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The Trillion Dollar Conundrum

Sep 20, 2012• 61

By David Dranove

In Tuesday’s Wall Street Journal Op-Ed pages, physicians from Harvard and University Pennsylvania Medical Schools criticize subsidies for expanding the use of health information technology (HIT). The physicians cite a recent review article that failed to find consistent evidence of cost savings associated with HIT adoption. If true, this is bad news for the health economy, as supporters claim that HIT could cut health spending by as much as $1 trillion over the next decade.

How can something that is so avidly supported by most health policy analysts have such a poor track record in practice? In a new NBER working paper by myself, Avi Goldfarb, Chris Forman, and Shane Greenstein, we label this the “Trillion Dollar Conundrum.” One explanation may be that most HIT studies examine basic technologies such as clinical data repositories, while most of the buzz about HIT focuses on advanced technologies such as Computerized Physician Order Entry. In our paper, we offer a rather different explanation for the conundrum, one that would have eluded physicians and other health services researchers who failed to consider the management side of HIT.

My coauthors on this paper are experts on business information technology. They are not health services researchers. When I approached them to work on this topic, they insisted on viewing HIT much as one would view any business process innovation. As I have learned, this is by far the best way to study most any issue in healthcare management. Those who advocate that “healthcare is unique” – usually by ignoring broadly applicable theories and methodologies—often strain to explain data that are easily understood using more general frameworks. Such is the case with HIT.

The Wrong Battles

Sep 20, 2012• 20

By Brian Klepper

This week the American Academy of Family Physicians (AAFP) issued a new report describing its vision of primary care’s future. Not surprisingly, the report talks about medical homes, with patient-centered, team-based care.

More surprisingly, though, it makes a point to insist that physicians, not nurse practitioners, should lead primary care practices. The important questions are whether nurse practitioners are qualified to independently practice primary care, and whether they can compensate for the primary care physician shortage. On both counts the AAFP thinks the answer is “no.”

AAFP marshals an important argument to bolster its position. Family physicians have four times as much education and training, accumulating an average of 21,700 hours, while nurse practitioners receive 5,350 hours.

It is unclear how this plays out in the real world but, intuitively, we all want physicians in a pinch. Researchers with the Cochrane Database of Systematic Reviews reviewed studies in 2004 and 2009 comparing the relative efficacy of primary care physicians and nurse practitioners. They wrote “appropriately trained nurses can produce as high quality care as primary care doctors and achieve as good health outcomes for patients.” But they also acknowledged that the research was limited.

There is no question that nurse practitioners can provide excellent routine care. For identifying and managing complexity, though, physicians’ far deeper training is a big advantage. In other words, difficult, expensive cases are likely to fare better from a physician’s care.

Health Insurance Exchanges Work

Sep 20, 2012• 6

By Rich McKeown

The Salt Lake Tribune Editorial Board recently used strong words to criticize the Utah Health Exchange. Its perspective ran afoul of our firm’s recent experience with the Utah exchange, which has been overwhelmingly positive.

Like many small businesses, the triggering event for our involvement in the Utah Health Exchange was the appearance of our insurance broker who laid out a spreadsheet presenting a 22 percent increase in next year’s premium costs. Disappointed, we asked our broker to review other options.

The conventional market yielded quotes ranging from a 22 percent to a 134 percent increase. Ask any small business and you will learn that these increases come right out of employee compensation and, in many cases, new hires. Containing these costs, particularly in small businesses with small risk pools, has eluded the best minds in health care policy for decades.

We asked our broker to explore the Utah Health Exchange with vigor. We considered it last year, but the deadlines proved to be an obstacle for us. Our experience this year was remarkable and is instructive for states that object to state-created health insurance exchanges on the flimsy basis of their association with federal health reform.

The Utah Health Exchange started in August 2009 with the primary target of helping small businesses obtain health insurance for their employees. It was named an exchange before the fury over Obamacare tainted the concept.

The word “exchange” connotes the market freedom that is associated with activities like the New York Stock Exchange. The Utah Health Exchange is organized by state government, but driven by the market. What we found was a transparent system that created options for every individual employed by us and exemplified market principles, states’ rights and federalism.

Folly To Forecast Startup Performance?

Sep 19, 2012• 2

By David Shaywitz, MD

Several days ago, Paul Graham, co-founder of noted Silicon Valley accelerator Y-Combinator (YC), wrote an exceptional post, “Black Swan Farming,” observing how crazy difficult it is to predict success in the startup space, and noting that just two companies – Airbnb and Dropbox – account for about 75% of the total value created by all YC-associated companies.

Yesterday, Dave McClure (the white-hot seed-stage Silicon Valley investor, familiar to readers of this column – see this discussion of his small bets style in connection with digital health) responded in a post titled (what else?) “Screw the Black Swans” that his investment model (at 500 Startups) is slightly different.

While most VCs are looking for the big score, McClure said, he’s deliberately seeking singles and doubles, which he basically expects will result in a similar expected value for his portfolio but reduce the chances of getting shut-out. He anticipates and is hoping for a greater number of successes (albeit more modest ones) than achieved by other VCs.

This will be a familiar dialog not only to investors but also to those in biopharma (who perhaps should be thought of as investors as well), as they continuously need to decide whether to go for a risky potential blockbuster or more of a sure-thing that ostensibly may be associated with a smaller market.

I’ve been fascinated with this exact question for a while (see here and here), and I’ve always looked at the problem a bit differently than McClure – which, if I’m right, may actually be good news for him.

Asking the Wrong Questions About the Electronic Health Record

Sep 19, 2012• 35

By Ashish Jha, MD

The wrong question always produces an irrelevant answer, no matter how well-crafted that answer might be. Unfortunately the debate on health information technology seems to be increasingly focused on the wrong question. An Op-Ed in the Wall Street Journal argues that we have had a “Major Glitch” in the use of electronic health records (EHRs). This follows on a series of recent studies that have asked the question “do EHRs save money?” Or “do EHRs improve quality?” with mixed results.

While the detractors point to the systematic review from McMaster, boosters point to the comprehensive review published in Health Affairs that found that 92% of Health IT studies showed some clinical or financial benefit. The debate, and the lack of a clear answer, have led some to argue that the federal investment of nearly $30 billion for health IT isn’t worth it. The problem is that the WSJ piece, and the studies it points to, are asking the wrong question. The right question is: How do we ensure that EHRs help improve quality and reduce healthcare costs?

The fundamental issue is that our healthcare system is broken – our costs are too high and the quality is variable and often inadequate. Paper-based records are part of the problem, creating a system where prescriptions are illegible, the system offers no guidance or feedback to clinicians, and there is little ability to avoid duplication of tests because the results from prior tests are never available. Even more importantly, the paper-based world hampers improvement because it makes it hard to create a learning environment. I have met lots of skeptics of today’s health information technology systems but I have not yet met many physicians who say they prefer practicing using paper-based records.

The problem is that some Health IT boosters over-hyped EHRs. They argued that simply installing EHRs will transform healthcare, improve quality, save money, solve the national debt crisis, and bring about world peace. We are shocked to discover it hasn’t happened – and it won’t in the current healthcare system.

Morgenthaler’s Picks: The Top Twelve Health IT Startups

Sep 18, 2012• 6

By Missy Krasner

Today we announced the 12 startup finalists for the 2012 DC to VC contest. DC to VC is a nation-wide contest to find the most promising health IT startups looking for Seed and Series A ($2-5M+) funding. An annual event started by Morgenthaler Ventures over a 3 years ago to help close the gap between what was going on in Washington D.C. (at ONC, CMS and the White House) and aligned interests in the Silicon Valley on health IT investing, the event has now grown into a large health IT startup competition. Morgenthaler Ventures got interested in this space when they invested in Practice Fusion over 3 years ago (they just invested in Doximity – see funding announcement). I joined as an Executive in Residence (EIR) in January after leaving Google Health and asked Matthew at Health 2.0 to combine forces with us to make the event even bigger–given he was our featured MC last year and will be again this year, too.

This year the application pool was overwhelming; we received over 140 applications to compete in the contest. Our pre-selection judges worked with us to narrow down the applications to the 13 finalists below who will present to a packed room of venture capitalists, angel investors, government officials and entrepreneurs on the last day of the annual Health 2.0 conference on October 10, 2012 in San Francisco, CA. Registration is open to all, so grab your seat fast as the room is getting packed!Continue reading…

How ObamaCare Could Cause Nonprofit Hospitals To Lose Tax-Exempt Status

Sep 18, 2012• 10

By David Whelan

Affordable Care Act (ObamaCare) has been knocked for its alleged unintended consequences. The bill’s attracted speculation that workers will lose their health plans, college grads will stop looking for jobs, and even that fewer people will get married.

Those are just the effects related to insurance regulations. Less attention has been given to how hospitals and health systems might change after ObamaCare.

The most common theory is that reform causes consolidation. But what if the effect on hospitals is even more radical? What if the legislation changes the largely nonprofit nature of the industry?

Right now approximately 60% of the 6,000 or so hospitals in the U.S. are nonprofit, while 25% are government-owned. The rest–fewer than 1,000–are for-profit. There’s a reason the pie cuts this way.

Religious groups, especially Catholic orders, opened many of these facilities as charitable institutions. (Ever driven by a hospital with Mercy in its name?)

Then during the post-war infrastructure boom the federal government offered subsidies to cities that wanted hospitals. Getting the money required nonprofit tax status and a promise to provide “community benefit.”

The Doctor-Patient Relationship. Is Over.

Sep 17, 2012• 28

By Rob Lamberts, MD

Probably the hardest part of making the change from a traditional to a direct-care practice is the effect it has on relationships. I am only taking a maximum of 1000 patients (less at the start) and will be no longer accepting insurance. These changes make it impossible for me to continue in a doctor-patient relationship with most of my patients.

For some, this transition will be more hassle than anything. Some people do everything they can to avoid my office, and so are not going to be greatly affected by my absence. They will simply choose another provider in our office and continue avoidance as always. There are others who see me as their doctor, but they haven’t built a strong bond with me (despite my charm), so the change may even be a welcome relief, or a chance to avoid initiating the change to another doctor.

But there are many people, some of which have already expressed this, for whom my departure will be traumatic. ”Nobody else knows me or understands me like you do,” one person told me this week. ”I’ve seen you for so many years, you just know so much more about me than any other doctor,” said another. I’ve seen tears, have gotten hugs, and get frequent demands for a clearer explanation as to what I am doing and why. It’s been a rough week for me, as I don’t feel I can cut off these relationships without some sort of closure. Fore someone who sometimes goes overboard in the importance of others not being mad, it’s been hell.

Out of the Box Thinking on Avoiding Hospital Readmissions. Stop Trying

Sep 17, 2012• 16

By Dr. Wes

As a cardiac electrophysiologist, I’m pretty far removed from public policy. But I have to admit that I was interested in the latest move by CMS to cut their Medicare payment rates to hospitals by invoking pay cuts for hospital readmissions. The Chicago Tribune‘s article is enlightening and filled with some interesting anecdotes after the first round of pay cuts were implemented: