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.

Livongo’s Post Ad Banner 728*90

Categories: Uncategorized

Tagged as: ,

Leave a Reply

34 Comment threads
0 Thread replies
Most reacted comment
Hottest comment thread
18 Comment authors
Sabatini J. MonatestiKen HeinrichjdK.S. Jeffery, MDeicu Recent comment authors
newest oldest most voted
Sabatini J. Monatesti

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… Read more »

Ken Heinrich
Ken Heinrich

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,… Read more »


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… Read more »


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.

John Fembup
John Fembup

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,… Read more »


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.


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… Read more »

Barry Carol
Barry Carol

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..


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… Read more »


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?… Read more »


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… Read more »

Eric Novack

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… Read more »

John Fembup
John Fembup

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… Read more »


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.

K.S. Jeffery, MD
K.S. Jeffery, MD

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… Read more »