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.

1. 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
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2. 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
1
. " National Ambulatory Medical Care Survey: 2007 Summary." CDC. CDC, November 3,
201. Web. 26 Nov 2011. <http://www.cdc.gov/nchs/data/nhsr/nhsr027.pdf>.
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3. 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.
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4. 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.
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5. 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
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6.  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: robert@acoadvantage.com | mobile: 484.431.3015
Copyright © 2011 ACOAdvantage.com. All rights reserve
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