Cedar Gate's AI-Powered Models that Predict CAD & CHF Risk Could Save $1.4 Billion+ READ PRESS RELEASE >

The Cost of Business as Usual

BLOG | September 16, 2022

The Value Revolution is Here.

Manifesto-Call-out-V2It should come as no surprise when we say the U.S. healthcare system is in a state of crisis. In fact, it has been for some time. The pandemic proved that prioritizing volume over value is unsustainable. Together, we have the power to create change. We all know a fee-for-service system is unsustainable, and the time to talk about the problem has come and gone. Our only option now is to march forward toward a more sustainable and effective healthcare system. Those who don’t will fall behind. 

This is our manifesto for change. 


The Consequences of Business as Usual

Significant barriers slowing our transition to value-based care up to this point include:

  • Complacency with a fee-for-service system
  • Fear of disrupting traditional revenue models
  • Lack of resources and inadequate tools to achieve VBC goals

Proactively trying to reduce key revenue drivers such as hospital admissions and emergency department (ED) utilization threatens the legacy business models of every participant in the healthcare ecosystem. The same is true of trying to keep patients out of doctor’s offices with more effective preventive care and disease management strategies.

Dr. Clay Christensen, the “architect of and the world’s foremost authority on disruptive innovation,” co-authored a whitepaper on How Disruptive Innovation Can Finally Revolutionize Healthcare. In it, he and his co-authors note the “fundamental disconnect between what patients need in order to maximize their health and what they actually get as consumers: more services and treatments that generate revenue.”

Providers, hospitals, and payers are reluctant to upend their longstanding revenue drivers. This concern stems from decades of working in a fee-for-service model that only rewards volume. But the consequences of “business as usual” are alarming. We must take steps to change both the care delivery and payment models to better align patient needs with healthcare system incentives.



In 2020 healthcare spending accounted for 20% of U.S. gross domestic product (GDP). The Centers for Medicare and Medicaid Services (CMS) projected healthcare spending to increase an average of 5.3% per year, and PwC projects that U.S. GDP will increase by about 2% per year through 2050. If these trends continue, healthcare will account for 57% of U.S. GDP by 2050 – almost $6 out of every $10 we spend in the U.S. economy.

At those rates, healthcare spending would eventually exceed GDP around the year 2067. We recognize that this hypothetical future is as unrealistic as it is undesirable. The country cannot spend every dollar we generate in our economy on healthcare, leaving no money for housing, food, consumer goods, and other necessities. But the gap between GDP and healthcare spending is closing every year. The longer we continue to operate in an unsustainable FFS system, discussing the problem without making drastic changes, the closer we get to a future where a significant part of our GDP goes only toward healthcare.


U.S. GDP growth projections derived from PwC, The World in 2050. Healthcare spending growth projections derived from CMS National Health Expenditure (NHE) data, as well as report from Deloitte, Breaking the Cost Curve. GDP projections beyond 2050 are estimated using the average of all the years between 2020-2050. These projections depict a hypothetical (and undesirable) future if current average GDP and healthcare spending increases continues indefinitely. 

Medicare’s Part A hospital fund is also running out of money. Current estimates project that the fund will only last through 2028 without a major overhaul and quick action by Congress (both of which are unlikely in the short term).

Most Americans (56%) get their healthcare through an employer. As insurance prices perpetually increased over the last several decades, employers shifted more of those costs to employees. About 75% of respondents in a McKinsey survey of employers said they have already increased, or plan to increase, the share of costs borne by employees. Annual premiums are rising much faster than wages. Now we’ve reached a breaking point: employees cannot afford to take on any more costs, and employers cannot afford to allocate more company resources to cover insurance.

When consumers have more out-of-pocket costs from things like high-deductible health plans (HDHPs), they are less likely to seek out preventive care and comply with disease management programs. This can increase total care costs if it leads to higher emergency department (ED) utilization and more preventable hospital admissions. It also leaves patients who cannot afford their deductibles essentially uninsured. Kaiser Family Foundation found that almost half of adults (46%) don’t currently have enough savings to cover their annual health insurance deductible. That number is likely higher for people with HDHPs.



One key to a thriving healthcare system is highly qualified and trained healthcare professionals. But the relentless demands of a FFS system is contributing to serious workforce burnout. When healthcare workers must prioritize volume and throughput, they cannot spend enough time with patients to have a meaningful impact on quality outcomes. It is a frustrating reality for people who specifically chose a career in medicine to help others.

Graph-6The current technology ecosystem is complex and disconnected, creating more work that results in higher costs and redundant care. But there’s little incentive to eliminate redundancies when people continue to get paid for these services. FFS systems do not incentivize teamwork and care coordination and workflows that improve efficiency and effectiveness. Administrative burdens in a complex system also place more demands on both clinical and non-clinical employees. Gartner found that all these factors – technology, ineffective teamwork, and administrative burdens – are increasing healthcare worker burnout.

All of this is driving people out of the healthcare profession. The Mercer U.S. healthcare labor market report predicted low-wage healthcare jobs (such as CNAs and MAs) will face a 3.2 million worker shortage within five years. The American Nurses Foundation projects that as many as 52% of nurses plan to leave their clinical practice, leading to a potential shortage of one million nurses by the end of 2022. A similar trend among primary care providers and behavioral health professionals is also possible, with 60% to 75% of providers reporting burnout symptoms. The American Association of Medical Colleges predicts a shortage of between 37,800 and 124,000 physicians by 2034.

Burnout and worker shortages also have serious implications on care quality. When providers and clinical employees are overworked, stressed, and burned out they are more likely to make mistakes. Medical errors can lead to severe and long-lasting consequences for patients, requiring more expensive care in places like EDs and hospitals.

Making these changes is not optional, so it’s time to either march forward on this journey or fall behind. Let’s turn the page on healthcare history together.



Previous: The State of Healthcare: A System in Crisis Next: Who Benefits from the Value Revolution? 
Your browser is out-of-date!

Update your browser to view this website correctly. Outdated Browser