POLICY/TECH: Solving the Market Adoption Problem, by Jess Parks

Jess Parks co-founded VISICU, Inc, was a partner at Accenture, and most recently was COO of Aveta, Inc., a Medicare Advantage plan. Jess thinks that, if he hasn’t solved it, he’s at least figured out the problem of irrational technology adoption in health care. See if you agree:

This past week I read two interesting articles that, when taken together, illustrate one of the most fundamental problems in today’s US health system. The first article was Ron Winslow’s piece in the Wall Street Journal: “The Case against Stents: New Studies Hint at Overuse”. Winslow writes that the explosive market adoption of drug-eluding cardiac stents has been well out in front of hard scientific evidence supporting stents’ efficacy for large swaths of the population with cardiac disease. The second article was by David Leonhardt in the New York Times: “What’s a Pound of Prevention Really Worth?” Leonhardt chronicles the experience of Dr. Arthur Agatston, the South Beach Diet doctor.  Dr. Agatston has built a medical practice that focuses on prevention of heart attacks in patients with cardiac disease, and has achieved some remarkable outcomes.

So what’s the “fundamental problem”? Our medical system has delivered billions in profits to the providers of stent treatment for cardiac disease (with suppliers, hospitals, and cardiologists all benefiting), while Dr. Agatston’s practice is virtually the only one of its kind, and loses money because the preventive medicine he delivers is inadequately reimbursed. The two articles illustrate the powerful and pervasive incentives for our healthcare system to allocate resources aggressively and disproportionately to profit-making activities. They also highlight the sub-optimal alignment between the potential for profits and the potential to drive the key outcome we all desire for our healthcare system – namely a healthier life lived for all.

Now don’t get me wrong, we need the profit motive in health care. Profits drive innovation, change, and operational discipline – there is no substitute and we would not have our system’s continuing stream of life-saving advances in treatment were it not for the profit motive. In fact, I’d argue that all the world’s nations benefit from the profit motive in US healthcare (yes, they are free riders!). And our system does make significant efforts to align profitability and desired societal outcomes through regulation, e.g. the FDA, provider licensure, underwriting regulations, the orphan drug act, etc., etc., not to mention the Hippocratic Oath. However, the alignment we have achieved falls short of what we need: insurers still cancel policies, the poor still have markedly reduced access to services, information exchange standards still do not exist, and we still suffer from countless wrong-headed resource allocations – paying more for amputation of feet than for regular preventive podiatric examinations of diabetics who are at high risk, more for invasive end-of-life heroics than for preventive community or home-based monitoring of at-risk elderly with chronic disease. I could go on.

There are major opportunities all around us to improve health outcomes, and these opportunities are obvious to all market participants. However, they will continue to sit latent and unfunded – because activities that do not increase insurance profits (today) or provider/supplier reimbursement (today) simply do not get funded and/or adopted by our healthcare markets, no matter how efficacious they might be. I know that many feel that the growth of so-called “disease management” programs sponsored by insurers are an example of how markets are working to align profit and outcomes. Sadly, I disagree, but that is another topic.

If we consider a list of key contributing factors to greater health for our society, the misalignment becomes very evident. Here is the list:

1. Risk identification (that is, identifying risks while there is still time to mitigate them)

2. Behavior modification (patient behavior)

3. Affordable access to healthcare delivery services

4. Identification of best practice in healthcare delivery operations (e.g. medical research, public health research, health services research)

5. Consistent adherence to acknowledged best practice operations within the clinical AND non-clinical components of healthcare delivery

6. Development of superior healthcare treatments (diagnostics, drugs, devices, supplies, procedures).

So I will ask the rhetorical question: in which category will an innovation be rapidly adopted by the healthcare market? The answer is clearly #6 – new healthcare treatments – because suppliers and providers can easily and directly make profits from introduction of superior treatments. And since all industry participants compete for resources, those that offer a clear and rapid return on investment command the majority of the healthcare market’s discretionary capital resources. If you were a venture fund with $1 million to invest, would you put it to work researching a new breakthrough treatment for breast cancer, or would you fund health services research on reducing nosocomial infections in hospitals via improvements in nursing assistant hygiene? Even non-profit charitable organizations (taken collectively) tend to allocate resources disproportionately to treatment R & D, primarily because this is where the greatest and loudest demand is coming from.

To make matters worse, success has driven industry behavior into a rut (albeit a well-greased one). Because the profits available from new treatments are so significant, the supplier / provider industry has over years invested billions to develop an industry-wide infrastructure for promoting and adopting new treatments. From the IRB to FDA approval to physician detailing to payer reimbursement the path to adoption is so well-tread that alternative promotion efforts for other types of solutions seem “unofficial”. If you are competing with this market adoption engine for physician or institutional attention, you have a very hard road ahead of you, even if your solution has good profits to offer.

For example, take #4 or #5 on my list. There are many operational process modifications – in many cases enabled by technology – that can make profits and improve outcomes for hospitals or home health providers or any other provider under PPS reimbursement. However the barriers to development and widespread, consistent adoption of these modifications are very high: 

There is in most cases no entity, let alone industry segment, that directly or significantly profits by market adoption of operational process improvements (some consulting firms promoting the change process may profit indirectly), so there is no investment in a cross-industry scaffolding for market adoption (despite their incredible value, I don’t consider organizations like the Institute for Healthcare Improvement or NCQA to be very effective in promoting adoption). As a result, every institution has to mount its own internally developed and internally funded effort for promoting and implementing the solution.

Rather than “adding” an element of care delivery, technology and process changes often focus on avoiding waste, redundancy, and/or inappropriate utilization, raising the burden of proof for efficacy and ROI significantly higher and making the solutions a target for patients, advocates, lawyers and physicians

Return on investment is complex, hard to measure, and usually delayed; in comparison to the ROI of learning/equipping to do a new procedure, doing it, and getting paid, or replacing a supply item that costs $10 per use with one that costs $8.

Imagine if stents were presented to the market this way:  “Hey, Mr. Hospital Medical Director, IHI says you really ought to convince your cardiologists to use drug-coated stents instead of referring their patients for bypass; they do have better outcomes for some patients… oh, there’s no payment for them, and you may lose some bypass volume, but we think it’s best practice…and almost forgot, you have to buy a two years’ supply of them and train the cardiologists before you get started.” Absurd, right? But that’s the message that many promoters of technology and process innovations are delivering today!


For each
of the items on my list except #6, I could elaborate on the challenges
of market adoption (examples include CHINs and RHIOs, EMRs, EHRs,
telemedicine and home monitoring, community-based medical management
that is integrated with local providers, clinical guidelines, CPOE,
etc.) but I want to communicate some ideas for solutions. There are two
considerations for solving the market adoption problem. The first is to
understand what factors and forces drive adoption. That’s easy:

>The market’s primary
participants (providers and/or payers) have to make good profits (or,
second-best: avoid bad losses). Cash is king.

> An existing
infrastructure for disseminating information and education must be
tapped or built (note: if each solution has to build its own
infrastructure, we will spend a LOT of money and have dubious results –
new start-up biotech, drug and supply companies do not attempt to build
a national sales and marketing infrastructure nowadays; they license an
existing distribution channel).

>Improve patient outcomes, or at least don’t hurt them…


The second
consideration is to develop a close approximation for these factors and
forces where they might not naturally exist, because as I’ve pointed
out they don’t naturally exist for many of the items on my “contributes
to greater health” list. I don’t have the answer, but I do have a
“Market Adoption Solution” list with a few opinions and ideas.

1. Codify best practice
in areas where it really makes a difference. Sorry, but this is a role
for the federal government. CMS, as the nation’s largest healthcare
payer and the payer of last resort, has a moral responsibility (and by
extension we all do) to LEAD in evaluating the research and determining
the major interventions where health can be improved and lives can be
saved. They need to follow the example of the Leapfrog Group. Just
identify a few things – technology, process, treatment, guidelines,
etc., that really make a difference. Where regional variation just
can’t ethically be tolerated. Yes it will be politically hard, but we
are all paying, CMS is our pooling agent, and who else can possibly
attract and devote the resources to make these important, informed,
objective determinations? This will go a long way towards solving the
promotion infrastructure problem for the big solutions.

2. Pay for performance
and penalize for not performing. CMS needs go beyond the little baby
steps it is taking now and show that where it believes variation is not
tolerable, it will disproportionately reward those who conform to
standard and penalize those who do not. This needs to be a large-impact
change, but could be phased in like risk adjustment. This type of
discriminating payment behavior could also fund new reimbursement
streams for desired behaviors and offset them not just by savings but
by penalties in other areas for non-conforming providers and
payers. This cannot be something where we measure every single care
delivery process and tweak payment up or down. CMS must be focused in
promoting only the solutions with most impact. Big solutions like EMR
could be rewarded and subsidized this way, with CMS driving adoption of
key standards. I have always been pessimistic about the viability of
health IT vendors because the market can’t / won’t spend enough to
support a portfolio of vendors and products that can keep pace with
changing customer needs. CMS could solve this by rewarding providers
and payers that actually make the right investments in their
information future and penalizing those who don’t.

3. Build and fund a
national, or even state-level, infrastructure for in-the-field,
in-the-market promotion of high-impact interventions and
solutions. Sort of like academic detailing. Governments would choose
the solutions – they could be the same big impact ideas that CMS is
identifying and rewarding, or it could be other smaller breakthroughs.
Solutions would have to compete to gain access to the promotion
infrastructure, because the budget would be limited.  A way to think
about it is to have a government-funded “IHI on steroids”. This is
something the government(s) could contract out to existing
suppliers/distributors that have research infrastructure and/or
promotion know-how in place.  An example of this model is the classic
governmental anti-smoking campaign, except that this approach would be
focused on the provider community, not on individual consumers.

realize that all this government-sponsored initiative is frightening to
many. However, the industry has demonstrated an inability to overcome
the adoption problem. Having the government coordinate and fund,
through its many auspices (HHS, NIH, IOM, CDC, etc.) the policies that
will drive adoption is much less scary that having a single national
payer, and it would fix many more problems. CMS is already a big enough
payer to drive most of the agenda outlined above. Yes it is possible
that the government decisions on what solutions have the most merit
could be wrong, or could lag the marketplace. However, rather than
stifle competition, the ideas I outline above could actually accelerate
innovation, because if implemented successfully they would lower one of
the biggest barriers we have to new solutions – the inability to “cross
the chasm” because there are no immediate profits to offset the
transaction costs of market adoption.

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34 replies »

  1. Your post, February 07, 2007,
    POLICY/TECH: Solving the Market Adoption Problem, by Jess Parks. I would like to take another look. Mr. Parks not much has chaned since 2007. Maybe we need to follow the money. Those who benefit from “out-of-control sick care” cost include food and pharmacutical companies. I wish to ask that we all take a look at who profits. I wish to focus on prevention using a recent CDC result: Top Food Pathogens. The CDC noted that pathogens contribute to cost but didn’t say how much. I would like to see their study expanded to include “sick care” costs associated with treating the patients who became ill due to pathogens. I would also like to see a study focused on “prevention” and the “sick care” costs associated with the treatment of obesity, diabetes, early onset of puberty, errors and omissions, MRSA, CDIF and resistance to antibiotics. The questions to answer are these: (1) What percentage of early onset of puberty, obesity and diabetes in children, or resistance to antibiotics can be linked to the uses of hormones and antibiotics in the growth of meat and poultry products, and what is their total $ contribution to the nations “out-of-control sick care” cost? (2) What percentage of readmissions and deaths are related to MRSA and CDIF, and what is their total $ contribution to the nations “out-of-control sick care” cost?

  2. To DrThom, and all the rest of you:
    Thanks for your efforts to sift through the emotion and name-calling and discuss this vital issue of healthcare reform in a rational way. I am a 60-something FP, retired from clinical medicine. I have practiced in the Trust Territories islands of the North Pacific as a medical missionary for my church at a minister’s salary.
    I have been a faculty member at the residency where I graduated. I have been in solo practice, earning about half what the average FP in the nearby city earned. I have donated a lot of care, I have done untold hours of education and counseling to help people try to quit alcohol, tobacco, drugs, violence, and hamburgers. I have been sued 3 times, and have never gone to trial.
    And except for the last line, I have loved it all, and hated some of it at times.
    My attempts at education of my patients were less than stellar in their results. My attempts to educate my fellow physicians (don’t use antibiotics for every URI, and don’t give them to someone else’s patient without an exam) were no more successful.
    I don’t enjoy arguing and shouting, else would I have made a great fortune in trial law.
    I retired earlier than I had envisioned when I started,
    somewhat broken in spirit, but happy with the modest successes I had as a clinician, and eternally grateful for the wonderful people I met who trusted me to care for them. After a time to rest, I responded to a call to help a forward-thinking medical management company to help teach and encourage their primary care docs to use and enjoy a really good EMR system. The company has bought the EMR system outright, and is introducing it slowly to its contracted physicians, taking the responsibility to provide training, support, and IT support to each office, for a minimal fee for the brave ones who agreed up front to sign on. Later, when we have the bugs worked out, we will charge a very reasonable monthly charge implement and to maintain the system, and help the local hospital and diagnostic centers to join the move to interoperable EMR.
    Will it work? God only knows, but I am trying to play a role to be part of the solution to the overall mess, and so far it is exhilarating to see the results of the
    first 8 or so months of operation. I was hired only 3 months ago, but I hope to be able to tell you next year that we are successful with the first 30 practices.
    I will continue to look to this site for information and encouragement as long as I last!

  3. John;
    No, I am not suggesting that we docs stay on the sidelines or just make inside comments (although, that’s all I will do since I retired at 52, partially due to the constant hassles of the system). And, in fact, the American College of Physicians has put forth a proposal – the details of which one could argue about, but which makes a crucial point – that is, one absolutely cannot fix the problem of health insurance/how to pay for health care WITHOUT simultaneously fixing the problem of health care delivery. On this latter issue, I certainly do think physicians should lead the discussion, since we have (had, for me) to live it every day. This is also true for patients, of which I am one now, and utterly frustrated by the system. One issue simply cannot be fixed without the other. I do not have the reference for the ACP proposal (I saw it on another, forgotten, blog) but I’m sure you could google it.

  4. Barry
    this is the link to the US preventative health taskforce.
    My wife tells me I have not given physicians enough credit for hand holding and “protecting” patients from quackery (www.quackwatch.com). Well, maybe. One of my professors said that although you can’t cure every patient, you can care for every one. Although I get paid an inordinate amount of money for it, perhaps I should put using the white coat’s god-like powers for reassurance on the list too.

  5. Bev,
    “I don’t think anyone would accept “physicians leading the discussion” for reform, because we would be labeled as just another interest group – and some (not all) of our national organizations are just that.”
    But what is the alternative? To stay on the sidelines and contribute nothing? Or perhaps to make an “inside comment” every now and then? How likely is that to result in what you want and what the country needs? Based on the past 40 years – no chance.
    It is common for physicians to complain about clerks and administrators who are running health care. Well, nature abhors a vacuum. The clerks and administrators rushed in to fill the leadership vacuum that physicians helped to create.
    Physicians did not run from the responsibility of leadership when they were instrumental in creating the Blue Cross and Blue Shield plans starting in the 1920’s or 30’s. The need for physician leadership is no less today.
    When people like me (I manage a large employee-benefits plan) were screaming about our costs starting in the 1970’s, we never asked for managed care – – we wanted better control of costs. We got managed care. Why is that? Many reasons, but one of them is that physicians sat on the sideline and criticized – but did not exert meaningful leadership and propose alternatives. So we eventually got what we have.
    Would the situation be better today if physicians had taken a more active role? Maybe, I can’t say. I can however say that I wish physicians had taken a leadership role then, and that I wish they would take a leadership role now. It’s just not enough to provide occasional comment.

  6. Postscript to my previous post to Dr. Thom; sorry, the comment about physicians leading the discussion was in reply to John Fembup’s statement, not Dr. Thom’s. I am still learning the system in the blogosphere.

  7. Dr. Thom;
    Applause on the “rant.” (: Right on target. We need to encourage more docs to read and comment on these blogs to provide the inside insight. (On another blog I had to take exception to someone’s comment that there is “no such thing as defensive medicine” – a hoot!) However, I don’t think anyone would accept “physicians leading the discussion” for reform, because we would be labeled as just another interest group – and some (not all) of our national organizations are just that.
    Dr. Jeffery;
    From family medicine to the ER, talk about frying pan to the fire! (I know, it’s shift work) As a pathologist, I can add that the waste in lab tests ordered (and delays waiting for them) is yet another amazement! I am interested, do you think a lot of the waste you describe is due to defensive medicine, given that the ER doc is not going to see that patient with a headache in followup?
    bev, M.D.

  8. Dr. Thom,
    That was the best comment on preventive medicine I’ve ever seen. I wonder if you could tell me where I could find a list of all the possible preventive interventions along with the scores they received from the National Preventive Healthcare Task Force. Information about the criteria for awarding the score would also be of interest (at least to me). It would be nice if such a list with grades were available in the form of a brochure that PCP’s could give to patients..

  9. Dr.Thom,
    Thanks for the breath of fresh air. I only noticed your posts recently. Your perspective is incisive, with a refreshing lack of self-importance.
    As I’m sure you know, putting evidence-based limits on what a universal coverage system would pay for is going to be extremely difficult politically. I’m not sure which group would yell loudest when something falls on the wrong side of the line: the suppliers of drugs and treatments, physicians who are wedded to some practice despite the evidence, or patient advocate groups who operate on the assumption that anything anyone believes could possibly be good for them should be covered no matter the cost or the likelihood of success.
    If we make it clear that the government standard coverage is just a baseline, and private insurance can be purchased for more than this, that would dampen the voices of resistance slightly…but enough to permit change? I doubt it, at least in the next several years.
    By the way, most nations with universal healthcare also have private supplemental insurance as an option. In fact, this supplemental private insurance generally covers anywhere from 10-50% of the population. Here’s a nice recent overview of several national systems.

  10. Mr. Fembup
    The droll conclusion to your post gave me a badly needed chuckle. I think the government should pay for only what has been demonstrated to work. But I would still like folks to have the choice to purchase variations from the norm on their own. Until recently in Canada, they did not.
    To the editors, I would very much be interested in a post describing the French health system. Whenever I see the stats, they seem to do better than anyone else on care indices, and cost; all with an ever more diverse population. How does it work? Who pays what? What about liability. I cannot find an easy source and am quite curious. Heaven forbid, but can the French be a model for us?

  11. Barry, we may be thinking of different things when the word prevention is used. I am looking at the National Preventative Healthcare task force which uses outcome based data to grade each intervention. If it gets an A- to A+ I pull out all the stops to twist my patient’s arms. I recommend Bs and actively discourage Cs,Ds,Fs and incompletes.
    This means smoking cessation counselling, livestyle modification, well child education (especially SIDS), PAPs, most immunizations, and seeing me every years to discuss them are on the starting line-up.
    Mams, colonscopy, aspirin some osteoporosis screening and a few imms are on the bench. The rest don’t make the team. That includes CXR, PSA, DRE, AAA u/s.
    As a Physician, I do a few things incredibly well, a few things harmfully and the rest I have no idea. See me and you will never die from cervical cancer(true,actually; it’s a A+), rarely die from an infectious disease and have less chance of dying from a lifestyle based disease. I can also improve your outcome in trauma and MI if you get to me soon enough and, if old enough, I may be able to extend your useful life by preventing a hip fracture. I can keep you comfortable as you die. If caught early enough with symptoms, I might cure your cancer, especially if you are a kid, and I can help you through a kidney stone or a migraine. If you are pregnant or a preemie I am also extremely useful. Assuming, of course, that I don’t accidently kill you.
    Other than that, I may be extremely good looking and cost a lot of money, but I am pretty useless, harmful even. I mostly just keep you occupied while the body heals itself; or does not. Now the drug reps and intervention companies flatter me into thinking I am more than I am. Occasionly they turn my head, but it passes.
    The healthcare system we are talking about does not have to be gold plated. It simply has to cover those things that we know medicine does well and leave the rest to the folks to purchase at their leisure. Reimburse based on the potential for benefit and not on the actual benefit and there won’t be any cherry picking. That means paying for thinking and talking and only for very targeted doing. I am not saying that bladder suspensions don’t work, I am saying that if you want one, pay for it yourself, if the market is freed up, it will be affordable. I am also not saying such a system is probable, we will probably end up with a Rube Goldberg patchwork that is expensive and works to cross purposes.
    However, this next point is very important. Without some sort of real liability protection such as health courts, any universal system is doomed to increasing expense as the talented flee the profession and worsening mediocracy as the pipline fills with second tier students. I work my self silly for my patients but I like myself too much to put myself in the hands of our punitive legal system. If you want me to be involved in the discussion, take care of business first, or at least on parallel tracks, then we can talk. I will be the cost driver in any health care system and I will be asked to teach the next generation. Without such changes I promise on a stack of bibles that no matter what the system is, if I smell a hint of a suggetion of the potential for a lawsuit, I will spend whatever is required to protect myself and teach the young to do the same. If you prevent me from doing so, I’m gone and I will actively discourage every student I meet from my beloved profession. Judge me if you wish, but hear my stories first. I have not come close to being named in 15 years but I have seen true healers brought low by sleaze-bag lawyers and coniving judges. In the end I expect we will get the system we deserve, unfortunately.

  12. John- I agree with your last two sentences… but I disagree with the ‘best you can hope for’ line.
    The thousands of codes is a burden to everyone but CMS. I do not see a ‘private sector’ model that would impose more codes— unless the laws are skewed even more in favor of insurance company hegemony over the people who actually provide care. A system that put patients in ‘the drivers’ seat’ would allow the ‘market’ to decide… why would doctors contract with insurers if the system is too complex… fewer contracted providers means the insurer might lose customers… companies change course…
    something like the rest of our economy

  13. Dr Novack, I dont follow you on this:
    “are you actually suggesting a free market, where docs can set rates . . . The current system has over 22,000 codes. (created by the government)… remember, the government desperately wants to institute the next generation of codes, which will be greater than 200,000.”
    So who is producing the proliferation of codes? The government? The private sector? Do you see a private sector model that could actually impose more codes than the government can thru force of law?
    Dr. Thom – you earlier remarked that “If the federal government is going to call the tune, it should at least call the one with less potential for waste”
    But which one is that? There are thousands of physicians, experts, politicians, pundits and other commentators touting their pet theories, and expending much of their effort in attempts to discredit competing theories. How can that lead to anything more constructive than noise? It hasn’t for more the past 40 years.
    I believe that physicians should take the lead as the national health care debate heats up again, but I don’t see it happening. So I’m worried that the best we can hope for is a Rube-Goldberg tax-funded universal insurance contraption designed by politicians primarily to buy votes. Oh yeah, and patronage jobs to the end of time. I can scarcely contain my enthusiasm.

  14. Thank you Dr. Jeffery. If more physicians would stand up and admit to what really goes on in healthcare, we might get somewhere. There era of “trust me, I’m a doctor” is long gone. I have great respect and admiration for physicians individually, but until we recognize and address the incredible unneccessary variation, the lack of following even the most basic of established guidelines, and the importance of systems of care and aligned incentives required to improve quality and outcomes nothing will change.

  15. Fascinating thread. I too am a family physician, and agree with Dr. Thom that the best way to decrease costs and improve outcomes is to decrease interference… to a point.
    It has been estimated that better than 80% of all healthcare expenditures are the direct result of the provider/patient encounter. If one wished to impact overall expenditures, it is logical then that one must impact the provider/patient encounter, for here lies the source of the expense, and by extension, waste.
    Why does the patient with a headache – lacking any ‘red flags’ symtoms or signs – get an educational handout and 10 minutes of reassuring education from me, but a CT scan and morphine injection from my colleague (‘competitor’?) in the ER? Here’s where some cannot nor should be freed from interference.
    Several have written on misaligned incentives and I couldn’t agree more. Consumer driven healthcare is an attempt to more closely align medical expenses with goals, but I believe providers must also bear responsibility for cost-effective care. I am my patients’ advocate, not merely my patient’s advocate (note placement of apostrophe).
    I left family medicine last year because the hours were long, the remuneration poor, and the bureaucracy intollerable. I now work in the ER, and I am appalled at the waste I see each and every shift. I conservatively would estimate that one-half to three-quarters of ER visits are completely unnecessary. Many occur because patients could not get access to their primary care physician, a void being cleverly filled by Minute Clinics and the like.
    More disturbing to me, however, are the number of visits that are due to iatrogenic cause – that is, as a result of being seen and treated by another MD. I see renal failure resulting from overdiuresis. I see urticaria from antibiotics prescribed for ‘bronchitis’. (These are two of the first three patients seen on today’s shift. The other was a girl with a cold who could not get into her regular doctor.)
    So it is here that I must disagree with Dr. Thom. More sticks and carrots are needed… for patients AND providers alike.

  16. “co-founded?” . . . Jess was VISICU’s first CFO. We generally consider Dr’s Rosenfeld and Breslow our “co-founders”.

  17. Lynn- you are mixing issues… avoiding the sick would be not willing to take on people who have had a previous hip replacement, for example, that might be ‘worn out’ and needs to be revised. Given that the additional compensation is about 20%, but the increased work load and expertise can be 400%, not to mention the increased liability, price fixing does have an impact, not just in SC, but in almost every state.
    The issue with ED coverage is a different one. (and one with which I am extraordinarily familiar)… it is beyond the scope of this thread, but I will try to get a post dedicated to it up with Matthew soon.
    Barry- are you actually suggesting a free market, where docs can set rates and compete? The current system has over 22,000 codes. (created by the government)… I am not convinced you would want to see the 22,000 codes listed x the number of insurance plans contracted and have to sort through this when you get to the doctor’s office.
    And, remember, the government desperately wants to institute the next generation of codes, which will be greater than 200,000.

  18. John
    I would love to see a comparative analysis of how the U.S. compares to France, Canada, UK, Germany, Japan, et. al. on my three prime suspects for cost differences which are: (1) physician compensation, (2) treatment strategy and the end (and very beginning) of life, especially when the prognosis is poor, and (3) defensive medicine.
    I think the U.S. probably does more diagnostic and interventional procedures on the base population as well. Other countries probably reduce such utilization to varying degrees by such strategies as certificate of need (CON) requirements, global budgets (mainly for hospitals) and, at least in the UK, explicit rationing using QALY metrics.
    I was surprised to learn from Peter that even Canada spends 44% of its healthcare dollars on its 65 and over population and another 3% on infants less than 1 year old.
    Dr. Thom,
    I would be interested in your definition of prevention. When I hear that word, aside from vaccinations and flu shots, etc., the following come to mind: routine physicals (at appropriate intervals based on age) which would include blood and urine chemistry and maybe an EKG and a chest X-Ray. Other procedures might include a rectal exam (for men), pap test (for women), mammogram (for women), screening colonoscopy (unpleasant and expensive), baseline stress test, and even a full body scan.
    Many of these tests can result in false positives that lead to further testing, while some early stage disease that is discovered (and aggressively treated) may never have developed into anything serious.
    I’ve seen studies (but don’t have the links) by the IOM that show that screening huge numbers of perfectly healthy people is not cost effective. Disease management, especially for people with diabetes, asthma, heart disease, etc. is a different matter. That probably is cost-effective for the most part.
    Separately, I’ve said numerous times in the past that I would love to be able to pay doctors, especially PCP’s, based on time instead of procedure code. How nice would it be to see a sign clearly posted that said something like: hourly rate: $300; minimum fee, $60 plus materials and supplies (if any). Outside lab tests and drugs are, of course, extra. In a practice with multiple doctors, there could be lower rates for new docs who just started practicing and higher rates for established veterans. It would certainly solve the pricing transparency problem and make it easy for providers to audit. If normal annual billing is 1800-2000 hours, a doc who billed 5,000 hours might have some explaining to do!
    I would be most interested in your thoughts.

  19. John Fembup–Unfortunately some physicians will avoid the very sick, just as the do today. In SC try and find an orthopaedist willing to provide ED coverage without compensation.
    But I have confidence in physicians like Dr. Bev and Dr. Thom who are challenged by caring for the ill and rise to that challenge. For the most part, in my experience with my physicians clients the motivation is to do their best for their patients. But physicians are captured by the preverse incentives in our healthcare system just like everyone.
    I have found physicians to be very creative when you tell them you don’t have health insurance and that you are paying for your care. My personal physician has been most inventive about being sure I get great care that I can afford that is focused on keeping me out of the jaws of the medical-healthcare-industrial complex.
    This has been a fantastic blog discussion. It has forced me to return to questioning the foundations of my current beliefs. Thanks folks.

  20. Wonderfully lucid discussion but I agree with Eric on the healthcare by lobbying conundrum.
    As a Family Physician and owner in a multispecialty group. I can tell you easily how to identify and encourage best practices. It is not as difficult as it seems.
    Get out of my way.
    I became a physician to care for my patients best I could based on the best available data. I will decide what the best practices are as I ethically care for my patients. Now, the waters are muddied by the government subsidizing treatment over prevention. Just keep those who profit from interventions from lobbying me and my patients. When you pay more for cognition and less for intervention, you will get more cognition and less intervention. Remove the ability of those who make money from intervention to influence the choice for intervention by preventing them from marketing and the utilization of interventions will diminsh towards a more scientifically based need.
    Promoting cognition will result in more thoughtful efficient medical care than we have now, it won’t be perfect but it will be better. It is, at least, much harder to overutilize cognition, especially to the extent that intervention is overutilized. You might be surprised how many prevention clinics pop up if you pay for it.
    The more of my pay is based on outcome, the more I will be tempted to cherry pick patients, especially if I see the outcomes are politcally determined as they must be if the government picks them. That approach helps no one. As the government continues to impair private purchases of EMRs whose price goes up in a consolidating market, it will become a non pay for non proven performance model. It may save some money but it will help no one and only engender further cynicism. Any system which does not essentially trust the decision making of the drivers will not meet the expectations of its architecs once it hits the real world.
    If the federal government is going to call the tune, it should at least call the one with less potential for waste.

  21. Jess-
    No comment on the need to reduce the per capita cost of health care delivery? “Affordable access” can mean making someone else pay for more of my care so I don’t have to pay so much for it. It would be more effective if “affordable access” were achieved by making health care much less expensive in the first place. So what do you see as possible answers to the per capita cost question?
    Arguably the best system (at least in the West) is France. In France health care cost per capita is about 2/3 of that in the U.S and has been increasing at a lesser rate than in U.S. If there are quality or access problems, they are minor – or well-hidden.
    Could we learn something useful about providing health care at less cost, from France? Or for that matter, from many other countries in which the cost of health care is much less per capita than in the U.S.?

  22. Lyn Bailey
    “Doctors and other providers who prosper because their patients don’t get sick or whose chronic conditions are well manged will devise amazing ways to keep patients healthy.”
    Would there be financial incentive for doctors and other providers to find ingenious ways in which to avoid patients whose chronic conditions are expensive to treat?

  23. Health care execs disband organization
    January 25, 2007 BusinessWeek.com
    Blumenthal alleged that HRDI members showed favoritism to certain vendors, who paid $40,000 for membership privileges in the group and received direct access to chief executives of hospitals and other health care institutions.
    Some executives were paid $20,000 to $25,000 a year to attend conferences with luxury accommodations and provide consulting services to companies that supply pharmaceuticals, medical devices and other goods and services to hospitals and other facilities, Blumenthal said.
    Some HRDI members referred vendors to purchasing personnel at their hospitals or introduced vendors to other chief executives, he said. The investigation also found evidence that some vendors’ sales to certain hospitals increased significantly after they attended “confidential” panel sessions with chief executives of those hospitals during HRDI’s semiannual meetings, Blumenthal said.
    “These practices threatened to inflate health care costs to patients and taxpayers — stifling competition in almost every health care supply and services market,” he said.
    According to HRDI’s Web site, its more than 30 members have included: Joel Allison, president and chief executive of Baylor Health Care System in Dallas; Dr. Benjamin Chu, president of Kaiser Foundation Health Plan’s Southern California region; Martha H. Marsh, president and chief executive of Stanford Hospital & Clinics in Stanford, Calif; Thomas Priselac, president and chief executive of Cedars-Sinai Health System in Los Angeles; and Elaine S. Ullian, president and chief executive of Boston Medical Center.
    HRDI’s client list includes health care products maker Abbott Laboratories of North Chicago, drug maker Eli Lilly & Co. of Indianapolis, the nation’s largest bank, Citigroup Inc., of New York, Johnson & Johnson Healthcare Systems of Piscataway, N.J., personal care products maker Kimberly-Clark Corp. of Dallas and Morgan Stanley Inc., one of the big five U.S. Wall Street investment banks.

  24. The article and all the comments make some great points, but there are two underlying threads in all of them (including the ones about food and education) that I find sad and kind of scary:
    1. John Q. American doesn’t want to take personal responsibility for ANYTHING.
    2. Special interests run most of our entire society.
    If no one has seen it, I recommend the recent book “Crisis of Abundance: rethinking how we pay for health care” by Arnold Kling. His concept of “premium medicine” in the U.S., from my experience, is dead on target.
    I have nothing brilliant to add to the debate about medicine, except that, as a retired M.D., I do take exception to the assertion that EVERYTHING docs do is related to profit. I am a retired pathologist, but I remember listening to the cardiologists buzzing in the doctors’lounge when drug-eluting stents first came out – they really thought that these stents were going to solve the problem of restenosis once and for all and be a definitive help to patients. “Best practice” sometimes does not become evident for years afterward…..
    bev, M.D.

  25. Mr Parks, I would suggest that your initial premise – “to allocate resources aggressively and disproportionately to profit-making activities” – is incorrect. The problem is that Dr. Agatston’s approach to health care is not profitable – there is too much demand for high cost therapies and not enough demand for prevention. “Who cares about eating right and losing weight when I can take a couple days off and get a stent (at little or no cost to me)?”
    As long as patient’s consider health care as essentially free, and consumers are incented to utilize expensive care like stents with little though to prevention, the problem you describe will persist.
    Alignment of who pays and who benefits is needed. The WSJ has an excellent editorial today on the elimination of tax credits for health insurance (The Biggest Secret in Healthcare). Eliminating this tax break would eliminate the perception of insured consumer-voters that someone other than themselves is paying for their health care, and create the market incentives for the irrational market behaviors you are describing.
    Your suggestions, and many other efforts to try to create artificial pressures on providers and others to save money, without incenting patients directly will only result in unhappy patients. The same thing happened with managed care. When changes were imposed to lower costs, consumers saw those changes as reductions in services that they thought weren’t paying for anyway and complained.
    Markets are messy and imperfect, markets managed by technocrats are worse.

  26. Interesting points about market adoption problem and your market adoption solutions:
    1. The federal gov’t does already codify some best practices but there ability is limited mainly by two political reasons. One, funding best practices research is not nearly as interesting/easy sell as funding bench science through the NIH. AHRQ generally has to scrap with Congress to keep their funding stable and at/above inflation. Two, any federal agency doing best practices research must walk a careful tightrope between doing credible research and challenging industry interests. The heads at AHRQ know this all too well since their forebear, AHCPR, had their funding stripped by Republicans in the 1980s when they became too aggressive in challenging interests related to back surgery. Sadly, being a program officer at AHRQ is as much about being politically astute as being a good researcher.
    2. Pay-for-performance initiatives are a nice catch phase but they are kind of skirting the issue. If healthcare payment is every going to change in this country, then CMS administrators and ultimately Congress need to reallocate payments so that preventive services receive more money. Congress talked a good game last year but ultimately caved in at the end. Both Democrats and Republicans are equally guilty here and I don’t see this changing in this session of Congress.
    3. Infrastructure issue is getting some play although this is actually starting to happen more at the state and local level. The federal government just has been unwilling to invest any kind of real funds into this area. Part of it is the huge fiscal deficit problems but I think another part is people looking at the NHS example and seeing all kinds of problems at building a national HIT infrastructure. I have the most hope for this area but I don’t see the feds contributing much in the way of dollars anytime soon. Look for action at the state and local level.

  27. Equating doctors to teachers with regard to outcomes is laughable. But if you want to use that analogy, then I could also say that just like teachers have resisted through their unions many of the efforts to reform education, so physicians have resisted efforts to reform the health system. But enough of the analogies, the real issue as I see it in Jess’ piece has to do with innovation and malaligned incentives. Where is the innovation in healthcare? Is it around providing more effective and cheaper care? No, as Jess points out, the only innovation in healthcare is in new technology which only drive up costs with questionable returns. Supply induced demand is alive and well in healthcare.
    As for the government stepping in and addressing quality, they have every right as they currently pay for half of healthcare now. If only employers, who pay for the other half, would do the same (Leapfrog was a start, but it seems that “lobbying” by disparate interest groups has resulted in a bit of reduction in the “teeth” of the Leapfrog efforts – oh, wait that only happens to the government…)
    As for referencing research on best practices, etc., remember the research that showed that physicians provide the recommended care only 55% of the time? Where is the innovation to improve compliance to even the most basic of proven clinical practices (e.g. asthma, diabetes, etc.)?
    I guess I shouldn’t be so hard on our healthcare system, why it’s only the most expensive in the world and clearly we have the best outcomes, oh, wait, let’s see, we rank about 30th… hmmm. Yes, government involvement could only make things worse since it seems to be working so well now.
    Real change in healthcare will require a complete reframing of how care is paid for and how it is organized. Clear thinking that pushes the envelope around the value equation and expectations for the outcomes associated with the tremendous cost needs to take place. Dismissing the government out of hand as having a role in that strikes me as a position that only someone benefiting from the current system could take.

  28. Interesting that the two goods/services under discussion are education and healthcare. Education, at least K-12 functions almost entirely in the local public sector and higher education in the public and private sector. Healthcare functions in the public sector and the quasi public sector.
    As an economist, I always follow the dollars. We get what we are willing to pay for either in the public, quasi-public, or private sector. We are reaping the unintended consequences of financing healthcare through employers and paying for sick care. We’ve structured tax policy, capital investments, reimbursements, and R&D on treating and/or curing illness. At the time the policies were inacted the major illness we faced were infectious and acute. We have been successful.
    We also created a funding system that won’t pay for those who are deserving. Heaven forbid that someone get healthcare they didn’t deserve.
    Now we are facing chronic diseases and conditions. Trying to provide care for these conditions in an infrastructure anchored, developed and enhanced over the past 60+ years for acute care brings us today’s mess of unintended consequences.
    Structure a healthcare “system” around paying providers who patients don’t get sick and watch what happens. Doctors and other providers who prosper because their patients don’t get sick or whose chronic conditions are well manged will devise amazing ways to keep patients healthy.
    Of course we need to still cover people with bad luck and bad genes who are injured or become seriously ill but the proportion of funds spent in that direction should not increase. New dollars should flow to those who keep us “not sick.” Let’s start with Medicare — Medicare Advantage might be the direction we should pursue. I’m just not sure all those insurance companies who still depend on sick care for their profits are the group I want controlling Medicare Advantage.
    If we keep paying highway/gas taxes we will continue to get highways rather than transportation if we keep paying for sick care we’ll keep getting sick care!
    (Thought the highway analogy was better than the school one.)
    Lynn Bailey
    Healthcare Economist
    Columbia, SC

  29. Peter,
    I’m with you on taxing the unhealthy foods. I think the farm lobby is probably too powerful to redirect farm subsidies, though, if it were up to me, I would eliminate them altogether.
    I’ve said before that I think product prices should, to the maximum extent possible, reflect the full social cost of producing (and consuming) them. That’s why I like cigarette taxes. I also like carbon taxes as a way to mitigate global warming. If the government needs to raise money somehow, especially to pay for healthcare for the uninsured, we should try to do it in ways that might even reduce the need for healthcare in the first place.
    The challenge of taxing bad foods is to design a tax that is easy to collect and administer and does a good job of reducing consumption of unhealthy foods. That’s easier said than done. Perhaps taxing fat grams at the manufacturer level might be one possibility.
    These assorted taxes on consumption, not only do less economic harm than high marginal income tax rates would do and discourage unhealthy behavior, they collect at least some money from participants in the underground economy and the small business sector who either don’t pay income taxes at all (or even file returns) or significantly under report their income.
    Finally, on the public education issue, my favored approach is school vouchers. If more parents had a choice in choosing the school their child will attend, they would have more of a stake in the system and more reason to care about their child’s progress and performance which might induce them to improve their own behavior toward their children in ways that will contribute positively to child development. Secondarily, when the public schools are faced with competition, they are more likely to take steps to improve their own performance as well.

  30. >>>”The best analogy is the public school system— we seem to want to pay for teachers who perform, but if there is no parent at home after school, if there are no books at home, if there is no family emphasis on education in the home, if TV is the main afterschool activity, how much impact can the teacher have? How much should he/she be penalized for the student’s failure to achieve?”
    Eric, you’re sounding like a “liberal” here, well done. I fully agree. As a free market conservative who recognizes this as a problem how would you avocate change? But your “cure” for healthcare is just the same, good observations about the need for personal (not corporate) responsibility and how a deterioration in society’s focus has led us here. But you propose no stategy, at least from government; you just seem to hope that somehow pointing out our weaknesses will get us there. What’s your opinion of my above post which sees a cause and proposes a way out?

  31. “If we consider a list of key contributing factors to greater health for our society, the misalignment becomes very evident. Here is the list:”
    Matt I think what should be at the top of the list is a complete realignment of our industrial food system. Right now most of our processed foods come from HIGHLY SUBSIDIZED processed corn, mostly controlled by ADM and Cargill. From feed lot beef to childrens cereals. Try to find a product on supermarket shelves that does not contain High Fructous Corn Syrup. Since 1985 America’s annual consumption of HFCS has gone from 45lb’s to 66lbs. As well, our consumption of all added sugars has gone from 128lbs to 158lbs (Omnivore’s Dilemma). SuperSize Me! Our food system is making us sick. If food subsidies were switched to fresh fruits and vegegables, and we taxed fast food as a health hazard, this would go a long way to keeping or present healthcare system(if that’s what you really want) by reducing usage. But that would be stepping on too many corporate toes which might upset the cash for votes political system which also keeps this madness going.

  32. Jess- well written, though I disagree almost entirely. As I have written before (just search for “an outcomes primer” in the THCB search box), outcomes in most cases have surprisingly little to do with the doctor.
    The best analogy is the public school system— we seem to want to pay for teachers who perform, but if there is no parent at home after school, if there are no books at home, if there is no family emphasis on education in the home, if TV is the main afterschool activity, how much impact can the teacher have? How much should he/she be penalized for the student’s failure to achieve?
    The same is just as true for healthcare.
    Interestingly, your top 2 reforms involve mostly a responsibility on the part of patients and the public, not on the part of physicians.
    Next, you speak of identifying ‘best practices’ as best done by the federal government— government agenices are subjected to relentless lobbying by disparate interest groups– from provider organizations to disease specific groups to insurers to device and pharmaceutical manufacturers. This approach does not work in any other sector of our economy and will not work in healthcare.
    Remember (I hope) the JAMA article from 2005 which showed that 1/3 of the ‘major’ studies (ie- those that would have a significant impact on treatments/care) were refuted within 10 years. No way government bureaucracies will keep up with this. impossible…
    Allow me to pose a rhetorical question: why have other sectors of the economy been able to fund technology advancement without government control? And do you want a federal agency (or more likely several) to have unfettered access to your medical records? Do you remember the regularly stolen laptops and computer hackings that have jeopardized other personal data?
    In sum, I do not believe you have laid out a case that would do anything more than lead us down the road to a healthcare system that mirrors public education and further cements our system as one defined by ‘healthcare-by-lobbyist’.