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Putting the ‘value’ in value-based payments

By JOSH SEIDMAN

Like Matthew Holt, I have also been ranting about the fact that “We’re spending way too much money on stuff that is the wrong thing.” As Matthew said, “it’s a rant, but a rant with a point!” And that’s a lot better than most rants these days. In addition to having a point, I’m also bringing a lot of data to my rant.

More specifically, we’ve known for a long time that clinical care only drives 20% (maybe less) of health outcomes, yet we continue to spend more and more on it.

We do that despite the well-documented fact that the U.S. performs worse than most OECD countries despite spending far more. I remember, in my first health care job in 1990, being blown away that the U.S. spent $719 billion on health care (or $1.395 trillion in 2022 dollars). Here we are, trillions of dollars later ($4.465 trillion) doing the same thing and expecting a different result.

After more than 30 years in health CARE, I decided that I really wanted to start doing something about HEALTH, which is why 3 years ago I joined Fountain House, the founder of the clubhouse movement, a psychosocial rehabilitation model for people with serious mental illness (SMI)—a model now replicated by 200 U.S. clubhouses and another 100+ in more than 30 countries around the world. It was actually people living with SMI that launched Fountain House in 1948, realizing long ago that addressing social drivers of health offered a new road to recovery and rehabilitation. Now 75 years later, we’re finally seeing some parts of the health care system come to terms with the necessity of addressing health-related social needs.

With decades of evidence behind us, Fountain House has spent the last year and a half building an economic model to understand clubhouses’ societal economic impact when one takes into account a wide range of costs—mental health, physical health, disability, criminal justice, and productivity or lost wages.

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Lucienne Ide, Rimidi

Lucie Ide is a physician running Rimidi, a company helping health systems manage patients with chronic conditions. They extract data from EMRs and transfer this into workflow for care teams, predominantly at ACOs and other risk bearing organizations, but also increasingly with FFS groups using RPM to manage those patients. Their current moves are to continue to extend from their first patient group (diabetes) to all types of chronic patients. We chatted about her company, but also about the wider move (or lack of it) to better manage patients in the US system–Matthew Holt

So what can we do about health care costs?

By MATTHEW HOLT

Last week Jeff Goldsmith wrote a great article in part explaining why health care costs in the US went up so much between 1965 and 2010. He also pointed out that health care has been the same portion of GDP for more than a decade (although we haven’t had a major recession in that time other than the Covid 2020 blip when it went up to 19%). However, it’s worth remembering that we are spending 17.3% of GDP while the other main OECD countries are spending 11-12%. Now it’s true that the US has lots of social problems that show up in heath spending and also that those other countries probably spend more on social services, but it’s also clear that we don’t actually deliver a lot more in services. In fact probably the most famous health economics paper of the last 50 years was Anderson & Rienhardt’s “It’s the Prices, Stupid”, which shows we just pay more for the same things. Anyone who’s looked at the price of Ozempic in the US versus in Denmark knows that’s true.

But suspend disbelief and say we actually wanted to do something about health care costs, what would we do?

There are 4 ways to cut health care costs

  1. Cut prices
  2. Cut overall use of services
  3. Reduce only unnecessary services
  4. Replace higher priced services with lower priced ones

Number 3 or reducing only unnecessary services is the health policy wonks dream.

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The 7 Decade History of ChatGPT

By MIKE MAGEE

Over the past year, the general popularization of AI orArtificial Intelligence has captured the world’s imagination. Of course, academicians often emphasize historical context. But entrepreneurs tend to agree with Thomas Jefferson who said, “I like dreams of the future better than the history of the past.”

This particular dream however is all about language, its standing and significance in human society. Throughout history, language has been a species accelerant, a secret power that has allowed us to dominate and rise quickly (for better or worse) to the position of “masters of the universe.”

Well before ChatGPT became a household phrase, there was LDT or the laryngeal descent theory. It professed that humans unique capacity for speech was the result of a voice box, or larynx, that is lower in the throat than other primates. This permitted the “throat shape, and motor control” to produce vowels that are the cornerstone of human speech. Speech – and therefore language arrival – was pegged to anatomical evolutionary changes dated at between 200,000 and 300,000 years ago.

That theory, as it turns out, had very little scientific evidence. And in 2019, a landmark study set about pushing the date of primate vocalization back to at least 3 to 5 million years ago. As scientists summarized it in three points: “First, even among primates, laryngeal descent is not uniquely human. Second, laryngeal descent is not required to produce contrasting formant patterns in vocalizations. Third, living nonhuman primates produce vocalizations with contrasting formant patterns.”

Language and speech in the academic world are complex fields that go beyond paleoanthropology and primatology. If you want to study speech science, you better have a working knowledge of “phonetics, anatomy, acoustics and human development” say the  experts. You could add to this “syntax, lexicon, gesture, phonological representations, syllabic organization, speech perception, and neuromuscular control.”

Professor Paul Pettitt, who makes a living at the University of Oxford interpreting ancient rock paintings in Africa and beyond, sees the birth of civilization in multimodal language terms. He says, “There is now a great deal of support for the notion that symbolic creativity was part of our cognitive repertoire as we began dispersing from Africa.  Google chair, Sundar Pichai, maintains a similarly expansive view when it comes to language. In his December 6, 2023, introduction of their ground breaking LLM (large language model), Gemini (a competitor of ChatGPT), he described the new product as “our largest and most capable AI model with natural image, audio and video understanding and mathematical reasoning.”

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Why Not, Indeed?

By KIM BELLARD

Recently in The Washington Post, author Daniel Pink initiated a series of columns he and WaPo are calling “Why Not?” He believes “American imagination needs an imagination shot.” As he describes the plan for the columns: “In each installment, I’ll offer a single idea — bold, surprising, maybe a bit jarring — for improving our country, our organizations or our lives.”

I love it. I’m all in. I’m a “why not?” guy from way back, particularly when it comes to health care.

Mr. Pink describes three core values (in the interest of space, I’m excerpting his descriptions):

  • Curiosity over certainty. The world is uncertain. Curiosity and intellectual humility are the most effective solvents for unsticking society’s gears.
  • Openness over cynicism: Cynicism is easy but hollow; openness is difficult but rich.
  • Conversation over conversion: The ultimate dream? That you’ll read what I’ve written and say, “Wait, I’ve got an even better idea,” and then share it.

Again, kudos. One might even say “move fast and break things,” but the bloom has come off that particular rose, so one might just say “take chances” or “think different.” Maybe even “dream big.”


Around the same time I saw Mr. Pink’s column I happened to be reading Adam Nagourney’s The Times: How the Newspaper of Record Survived Scandal, Scorn, and the Transformation of Journalism. In the early 1990’s The Times (and the rest of the world) was struggling to figure out if and how the Internet was going to change things. Mr., Nagourney reports how publisher Arthur Sulzberger (Jr) realized the impact would be profound:

One doesn’t have to be a rocket scientist to recognize that ink on wood delivered by trucks is a time consuming and expensive process.

I.e., contrary to what many people at The Times, and many of its readers, thought at the time, the newspaper wasn’t the physical object they were used to; it was the information it delivers. That may seem obvious now but was not at all then.  

Which brings me to health care. Contrary to what many people working in healthcare, and many people getting care from it, might think, healthcare is not doctors, hospitals, prescriptions, and insurance companies. Those are simply the ink on wood delivered by trucks that we’re used to, to use the metaphor.

And it doesn’t take a rocket science to recognize that what we call health care today is a time consuming and expensive process – not to mention often frustrating and ineffective.

Why not do better?

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Supporting innovations in cancer treatment and prevention for our nation’s most vulnerable

By KAT MCDAVITT and LESLIE KIRK

Innsena has made a $100,000 contribution to CancerX, making Innsena the public-private partnership’s first Impact Supporter.

Why? There are few conditions in which the disparity in innovations benefiting underserved communities is more apparent than in the treatment and prevention of cancer.

Patients without insurance are more likely to present with more advanced cancers, and the cancer death rate for people of color is significantly higher than for white patients. More people die from cancer in rural communities than in urban settings. 

In CancerX, we found a community of partners taking on hard problems to equitably deploy innovative solutions that can reduce the risk of, and cure cancer for all patients. Even—and especially—when financial incentives do not otherwise exist for the private sector to solve those problems.  

Innsena is committed to improving equitable access, treatment and outcomes for the most vulnerable among us. We focus on supporting improved outcomes for Medicaid members and underserved communities. The disparity caused by the absence of incentives and funding for innovators to enter the Medicaid market can’t be overstated. 

But innovators, and the investors who fund these pioneers, are exactly what our industry needs to change health outcomes in underserved communities. 

We decided that, if the incentives to innovate in cancer care for vulnerable populations don’t exist, then we would create them. Our financial commitment to CancerX is a step forward that we hope will start a broader movement. 

Our team’s $100,000 contribution will help the team at CancerX to accelerate programs underway—including its effort to improve equity and reduce financial toxicity in cancer care and research—and to more rapidly launch new initiatives. 

We’re particularly proud to support the public-private partnership’s efforts to improve equity and reduce financial toxicity. Cancer deaths are inequitably distributed across the United States—and those patients who do survive are 2.5 times more likely to declare bankruptcy than those without disease. 

Likewise, a key component of CancerX is a start-up accelerator for companies bringing more digital solutions for the treatment and prevention of cancer, with special attention given to organizations that focus on disadvantaged populations. We’re honored to support the start-ups selected for the first CancerX accelerator cohort with both mentorship and financial support. 

And to that end, as individuals, we’ve gone one step further to support start-ups focused on preventing and curing cancer for vulnerable patients. We’ve also partnered with Ben Freeberg and his team at Oncology Ventures to ensure that digital health start-ups innovating for all patients in the oncology space have funding available to advance their causes. 

Innsena is joining more than 150 organizations already working together to make a difference for all patients in the prevention and treatment of cancer. CancerX is co-hosted by the Moffitt Cancer Center and Digital Medicine Society, alongside the US Department of Health and Human Services Office for the National Coordinator for Health Information Technology and Office of the Assistant Secretary for Health. 

We need more innovators working to improve care for the underserved. Join us in supporting CancerX. As a community we’ll make a difference. 

Kat McDavitt is President and founding partner of Innsena. Leslie Kirk is CEO and managing partner of Innsena.

The 2024 Word of the Year: Missense

By MIKE MAGEE

Not surprisingly, my nominee for “word of the year” involves AI, and specifically “the language of human biology.”

As Eliezer Yudkowski, the founder of the Machine Intelligence Research Institute and coiner of the term “friendly AI” stated in Forbes:

“Anything that could give rise to smarter-than-human intelligence—in the form of Artificial Intelligence, brain-computer interfaces, or neuroscience-based human intelligence enhancement – wins hands down beyond contest as doing the most to change the world. Nothing else is even in the same league.” 

Perhaps the simplest way to begin is to say that “missense” is a form of misspeak or expressing oneself in words “incorrectly or imperfectly.” But in the case of “missense”, the language is not made of words, where (for example) the meaning of a sentence would be disrupted by misspelling or choosing the wrong word.

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The Optimism of Digital Health

By JONATHON FEIT

Journalists like being salty.  Like many venture investors, we who are no longer “green” have finely tuned BS meters that like to rip off the sheen of a press release to reach the truthiness underneath. We ask, is this thing real? If I write about XYZ, will I be embarrassed next year to learn that it was the next Theranos?

Yet journalists must also be optimistic—a delicate balance: not so jaded that one becomes boooring, not so optimistic that one gets giddy at each flash of potential; and still enamored of the belief that every so often, something great will remake the present paradigm.

This delicately balanced worldview is equally endemic to entrepreneurs that stick around: Intel founder Andy Grove’s famously said “only the paranoid survive,” a view that is inherently nefarious since it points out that failure is always lurking nearby. Nevertheless, to venture is to look past the risk, as in, “Someone has to reach that tall summit someday—it may as well be our team!” Pragmatic entrepreneurs seek to do something else, too: deliver value for one’s clients / customers / partners / users in excess of what they pay—which makes they willing to pay in excess of what the thing or service costs to produce. We call that metric “profit,” and over the past several years, too many young companies, far afield of technology and healthcare, forgot about it.

Once upon a time, not too many years ago, during the very first year that my company (Beyond Lucid Technologies) turned a profit, I presented to a room of investors in San Francisco, and received a stunning reply when told that people were willing to pay us for our work.  “But don’t you want to grow?” the investor asked. 

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Who to Blame for Health Costs: The Poisoned Chalice of “Moral Hazard”

By JEFF GOLDSMITH

How the Search for Perfect Markets has Damaged Health Policy

Sometimes ideas in healthcare are so powerful that they haunt us for generations even though their link to the real world we all live in is tenuous. The idea of “moral hazard” is one of these ideas. In 1963, future Nobel Laureate economist Kenneth Arrow wrote an influential essay about the applicability of market principles to medicine entitled “Uncertainty and the Welfare Economics of Medical Care”.    

One problem Arrow mentioned in this essay was “moral hazard”- the enhancement of demand for something people use to buy for themselves that is financed through third party insurance. Arrow described two varieties of moral hazard: the patient version, where insurance lowers the final cost and inhibitions, raising the demand for a product, and the physician version–what happens when insurance pays for something the physician controls by virtue of a steep asymmetry of knowledge between them and the patient and more care is provided than actually needed. The physician-patient relationship is “ground zero” in the health system.

Moral hazard was only one of several factors Arrow felt would made it difficult to apply rational economic principles to medicine. The highly variable and uniquely threatening character of illness was a more important factor, as was the limited scope of market forces, because government provision of care for large numbers of poor folk was required.  

One key to the durability of Arrow’s thesis was timing: it was published just two years before the enactment of Medicare and Medicaid in 1965, which dramatically expanded the government’s role in financing healthcare for the elderly and the categorically needy. In 1960, US health spending was just 5% of GDP, and a remarkable 48% of health spending was out of pocket by individual patients. 

After 1966, when the laws were enacted, health spending took off like the proverbial scalded dog. For the next seven years, Medicare spending rose nearly 29% per year and explosive growth in health spending rose to the top of the federal policy stack. By 2003, health spending had reached 15% of GDP! Arrow’s  moral hazard thesis quickly morphed into a “blame the patient” narrative that became a central tenet of an emerging field of health economics, as well as in the conservative critique of the US health cost problem.  

Fuel was added to the fire by Joseph Newhouse’s RAND Health Insurance Experiment in the 1980s,  which found that patients that bore a significant portion of the cost of care used less care and were apparently no sicker at the end of the eight-year study period. An important and widely ignored coda to the RAND study was that patients with higher cost shares were incapable of distinguishing between useful and useless medical care, and thus stinted on life-saving medications that diminished their longer term health prospects. A substantial body of consumer research has since demonstrated that patients are in fact terrible at making “rational” economic choices regarding their health benefits. 

The RAND study provided justification for ending so-called first dollar health  coverage and, later, high-deductible health plans. Today more than half of all Americans have high deductible health coverage. Not surprisingly, half of all Americans also report foregoing care because they do not have the money to pay their share of the cost!   

However, a different moral hazard narrative took hold in liberal/progressive circles, which blamed the physician, rather than the patient, for the health cost crisis.  

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Medicare Is Now Profitable as a Total Program Because of Medicare Advantage

By GEORGE HALVORSON

Medicare made $83.4 billion very real dollars in 2022. The 17% discounts below the average cost of fee-for-service Medicare, that happen in every county for Medicare Advantage, have been very real and extremely successful in paying for Medicare coverage — in a way that now makes the program a profit center for the US Government.

You can see the actual financial report page from the 2023 Medicare trustee report below. It shows that the Medicare trust fund grew in 2022 for the first time in decades. More than half of the Medicare members are now enrolled in Medicare Advantage plans. Those members cost significantly less than their equivalent fee-for-service Medicare patients.

These are the actual numbers from the trustee report.

The Medicare trustee report says that the total Medicare program grows per member by 6.7% every year. They project in that report that they expect that rate of increase to be consistent over the next decade. The enrollees in the Medicare Part A and Part B programs have expenses that increase slightly above that number every year. That’s been true for a couple of decades.

Medicare loses money on every Part A and Part B member when expenses for those programs are higher than the 6.7% average.

Medicare Advantage costs for Medicare Part C are increasing at a lower rate than that number. That means that Medicare makes money and creates a surplus with the Medicare Advantage patients.

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