Separated at Birth? Higher Education and Healthcare

A story in the Wall Street Journal last week made some concerning observations about colleges and universities in the United States. (Click here...WSJ subscription required) College tuitions continue to rise, consistently outpacing inflation. The majority of students cannot come close to paying the actual cost of a college education, particularly at private colleges. The funding gap is filled by a complex mosaic of grants, merit awards, need based financial aid and subsidized loan programs. A minority of students pays list price and helps to subsidize those who cannot pay. 

So here we have a socially critical service, access to which many would call a fundamental right. The list prices are steeply discounted for some, and costs shifted to others. In addition, the system depends on a complex stream of government subsidies that obfuscates the true cost to most consumers. If this sounds familiar, it should. This is part of the same dynamic facing the healthcare system, which caused me to wonder what other similarities are there between higher education and healthcare? Here are a few:

• National Love/Hate Relationship. We respect and admire our healthcare system. It is widely acknowledged we have the best “rescue” healthcare system in the world. That is, if you are critically ill and need a coronary artery opened quickly, or access to the latest chemotherapeutic agent for a rare cancer, you will receive treatment faster than anywhere else in the world. However, we are also uncomfortable that our national health outcomes do not justify our investment. We are unsatisfied with our average life expectancy and infant mortality rates. We have large disparities in deliver of care.   In higher education, we take pride in our institutions of higher learning as leading the world in innovation. However, at the same time we are uncomfortable that our outcomes are not what they should be – that other countries are surpassing the United States in areas critical for success in the future global economy. In particular, there is concern we are failing in the so called “STEM” disciplines – Science, Technology, Engineering and Mathematics. 

• Bubbles. The rate of healthcare inflation consistently outpaces the overall inflation rate year after year, making healthcare increasingly unaffordable. The same dynamic is true of higher education. In both cases, the consumer has been insulated from true costs of the service by fiscal intermediaries – in healthcare, free or subsidized insurance; in higher education, ready availability of subsidized loans. The separation of the service from true economic cost over decades has mitigated any power the invisible hand of the market might have had in creating a more sustainable system. In both cases, the public subsidy has grown to the point that it is probably unsustainable.

• Leadership. In healthcare, at least traditionally, physicians are culturally discouraged from assuming increased administrative responsibility. Colleagues, only half jokingly, talk about “going over to the dark side.” There is traditionally very little training in medical school or residency to prepare physicians for leadership roles in the healthcare system. Similarly, in higher education, administration is often viewed as a necessary evil. Advancement through academic leadership positions is sometimes viewed as a distraction from real academic work. Like healthcare, little is done to develop faculty to take on these roles. In both cases, the enterprises are entering a period of transformative change, with very little leadership bench strength.

• Outcomes are not entirely the system’s fault. To be sure, much of the criticism of the healthcare system is justified, and improvements are needed. However, even with “perfect” healthcare, there are other factors that almost certainly have a greater impact on the overall health of the country than the care delivery system. Environmental factors (pollution, absence of green space), genetics (some people appear genetically programmed for more severe disease) and behavioral factors (smoking, obesity, high risk behaviors) are far more critical determinants of health than access to medical care.  In higher education, although the system can clearly improve, it would be naïve to ignore other major determinants of outcome. Cultural, socioeconomic and early childhood developmental factors are clearly critical. It is no more realistic to expect the healthcare system alone to cure a long-standing diabetic, overweight, non-English speaking smoker than it is to expect a university to remediate a socially disadvantaged young adult who never learned basic principles of 8th grade math.

• “Why can’t you run this like a business?” In both healthcare and higher education, there are people in advisory and governance roles that have earned great success in a wide variety of private enterprises. There is often a feeling among these highly accomplished people that if healthcare (or higher education) just adopted sound business principles, our system would be fixed. That is true to a degree. Healthcare and higher education should be managed on a solid business foundation. However, the perverse economic dynamics of the industry, the belief that the service provided is a fundamental right and the resulting regulations to protect those rights creates dynamics you would not find in a typical business. It is unlikely a consumer would show up on a car lot, drive away in a car they cannot afford because they have real need of a car, with the promise that a third party may ultimately pay some fraction of the actual cost.

• Disruptive innovation. Both systems are facing disruptive innovators. In healthcare, Wal-Mart is progressively entering the primary care space. Radiographs can be interpreted by a radiologist on the other side of the planet at a fraction of the cost. In higher education, there has been rapid growth in for-profit colleges, with a heavy on-line emphasis. Massive Open On-line Courses (MOOCs) are attracting thousands of students to courses taught by the nation’s best instructors at little to no cost. No one can fully predict what this all will mean, but when high costs meet the public perception of poor quality or service, the disruptive niche innovators will not be far behind. 

• Shift in the international market. For the past half a century, people world-wide come to the United States for access to the most advanced care possible (and usually paid a premium for that access). They continue to come. However, the role of the global community has changed in the past few years. Many cognitively based tasks can be outsourced to countries with an educated workforce, like India. Specialty hospitals are springing up around the world, promising and delivering high quality outcomes and great customer service at a lower price. Medical schools and educational accreditors are expanding into international markets. In higher education, international students flock to universities in the United States for an exceptional educational experience. Although this continues, since the recession students have become more cost sensitive.  A small, but rapidly growing number are attending prestigious European colleges, where they can obtain an equally (at least) prestigious degree at lower cost than many public and private colleges in the US.

I am sure there are many more parallels. My sense is that both healthcare and higher education are on a trajectory headed steadily to transformational innovation. It also appears that healthcare is slightly further down that path. Hopefully, we will benefit from shared experiences.