OP-ED

Innovation, Not Legislation: Venture Capital is the Path to Improving Patient Safety and Reducing Waste and Error in the U.S. Healthcare System

Picture 89 All eyes are on Toyota’s recall of 8.5 million vehicles due to faulty gas pedals and brakes. The recall has sparked congressional hearings, a probe by the U.S. Department of Transportation, possible criminal charges stemming from a federal grand jury investigation and numerous civil lawsuits, all in the name of driver safety.

This aggressive response to Toyota’s mistakes is appropriate, even though the human toll from its miscues has been, thankfully, relatively modest – 34 alleged deaths and a few hundred injuries. Not to downplay this misery, but in stunning contrast, consider this: More than 100,000 Americans die annually in U.S. hospitals because of avoidable medical errors, according to the Institute of Medicine (IOM), which also says that medical errors rank as America’s eighth leading cause of death. This is higher than auto accidents (about 45,000) and breast cancer (about 43,000). And the problems don’t end here. Studies show that approximately 19% of medications administered in hospitals are done so in error, injuring about 1.3 million each year, according to the FDA.

Something must be done to address this woeful situation. In addition to avoidable death and injury, it is costing the economy $60 billion a year. If recouped, those dollars could fund health insurance for a large number of those currently uninsured.

Despite recent attention to health reform, neither the House nor Senate have given more than lip service to this issue, even though there are readily available technology solutions to dramatically reduce the incidence of medication errors, pressure ulcers, hospital-acquired infections and other patient safety issues. It isn’t legislation that will cure our country’s healthcare woes — it is innovation and venture capital, the money that fuels it.

And yet only a handful of venture capital funds have invested in this area, despite the huge market opportunity presented by patient safety and related healthcare IT. This is what has to change, and it is in the interest of firms to do so because the funding of healthcare information technology can be a lucrative path. Venture firms can do well by doing good.

The opportunity is ripe for innovation and closely aligned with public policy to bring quality and cost-containment to our healthcare system. By fostering innovation in patient safety technology, venture capitalists can bring meaningful reform to the healthcare system outside of politics, resulting in billions in savings annually and the improvement of public health.

Mistakes are ubiquitous in hospitals because they lag decades behind other industries in using technology to optimize operations. This means much detail-oriented work is performed by well-intended but error-prone human beings. The adoption of technology can significantly ameliorate such problems by substantially improving communication and standardizing repetitive activities. In fact, many new patient safety companies are now emerging, including some that offer wireless devices that help nurses administer medications without error and others that use technology to mitigate hospital-acquired infections and prevent sponges from being left inside surgical openings.

Hospitals can learn a lot from the aviation and car manufacturing industries. Unlike hospital staff, pilots go through a standardized pre-flight checklist before every flight to remove the risk of human error as much as possible. Every aviation accident is pored over by the National Transportation Safety Board with an eye toward continuous safety enhancement. Despite Toyota’s current woes, new automobiles are also tested rigorously, and product recalls are common when problems are found after vehicles are sold. There is also a broad consumer movement dedicated to ensuring driver safety, even a Consumer Product Safety Commission. It is time for a similar movement to spread to healthcare.

A few hospital systems are committed to a culture of patient safety and are reaping results. Utah’s Intermountain Healthcare and Florida’s Health Management Associates are recognized for their adoption of patient safety technologies, resulting in significant quality gains and cost reductions. By hardwiring safety within their operations, they make it easy for caregivers to do the right thing and difficult to do the wrong thing. Sadly, this commitment has been the exception, not the rule. Hospitals have faced few repercussions for failure to foster patient safety and certainly no congressional inquiries, but that is slowly changing. Good signs are the advent of The Centers for Medicare and Medicaid Services’ “never event” rules for non-payment of certain errors and rising media awareness of the rampant mistakes in our health care system. Coupled with the crushing economic pressures now confronting t hospitals, this has created a perfect storm of market pressures to bring patient safety technology to the forefront of hospital management.

The United States can’t afford to let this problem linger. The aging baby boom generation, saddled with chronic illnesses, is flocking to hospitals en masse at a time when growing pressure to cut costs and stretch staff amid the recession is fueling an increase in medical errors. In a survey conducted in November 2009 of 850 hospital nurses and pharmacists by the non-profit Institute for Safe Medication Practices, nearly half reported a negative impact on medication safety in their hospitals due to the economy and 20% reported mistakes in the past year with the most dangerous medications, such as insulin, narcotics, heparin and chemotherapy.

Now is the time for venture capitalists and other investors to strike. If hospitals begin to view patient safety the way the marketplace views driver safety, this will translate into more than 6,000 large customers looking for solutions. Like the movement to automate the manufacturing industry, we are at the beginning of a potential revolution in hospital automation. It could not be a better time for investors to make a commitment to this opportunity and improve the health of our nation’s struggling healthcare system while reaping the financial rewards of growing market demand.

Lisa Suennen is a partner of Psilos Group, co-headquartered in the Bay Area and New York City, The firm has funded and developed more than 38 innovative companies, including ActiveHealth, AngioScore, Click4Care, Definity Health, ExtendHealth and OmniGuide. (An earlier version of this piece omitted this bio in error)

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international strategic venturesErick TrevethanLori NerbonneChrisContrarian Recent comment authors
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Erick Trevethan
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Erick Trevethan

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Lori Nerbonne
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Lori Nerbonne

Although I agree that innovation is urgently needed, I would argue that legislating transparency must go hand in hand. Consumers, investors, the public in general is largely misinformed about patient safety and their risk of suffering harm because they lack access to the outcome data they need to make informed decisions. Until we can legislate that hospital performance data be made public, we won’t have engaged healthcare consumers. More importantly, people will continue to choose hospitals on blind faith, and in doing so, will put themselves at great risk for harm or untimely death. I live in a state that… Read more »

Chris
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Chris

Insurance companies do two things; They build networks and adjudicate claims. All the other things that they claim to do are just wall paper. I believe that it is irresponsible for company executives to leave the progression of health goals at a company in an insurance company’s hands. It is not in their best interest to make people healthier or more of a consumer of health care. The Insurance companies are so inefficient because they operate as monopolies and have no real competition; why invest in technology and or innovation when there is no competition when you can still get… Read more »

Gary Lampman
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Gary Lampman

Venture Capital is this Giant sucking sound that has sucked the Life out of the Patient’s Safety in order to derive profits at their expense.Beneath the sweet sounding words and poetic Harmony of Venture Capital raising the bar on medical Error, Patient Safety and reducing waste. Is a foul stinch of a corrosive Toxicity in the Medical World. Venture Capital has no conscious regarding any of these Concerns. The returns on investiment are the only consiousable role they would be party of today and in the Future. In a Day and time that Business is cutting back to maximize profits.… Read more »

Gary Lampman
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Gary Lampman

Give it a Break Guys! Hospital Markets DO NOT Reflect Any Free Market Model that is seen in the Private sector. I have no idea Why it seems that some erroneously assert this prospectus; that outcomes are dictated by market Forces. If the Statement was true than Health Insurance would have followed the recent policies on Medicare and have stopped the practices of Paying for Never Events.Simply,because this would be a reasonable expectation of a consumer Driven “Free Market.” Believe Me this is what the consumer expects! However,Insurance has no interest in Patient Outcomes, when it hinges on the profitability… Read more »

Contrarian
Guest
Contrarian

Yes Joe the free marketing works with LASIK. Offer a low ball price to get you in the door but infrom you that you eyes are different and your charge will be in the thousands. LASIK for the most part are like hospitals in that they have a local monopoly.

Contrarian
Guest
Contrarian

I’m not sure what is referred to as waste in healthcare, but training and hiring more nursing staff would be the first step in reducing errors and improving patient safety. Every hospital is grossly understaffed with these professional. I would further suggest that instead of paying unemployment benefits, consider giving unemployed a paycheck to work in hospitals changing bed pans, washing bottoms, responding to non medical patient requests, thus freeing nurses to do what only nurses can do. The unemployed worker could still attend interviews for their desired jobs and receive other employment related services. This would decrease the rate… Read more »

Joe Mandato
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Joe Mandato

Lisa makes a number of great points! Unlike healthcare, fundamental process changes and simple technologies have transformed many industries thus improving their efficiency and productivity. The driver, however, is the free market, which to a great extent is missing in the delivery of cost effective healthcare. Here in Palo Alto there are several centers offering MRI’s at the same artifically high price because that is what insurers will pay. On the other hand, in private pay procedures such as Lasik, prices in the free market have gone from thousands of dollars per eye to hundreds per eye. Adoption of new… Read more »

Margalit Gur-Arie
Guest

Lisa, I started out saying this: “While I completely agree that a lot more can be done to improve patient safety and reduce errors…” However, health care givers are human and they will make mistakes no matter how much technology you throw at the system. The current technology in healthcare needs human operators and those operators will be making new mistakes. It’s not at all akin to industrial automation, where people are removed from the process. The numbers quoted here are for preventable mistakes. I assume the numbers would be much higher if you include “unpreventable” errors. Errors in diagnosis… Read more »

Lisa Lindell
Guest

Regarding the topic of the post, the reason venture capital isn’t funneling into patient safety, Lisa, is because it’s not profitable to deliver safe, efficient, quality healthcare. Ask Intermountain how much money their good deeds have cost them. They are punished financially for trying to be innovative. Words like “safe and quality” in health care are like “sale and discount” in retail. Safe, quality healthcare doesn’t generate revenue.

Lisa Lindell
Guest

“As long as imperfect human beings have to deliver medical care, errors and their deadly consequences, are going to be inherent to the process.” Margalit, I can’t believe you’re serious. Deadly consequences caused by somebody’s negligence are not ok in any industry. Would you really risk your life for an elective procedure? I find that highly unlikely. The “100,000” deaths from medical errors quoted by the IOM is from a 1999 report. It’s time for some new statistics. According to Dr. Don Berwick, the Institute for Healthcare Improvement estimates FIFTEEN MILLION injuries to patients per year. (From the documentary Money… Read more »

Sherry Reynolds
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Sherry Reynolds

Actually many of the most effective patient safety interventions don’t require new investments or equipment but simply implementing what we already know. Things as simple as standardizing how we place a central line, having a time out before surgery, washing your hands before touching a patient. The federal government is also investing between 20 and 40 billion in EHR’s alongside private companies like Epic, NextGen and eClinworks so that small providers can implement them. The never events are useful since once you remove the incentive for hospitals (they make more money when you acquire an infection then when you don’t)… Read more »

Gary Lampman
Guest
Gary Lampman

“More than 100,000 Americans die annually in U.S. hospitals because of avoidable medical errors, according to the Institute of Medicine (IOM), which also says that medical errors rank as America’s eighth leading cause of death.” What about HAI’s Hospital Acquired infections? Some 98,000 people die from Staph Infections every Year according to the IOM. So can I roughly estimate nearly 2,000 patients die between Medical Error and Staph Infections each Year? Yes! Did you know that Preventable infections such as MRSA is Generally ignored in Hospital Settings? Did you know that MRSA Kills more People than AIDS? Yes, it is… Read more »

Lisa Suennen
Guest

Rbar: Intellidot has changed it name to Patient Safe Solutions. You will find more about their products on http://www.patientsafesolutions.com. They have over 90 hospitals that have implemented their medication error reduction solution, along with other modules. If you wish more on my bio, you will find it at http://www.psilos.com. By the way, many people think that IOM’s estimates of deaths and injuries due to medical errors are understated, particularly since they do not take into accounts the errors that occur on an outpatient basis. Lisa