Two weeks ago I had the good fortune to be invited back to the South by Southwest Conference (SXSW) to participate as a judge of a digital healthcare start-up competition. SXSW, which takes place in Austin, TX, is historically an indie music gathering that has evolved into a massive mainstream music conference as well as a monumentally huge film festival, like Sundance times twenty. There are literally hundreds of bands and films featured around town. There has now evolved alongside this a conference called Interactive that draws more than 25,000 people and focuses on technology, particular mobile, digital, and Internet.
In other words, SXSW has become one of the world’s largest gatherings of hoodie-sporting, gadget-toting nerd geniuses that are way too square to be hip but no one has bothered to tell them. Imagine you are sitting at a Starbucks in Palo Alto, CA among 25,000 people who cannot possibly imagine that the rest of the world still thinks the Internet is that newfangled thing used mainly for email and porn. SXSW is a cacophonous melting pot of brilliance, creativity, futuristic thinking, arrogance, self-importance, ironic retro rock and roll t-shirts and technology worship. One small example: very hard to get your hands on a charger for anything other than an iPhone 5 because, seriously, who would have anything else?
In case you missed it, the shocking news was that health IT companies that stood to profit from billions of dollars in federal subsidies to potential customers poured in – well, actually, poured in not that much money at all when you think about it – lobbying for passage of the HITECH Act in 2009. This, putatively, explains why electronic health records (EHRs) have thus far failed to dramatically improve quality and lower cost, with a secondary explanation from athenahealth CEO Jonathan Bush that everything would be much better if the HITECH rules had been written by Jonathan Bush of athenahealth.
Next up: corporate lobbying for passage of the 1862 Pacific Railroad Bill is blamed for Amtrak’s dismal on-time record in 2013.
The actual scandal is more complicated and scary. It has to do with the adamant refusal by hospitals and doctors to adopt electronic records no matter what the evidence. Way back in 1971, for example, when Intel was a mere fledgling and Microsoft and Apple weren’t even gleams in their founders’ eyes, a study in a high-profile medical journal found that doctors missed up to 35 percent of the data in a paper chart. Thirty-seven years later, when Intel, Microsoft and Apple were all corporate giants, a study in the same journal of severely ill coronary syndrome patients found virtually the same problem: “essential” elements to quality care missing in the paper record.
I have been absent from the blogosphere for about two months. The fact is, there just isn’t all that much new to write about. Healthcare spending growth continues to moderate, but not by enough to stave off forecasts of doom for Medicare and Medicaid. Nor can employers begin to shift money from health benefits back into wages. But wheels are turning. Health networks are expanding as providers prepare to offer ACOs and/or increase their bargaining clout. A handful of states are poised to start up exchanges with the feds ready to take the reins in the laggard states. Aon/Hewitt is about ready to launch a private sector exchange. We will start to learn whether exchanges save or destroy private health insurance.
The Affordable Care Act has had many detractors but at least it has disrupted the status quo. We needed to see fundamental changes in how we pay for and deliver healthcare services and the ACA has delivered. But ACA has brought us a very particular set of changes. Time will tell if we have chosen the right path.
Even as the industry changes the way it does business, one critical aspect of change is missing. The faces are all the same. The same large systems that dominated the fee for service world seem poised to dominate the shared savings world, and the same insurers that dominated the traditional employer-based insurance market stand ready to dominate exchanges. Value might be created when old businesses play by new rules, but even more value is created when new players are free to enter and perhaps even break the rules.
Entry is the engine that drives economic progress. Entrants bring new technologies to manufacturing and new service models to sales. Threatened by entry, incumbents strive to innovate and improve customer service. This is as true in high tech industries as it is in the service economy. Research confirms that entry is ubiquitous – in a typical manufacturing industry, fully one third of established firms are replaced by entrants within five years. Though the data is not as readily available, turnover in the service sector is likely even higher.
Innovation has been a driving force behind health care from the beginning, yet with the U.S. health care system in the midst of an unprecedented transformation and a focus on lowering costs, many are asking, “What will become of innovation?”
The answer to that question is also a potential solution for hospitals facing financial pressures – a solution that has the power to improve patient care as well.
A growing number of hospitals are looking to develop a new revenue stream through the commercialization of medical innovations. They’re not doing it alone.
Just as Cleveland Clinic collaborates with other health systems on cardiovascular or cancer care, Cleveland Clinic Innovations has formed a national Innovation Alliance network to collaborate on the commercialization of medical innovations.
Cleveland Clinic Innovations, the corporate venturing arm of Cleveland Clinic, has a track record of converting and commercializing medical expertise, creating 55 spin-off companies and more than 300 licensed technologies that began as doctors and researchers’ ideas. Those companies have received nearly $700 million in equity investment.
In the 1960s, Texas Instruments developed the first handheld calculator. It could display up to 12 digits while performing addition, subtraction, multiplication and division. And it cost $2,200.
Since then, the calculator has come a long way. Competition forced continuous innovations, and today’s models are more lightweight, have longer battery life, are capable of performing more complex computations –all at a dramatically reduced price point.
That’s the typical cycle in virtually every sector of the American economy. Innovations are introduced, competition forces design improvements and cost reductions and products are continually improved until the next big thing comes along to start the process over again.
But that’s not the way things work in healthcare.
Like the calculator, Medicare was first created in the 1960s.
But even though the practice of medicine has changed dramatically over the last 40 years, the Medicare program has stayed largely the same. And, since most commercial insurers tend to follow the government’s lead in terms of payments and benefit design, even private markets have played a role in limiting innovations in the way we pay for healthcare.
Technology is transforming health care in many ways. CEOs of health care businesses think the biggest transformation in the next few years will come from making patients, doctors and health-care workers more communicative and collaborative.
They foresee patients with the same rare diseases coming together in online social networks where they can discuss their symptoms. They see overweight consumers building mutual support networks to share diets and praise exercise. They anticipate that knowledge will be shared so that nurses, pharmacists and social workers can often perform tasks that today are handed to doctors by default.
Every year, IBM surveys hundreds of CEOs from around the globe about a variety of issues. Among 1,700 CEOs surveyed this year there were 58 who head hospitals, medical practice groups and insurers.
The CEO perspective is interesting, because most outsiders don’t think of collaboration as being a key outcome of medical technology. Most of us think of laser-guided surgical instruments or designer drugs or computerized analytics that spot hitherto unnoticed disease-causation chains.
The CEOs overall see technology as a way to open up their organizations to create value through collaboration. Making the organization more transparent makes it easier to share cultural values and goals. And that makes employees more receptive to tough changes, because they understand what’s behind the plan.
Disruptive leadership. That’s a thing now? I’m told that this is a kind of leadership—I thought it was a market dynamic.
What does it take to be a “disruptive” leader?
Does it mean talk like a pirate when explaining how the company will be cutting benefits?
Does it mean dress like Ali G and try to imitate him but only muster a WASP accent?
I suppose it does…but that’s the easy part.
Job #1 in leading a true market disruptive: FIND AND FERTILIZE THE HIDDEN RAGE AT THE STATUS QUO THAT LIES WITHIN ALL OF US. Find it in yourself and feed it and then find it in others and attract them to work with you.
I’m constantly looking for change in my personal life. For example, I just bought a Tesla. My other car is a 1983 Land Rover. Why? Because in 1983 you didn’t need to sell cars with a seatbelt dinger and airbags in the front seat andD because Tesla is the first ATTACKER disruptive car maker to make it past the fetal stage in my entire life. I must feed them. I HATE the established car industry! I have been trapped inside a small number of culturally (and occasionally financially) bankrupt brands that have lost any interest in fighting the over-regulated morass that constraints.
There’s a big discussion going on in the health tech community about a controversial keynote speech given by Vinod Khosla at the Health Innovation Summit (HIS), in which he stated that 80% of what doctors do could be replaced by machines.
If you’re a doc like me who has no idea who the heck Vinod Khosla is (he’s a venture capitalist and co-founder of Sun Microsystems), why he’d be a keynote speaker at a healthcare event and what the heck HIS is, well, that’s the point of this post. You see, there are a whole lot of folks like Khosla out there – investors, entrepreneurs, tech types – who are attempting to redefine healthcare according to their own personal vision. Where we see a healthcare system in crisis, they see opportunity – just another problem with a technological solution. Computer-driven algorithms are the answer to mis-diagnosis and medical error, IPhone apps can replace physician visits, video connectivity can increase access.
Where we see illness and distress, they see a market.
And what business folks like to call disruption in the marketplace. Think about what happened to downtown small town USA after the first shopping mall opened. Or what happened to movie houses when Netflix started offering DVD rentals online. Or where all the independent bookstores went when the first Borders opened up, and what happened to Borders when the Kindle hit the market.
Out with the old, in with the new.
If Khosla is right, the we docs in our offices and hospitals are the old downtown department stores, the bookstores and the bricks and mortar businesses in an online revolution. We’re replaceable. At least most of us.
While the nation has been focused on the recent Supreme Court ruling on the Affordable Care Act, innovations in hospitals and physician practices far from Capitol Hill have been triggering an historic transformation of our health care system. Propelled by a mix of urgency and vision, innovators at hospitals, physician groups and companies are remaking American health care by demonstrating that more effective and affordable care is achievable quite apart from statutory changes in Washington.
These organizations are working to achieve the Triple Aim: improve the health of the population; enhance the patient experience of care (including quality, access, and reliability); and reduce, or at least control, the per capita cost of care. This approach, developed by the Institute for Healthcare Improvement, is a sharp break with the traditional focus on single encounters with patients within the strict walls of health care delivery, typically addressing only the most immediate problems.
In 1932, the Committee on the Cost of Medical Care identified rising medical costs as a threat to the financial security of millions of Americans. In a series of studies that created the field of health services research, the Committee recommended several strategies for cost containment that reads like a blueprint for today’s cost containment efforts: prevention, price controls, capitation, elimination of unnecessary care, and integration. If it sounds like a précis of my previous two blogs – cut prices and cut quantities – it should. We have known for a long time that those are the only ways to cut spending. And yet here we are, 80 years later, facing a spending crisis that threatens to take down the entire economy.
In my lifetime, we have been subjected to a steady drumbeat of rising medical costs. There have been respites – for a couple of years after Medicare introduced DRGs and for about five years in the 1990s during the heyday of HMOs. While DRGs and HMOs shifted costs down, they did not seem to reverse underlying growth trends, although HMOs did not thrive for long enough to be certain.
Not for lack of trying have medical costs continued to increase. We promote prevention, regulate prices, capitate providers, and review utilization to eliminate wasteful spending. We have seen horizontal integration that led to market power and higher costs, and vertical integration that more often than not created unmanageable bureaucracies. Most of today’s proposals for cost containment can be encapsulated by two words: “Try harder.” The Affordable Care Act gives us free preventive care, stricter price controls, ACOs, and the Comparative Effectiveness Institute. We need radical change but all we get is creeping incrementalism. I will take creeping incrementalism over the do-nothing approach of the previous decade, if only because we could use another respite. But the ACA is no permanent fix.