The Measurement Trap: Why We Track Healthcare Costs and Outcomes Exactly Backwards

The value equation in healthcare is outcomes divided by cost — but here's the revelation Stacey Richter had in this conversation: we've been measuring it exactly backwards. In American healthcare, costs are tracked at the macro aggregate level while outcomes are measured at the narrow individual service level. Flip that — measure costs at the unit level and outcomes at the whole person and whole community level — and a very different picture of the system emerges. In this episode, Stacey Richter speaks with Dr. Mick Connors, MD, an emergency room pediatrician and healthcare entrepreneur who has worked across for-profit institutions, hospital administration, and pediatric telemedicine, about why the margin-over-mission drift is making everyone miserable — clinicians, patients, and plan sponsors alike. WHAT YOU'LL LEARN ✅ Why the absence of unit-level cost accounting is a foundational flaw in healthcare: when no one knows what it costs to deliver any individual service, and purchasers are buying discounts rather than prices, the only financial lever left is raising aggregate revenue ✅ How "no margin, no mission" is routinely misapplied — conflating revenue with margin — and why Dr. Connors illustrates this with a real case where spinal surgery rods cost more than the reimbursement, producing negative margin despite high downstream revenue ✅ How an investor mindset in pediatric primary care — whether driven by private equity or fee-for-service incentives — produces the same result: cherry-picking healthy patients, routing sick and complex kids to the ER, and gaming HEDIS metrics rather than improving total cost of care for the attributed population ✅ Why Dr. Connors argues outcomes should be measured at the population level, not the process level — and what it would actually look like to say: here are 1,500 attributed patients, here is what they spent this year, now reduce that spend by improving outcomes for the 20% driving costs ✅ Why dyad leadership — a clinical co-leader paired with a finance or business co-leader, both with actual decision-making authority — is necessary to keep mission from getting steamrolled by margin, and what happens to trust and care quality when that balance is lost ✅ How CEO salaries have grown 100% over 10 years while physician compensation has declined — and why Dr. Connors argues the pendulum needs to swing back before the system loses what remains of patient and clinician trust WHY THIS MATTERS When the incentive structure rewards volume, revenue, and efficiency over outcomes, clinicians who do the non-billable work — the follow-up call, the 20-minute visit with a complex family, the relationship that keeps a kid with asthma out of the ICU — are effectively penalized for practicing good medicine. Stacey's framing here cuts to the core: we are incentivizing A and expecting B. Until cost accounting happens at the unit level and outcomes are measured at the whole-patient level, the value equation that everyone claims to be pursuing remains structurally impossible to actually achieve. === LINKS === 🔗  Show Notes with all mentioned links:   https://cc-lnk.com/EP495 🔗  Visit this week's sponsor Payerset:   https://payerset.com ✉️  Enjoy this podcast? Subscribe to the free weekly newsletter: https://relentlesshealthvalue.com/join-the-relentless-tribe 🫙  Support the podcast with a small donation to the Tip Jar: https://relentlesshealthvalue.com/join-the-relentless-tribe 🎤  Listen on Apple Podcasts  https://podcasts.apple.com/us/podcast/feed/id892082003?ls= 🎤  Listen on Spotify  https://open.spotify.com/show/6UjgzI7bScDrWvZEk2f46b 📺  Subscribe to our YouTube channel   https://www.youtube.com/@RelentlessHealthValue === CONNECT WITH THE RHV TEAM === ✭ LinkedIn   https://www.linkedin.com/company/relentless-health-value/ ✭ Threads  https://www.threads.net/@relentlesshealthvalue/ ✭ Bluesky   https://bsky.app/profile/relentleshealth.bsky.social ✭ X   https://twitter.com/relentleshealth 06:32 How Dr. Mick Connors defines margin. 08:18 EP294 with Steve Schutzer, MD. 08:54 Why nobody wants to do cost accounting in healthcare. 09:20 EP490 with Shane Cerone and Sam Flanders, MD. 11:05 Infographic by Andrew Tsang showing streams of income. 12:27 What is the value equation? 15:55 EP404 with Suhas Gondi, MD, MBA. 15:59 EP466 with Vivian Ho, PhD. 16:01 EP482 with Preston Alexander. 16:25 EP474 with Yashaswini Singh, PhD. 17:44 How business decisions can really undermine the value proposition. 18:58 Classic article on incentivizing. 23:07 EP295 with Rebecca Etz, PhD. 24:21 Why it comes down to the 80/20 rule. 26:31 EP445 with Tom X. Lee, MD. 26:35 EP460 with Rushika Fernandopulle, MD. 26:40 Why mission return requires dyad leadership. 27:13 What does dyad leadership mean? 27:33 EP492 with Sam Flanders, MD, and Shane Cerone.