CLEVELAND – In a time of continuous heated debates about reforming America's healthcare system, the CEO of IBM, Sam Palmisano, spoke to attendees at the Cleveland Clinic Medical Innovation Summit on Tuesday about why the U.S. healthcare system isn't a "system" at all.

"The single question that is most critical to the future of healthcare in this country – and the world – is the need for a true healthcare system," Palmisano said. "Underscore 'system.' And I believe we have a better chance now than ever before to build it."

To explain why, Palmisano discussed some of the emerging shifts in technology and business that he believes are helping to make the world smarter.

He mentioned several events that have occurred in the first decade of the 21st century. "In the last few years, our eyes have been opened to global climate change," Palmisano said. "And to the environmental and geopolitical issues surrounding energy." He also noted that, "we have been made aware of the vulnerabilities of global supply chains for food and medicine." Also, he said, "we entered the new century with the shock to our sense of security delivered by the attacks on 9/11." And now of course, "we are in the midst of a global financial crisis."

While these events may seem unrelated, Palmisano has a different view. He believes these are a pattern of events that is a result of the fact that the world is now globally connected. "These wake-up calls have reminded us that we are all now connected – economically, technically and societally."

"The world is becoming smarter and this isn't just a metaphor," Palmisano said. "Intelligence is being infused into the way the world literally works – the systems and processes that enable services to be delivered."

The world is becoming instrumented, Palmisano said. He noted that there are nearly a billion transistors for every person on the Earth, each one costing one ten-millionth of a cent. There are 4 billion mobile phone subscribers, he said, and 30 billion radio frequency identification tags produced globally.

The world is also becoming interconnected, according to Palmisano. Soon, he said, there will be 2 billion people on the Internet. But that's just the beginning, he noted. "Systems and objects can now 'speak' to one another. "Think about the prospect of a trillion connected and instrumented things – cars, appliances, cameras, roadways, pipelines, even pharmaceuticals and livestock. And then think about the amount of information produced by the interaction of all those things. It will be unprecedented."

All of these sensors and data is creating the potential to add intelligence, Palmisano said, reiterating his point that, "the world is getting smarter."

Palmisano quoted Denis Cortese, MD, president/CEO of the Mayo Clinic (Rochester, Minnesota) saying that Cortese surprised audience members at an IBM forum on "smarter cities" in New York last week when he said that the American healthcare system isn't broken because that would imply that there actually is a system to be fixed.

"At IBM this is something we know quite a bit about; we know about systems," Palmisano said. He outlined four essential qualities any system must have to be well-functioning: first, there must be clarity on the system's purpose or goal; second, its elements must be connected – interfaces matter; third, we must be able to know, continually and with confidence, the status of the system and its critical components; and last, the system must be able to adapt as conditions change.

How does this apply to healthcare?

"In theory, everyone agrees on the system's purpose ... that American healthcare must become patient-centric," Palmisano said, adding that the system also must be value-focused, evidence-based, accountable, and sustainable.

"There is wide recognition that the components of American medicine and healthcare – testing capability, hospitals, medical schools, emergency response, pharmaceuticals and the like ... they are not the problem," Palmisano said. He noted the amazing breakthroughs occurring in innovation, thanks in large part to many of the summit's attendees – and said that, "what you guys do is not the problem. The problem is that nothing is actually connected."

"This is something so basic that we simply take it for granted in other areas of life," Palmisano said.

For example, he said, in the banking system we assume we can transfer funds and make payments between institutions. Another example he used is the airline system. "We take for granted that reservations are connected to ticketing, payments and loyalty programs," Palmisano said.

Why do these other systems work?

"All of these systems have standards and interfaces that permit information and data to flow," Palmisano said. "I'm talking about the processes and protocols that comprise the work of any system. Healthcare in America fails this key test of a well-functioning system."

Palmisano said that because the components and subsystems of healthcare are not instrumented it is impossible to know with confidence what their current status is. "Indeed, most of the participants in the system – most notably, patients – must record their status anew every time they interact with it."

For example, he said that more than 20% of lab tests are repeated unnecessarily because patient records are not available at the point of care.

To put it in terminology that the clinical audience at the summit might better understand, Palmisano said that, "if the healthcare system was a patient, and we were its doctors, we would be unable to read its vital signs."

Palmisano did however acknowledge the efforts of the Cleveland Clinic to pioneer the use of electronic patient records, reducing errors, lowering costs and becoming more patient-centric.

His remarks seemed to stick with several attendees and other speakers Tuesday even as they turned their attention to an afternoon session on corporate venturing. Ven Manda, VP of Medtronic Ventures and New Therapies and a panel member on that afternoon session, said that Palmisano's comments about the problem not being at the component levels struck a chord with him. "Are there standards? Are there processes and protocols? That was a key take-away for me and I'm not sure we have the answer to that," Manda said.

Can America's healthcare system adapt to change?

The fourth characteristic of a well-functioning system, according to Palmisano, is adaptability. "Ask yourself, is our healthcare system in America today – spanning providers, hospitals, insurers, pharmaceuticals, employers, communities and government – is that ecosystem ready for what's coming?" He noted that demand is only going to grow, especially as the Baby Boom population enters its senior years.

"If we agree on the need for, and lack of, a healthcare system," Palmisano said, "then the questions become 'how do we get there,' what do we do first and why,' and 'who's going to do it?"

Palmisano asked the audience to think about the retail system. "We take it for granted that store shelves are being stocked, inventories are being managed, global supply chains are operating smoothly and efficiency is being continually improved," he said. "... it began with the invention of having a universal product code – the UPC."

Palmisano said the UPC was originally developed to help supermarkets improve checkout speed. It was first used in a supermarket in Troy, Ohio in 1974 when the cashier scanned a package of Wrigley's gum. We now know, he said, that the invention of the UPC "did much more than improve checkout speed." He said it also "streamlined global supply chains."

What could change healthcare the way the UPC changed retail?

Palmisano says one strong candidate for changing healthcare the way the UPC changed the retail industry is the electronic health record. "Of course, that would just be a start. Connectivity is going to be necessary. But as we've learned painfully over the past decade, it isn't sufficient."

Also needed, Palmisano said, is "the ability to inject intelligence and analytics into the network and the myriad things, processes and management systems it connects." Then again, he noted, "As we've seen in other industries, world-sized trees can spring from seemingly small acorns."

Just like retailers in 1974 didn't know the extent of how the UPC invention would change that industry, Palmisano said that, "we can't know today all the dimensions of such a system."

Amanda Pedersen, 229-471-4212;