly no. We Americans are a fiercely innovative, hard-working, and

talented people.

So given who we are, let us invent a future for ourselves, a future we want. For the author of this

article, we envision a healthcare system which is relentlessly innovative, highly efficient, powerfully

effective, and squarely committed to improving health and wellbeing. The outcomes of this vision are:

A society with high levels of physical and mental well-being – employers, healthcare providers, and most especially individuals view health and wellness as key assets worthy of significant investment. People with high levels of health and wellness have the freedom to enjoy their lives and all the wonderful experiences that are associated with being alive

A society with rapidly rising levels of wealth and abundance – people with high levels of health and wellbeing are naturally more productive and have fewer healthcare needs

High levels of physician and health worker satisfaction – physicians and other health workers are satisfied, empowered, and effective at preventing, treating, and curing illness and disease


Healthcare delivery system which is efficient and accessible – healthcare services are high quality, cost effective, and convenient for all Americans

We invite you to partner with us in creating this future together.

About the author

Robert Bond is the co-founder of www.acodatabase.com which is the premier database and discussion forum focused on the accountable care and health reform industry. In addition, Robert is a healthcare and information technology consultant, thought leader, and speaker. He has worked with many leading individuals and organizations in the healthcare industry including Dr. David Brailer (White House Health IT Czar), Duke University Medical Center, Sg2 Healthcare Intelligence, CMS, Merck & Co, and Booz Allen Hamilton.

Robert is an expert in healthcare informatics and health IT strategy. In addition, he has extensive knowledge of health reform related trends and understands how organizations can leverage the value of their data assets to improve quality and reduce costs.

Robert earned his MBA with a certificate in healthcare management from Duke University. His bachelor’s degree in engineering was awarded at the University of Pennsylvania.

Contact Robert email: [email protected] | mobile: 484.431.3015

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American Healthcare Industrial Revolution

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