The Healthcare Breakdown No. 027 - Breaking down why we’re all f*cked

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What we’re breaking down: The insanity of the macro picture of healthcare

Why it matters: 2 choices, fix it, disrupt it. If you want to do either, you need to understand the magnitude

Read time: The standard daily existential crisis cycle of a millennial (5 minutes for real though)

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Ok, I don’t really think we’re effed. Maybe we are, but to quote one of my favorite movies, “if nothing is ok, then it’s ok.”

The adopted cousin of that quote would be, “ya ain’t got shit to lose, so may as well go for it.”

That ones brought to you by a lifetime in The South. Capital S.

If you can’t tell this episode is going to be a little different. Maybe I am feeling optimistic or downtrodden, or pissed. It could be the midday cocktail. Whatever the reason, I want to talk about it. Because it’s all so absurd.

But in it’s absurdity, is all the opportunity we need.

There’s a hospital that closed 20 years ago in Georgia. The crown jewel of Hancock county Georgia is a little town called Sparta.

Ya, like that movie with 300 super ripped dudes.

Hancock Memorial hospital was the economic engine of the community. It closed, because it couldn’t pay it’s bills.

The amount of those bills?

$2M.

Up the road, a health system CEO makes $2.5M annually.

Theater of the absurd.

And while it can seem distant, it’s not. It’s personal.

If you are like most Americans, you probably spend anywhere from $1,300 a year to $6,100 a year in premiums depending on whether you’re a twenty-something who never smoked (according to your unverifiable questionnaire), with no pre-existing conditions, or you’re a fifty-something with too much mortgage, staring down three out of state college tuitions, and a panache for the art of cocktail making.

You pay something like $2-6K in premiums a year. Then in a bad year, you’re on the hook for your deductible, let’s call it $3K.

Let’s settle on $7K all in, for a healthy, employed family of two.

Cool, well unfortunately not everyone in America is like you. And while the premium is manageable, since they just sweep it out of your paycheck anyways, the deductible is not.

So, little Stevie slips and breaks his wrist and suddenly, you’re on the hook for $3K.

$700 in the bank.

You can’t pay.

The hospital sues you.

Let’s look at one.

Atrium sued 2,482 patients from 2017 to 2022 and won about $24M.

Not exactly chump change.

Or is it?

$4M a year, while…

Revenue: $13.7B
EBITDA: $529M

Not even a rounding error.

Also…

$12.5B in investment transactions.

It also dropped off $52M in the Cayman Islands in 2017.

Good look.

Anyways, times are tough for hospitals. Even the largest ones.

Personnel costs are up, supply costs are up, and executive leadership capabilities are down. And these days insurers aren’t paying enough to cover the last part of that sentence.

Speaking of insurance. Here’s a fun fact.

Oh wait… that’s not very fun. Fun for them I guess, definitely not fun for anyone else.

P.S. I added it all up for you, so you don’t have to…

5 companies made $839B last year in revenue.

$40B in profit…

Profit.

After salaries, bonuses, stock-buybacks, all that super value-add stuff.

But wait! There’s more.

That’s just insurance.

People yell about pharma companies a lot, right? And those pesky hospital supply costs keep ticking up…

Well… here’s a selection.

5 companies.
$376B in revenue.
$88B in the profits.

Now, to be fair the pharma companies are global. The US is like 40% of their market. I also didn’t convert Swiss Francs to US Dollars, because once we’re in the tens of billions, it’s like, come on.

And just get on the Euro already Switzerland. So neutral. Like everyone is annoyed, get over yourself already.

Anyways.

What is the point of all this? These staggering numbers? I didn’t even do medical devices.

Ok, one real quick.

A cool $31B in revenue and $3.8B in profit.

What’s the point in showing all this insanity?

The first part of the point is the order of magnitudes we work with in healthcare. Hospitals make too much money. Pharma makes too, too much money. Insurers make too, too, too much money.

Each rung you go up, the order of money magnitude changes. And best believe the interests of these organizations is to keep the money train rolling.

The take away here, is you have to know what you’re up against. And be very specific about the swing you’re going to take.

Make it count.

The other part of the point is that this is whack AF.

These numbers are the reason people are dying in The United States from lack of healthcare.

Our healthcare system is designed to and is doing an exceptional job making money.

That’s where you come in.

If you call four of your besties after they sleep off their champagne hangover from last night, the five of you may just figure out the way to attack one of the many super important problems in healthcare.

Here’s the rub though.

These numbers? They have to get smaller. If they keep getting bigger, we really are all effed.

And you can’t pitch that to your local venture capitalist. Like, Andreesen Horowitz is totally psyched on innovation in healthcare… to make as much money as possible.

Go pitch them that your goal is to put your own startup out of business in 12 years and see what happens.

It’s time to play a completely different game. One where we all win.

Don’t get me wrong, this isn’t a money is evil rallying cry. Not about that. But I am about building businesses the right way. Businesses that deliver value, not extract it. Ones that create solutions, not more problems. Ones that change things for the better.

It’s why I started writing my way through LinkedIn. It’s why I go to healthcare conferences on my own dime. It’s why I talk to just about anyone much to my wife’s chagrin. And it’s why I write this periodical.

I believe in one simple idea. That the systems have to change in order for real change to occur. People, as it turns out, are the only ones that can change systems.

I believe in you. In us.

See you out there!

Love,
Your favorite aspiring healthcare optimist