Being born and raised in the New York City area, my social circles, sadly, do not include any farmers. My experience with farming is confined to the annual trip I take with my wife and children to a farm about a half hour from our house to pick up pumpkins for Halloween. And with that, I’d be hard pressed to say it’s truly “farming”.
While the agricultural economy in this country is enormous, the average, non-farming American pays it little mind, chalking it up to great soil and big machinery. What else really goes into it?
On a plane recently, I had the good fortune to sit next to an executive from a huge farming machine and equipment manufacturer. He explained in detail how they work with their customers, US farmers, to ensure their crops require big machinery for a successful and profitable harvest. This company provides geo-coordinates to their farming customers where they want soil samples taken. The farmers collect the samples, send it in for analysis and the equipment provider tells them, based on the type of crop grown in that soil, what supplements need to be added along with other variables to ensure a productive crop. A little potash here, some potassium there…..voila. A bumper crop is had.
With this approach, farmers can accurately forecast pricing. Imagine… you have a 5,000 acre farm, four different crops, massive combines and harversters, and you have a pretty good handle on cost, pricing and the forecasting of both. Furthermore, the data is aggregated and used for analytics and benchmarking.
Put the tractor in reverse and now back up to US Healthcare.
Recently, Jaime Rosenthal of Washington University led research whose findings were published in JAMA regarding the cost of total hip replacements. Her study found that hospitals estimated the cost of a hip replacement for an uninsured senior to be anywhere from $12,000 to $126,000. Over 300,000 hips are replaced every year in this country and the best answer Americans can get is “put off buying a new car for a year or two” all the way to “it’s a great time to re-fi…do you have any equity in your house?”
If our healthcare system were to treat patients like equipment manufacturers treat farmers, healthcare would get a lot of business done and customer focus would be its beacon of success. The hospital would provide the patient with information on the surgeons and implants available, along with the offer to do a study of the patient’s physiology, the ergonomic demands of their environment and financial standing to put together a proposal with transparency, optimization and efficiency. That said, given the cost this kind of service seems impossible. However, if for just one second we dare to imagine that implant pricing was as visible as the price of gasoline, it would be a good start.
Rather than provide facilities and the general public with data and transparency around total hip replacement costs, big vendors, whose implants represent a major portion of the procedural cost, have targeted doctors as their customers – the only segment of the healthcare supply chain whose compensation is currently not effected by the cost of the implant. Continuing with our agrarian analogy, that’s akin to a supermarket deciding that Joe Farmer needs an industrial harvester for a 3 acre patch. While there is a big push to reduce cost through ACOs and other performance based reimbursement models, we have yet to see mainstream adoption.