Third in a series. Please read part 1 and part 2.

We expect that most readers have noticed the differences in health care delivery compared to other industries that we discussed in part 1 and part 2. Those differences relate to board governance, health care leadership, infrastructure, and operations. Readers probably also noticed that these differences are negative, not positive. The big question is, why these structural and strategic differences exist and what can be done about it. We believe that the differences in health care versus other industries have arisen because of the economic differences in health care–those differences we cited at the beginning of this article. The study and emphasis of those economic differences started in 1963, when economist Kenneth Arrow (who later won a Nobel Prize) wrote a seminal paper in the American Economic Review, “Uncertainty and the Welfare Economics of Medical Care.” The paper gave birth to modern health care economics and thus many attempts to determine how different American health care is from other American industries. Some of the explanations of economic differences in health care developed a name―economic exceptionalism. Here’s an excerpt from a 2016 paper in the American Economic Review: “… ‘health care exceptionalism’ has a long tradition in health economics. It dates back at least to the seminal article of Arrow (1963), which started the modern field of health economics by emphasizing key features of the health care industry that distinguish it from most other sectors and therefore warrant tailored study …”

Note that the economic differences in health care are not just differences, they are a sense of exceptionalism. Exceptionalism is a loaded term, and so let’s define it.

Exceptionalism: The condition of being exceptional; uniqueness; a theory that a nation, region, or political system is exceptional and does not conform to the norm.

Exceptionalism can imply either a) a sense of being different, like “an exception to the rule,” or b) something extraordinarily good, like an “exceptional athlete,” or c) both. In his venerated 1840 treatise, “Democracy in America,” Alexis de Tocqueville described America as “exceptional,” which eventually led to the coining of the term American exceptionalism. That’s where or how you may have heard the term used, and politicos debate ad nauseam whether the term means a, b, or c in the above.

We believe that economic exceptionalism in health care, which began around the 1960s, connoted essentially the first sense—different or unique, but not better. And we further believe that this economic exceptionalism gave rise to a sense of strategic and cultural exceptionalism―because health care delivery system leaders operated economically exceptional (different) organizations in an economically exceptional (different) industry, they slowly came to believe that they themselves, their teams, and their organizations generally, were and are strategically and culturally exceptional. Further, we believe that they believe they are culturally exceptional in the “better than” sense of the word.

Why do we believe that? Because health care leaders’ behavior and words often show us their beliefs. There is a well-known term, medical narcissism, studied at length by John Banja and covered in his book, Medical Errors and Medical Narcissism. He shows that MDs often have “fantasies of omnipotence” and feelings of “specialness” that have developed to help them cope with their jobs’ high levels of pressure and stress. In many cases, the MDs in leadership positions at health care delivery organizations personify a situation of factual economic exceptionalism plus medical narcissism. They often show through words and behavior that they believe that because they are economically exceptional in the first sense of the term (different), they are also generally exceptional in the second sense of the term (better).

For instance, in the face of generally poor industry and organizational performance, health care leaders carry on making relatively minor changes in their organizations and the industry. For instance, a colleague of ours attended a “fireside chat” with the CEO of a top-ten largest health care delivery organization in the U.S. only to hear from the CEO that the main thing that can be done better for improved outcomes is . . . for citizens to take better care of themselves. In other words, he did not say clearly or strongly that health care overall or his organization should change to serve citizens better. He spoke as if he and the health care delivery industry uniquely face that pesky difficulty of human beings wanting good service and results and if they don’t receive it, it’s their fault. To us, that is an example of an attitude of exceptionalism in each sense of the word.

We believe that leadership’s ingrained culture of exceptionalism drives today’s situation in which patient satisfaction is low, inefficiency is high, and patient outcomes are poor. We further believe that the industry can only solve its deeply entrenched problem through making a fundamental, long-term, steady shift. It must recognize that its economic exceptionalism (being different) does not make it culturally or organizationally exceptional (being better). We believe that the best course of action would be for the industry to become economically unexceptional, i.e., normal. In other words, we think the industry should economically restructure to have for-profit providers that pay taxes, easily available quality metrics, clear and transparent pricing, and payers and customers that are well informed and aligned. We have written previously about health care delivery organizations that are economically non-exceptional and therefore, ironically, quite exceptional. These are organizations such as Devoted Health and One Medical (in which we have no financial stake).

Yet, we acknowledge that health care industry leaders will not agree to shift the economic structure of the industry. As such, leaders must urgently and importantly work on values and culture in their organizations. Beyond Hippocratic Oath and patient privacy being driving aspects of the MD-leader’s deeply engrained operating style, medical narcissism also lurks. A leadership style infused with medical narcissism intersects with economic exceptionalism to the great detriment of patients everywhere. Effective large company leaders have been shown to be modest, self-effacing, quiet, and reserved, uncharismatic to the point of unremarkable, but with indomitable will. Thus, medical narcissism must be replaced with this Level-5 Leader type of humility.

In summary, leaders in health care need to come to terms with and fix their beliefs in their own, their organizations’, and their industry’s exceptionalism at the strategic and cultural levels. Yes, we do know this is an exceedingly large and difficult undertaking, but we’re convinced it’s worthwhile, meaningful, and better than the alternative of the industry continuing as is and inadequately serving patients.

Joe Mandato is a venture capitalist investing in the life sciences and a faculty lecturer in biodesign at Stanford University. He is former CEO, and current and former board member, of a number of health care and medical device organizations. He can be reached on Twitter @josephmandato.

Ryan Van Wert is CEO, Vynca Health, and a critical care physician, clinical assistant professor in the department of medicine at Stanford University, and associate director of Stanford’s Byers Center for Biodesign. He can be reached on Twitter @ryanvanwertmd.

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