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Technology Made Health Care Expensive. Can It Now Control Costs?

A new class of digital entrepreneurs is needed to solve health care's biggest problems.

Ricardo Reitmeyer/Shutterstock

Technology has revolutionized medical care. Three-dimensional printers can create human valves and ears. Non-invasive heart surgeries have replaced operations that used to begin by cracking open a chest. Proton therapy is delivering higher doses of radiation targeted to cancer cells, while saving healthy tissue and organs.

But all of this costs money — about $41 billion in research and development dollars, in 2012. According to an article in Forbes, research costs for medical care — especially drugs — reach astronomical amounts. Consider that about 95 percent of experimental medicines that are studied eventually fail. That means that a company with dozens of new drugs in the pipeline may only release one. The total cost to get that single medication to market: About $5 billion.

In other parts of the economy, new technology improves inefficiencies and makes products and services less expensive. In 1988, a top-of-the-line laptop cost more than $7,000, adjusted for inflation. Now you can buy a laptop that’s leaps and bounds more powerful and faster for less than $2,000. A late-’80s cellphone that only made calls cost about $4,000. Now, a smartphone, with GPS maps, email, Internet, video and music capabilities can be had for less than $300.

“Computers make things better and cheaper. In health care, new technology makes things better, but more expensive,” said Jonathan Gruber — an economist at MIT who leads a heath-care group at the National Bureau of Economic Research — in an MIT Technology Review article.

Indeed, there always seems to be more-accurate tests for diagnosing diseases, a less-invasive procedure, a better drug with fewer side effects. And herein lies the conundrum: As technology helps us live longer, how can we justify curbing innovation? Don’t we all want the best, most state-of-the-art technology available, regardless of the cost?

The problem needs a new framework. We can’t stop developing innovative technologies just because they are expensive, but we can emphasize products that will reduce cost. There are several areas where this can be put into action:


In today’s health-care landscape, you can visit eight hospitals and receive eight different courses of action, all at various prices. Big data helps hospitals analyze outcome data and standardize the way to deal with medical issues: It’s called evidence-based medicine. hospitals need help synthesizing treatment data, tracking outliers, assessing risks and applying financial analysis to procedures and processes.

Of course, we can’t exclude new treatment options. To tackle that with as little controversy as possible, physicians Steven Pearson and Peter Bach wrote in a 2010 Health Affairs article that Medicare could cover new innovations for three years. If there was no evidence of effectiveness, they would revert to paying for the standard treatment.

This would help prevent against practicing medicine that tends to use new, expensive treatment as a proxy for quality, when there’s little evidence that exists to prove it.

Data is also going to help consumers make better choices. As more cost burden shifts to patients, they need to be more savvy about their choices. Transparency tools that reduce confusion will be in demand. Think Zillow or TripAdvisor for health care.


Devices are giving more power to patients — minus the doctor. EyeNetra has developed an app for smartphones that measures a patient’s eyeglass prescription. CellScope has a tool that allows parents — not pediatricians — to diagnose an ear infection.

In some cases, devices are cutting out doctors all together, but others are bringing them closer through collaboration. GlowCap monitors Rx bottles to see how often the cap is taken off. The device can also alert caregivers and providers. Sherpaa is allowing patients to email doctors and get a prescription — no visit required.

Electronic medical records

Long talked about, practices are finally implementing electronic medical records. Part of the Meaningful Use mandate, the hope is for EMRs to improve efficiency and quality by reducing errors.

Of course, not everyone is happy. Small practices are griping about the cost of implementation, not to mention the productivity loss as their staffs get up to speed with the new technology. But from the perspective of parents and patients, the technology has been embraced. The Atlantic’s recent segment, “Let’s Talk About Electronic Medical Records” elicited this response:

“I can’t tell you how reassuring it is as a parent to know that any doctor or specialist we see has access to my daughter’s entire clinical history. If we have to run to the ER at 2 am on a Saturday, god forbid, it is immensely comforting to know that the resident examining our child has exactly the same information as her primary care physician, and has a complete picture of her medical history since the day she was born.”

The dollars saved in better tracking — in an effort to avoid duplicative procedures/tests — would take a significant chunk of extraneous cost from the system.

Health IT vs. medical technology

Medical breakthroughs have helped people live longer. But not all breakthroughs are created equal or deliver on the health-care brass ring of value: The place where cost and quality collide. What’s needed today to drive and measure that value is health IT. We need to manage data — both on the patient and system level — to realize higher-quality, better-value care.

A new class of digital entrepreneurs is needed to solve health care’s biggest problems. No PhD required.

Mitch Rothschild is the CEO of Vitals, a company that connects patients to quality, cost and accessibility information so that they can make informed decisions about their health-care providers. Reach him @vitals.

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