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.
In the 20th century, hospitals completed their
transformation from the hospice-like institutions of the Middle Ages, into
large, gleaming centers of advanced medical expertise and technology that save
and improve lives every day. But an unintended consequence of hospitals’
dazzling capabilities is a staggering cost burden that’s proving toxic to the
Today, hospital care accounts for approximately 33% of the US’ $3.5 trillion annual health care expenditures, according to CMS. The drivers of hospital costs are complex and hard to tackle, including (but not limited to) market consolidation that enables price hikes, heavy administrative burdens, expensive technology and patient usage patterns.
In The Innovator’s Prescription, Clayton Christensen et al. explained another important driver of high hospital care costs: conflation under one roof of business models designed to address very different needs—such as the need for diagnosis of unique, complex conditions and experimental treatments, versus that for highly standardized services (for instance, some surgical procedures). This common phenomenon makes optimization of either business model very difficult, and thus drives up overhead costs.
One solution to this seemingly intractable
problem is to make home and community the default locations for care, where in
many circumstances it can be provided less expensively, more conveniently, and
more effectively than in a hospital. Fortunately, business model innovation
toward this end is gaining traction.
The 2016 21st Century CURES Act is the law. It is built around two phrases: “information blocking” and “without special effort” that give the administration tremendous power to regulate anti-competitive behavior in the health information sector. The resulting draft regulation, February’s Notice of Proposed Rulemaking (NPRM) is a breakthrough attempt to bend the healthcare cost curve through patient empowerment and competition. It could be the last best chance to avoid a $6 Trillion, 20% of GDP future without introducing strict price controls.
This post highlights patient-directed access as the essential pro-competition aspect of the NPRM which allows the patient’s data to follow the patient to any service, any physician, any caregiver, anywhere in the country or in the world.
According the 2019 Bloomberg Healthiest Country Index, the U.S. ranks 35th out of 169 countries. Even though we are the 11th wealthiest country in the world, we are behind pretty much all developed economies in terms of health. In the Americas, not just Canada (16th) but also Cuba (30th), Chile and Costa Rica (tied for 33rd) rank ahead of us in this Bloomberg study.
To answer this layered question, we need to look at the top ranked countries in the Bloomberg Index: From first to 12th, they are Spain; Italy; Iceland; Japan; Switzerland; Sweden; Australia; Singapore; Norway; Israel; Luxembourg; and France. What are they doing right that the U.S. isn’t? In a nutshell, they embrace half a dozen critical economic and societal traits that are absent in the U.S.:
· Universal health care
· Better diet: fresh ingredients and less packaged and processed food
When it comes to access to health care, the 34 countries that are ahead of the U.S. in the Bloomberg health rankings all offer universal health care to their people. This means that preventive, primary and acute care is available to 100% of the population. In contrast, 25 – 30 million Americans do not have health care insurance, and an equal number are under insured. For 15 – 18% of our population, financial concerns about how to pay for a visit to the doctor, how to meet high insurance deductibles, or cash payments after insurance take precedence over taking care of their health. Lack of preventive care leads to visits to the emergency rooms for ailments that could have been prevented through regular primary care follow-up, at a very high cost to our health system. Note: We spent $10,700 per capita in health care in 2017, more than three as much as Spain ($3,200) and Italy ($3,400). Many Americans postpone important medical operations for years, until they reach 65 years of age, when they finally qualify for universal health care or Medicare. Lack of prevention and primary care, health interventions postponed, and the constant worry that medical costs might bankrupt one’s family: none of this is conducive to healthy lives.
As news of Tom Brokaw’s cancer diagnosis spreads, so does his revelation that his cancer treatments cost nearly $10,000 per day. In spite of this devastating diagnosis, Mr. Brokaw is not taking his financial privilege for granted. He is using his voice to bring attention to the millions of Americans who are unable to afford their cancer treatments.
My patient Phil is among them. At a recent appointment, Phil
mentioned that his wife has asked for divorce. When I inquired, he revealed a
situation so common in oncology, we have a name for it: Financial
Toxicity. This occurs when the burden of medical costs becomes so high,
it worsens health and increases distress.
Phil, at the age of 53, suffers with the same type of bone
cancer as Mr. Brokaw. Phil had to stop working because of treatments and
increasing pain. His wife’s full time job was barely enough to support
them. Even with health insurance, the medical bills were mounting. Many
plans require co-pays of 20 percent or more of total costs, leading to insurmountable
patient debt. Phil’s wife began to panic about their future and her debt
inheritance. In spite of loving her husband, divorce has felt like the only
solution to avoiding financial devastation.
Health systems and employers are bypassing insurers to deliver higher-quality, more affordable care
By MICHAEL J. ALKIRE
Employee health plan premiums are rising along with the total healthcare spending tab, spurring employers to rethink their benefits design strategy. Footing the tab, employers are becoming a more active and forceful driver in managing wellness, seeking healthcare partners that can keep their workforce healthy through affordable, convenient care.
health systems assume accountability for the health of their communities, a
market has been born that is ripe for new partnerships between local health
systems and national employers in their community to resourcefully and
effectively manage wellness and overall healthcare costs. Together, they are bypassing traditional
third-party payers to pursue a new type of healthcare financing and delivery
While just 3 percent of self-insured employers are contracting directly with health systems today, dodging third parties to redesign employee benefit and care plans is becoming increasingly popular. AdventHealth in Florida announced a partnership with Disney in 2018 to provide health benefits to Disney employees at a lower cost in exchange for taking on some risk, and Henry Ford Health System has a multi-year, risk-based contract with General Motors.
The notion of bypassing payers is attractive for employers, especially on the back of consecutive cost increases they and their employees have swallowed over the last several years. Payers have traditionally offered employers rigid, fee-for-service plans that not only provide little room for customization, but often exacerbate issues with care coordination and lead to suboptimal health outcomes for both employees and their families. Adding to this frustration for employers is the need to manage complex benefits packages and their corresponding administrative burdens.
Discouraging headlines remind us daily of the ugly battles between payers and providers. Fighting for their slice of the $3.5 trillion health care pie, these companies often seem to leave the consumer out of the equation. But it is not the case across the board. Our latest research documents that when doctors and health plans drop their guards, align incentives and focus on the mutual goal of delivering the best possible care, patients win.
For example, when SelectHealth in Utah
partnered with obstetricians and refused to pay for medically unnecessary — often
dangerous — early inductions of labor,
procedure rates dropped from 28% to zero, leading to shorter labors, fewer
C-sections and $2.5 million in annual savings for all. When Kaiser Foundation Health
Plan execs collaborated with Permanente doctors around opioid safety, prescriptions
for the often-deadly drugs dropped 40%. And, when Security Health Plan in
Wisconsin enlisted physicians and surgeons to develop a new outpatient surgery
and rehab center, health outcomes improved; patient satisfaction jumped to 98%;
and they saved $4.7 million in the first two years.
Bayer’s G4A team launched their 2019 program today, so here’s a little help for anyone curious about the state of pharma startup investment and what it takes to land a deal there these days.
I had the chance to pick the brain of Bayer’s
Global Head of Digital Health, Eugene Borukhovich, during JP Morgan Healthcare
Week and pulled out these three gloriously thought-provoking soundbites from
our conversation to give you some insight as to the mindset over at big Bayer.
“Digital therapeutics are shining light on the convoluted, complex mess of digital health”
If you’ve wondered what lies ‘beyond the pill’
for Big Pharma, wonder no more. It seems the answer is digital therapeutics.
Eugene predicts that “within the next couple of years, ‘digital health’ as a
term will disappear,” and calls out organizations like the Digital Therapeutics
Alliance for their efforts to set standards around evidence-base and behavior
modification so regulators and strategic investors alike can properly evaluate
claims made by health tech startups. As time goes on, it looks like efforts to
‘pharma-lize’ the ways startups take their solutions to market will increase,
pushing them into more traditional go-to-market pathways that have familiar and
comforting guidelines in place. As Eugene says, “Ultimately, what we say in my
team, is that it’s about health in a digital world today.” Sounds like that’s
true for both the products he’s seeking AND the way pharma is looking to bring
them to market…
“These multi-hundred million [dollar] press releases are
great to a certain extent, but what happened to the start-up style mentality?”
When asked about Big Tech getting into Big
Health, in the end, it seems, Eugene shakes out to be in favor of the ‘Little
Guy’ – or, at least, in their approach. Don’t miss his comments about
“cockiness in our healthcare industry” and how Big Tech is working around that
by partnering up, but the salient point for startups is that big companies still
seem very much interested in buddying with smaller businesses. It’s for all the
same reasons as before: agility, the ability to iterate quickly, and the
opportunity to do so within reasonable budgets. Eugene offered this telling
rhetorical musing: “Just because it’s a combination of two big giants…do you
need to do $500 million? Or, do you give some…traction, milestone, [etc.]…to
prove it, just like a start-up would?”
“In large organizations, transformation equals time, and…we
don’t have time.”
“To me,” says Eugene, “the biggest challenge is
actually landing these inside the organization.” He’s talking about novel
health solutions – digital therapeutics or otherwise – after learning from
previous G4A cycles. Culture, precedent, and years of market success loom large
in big healthcare companies across the ecosystem, which is one reason why innovation
inside them is so challenging. Eugene says he’s “a big believer in a small team
– even in large organizations – to take something by the cojones, and get shit
done, and move it forward, and push the envelope from the bureaucracy and the
process.” There’s a sense of urgency to ‘innovate or die’ in the face of the
growing competition in the healthcare industry. “Back to this earlier
conversation around whether it’s tech giants or other companies,” he adds, “it
is a race to the speed of the organization. How quickly we learn and how
quickly we make the decisions. Bottom line, that’s it.”
There’s plenty more great insights and trend
predictions where these came from, plus the juicy details behind how G4A itself
has pivoted this year. Check out the full interview now.
What are the challenges of bringing advanced imaging services to India? What motivates an entrepreneur to start build an MRI service? How does the entrepreneur go about building the service? In this episode, I discuss radiology in India with Dr. Harsh Mahajan, Dr. Vidur Mahajan and Dr. Vasantha Venugopal. Dr. Harsh Mahajan is the founder of Mahajan Imaging, a leading radiology practice in New Delhi, and now a pioneer in radiology research in India.
Listen to our conversation on Radiology Firing Line Podcast here.
Saurabh Jha is an associate editor of THCB and host of Radiology Firing Line Podcast of the Journal of American College of Radiology, sponsored by Healthcare Administrative Partner.
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