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The High-Tech Cures for Rising Health-Care Costs

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A third of the world's population contracted the influenza virus between 1918 and 1920, and 50 million people died. Since warnings of a potential bird-flu pandemic began circling at the end of 2003, an estimated 332 people have died worldwide, all in developing countries. The first open-heart surgery was performed in 1952; today, more than half a million heart surgeries are performed each year in the United States alone. Medical science has arguably progressed further in the past century than it had in all prior human history, and the pace of progress appears to be accelerating. But there's no progress without cost.

Recent years have witnessed an explosion in health-care costs, causing particular consternation in the United States as our polarized political climate sharpens the debate over whether health care should be a right or a privilege. Despite all medicine's advancements -- or perhaps because of them -- we spend almost 4 times as much per person on health care as we did in 1970. If trends continue, the average cost of annual health-insurance premiums will be higher than most families' household incomes in the next 20 years.

As my colleague Morgan Housel pointed out in rebutting that ridiculous claim, trends tend not to continue in a straight line forever. Things change. The question will be what drives that change. Morgan identified compelling economic reasons why the current trajectory is unsustainable. I'll take a different angle, looking closer at the technology behind modern medicine and seeing how progress on the bleeding edge could arrest and reverse a decades-long bubble in health-care spending.

Agents of change
Although health care continues to be transformed by technological advancements, costs have not come down as they have in nearly every other arena where technology's been applied. The human body is, let's face it, a lot more complicated (and a lot more valuable) than a process on a factory floor, and we still know far less about how it works than we could. That could soon change.

I've identified three key technological trends working to make health care more effective and more affordable. They are:

  • Automation: doing the work of doctors with algorithms.
  • Robotics: performing surgery with far greater precision than human hands.
  • Genetics: understanding the inner workings of each unique body.

Call it ARG. Yes, the future sounds kind of like a pirate.

Applying computing power to medical diagnostics is not new, but for a long time it was subject to the limitations of computation and algorithmic capabilities. An archaic medical-records system hasn't helped, nor did the fact that medicine, like computing, has seen the frontiers of its knowledge and functionality rapidly expand in recent years. I briefly highlighted a robotic nurse when discussing the effects of automation last year, but that's only one of many possible examples.

The Becton, Dickinson (NYSE: BDX  ) FocalPoint medical imaging system, profiled in Slate last year, has nearly doubled a human examiner's speed of operation while simultaneously improving the ability to find cell abnormalities. Other machines can detect abnormalities in images of the colon, chest, and arteries. IBM (NYSE: IBM  ) may soon leverage its Jeopardy!-winning Watson supercomputer as a diagnostic tool. More applications will undoubtedly be forthcoming. Speeding the diagnostic process while reducing labor requirements and improving accuracy can and should reduce costs over the long term.

There will be worries that machines will make mistakes, but humans make plenty of mistakes as well. Medical errors in hospitals have been cited as the cause of anywhere from 100,000 to a million unnecessary deaths per year. Even the most conservative estimate is far too high to accept. Medical-technology companies afraid of malpractice suits may be protected by the Supreme Court's 2008 Riegel v. Medtronic decision, which ruled that FDA-approved devices are protected from consumer lawsuits. Replacing doctors with devices might therefore save money on insurance premiums as well.

The encroachment of robotics into our hospitals should be no surprise to longtime Fool readers, who've been well aware of Intuitive Surgical (Nasdaq: ISRG  ) and MAKO Surgical (Nasdaq: MAKO  ) for years. These companies are not only great investment opportunities; they're also transforming the process of surgery itself. There may come a day when most surgeries, like the diagnostics I mentioned, are performed by robots controlled by highly sophisticated software, without the need for any direct human intervention. This won't happen any time soon, but in the long run, people will be as accepting of machine surgeons as they once were of bloodletting -- and machines are undeniably far more effective.

This is the area that offers the greatest transformative potential in years to come. Despite all science's efforts, we still know precious little about how our genomes make us tick. That's in large part due to the oppressively high cost of genome testing, which is finally poised to break through the $1,000-per-test barrier later this year. That's beyond the reach of most people, but my projections see testing costs approaching the price of a fast-food hamburger before the end of the decade. When you consider that a full-genome sequencing cost millions a mere decade ago, that's incredible progress.

Illumina (Nasdaq: ILMN  ) and Life Technologies are on the vanguard of this growing field, but their technology alone won't create the transformation we need. There's a vast chasm between information and knowledge. For example, Alzheimer's is well understood from a genetic standpoint but poorly served by current treatments. Complex diseases require vast amounts of information to be processed into meaningful analyses and viable prescriptions, and a broad base of cheaply sequenced genomes would be the necessary starting point to bridge that chasm. There may be fewer than 50,000 sequenced human genomes today. Imagine the wealth of information unlocked by the sequence of millions.

Imagine medicine tailored not to general symptoms but specific genetic markers. It would greatly cut down on both prescription-drug abuse and accidental drug-related deaths, which now outnumber car-related fatalities in the United States. Of course, it should also greatly improve the quality of care, as patients can be treated as individuals rather than symptoms. The combination of genetics and analytics may offer the greatest chance we have of breaking the cycle of rising medical costs -- provided the results are used for effective treatment instead of profit-seeking.

ARG, matey
I'm not here to suggest that things are about to turn around. It's taken decades to reach this point, and there may be decades ahead before the dream of affordable universal health care comes to pass. But technology will have its part to play, as it always has. We can cure diseases we couldn't identify a century ago, and we can fix many defects that would have felled our parents and grandparents.

Even so, there's still a long way to go before science can say it really understands the human body. The gulf between information and knowledge continues to shrink with each passing year, and with it the need for unnecessary procedures shrinks, the risk of death lowers, and (so the theory goes) the costs of restoring health should fall. It's taken billions of years to create human beings, so a few more years to understand them should be worth the cost in the long run.

What do you think will happen to medicine once technology begins to really understand how we tick? Let me know with a comment.

Medicine might not see the next big technology transformation, but this industry will. Find out more about one company poised to reap windfalls in the next trillion-dollar revolution. All the info you need is right here in The Motley Fool's free report. Claim your copy now.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more news and insights. The Motley Fool owns shares of Medtronic and MAKO Surgical. Motley Fool newsletter services have recommended buying shares of Illumina, MAKO Surgical, Intuitive Surgical, and Becton. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (2) | Recommend This Article (9)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 01, 2012, at 1:14 PM, ISRGer wrote:

    I agree; ISRG and MAKO have the knowledge, drive, and produce necessary robotic equipment to significantly improve medical surgery at a smaller cost to us humans (money and hurt) with a far greater faster, more predicatble and a hugely greater favorable outcome.

  • Report this Comment On April 01, 2012, at 1:22 PM, ISRGer wrote:

    The foregoing suggestions favoring ISRG abd MAKO because of their robotic surgery equipment are truly a gift for serious consideraqtioopn for winners in the stock market. I own both. Thanks for listening and good luck on your investment choices. Charlieboy Stevens

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