The High Price Of Healthcare

This article first appeared in Harvard Business Review.

In Qatar, fewer than 10 percent of physicians are primary-care doctors, compared with almost two-thirds in France.

The healthcare system in the United States, with its technological prowess and massive infrastructure, often serves as a reference point for rapidly developing economies around the world while they build their own medical systems. With expanding middle classes demanding more comprehensive care, governments of these emerging markets are under pressure to invest as chronic disease rates – particularly those related to Western lifestyles – dramatically increase and the average age of their onceyoung populations begins to rise.

But replicating the facility- and labor-intensive American model – which is more costly than that of any other nation yet produces subpar results – will set these emerging economies on the same course of endless cost escalation that has plagued the United States. Still early in their healthcare-modernization programs, many nations in the Middle East and Asia are already struggling with double-digit annual increases in healthcare expenditures, well above the rate of expansion of their gross domestic products. Instead of copying the American model, these countries should leapfrog the United States by focusing more on keeping their populations healthy, tying care providers’ pay to outcomes rather than the volume of services delivered, and using technologies such as telemedicine, in-home monitoring, and remote imaging to reduce the need for hospitals.

One major reason for the rapid cost inflation in healthcare is burgeoning hospital construction. As more countries try to provide Americanstyle care, the number of hospital beds around the globe has begun to grow rapidly. China alone has set a target of having six hospital beds per 1,000 people by 2020 – more than twice the ratio maintained in the United States and the United Kingdom.