America’s Healthcare System – Part 3
A Simple Profile of the American Healthcare System
This is the third essay in Civic Way’s series on the US healthcare system. In our last essay, we summarized the history of healthcare in America. In this essay and the next, we offer a profile of the healthcare industry’s primary participants. The author, Bob Melville, is the founder of Civic Way, a nonprofit dedicated to good government, and a management consultant with over 45 years of experience improving public agencies.
Highlights:
The US healthcare system is a phrase we hear a lot, but it is a system in name only
From an economic standpoint, healthcare is huge, affecting every American business and consumer
From an organizational perspective, it is a convoluted, unfathomable maze
There are several trends that could disrupt the healthcare sector, but their benefits may disappoint
Introduction
American healthcare is often called a system, but it is hardly that. Labeling it a system is misleading, and probably more of a nod to its economic and political magnitude than anything else.
Healthcare may not be a system, but it is our nation’s single largest sector. At over $3.6 trillion per year, it consumes at least 18 percent of our gross domestic product, nearly twice as much as other affluent nations. It touches every person and virtually every corner of American society. For most of us, it is even harder to avoid than it is to comprehend.
What are the major components of this sprawling sector?
First, there are the people who consume healthcare and those who work in the industry. The consumers represent the biggest—and probably the least influential—component. The workers include physicians, nurses and scores of other occupations.
Second, there are the organizations that fund and provide healthcare services and products. Government at all levels—federal, state and local. Corporate entities, including Big Pharma, insurers, medical suppliers and technology firms. Providers, including hospitals and primary care practices.
Healthcare Consumers
Every American is a healthcare consumer, that is, a patient or potential patient. And there are 331 million of us.
The numbers are staggering. To illustrate, in 2019, there were over 36 million hospital admissions, 145 million hospital emergency room visits and 900 million hospital outpatient visits. In 2020, there were an estimated 860 million office-based physician visits. Over 80 percent of all adults visited a healthcare professional and over 50 percent saw a primary care physician during the year.
Healthcare Workers
Healthcare is the US’ largest employer. There are about 22 million workers in the healthcare industry, including 15.1 million physicians, nurses, technicians and support personnel. Historically, the two most important groups of healthcare workers have been physicians and nurses. Those two groups are discussed below.
Physicians – There are over 985,000 licensed physicians and over 136,000 active physician group practices. In addition to primary care physicians, there are pediatricians, OB/GYNs, orthopedic surgeons, anesthesiologists, and psychiatrists, to name a few of the 130 or so specialties.
The physician profession is undergoing big change. Physicians are leaving solo offices for larger physician-owned practices and moving from physician-owned practices to larger hospital-owned practices. Every year, thousands of physicians are leaving independent practice to become hospital system employees. By 2021, nearly 70 percent of US physicians were employed by hospital systems. As recently as 2010, only 28 percent of primary care physicians were part of hospital-owned entities.
Nurses – At over four million, nurses constitute the biggest healthcare workforce. This number includes 3.1 million registered nurses (including 96,000 school nurses), 676,000 licensed practical or vocational nurses, and 211,000 nurse practitioners. About 60 percent of nurses work in hospitals and 20 percent in outpatient settings.
The nursing profession, while growing, is facing some worrisome issues. Turnover—in 2020, the turnover rate was 18 percent for registered nurses and over 20 percent for some specialties. Uncertainty—nursing, as a cost center (not a profit center), is vulnerable to layoffs and furloughs. The inevitable stress and burnout, coupled with retirements, have contributed to significant staffing shortages.
And there could be dramatic changes in the coming years. A more significant primary care role under physician supervision. A larger public health role for school nurses, especially as a safety net for the most vulnerable children. The impact of telemedicine. Greater demand for home healthcare nurses. A more flexible, team-based hospital staffing model (more floating nurses).
The healthcare sector includes a wide range of other occupations. Physician assistants. EMTs. Paramedics. Pharmacists. Therapists. Technicians. Dentists. Hygienists. Aides. Their roles, training, licensing and compensation will no doubt change as the healthcare sector changes.
Government
Clearly, government, especially the federal government, is a force in healthcare. The federal Department of Health and Human Services (DHHS) includes three agencies with huge roles—the Centers for Medicare and Medicaid Services (CMS), Food and Drug Administration (FDA) and National Institutes of Health (NIH).
CMS administers Medicare, Medicaid and the Children's Health Insurance Program (CHIP). The FDA regulates prescription drugs and medical devices. The NIH funds and oversees (or conducts) health-related research via 20 national institutes like the National Cancer Institute and National Institute of Mental Health.
Another cabinet-level (albeit smaller) federal agency, the Department of Veterans Affairs (VA), manages the Veterans Health Administration (VHA). The VHA, with a budget of over $220 billion and nearly 350,000 employees, runs the world’s largest healthcare system for veterans. With about 170 medical centers and 1,120 other facilities (e.g., clinics and nursing homes), it serves over 9 million veterans per year.
State governments, due primarily to Medicaid and CHIP, also play an important healthcare role. State governments manage Medicaid in accord with CMS guidelines but with extensive latitude. For example, state Medicaid eligibility criteria and benefits vary widely. However, states are heavily dependent on federal funds, especially for the Medicaid program.
The role of local government in healthcare has waned, but it could do so much more. Many cities once ran hospitals for the indigent, but most such hospitals have been closed or transferred to nonprofit hospital systems. Some localities provide supplemental healthcare funding (e.g., through bond issues). But local governments remain largely an untapped resource.
Local governments offer three prospects. First, given their dominant public health role (see Civic Way’s public health series), they could be the missing link between healthcare and public health. Second, as the front-line providers of most community services—like police, fire and emergency management services—they could help connect citizens to other services they need. Third, local governments, through their social services, are ideally suited to confront the social and environmental conditions that influence health.
Next Essay
In our next essay, we will continue our profile of the healthcare sector, focusing on corporations, hospitals, primary care practices and other providers.