Picture, if you will, a healthcare sector that costs less, whose share of the national economy is more like it is in other advanced economies—let’s imagine 9% or 10% rather than 18% or 19%.
A big part of this drop is a vast reduction in overtreatment because non-fee-for-service payment systems are far less likely to pay for things that don’t help the patient. Another part of this drop is the greater efficiency of every procedure and process as providers get better at knowing their true costs and cutting out waste. The third major factor is that new payment systems and business models actually drive toward true value for the buyers and healthcare consumers. This includes giving a return on the investment for prevention, population health management, and building healthier communities. This incentive would reduce the large percentage of healthcare costs due to preventable and manageable diseases, trauma, and addictions.
Picture, if you
will, a healthcare sector in which prices are real, known, and reliable.
Price outliers that today may be two, three, five times the industry median
have rapidly disappeared. Prices for comparable procedures have normalized in a
narrower range well below today’s median prices. Most prices are bundled, a
single price for an entire procedure or process, in ways that can be compared
across the entire industry. Prices are guaranteed. There are no circumstances
under which a healthcare provider can decide after the fact how much to charge,
or a health insurer can decide after the fact that the procedure was not
covered, or that the unconscious heart attack victim should have been taken to
a different emergency department farther away.
well-informed, savvy healthcare consumer, with active support and incentives
from their employers and payors, who is far more willing and eager to find out what their choices are and exercise that
choice. They want the same level of service, quality, and financial choices
they get from almost every other industry. And as their financial burden
increases, so do their demands.
Picture a reversing
of consolidation, ending a providers’ ability to demand full-network
contracting with opaque price agreements—and encouraging new market entrants
capable of facilitating a yeasty market for competition. Picture growing
disintermediation and decentralization of healthcare, with buyers increasingly
able to act like real customers, picking and choosing particular services based
on price and quality.
industry whose processes are as revolutionized by new technologies
as the news industry has been, or gaming, or energy. Picture a healthcare
industry in which you simply cannot compete using yesterday’s technologies—not
just clinical technologies but data, communications, and transaction
After 3 days at the Health 2.0 conference, everyone is agreed with Jane Sarasohn-Kahn that more consumer choice and better transparency and an “Amazon like shopping experience” would improve health care. In fact in her wonderful book, HealthConsuming, Jane talks a lot about the dark side of putting this much pressure on consumers, but I just had an experience that revealed what might go wrong. Bear with me, this does get back to health care…
The short answer is that BestBuy‘s home appliance service delivery and fulfillment seriously sucks. It has gone off the rails in a massively bad way. You’d think they’d have a multi-platform CRM that worked but it’s a disaster
The story. The washer in an apartment I used to live in but now rent out broke after 9 years–fair enough. And I spent a long time on a customer IM chat with Best Buy figuring out if there was an available washer that would stack under the still working dryer (which was stacked on top of it). But the answer was no.
So in the same IM chat the Best Buy agent suggests a replacement washer and dryer, and all the stuff required to put it in, and added installation and delivery. And he gets me a page where I can fill in my details, credit card and buy it all, then return to the chat to set a delivery date. Pretty snazzy BUT apparently the agent forgot to add removing the old ones to the order (even though most of the conversation was about the old ones!) Remember that for later…
An official of a health system in North Carolina sent an email to
the entire board of the North Carolina State Health Plan calling them a bunch
of “sorry SOBs” who would “burn in hell” after they
“bankrupt every hospital in the state.”
Wow. He sounds rather upset. He sounds angry and afraid. He
sounds surprised, gobsmacked, face-palming.
Bless his heart. I get it, I really do. Well, I get the fear and
pain. Here’s what I don’t get: the surprise, the tone of, “This came out
of nowhere! Why didn’t anyone tell us this was coming?”
Brother, we did. We have been. As loudly as we can. For years.
Two things to notice here:
What is he so upset about? Under State Treasurer
Dale Folwell’s leadership, the State Health Plan has pegged its payments to
hospitals and other medical providers in the state to a range of roughly 200%
of Medicare payments (with special help for rural hospitals and other
exceptions). In an industry that routinely says that Medicare covers 90% of
their costs, this actually sounds rather generous.
What is the State Health Plan? It’s not a payer,
that is, an insurer. It’s a buyer. Buyers play under a different set of rules
and incentives than an insurer.
We Need Legal Assaults On The Greediest Providers!
When a patient is hospitalized, or diagnosed with a deadly disease, they often have no choice about the cost of their treatment.
They are legally helpless, and vulnerable to price gouging.
Medicare offers decent protection — i.e. limits on balance billing, and no patient liability if a claim is denied.
But under age 65, it is a Wild West — especially for emergency care, and drugs and devices. The more they charge, the more they make. Even good health insurance does not offer complete financial insulation.
We need more legal protection of patients. In some cases we need price controls.
‘Charging what the market will bear’ is inadequate, even childish, when ‘the market’ consists of desperate patients. Where contracts are impossible and there is no chance for informed financial consent, government can and should step in.
This series describes the new laws that we need. Very little is required in tax dollars….but we do require a strong will to protect.
Amazon has quietly put together a syndicate including Berkshire Hathaway and JP Morgan to provide better and more affordable health care for their combined 1.2 million workers.
The joint effort, called Haven, makes sense because many companies of size today are self-insured to provide health care at lower costs. But this is different. Jeff Bezos, Jamie Dimon and Warren Buffett seem to be personally involved in the development of Haven. So, what could they possibility have up their sleeves?
At the same time, many Democrats running for president are promising single payer health care (Medicare For All) as the solution to controlling costs and providing quality health care for everyone. Republicans argue that this is socialism and will result in unacceptable increases in taxes that will ruin our economy.
While politicians debate, Amazon’s real objective may be to create a health care payer to rival all payers with tens of millions of Amazon Prime Members as health plan members.
With Amazon’s buying power, scale and capabilities, the ecommerce giant could create a health payer offering that could render the need for a single payer system moot.
A massive lawsuit filed in May by 44 states accuses 20 major drug makers of colluding for years to inflate prices on more than 100 generic drugs, including those to treat H.I.V., cancer and depression. If true, the alleged behavior is not just a violation of antitrust law, but also a betrayal of the government policies that created and defended the entire generic drug industry.
Most prescriptions in the U.S. today — 9 in 10 — are filled with generics, which are just as safe and effective as their brand-name equivalent. And yet generics account for only 22 percent of U.S. prescription drug spending. These prices are so low because of competition between makers of different versions of the same generic drug. The more competing generic alternatives, the lower the price, theoretically right down to the marginal cost of manufacturing the pill.
This success is the result of decades of careful federal and state policymaking, all geared towards introducing competition in prescription drug markets. The entire generic industry has its origins in the Hatch-Waxman Act of 1984. Prior to Hatch-Waxman, a company that wanted to sell a competing version of a drug whose patents had expired had to conduct lengthy and expensive clinical trials to get approval from the U.S. Food and Drug Administration. Hatch-Waxman established a quicker, less-expensive path to FDA approval that leans on the scientific research supporting the already approved brand-name drugs.
Hatch-Waxman also created incentives for generic drug makers to challenge drug patents that prevent competition. Successful challengers win a 180-day period of exclusivity during which their generic is the only one allowed to compete with the brand-name drug. The floodgates open and additional competition pushes prices down further after the 180-day period.
In this two-part series, we examine several common misconceptions
made by health tech start-up companies in working with Health Systems and
offers advice on how to recognize and address each. From approaching systems
with a solution-first mentality to not understanding the context in which
health systems work, we look to provide constructive criticisms meant to
support more effective partnerships between health systems and digital tech
and Reactions from the Industry
Understand the Current System Environment We Are Working In: In some cases,
technology solutions are barricading healthcare systems inside. In other
cases, they are allowing us to seamlessly interact with other systems. Typically, large healthcare systems have a
combination of both. For outside solutions to be effective,
start-ups need to be intimately familiar with the existing (and on-the-horizon)
systems that healthcare organizations are using or contemplating. Rarely
will a solution not have to interact with existing software solutions – and
this goes well beyond just the EMR.
Have an Integration Plan: A
stand-alone solution, which doesn’t tie to one or more of the healthcare
institutions key systems of record (SoR) or systems of engagement (SoE) is a
useless solution. Your solution should be able to stand alone in the first few
weeks, as users begin to use it and get familiar with its capabilities.
However, as soon as value is realized
(not necessarily achieved), it’s crucial that your solution support either SMART on FHIR, FHIR,
HL7v2.x, or all of the above. If you don’t have a believable integration story
fully worked out, you’re not ready to launch into the health system market. Go
back and do your homework.
Having a Clinician Is Nice, But Not Enough: The physician, nurse, or other clinician on your team helps credibility but we also understand the incentives associated with selling solutions, and this takes away from the altruism you think we will blindly swallow. And they are rarely businessmen or women who understand both the complexities of solving a problem that isn’t theirs and starting, let alone, running a company. Pair an MD with an MBA? Now we’re talking.
Start-ups are an increasingly important “node” within the
healthcare ecosystem. They are challenging status quo concepts that have
long been ingrained in the healthcare system, like questioning the value of
traditional EMR systems, or shifting the power of information to patients, or
breaking down cost and quality transparency barriers. They may be the future of
the industry, but startups have a long way to go to truly transform the
system. The reasons are many, from an incredibly convoluted and bureaucratic
review process and rigid risk-controlling regulations and policies, to the
large-scale organizational inertia most of our healthcare systems have.
And while all of these hurdles can and will be overcome if we work
together, there are still several lessons each “node” in the ecosystem can learn to more effectively work with each other.
This article is directed at the emerging digital solutions trying
resiliently to help transform this stubborn industry. It provides some critical
lessons in dealing with healthcare systems and is accompanied by reactions from
a digital solutions expert with serial digital health entrepreneurship
experience. We hope to provide perspective from two people living and
breathing, and surviving, from both sides of the
equation every day.
and Reactions from the Industry
Healthcare Startups Must Understand how Provider
Systems Operate: Most
health systems are increasingly becoming rightfully skeptical about new
solutions because they feel the solutions don’t understand the environment of
their system. To help overcome the challenges of introducing your innovation into a complex business and
clinical environment, startups must understand how health systems operate to
include how they make decisions, contract and evaluate solutions.
Recognize that Decisions are Consensus-driven and Permissions-based: Unlike
other industries, where “shadow IT” is rampant and there can be one or two “key
decision makers,” in health systems you’re not likely to get very far without
figuring out how to build consensus among an array of influencers and then
figuring out how to get permissions from a group of key decision makers. You
should seek a “Sherpa” that understands enough about your solution to champion
the idea of change – which is really what you’re seeking when you’re
selling a new solution (the solution is just the means to accomplish the change,
it’s the change that’s hard). The first thing to focus on is to identify the
group of decision makers and how you convince them that the status quo should
be abandoned in favor of any change –
then, once you know how to convince them of some
change you’ll work with the group to get the right permissions to work on the
change management process – which will then influence a purchase of your
Introduction Every day and in every corner of the country, innovative health care leaders are conceiving of strategies and programs to manage their patients’ health, as an alternative to treating their sickness (see Figure 1).
The value-based contracts that have proliferated in this
country over the past decade and which now account for about half of the money
spent on healthcare allow these wellness investments to make good financial
sense in addition to benefiting patient health.
However, a phenomenon in health coverage in the US is
increasing costs, destabilizing care continuity and holding back the potential
of value-based care. It prevents us from making the long-term investments we
Churn refers to gaining, losing, or moving between sources of coverage. Every year, approximately a quarter of the US population switches out of their health plan. Reasons can be voluntary or involuntary from the perspective of the beneficiary (see Table 1) and vary from changes in job status, eligibility, insurance offerings, and preference, to non-payment of premiums, to unawareness of pending coverage termination.
The Office of the National Coordinator (ONC) and the Centers for Medicare and Medicaid (CMS) have proposed final rules on interoperability, data blocking, and other activities as part of implementing the 21st Century Cures Act. In this series, we will explore the ideas behind the rules, why they are necessary and the expected impact. Given that these are complex and controversial topics open to interpretation, we invite readers to respond with their own ideas, corrections, and opinions. In part five of this series, we look at how competition unlocks innovation, and how the proposed rules may disrupt the balance between innovation, intellectual property (IP), and supporting business models.
The recent publication of proposed rules by ONC and CMS set off a flurry of activity. In anticipation of their implementation, the health care industry is wrestling with many questions around business models. What practices inhibit competition and innovation? How do we balance the need for competition while protecting legitimate intellectual property rights? How can vendors ensure profit growth when pricing is heavily regulated? In this article, we will examine how competition unlocks innovation and the possible disruptions the proposed rules may bring for innovation, intellectual property (IP) and supporting business models.
In most markets, innovation is driven forward by competition. Businesses compete on equal footing, and their investment in R&D drives innovation forward. Innovation in health care has been dramatically outpaced by other markets, leading to an urgent need for both disruptive and evolutionary innovation.
What is inhibiting health care innovation? The rules identify a combination of tactics employed in health care that restrict the free flow of clinical data, such as:
These tactics slow innovation by contributing to an
environment where stakeholders resist pushing the boundaries — often because
they are contractually obligated not
to. The legislation and proposed rules are designed to address the ongoing
failure of the market to resolve these conflicts.
As the rules are finalized, we will continue to monitor whether
the ONC defines these practices as innovation stifling and how they will
implement regulations — both carrot and stick — to move the industry forward.