The productivity imperative for healthcare delivery in the United States

22 Feb 2019

There is little doubt that the trajectory of healthcare spending in the United States is worrisome and perhaps unsustainable. Underlying this spending is the complex system used to deliver healthcare services to patients. Given that the US currently expends 18% of its gross domestic product (GDP) on healthcare, this system might be expected to deliver high-quality, affordable, and convenient patient care—yet it often fails to achieve that goal.

Numerous factors have been blamed for the US’s higher healthcare spending, including an excess supply of healthcare services, poorly controlled demand for those services, other market irregularities (e.g., reimbursement mechanisms), regulatory requirements, structural differences between the US and other wealthy countries, and patient characteristics and behaviors (especially those influenced by social determinants of health). One explanation, however, has largely been overlooked: poor productivity in the healthcare delivery industry. Between 2001 and 2016, healthcare delivery contributed 9% of the $8.1 trillion ($4.2 trillion in real terms) growth in the US economy—but 29% of the 14.4 million net new jobs. Looking at healthcare delivery in terms of productivity provides three important advantages.

  • First, it puts the focus not on short-term spending minimization but on long-term growth and the overall spending trajectory.
  • Second, it makes it possible to identify specific opportunities that are likely to better control healthcare spending growth without harming—and in some cases improving—both patient outcomes and the overall economy.
  • Third, productivity is the lifeblood of any economy’s ability to deliver more for less (or, at least, the same cost). In practical terms, increased productivity in healthcare delivery would make it possible to continue driving medical advances and meet the growing demand for services while improving affordability (and likely maintaining current employment and wages).

This report addresses the supply side of the healthcare delivery equation—what and how services are delivered. Thus, our focus is on the individuals and organizations that provide healthcare services, including ambulatory services, hospitals, and nursing and residential care facilities. Although we describe the implications of our findings for payers and governments, the productivity of these sectors (and others, such as pharmaceuticals and medical devices) is not analyzed in depth. Furthermore, we acknowledge that the demand side of healthcare delivery is also important for controlling the long-term healthcare spending trajectory. Demographic changes in the US make it highly likely that demand will continue to grow, although greater patient engagement in healthcare decisions could slow the rate of healthcare spending growth considerably. While demand-related opportunities can play a significant role, they do not eliminate the need to improve the productivity of healthcare delivery.

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