Yale School of Management

Can Innovation Make Healthcare Cheaper?

October 23, 2014

Healthcare in the United States costs more than any other industrialized nation, and often that extra cost is a result of medical innovations—new drugs and devices that extend or improve life but are very costly. But Dr. Mark McClellan, senior fellow and director of the Health Care Innovation and Value Initiative at the Brookings Institution, also views innovation as a tool for bringing U.S. healthcare costs into line with peer nations. He spoke with students in the Yale SOM MBA for Executives program's Colloquium in Healthcare Leadership on October 10.

What a lot of people focus on in healthcare is the innovations in biomedical technologies, where we really are on the cusp of continuing breakthroughs in the way many conditions are treated. This year a lot of the news has come from hepatitis C, but if look back over last 20 to 30 years, there's hardly any condition or health problem where care hasn't changed significantly and for the better. Think about cardiovascular disease where the CDC just announced this week that life expectancy is higher than ever due largely to 60% reductions in death rates from heart disease, stroke, and cardiovascular-related heart conditions. A lot of that is attributed to the changes in medical technology.

When I was trained at Brigham, my HIV patients were dying from lack of any effective therapies. Now it's been transformed into a chronic disease with only minimal impact on life expectancy. Many types of cancer—I could go on and on. The opportunities for the future are even greater.

The challenge, though, is that these are technologies that tend to increase healthcare costs. But there's a lot of innovation that could happen in healthcare that goes in the other direction. There are lots of opportunities to use information technology and better diagnostic systems that target the use of medical technology more effectively—what's called precision medicine—and technologies that give people more confidence that if they are spending more money on treatment, it's going to work for them. There are new technologies that enable more wireless and remote monitoring and more support for people to take a more active role in staying healthy and avoiding complications and the traditional healthcare costs that add to the healthcare bill. New methods and team approaches for delivering care, whether it's nurse practitioners and other allied health professionals working with a primary care provider or with a set of specialists to get better outcomes and lower costs at the same time.

One such initiative, Project Echo, is providing high quality specialty services for hepatitis and other liver conditions in remote areas through tele-medicine and other kind of support tools. And looking at behavior, there are opportunities for improving health through diet and lifestyle, exercise and other activities, which are challenging, but there are some technologies coming along to help with that, too. All those kinds of approaches can get to better value in healthcare through reducing costs.

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About the author

John Zebrowski

Senior Associate Director for Digital Media