Counterpoint

In last month’s Counterpoint, I dissected the National Health Expenditures methodology (the “NHE Methodology”) to reveal what CMS describes as “facts” are, in fact, estimates of estimates. Whatever the aggregate amount of healthcare expenditures in the United States, the cost of healthcare has increased faster than any sector of the economy except for education. 

In Plato’s Phaedo, Socrates states his conviction “that the earth is a round body in the centre of the heavens,” and since that time, few educated people have believed that the earth is flat.¹ Even so, today almost 3,000 people are members of the Flat Earth Society, which was founded by an English inventor named Samuel Birley Rowbotham in 1849.² 

Similarly deluded, but much greater in number, are the health economy stakeholders who believe that demand for healthcare services is increasing. Most of those zealots believe in a national demand forecast model developed in 1984 by the late Michael Sachs, who founded The Sachs Group. Like members of the Flat Earth Society, health economy stakeholders who believe in Sachs’ national demand forecast model continue to defy tangible proof of reality. 

In last month’s Counterpoint, I asked this question: 

Are you operating your business with information as flawed as the NHE?  

If you use a national demand forecast model developed 40 years ago to create your strategic plan and make capital investments, then the answer is yes. Like Porter Waggoner’s protagonist, you don’t know the cold, hard facts of life, which for healthcare providers is this: chronic disease burden is not correlated with the demand for healthcare services. 

This is, of course, obvious to anyone who knows anything about management of chronic disease. The fact that obesity and diabetes and chronic obstructive pulmonary disease and heart failure are frequent traveling companions doesn’t mean that a patient receives maximum treatment for all those co-morbid conditions.  

It is axiomatic that healthcare is local, and so is demand for healthcare services. As a result, the perennial use of a national demand forecast model for strategic planning indicts its adherents, all of whom are left with a Dusty Springfield strategy: 

Wishin' and hopin' and thinkin' and prayin' 
Plannin' and dreamin'  

Even so, the flat to declining national demand for healthcare services despite the continuing deterioration of health status in America does call into question how all that disease burden is being managed. The answer is clear: specialty pharmacy. 

In 2011, Marc Andreessen wrote these famous words: “Software is eating the world.” Similarly, as one colleague is fond of saying, specialty pharmacy is eating healthcare services.  

The battle between specialty pharmacy and every healthcare provider – hospital, ASC, physician, post-acute care provider, etc. – is existential, and providers are losing.  

Almost everyone knows that KEYTRUDA® is a truly innovative and transformational therapy. Few have understood it as a harbinger of doom for providers of healthcare services, even as they lament the fact that their oncology “center of excellence” generates most of its revenue from distributing KEYTRUDA®. And, of course, if the patient prefers being hooked to an IV in an infusion therapy center over the hospital outpatient department, imagine how much more they prefer to do that on a sofa in their living room.  

Specialty pharmacy’s conquest of healthcare services may have begun with KEYTRUDA®, but it won’t end there. Specialty pharmacy threatens the future of numerous high-volume oncology, cardiology and digestive interventional procedures. Most recently, GLP-1 drugs - which under a strict interpretation of patent law would now be generics given the 2005 approval of BYETTA® - have materially impacted interventional procedures in the past three years, most notably bariatric surgery. Only orthopedic surgery and neurosurgery are likely exempt from the rapid advances in specialty pharmacy, at least until stem cell therapy becomes more widely accepted.

If your strategic plan doesn’t incorporate the fact that the national demand for healthcare services has been declining for years, then you are as pitiful as members of the Flat Earth Society. It is axiomatic that hope is not a strategy, and wishing and hoping will not equip you to win healthcare’s negative-sum game.