spending is 14.6% of the country's gross domestic product (GDP). No other country comes close to that figure. In Canada, for instance, healthcare spending is only 9.6% of the country's GDP; it's 9.7% in France, 10.9% in Germany, 9.2% in Sweden, and 11.2% in Switzerland.

Yet the U.S. ranks behind most of Western Europe in key health measures, such as infant mortality and life expectancy. In a 2000 report, the World Health Organization ranked the American healthcare system 37th in the world in overall performance. Perhaps most surprising, given that the United States does not have a nationalized system, is the fact that health-care spending makes up 23% of this country's government expenditures—a much higher percentage than in most European countries that do offer universal health care.

"The medical system is kind of like a deer in the headlights," says Susan Dentzer, a 1977 Dartmouth College alumna who tracks health-care spending as the health correspondent for the PBS NewsHour with Jim Lehrer. "Nobody can quite figure out what to do about it.

"In many industries," she adds, "technology decreases costs. It's just the opposite in health care."

That's a key difference between health care and the industries with which Deming worked. A recent series of articles in the New York Times illustrated the problem. The Times focused on four diabetes prevention and treatment centers that opened in the late 1990s at New York hospitals. Seven years later, three of them had closed and the number of New Yorkers with preventable type II diabetes had nearly doubled.

"They did not shut down because they had failed their patients," the Times explained. "They closed because they had failed to make money. They were victims of the byzantine world of American health care, in which the real profit is made not by controlling chronic diseases like diabetes, but by treating their many complications. Insurers, for example, will often refuse to pay $150 for a diabetic to see a podiatrist, who can help prevent foot ailments associated with the disease. Nearly all of them, though, cover amputations, which typically cost more than $30,000."

The problem exists to varying degrees in all specialties. "We had a visiting surgeon from Bosnia," Batalden recalls. "While he was here, he leaned over to me and under his breath, he asked, 'How can you spend so much money?' I said, 'It's easy. If you divide a problem into enough pieces and you charge by the piece, you can run up the cost.'

"For instance," Batalden continues, "we say, 'Go see so and so. He's the best at

treating the left eyelid.' We get better and better at less and less. It's amazing how much knowledge you can get about some part of the body. But who's going to pay for this," he concludes, "is really a tricky issue."

Employers, who historically have financed private insurance for their employees, are pulling back from that role more and more to remain competitive. "People who work in international markets are very concerned because the cost of health care is making American industries less competitive," says James Strickler, M.D., former cochair of the board of directors for the International Rescue Committee and former dean of DMS. "If they can't compete, they will shut down or move operations overseas, which means there will be fewer insured workers putting money into the health-care system."

A recent study by the Commonwealth Fund reported that the percentage of Americans making between $20,000 and $40,000 a year who lacked health insurance for part or all of the year was 41% in 2005—a dramatic jump from 28% in 2001.

"Many people of the liberal persuasion think we should provide good health care because it's the right thing to do," Strickler continues. "I believe that. But this isn't what influences the political system. What does influence it is hard, cold reality . . . that American business is increasingly compromised by its health- care costs."

Until recently, most efforts to "fix" U.S. health care have simply shifted costs somewhere else—to individuals, private insurers, employers, the government, or academic medical centers and other nonprofit hospitals—rather than trying to reduce the cost of the entire system. Batalden, his microsystems team, and their colleagues in Dartmouth's Center for the Evaluative Clinical Sciences (CECS).

What's needed, Batalden and his colleagues argue, is a systematic approach—one that recognizes that the greatest power for change lies on the front lines, where patients and caregivers meet. Microsystems are "not something you install," Batalden continues. "Microsystems just are."

have shown repeatedly that spending more on care doesn't necessarily result in better care. Rather, systems that spend less on health care often have better outcomes and are more efficient than their high-spending counterparts. (This field of research was pioneered by CECS's director, John Wennberg, M.D., who recruited Batalden to Dartmouth.) Furthermore, improving quality and efficiency often results in cost savings, as demonstrated by the efforts in the Dartmouth ICN.

Neither Batalden nor any other reasonable health-policy expert expects to solve the cost problem by returning to the low-tech medicine of Eisenhower's era. But the unbridled use of costly technology hasn't worked either.

What's called for, Batalden and his colleagues argue, is a systemic approach—one that recognizes that the greatest power for change and improvement lies on the front lines, where patients and caregivers meet. "The microsystem is where health care is made," says Batalden. An organization "can't really do quality improvement," he says, unless it understands how patients and frontline providers interact and the way frontline processes work. "If you don't understand the way things work," he continues, "and you try to change them, you can follow any recipe, but it won't really be a sustainable change." Microsystems are "not something you install," he says. "Microsystems just are. The question is, how aware are you of them?"