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Health in 2 point 00 — Episode 12

Jessica DaMassa asks me about the AMA & digital snake oil, Israel investing in Digital Health, and the budget impact on CSRs & Obamacare in today’s edition of Health in 2 point 00 — Matthew Holt

Microsoft Ventures Tel Aviv Is Looking For Startups

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In the past century, medicine has gone from a largely unscientific trade where noxious drugs were given to patients to purge them of unknown toxins to a science where we have the technology to decode the human genome and peer into the deepest recesses of our anatomy non-invasively.  We have learned so much and generated massive amounts of data relevant to the understanding and care of the human body.

Globally, we spend enormous sums on healthcare, but we are not necessarily getting any healthier.  In 2012, U.S. healthcare spending was $2.8 trillion, or roughly 18% of GDP[1].  Compare this with the global average of 10.2%, the EU at 10.1% or The Netherlands, the developed country with the second highest per capita spending of 12.4%. Despite the scientific advances and extraordinary spending, access to the best, most effective care is far from ubiquitous.

Healthcare, like any other industry, is driven by motivators. While government and regulatory pressures drive many behaviors in medicine, financial considerations are also important drivers  When healthcare reimbursement works on a fee-for-service system in which providers are compensated for each service they provide, the incentives do not necessarily  promote the most efficient and cost-effective options. Rather, the incentives encourage the delivery of “more” healthcare. But we don’t necessarily need “more” – we need “smarter.” More adds costs. Smarter solves problems.

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Observations About the Israeli Health Care System

As I share this view from my room in Tel Aviv after leaving the conference in Haifa, it is a good chance to consider the features of the Israeli health care system and draw some comparisons with that of the US. You can find a full description here, but let me hit the highlights as I understand them, based on discussions over the last two days.

Israel has had universal coverage for many years. It is provided by four HMOs, one with about 55% of the market, another with 20% or so, and the remaining two splitting the rest. The competition that exists is not based on price. Indeed, the cost of care is covered by a payroll tax and other government funding in the form of a capitated payment to each HMO based on enrollment. People are free to shift from one HMO to another as often as every two months, but only a very small percentage (well under 2%) shift each year.

Supplemental insurance, privately paid, is also available. However, the basic coverage offered to the population is very inclusive, and the supplement is for the small number of elective items that are not of great interest to most people.

The HMOs offer a strong primary care network and then contract with the hospitals for secondary and tertiary care. Some hospitals are owned by the HMOs, but many of the patients go to hospitals that are not owned by the HMOs. These are either government owned or are private, non-profits.

Now, as we explore transactions among these entities, it gets interesting. What is the process by which the rates for the government hospital are set with the HMOs, for the services purchased by the HMO out of its capitated budget? This is a negotiation in which the government is a participant. But recall that the government also owns those hospitals for which it is negotiating the rates with the HMOs. The HMOs are not permitted to joint together to negotiate with the government.Continue reading…

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