Category: health system

Thoughts from PMWC 2016

~ neupert ~ 4 Comments

I went to the Personalized Medicine World conference to learn more about how genomics (and other ‘omics) are advancing drug discovery, molecular diagnostics, current cancer treatment paradigms and creating new sectors like ‘scientific wellness.’   My general observations are:

  • The scope and pace of advancement is accelerating:   it is no longer curiosity driven research – searching to see what one might find.  People are figuring out how to leverage the tools/data into insights that enable better, more precise lab tests or smarter and faster drug development.   To borrow a phrase from John Doerr during the Internet boom – if anything the space is being under-hyped.
  • Roadblocks to adoption and commercial success remain:  the ability of existing institutions to adapt, change and incorporate new techniques, tools and solutions is much slower than the pace of innovation.   One of the biggest issues (as always in health) is the rigidity in the reimbursement system.   Another is the ability of the health delivery system (physicians) to learn when and how to use new options to improve patient outcomes.    Some, like HLI and Arivale, are simply bypassing the existing institutions and going direct to consumer.   Policy is another arena that is having trouble keeping up with the pace of innovation.
  • Large number of new companies going after opportunities: I was surprised at the number of new companies in almost every sector – new lab tests, new genomics tools, software platforms and companies/consortia going after drug development.   This field feels more global with key participants from international groups than in the early stages of the commercialization of the Internet, even though the conference was held in Silicon Valley (fittingly at the Museum of Computer History).    There is also a big focus on collaboration across companies, govt., academia in many of the cool projects – whether it be establishing of open standards, or large scale projects.
  • Obama’s Precision Medicine Initiative: I was surprised at how much play this got at the conference.   The money is relatively small (<$250M) out of a >$30B NIH budget – but it has managed to capture the imagination of many players and other countries.    One thing the government can do effectively is set the agenda and drive attention/focus on key priorities and the PMI is effective at doing this.    Kathy Hudson at NIH also noted – it (and Obama’s ongoing interest) is an effective tool for dealing quickly with otherwise intransigent inter-agency problems.
  • Quality of People: during my work career, I have been blessed with the opportunity to work with some of the amazing business people of my generation.    The people that are going after this field – the intersection of science, medicine, and technology – are truly talented, energetic, high quality problem solvers and forward thinking.    I was impressed and excited to see this, because it means the future is going to happen faster than many think.

The next two decades are going to be a continuing explosion of innovation, because there is so much for us to learn about how the body and the mind work and to how we can appropriately intervene to improve wellness and to mitigate disease progression.    Back in the early 1980’s when I started in the personal computer industry – no one predicted or visualized what a huge transformation was beginning.   I believe the transformation going on now in biology, health, medicine – will dwarf that one more than we can fathom today.

Lessons from Obamacare’s rollout you may have missed

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With all of the headlines, stories and political spin about Obamacare, you might have missed some of the key insights from my point of view.    There is a consensus among healthcare experts, industry stakeholders, politicians and consumers that the U.S. has a flawed, sub-optimal health care system.     There is an access problem (folks that don’t have either insurance or access to programs of care), a cost/value problem (we spend too much for the health outcomes we get for a bunch of reasons — to the tune of nearly a $800B/year), a funding problem (current trends of health spending by public entities is not sustainable and is crowding out other necessary investments) and what I will call a data problem (we don’t really understand what works and for whom, what things cost or how the various perverse incentives impact outcomes).     We lack consensus however on how to address these intertwined problems, on whether ‘competitive markets’ are appropriate and viable in the health delivery sector and on what kind of compassionate, modern and innovative society in which we want to live.

In previous posts, I have argued that the existing framework of government intervention (e.g. employer tax break for health insurance, Medicare pricing formulas/rigidity, HIPAA, etc.) is the root cause of many of the current problems above.   So the key question surrounding Obamacare and its implementation readers should consider — is more centralized government involvement (direct execution like healthcare.gov, or laws/regulation/mandates) likely to lead to a better healthcare system?     Let’s look at some recent evidence:

  1. Execution of the healthcare.gov implementation:   this project has failed on every imaginable front, which has been well documented.   However, the least reported but most important lesson here is the systemic failure of large, mission critical government IT projects — despite years of efforts by administrations of both parties to address the fact.  Last year,  I volunteered with the Romney Readiness Project and my role was to evaluate prior OMB efforts to improve the results of government IT projects and to identify potential solutions.   The record for both projects and improvement programs over the last 20 years is dismal and depressing.   The examples are too numerous to detail — the FAA infrastructure revamp, the IRS systems, health IT within VA and DoD — and more.   The GAO, OMB and each agency’s office of Inspector General provide ‘oversight’ and generate separate reports about failing projects — over budget (by billions), beyond deadlines (sometimes by decades) and suggest corrective actions — latest one here.    We have a new roles for “CIO” and “CTO” in OSTP in the White House.   Substantively — despite the oversight, good intentions and new roles — the results don’t change.     Government projects currently lack the appropriate framework for successful, large scale, mission critical IT projects — leadership/vision/clarity embodied in people, process, real-time adaptability, customer focus and a competitive environment driving real outcomes.     My chief hoped for lesson is that, as a result of the public failures of healthcare.gov, politicians and citizens acknowledge we need to radically re-think what IT projects are appropriate for government and how to do them.
  2. Tools available to the government for intervening or managing ‘markets’:  there have been a number of op-eds by experts recently touting the success of Obamacare.    IMHO, they are mostly misleading, wishful thinking or fail to examine the root causes noted above.    David Cutler in the Washington Post tries to give Obamacare credit for slowing healthcare costs in the past few years…which seems somewhat improbable given its core features haven’t been implemented yet.   The types of examples he gives are – CMS across the board rate cuts (blunt instrument account for 5%), change in hospital readmissions or hospital acquired infection payments (certainly don’t need Obamacare insurance mandates for this) and then the hopes for accountable care organizations or more focus on ‘value based’ reimbursement vs. fee for service.   His core claim that Obamacare had twin goals — more access/coverage and making care more affordable — I don’t accept when you observe where nearly all the energy is going (coverage).  Much of the ACO activity is in the private markets not in the Medicare market.   The primary tool for government to control costs (as currently structured) is to reduce rates arbitrarily or to constrain access — these aren’t the way markets work to deliver long term value.   Alan Blinder in a WSJ op-ed says in order for America to be a humane society we have to solve the coverage issue (uninsured) and to be an efficient society we have to improve health outcomes for the amount we spend.   I agree with these goals.   However, he uses this as an argument to say Obamacare is worth it, without considering any alternative paths to accomplish said goals. In my private equity role, I get to look at the landscape of emerging health companies.   Many of them are focused on optimizing around the rules set by Congress or CMS; one egregious example is the 340b pharmacy program which takes money from one pocket and puts it in another or another example has been the EMR market which was largely driven by helping physicians ‘code’ better — namely increase revenue per visit.   This doesn’t lead to better health outcomes for the same or less cost.    There are market segments in health;  cosmetic surgery, Lasik eye surgery, dental, — where market dynamics work.  In these segments, you have seen increased price transparency, bundling of services to deliver more value, flexibility and continuous adaptation/innovation which over time has delivered more value to society – as measured by more and better services for less resources.   Government controlled or centrally managed systems can’t deliver this type of outcome.    Good intentions and experts aren’t as effective markets with millions of incremental decisions made by providers and consumers/payers.

Update 12/4:   the question of Obamacare and credit for slowing costs continues — here is a great takedown of Krugman’s NYT attempt by Goodman in Forbes.

My hope is that as a result of the Obamacare implementation failures, we start to explore and debate alternative solutions and not just try to incrementally tweak Obamacare with more and more government power and decision making…which simply won’t work.

Book Recommendation — Fat Chance… by Robert Lustig M.D.

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I had the honor to listen to Dr. Lustig at the Health Evolution Partners Leadership Summit.    While he didn’t persuade me at the time — I did decide to read his book — Fat Chance: Beating the Odds Against Sugar, Processed Foods, Obesity, and Disease and it did change my understanding and thinking on obesity and nutrition.

I work hard to eat smart and stay fit.  I get easily frustrated by the impact of obese people in our ever day lives — in airplanes, amusement parks, and especially in our health delivery system (costs, equipment, injuries and more).   I was always taught that weight management was simple — calories consumed minus calories expended — determine weight outcome.    Lustig and the details in his book have convinced me that for many folks, the above is just not true (his claim is roughly 55% of US population).

Obesity is a major health problem and the issue has many public policy considerations (Bloomberg and Big Gulp anyone?) — so I figure we all need to be educated on how nutrition really works.     For details, examples and the science — read the book or watch the video — below are the key insights for me that he supports with science and/or things I have changed in my own routine:

  • sugar (all forms) is a much bigger culprit in weight gain than fat in our food.
  • how one’s body responds to sugar is multi-factorial (hormones, insulin resistant or not, and more).    Behavior and hormones interact with each other — often in pro-cyclical ways that are bad.
  • form matters (in addition to volume) — specifically fiber + natural sugar has a different/better impact than refined sugar alone
  • reducing caloric intake signals to your body to increase fat storage — so eating less by itself exacerbates the dieters situation
  • one’s weight by itself — is a very crude measure and can give false indicators for any diet regimen.   Improved muscle mass increases calories burned at rest.    The desired outcome and focus should be on the ratio of muscle/bone to fat.     if you start a weight loss program and reduce caloric intake without exercise — you lose muscle first (not fat) and make the problem worse.
  • breakfast matters (to the hormones) and breakfast should include proteins (more eggs in my future)
  • I stopped drinking OJ (even organic, fresh squeezed) in the a.m. — high in sugar and separated from the fiber, an easy change.
  • I switched my bread choices to be ones with a lot more natural and whole kernels in them (fiber again)
  • I switched from leanest fat possible meat choices (less than 10%) to feeling like 15% was ok
  • I am reading labels even more carefully.
  • I am more open to ‘public health’ options that impact the food environment

I don’t agree with Lustig’s polemic against the food industry nor with all of his solutions, which is why he didn’t persuade me at the HEP summit event.    However I do agree we need better public health solutions for this growing epidemic.    Now it is time for me to get out for my run!

Doctor and patient working together to find value (price and outcome) — what a concept!

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The news recently has been inundated with stories and speculation about the upcoming health insurance exchanges mandated by Obamacare.    In the meantime, the WSJ published this op-ed from a physician, who saved his patient $17k on a routine procedure by performing the procedure for cash and bypassing his insurance company completely.

I bring this op-ed to folks attention for the following reasons:

  • what the U.S. healthcare system needs is more “value” from its healthcare spending.    More people on ‘insurance’ alone does not drive value.
  • if we learn how to deliver more affordable healthcare (value) — then as a society we can also figure out how to provide access to everyone.
  • Our current third party payment system (public and private) creates not only an unconscionable number of mis-aligned incentives and it inhibits innovation around delivering ‘value.’      Single payer would be worse.
  • While most folks accept that market based systems deliver better products at lower prices (value) they then go on to say – but healthcare is different.   I accept that healthcare has unique attributes (e.g. I can’t shop between an accident and the ER), but I firmly believe that a market based healthcare system where the consumer/patient managed the purchasing of health services directly would be vastly superior to what we have.     This op-ed demonstrated in one small way how that could be true.

Observations from The Clinical Genome Conference

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I am interested in the progress of “personalized medicine,” so I participated in TCGC — The Clinical Genome Conference in San Francisco this week.     It is a small conference, mostly academics and scientists.  The biology and statistics were over my head,  nonetheless, I’m glad I went.

The core question is — is NGS (next generation sequencing or whole genome sequencing) ready to be used (and how) in clinical medicine?     We all hear about the $1000 genome is around the corner (that is your whole genome sequenced for ~$1000) — but having this test done, will it enable a physician to a) better diagnose what is wrong with the patient and b) will it enable the physician to better treat the patient?

My quick observations are:

  • I was surprised by the number of teams working on various elements of the problem around the world.    Prior to the conference I was familiar with several efforts, but there must be literally hundreds of teams working on tools, pipelines, proprietary data sets etc.    Clearly many see the science and market opportunities and they are pursuing them.
  • Many of the presenters talked about the same problems — lack of clear interfaces across the pipeline, lack of a complete or gold reference standard, need different tools for different parts of the genome/exome, still lots of manual curation required etc.   Then there were some new problems raised like patient consent, patient/physician reporting and education, clarity around things like sensitivity and specificity of the results and recommendation.    Many of these issues were raised in the CLARITY challenge I posted about earlier.
  • Lots of teams/companies are going after building an end-to-end pipeline of tools, dbs and knowledge.    Most of the existing tools are open source, as are many of the knowledge sources.    Given the immaturity of the industry — perhaps a vertically integrated solution is the right business approach.   There seems to be a some  “build it and they will come” thinking around business models.
  • Few talked about what I think a central problem re: faster adoption of NGS in clinical medicine is — namely the lack of new, targeted, identified or approved treatment options.    The “test” potentially improves the physician’s ability to diagnose the problem or understand the root cause of the disease — but for many conditions there are no treatment options.    The science is learning faster around the diagnosis side of the equation, which is good — but the lag time around finding, building and approving treatments may be the rate limiter for growth of the sector.
  • There are some interesting ideas around sharing knowledge and “crowdsourcing” solutions to the tough problems that should accelerate growth and adoption.     I found this one intriguing www.bioplanet.com/gcat — trying to build truth sets.

The sector is super exciting for its potential and filled with really smart, interesting and passionate people.     I will continue to monitor and stay involved.

Medicare to approach 6% of GDP by 2040 — contrary to media reports, reform more urgent than ever

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Medicare is projected to become nearly 6% of GDP by 2040 and less than 1/3 of that is financed by existing sources of income (payroll taxes and premiums) — the rest is going to come from deficits and transfers from general tax revenues.     This good news was recently released this month by the Medicare Trustees and is based on some rosy assumptions — namely the SGR actually happens (25% cut in doctor fees) — which has been postponed by Congress for the last 10 years.   For those of you who want to be educated about the finances of this critical entitlement and why/how it is driving our Federal and State budgets into further deficits, I encourage you to read this quick analysis by one of the public trustees.

My take is we need to reform Medicare — how it is financed and how it operates — if we hope to have any chance of getting government spending under control.    Yes, we need to provide health coverage to our citizens.    But it makes no sense to do so in a way that clearly does not work and is unsustainable.     As I have written in the past — we need to focus on ‘value’ in our health delivery system (better outcomes for less inputs) and not just access (insurance coverage and benefits).    IMHO, this means the consumer/citizen needs to be more accountable and have more choices.      The political dialog needs to start with citizens having a better understanding of our programs and what they cost.     You are not going to get that from the mainstream media — I hope you all read the analysis.

Is this any way to run 17% of the U.S. economy?

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Most readers probably don’t follow Medicare Advantage pricing — I know I didn’t until getting educated by one of the HEP portfolio companies (Censeo), which provides services to Medicare Advantage plans.    I also occasionally have CNBC on while I’m working in my office in the morning (a habit from my days in the MSNBC business).    When I saw the graphic of many health plans up over 6% in early trading, I decided to write this post.

Background:  in Feb. CMS announced in a preliminary ruling, that the amount they would reimburse plans for Medicare Advantage (MA) members would go DOWN 2.3%.    Yesterday CMS announced their final ruling — and that is MA pricing would actually INCREASE by 3.3%, hence the big gains in stock prices.    You can get more detail from CNBC here and the WSJ editorial take on the politics here.

What economic factors have changed in the last 60 days to support a swing of 5.5% on pricing of health costs for nearly 14M Medicare Advantage members?    This situation is a clear example of why the country needs to steadily move to more ‘market’ based pricing of health services instead of having them set by government central planners.     Let me identify a few of the negatives I see:

  • when ‘price’ setting is arbitrary — all the power/energy migrates to Washington DC.    Stakeholders all lobby and pressure both the agency (CMS) and Congress for protection.   Who pays — we all do!   I understand there are many examples of this negative (subsidies for sugar cane, milk, ethanol — you name favorite program) but the fact that Medicare pricing (not just for MA plans) is set by a govt. agency subject to political pressure on all sides and disconnected from the value creation/discovery of the marketplace has pervasive, unintended and negative consequences for the health sector.
  • where is the discussion/data of whether Medicare Advantage plans are actually better in terms of quality of care, cost and outcomes than traditional fee for service Medicare?        The MA plans are popular with folks eligible for Medicare, which is why enrollment has doubled since 2006 and exceeds 25% of the eligible Medicare population.     Apparently, CMS subsidizes MA members (e.g. pays plans more than fee for service Medicare) and this is supposed to decline over time (cuts anywhere?).    There is an old policy brief here, which I don’t think tells the real story.    Where is the data comparing both cost and quality trends of like populations in MA vs. FFS?    Has there been innovation by MA plans to provide better coordinated/managed care for categories of ill people?    What have we learned?
  • investors in Humana (and others) should be upset — how are investors (and management) supposed to make capital allocation decisions when decisions are set by central planners and subject to political pressure?
  • how are physicians and health systems supposed to make investment and capital allocation decisions around providing better ‘coordinated care’ — when it is not the economics driving decision making but some other, unpredictable set of forces?

John Goodman at NCPA has written consistently on the need for innovation on the “supply side” of health — namely how services get packaged, how entrepreneurial physicians would be incented to innovate and how consumers could discover what works for them — but all this can’t happen because “price” and “package” is set by a combo of CMS or health plans.

I want to see more innovation and better quality of care with better outcomes for the same or less cost.   I think it is possible.    We would get more innovation faster if Washington DC wasn’t the center of all decision making and planning.   Health is too important.

After $1B spent — VA and DoD abandon joint EHR effort — shocking news!

~ neupert ~ 2 Comments

I don’t know what is more outrageous:

  • the fact that both the VA and DoD have technologically out-of-date and insufficient HIT systems, despite spending hundreds of millions of dollars ANNUALLY to support them
  • the fact that after nearly a decade of efforts — interoperability between the systems is still a ‘future promise’ instead of an everyday reality
  • that politicians (President, Congress) make grand promises, divert lots of attention and money and have absolutely zero accountability to achieve meaningful results

I sympathize with the hard working and well-intentioned folks within the DoD and VA that build and procure their HIT systems — the context and rules within which they operate are screwed up to say the least.     That said, I can’t get myself too excited about the ‘sky is falling’ chorus around the upcoming budget cuts from the ‘sequester’.   This is but one example (of hundreds) where current government spending (I’m sorry “investment”) is not increasing productivity, real GDP or infrastructure for the future.

Audacity of spin-handlers for Obamacare

~ neupert ~ 1 Comment

I respect Don Berwick and Zeke Emanuel as smart, thoughtful and well intentioned policy folks.   Yesterday in an Op-Ed in the WSJ they tried to position Obamacare as ‘market-friendly’.   The audacity of positioning Obamacare as ‘market-friendly’ vs. the proposals of Romney/Ryan is just so outrageous that it can’t be allowed to stand without comment.   They must be subscribing to the theory the bigger the lie they tell — the more likely it is for the public to believe it.    From a quick scan of the online comments — at least they aren’t fooling the WSJ online readers.

One should really worry about the diagnosis and treatment plan from their physician when they either don’t see/acknowledge relevant facts or miscontrue the evidence to fit their preconceived notions, as is the case here.    Let’s go through some missing facts/evidence:

  • Medicare Part D — prescription drug benefits:   the market based approach of multiple plans, with different prices/formularies competing — with the consumer able to choose the right fit for them — has been a huge success and been substantially more cost-effective than any CBO or CMS projection at the time.
  • Medicare Advantage Plans:   super popular with Medicare beneficiaries — over 12M+ enrollees.   Again a program where the consumer chooses and the market is competing for their business.    Oh wait — maybe they didn’t mention this because Obamacare takes a lot of money from this program.    Furthermore — the whole point of MA plans is to encourage a focus on value (not volume) as they say they want (and I agree is critical — see prior post) — but just not in this ‘market-friendly’ approach.
  • Their approach is totally top down (ever see a top down, centrally controlled market work?):
  • support point 1 — administrative costs lower in CMS vs. private insurance — this is a total red-herring of comparing apples and oranges — but demonstrates clear bias to government centered
  • support point 2 — experts have determined that ‘bundles of care’ is critical to payment reform and CMS will help determine what payment models will work.    The rate of innovation will be determined by CMS and is again ‘expert-centered’ or government controlled.   This isn’t the way most markets work well.    Now — I accept that somehow CMS payments have to be reformed.    Seems like ‘vouchers’ with consumers choosing and suppliers competing might be a lot more likely to succeed here — even if it is messier.
  • support point 3 — IPAB.    This is the epitome of government centered without accountability.  I accept IPAB might be better than Congress in making recommendations on how to control costs — but to position it as ‘market-friendly’ and innovative — really?
  • Ryan Voucher plan:   the authors simply assert the Ryan voucher plan is “inadequate” and imply that throwing Medicare members on the ‘private market’ is inhumane….but provide no evidence (see first two facts above).   They prefer one size fits all vs. consumers/suppliers interacting in a marketplace to figure it out and drive continuous improvement.   The IOM recently released a report that estimated 33% of today’s health spend is waste and does not add to “value” in the form of better health outcomes — that is $750B in annual spend. Here is some evidence to suggest there is no credible reason today to say the ‘vouchers’ are inadequate.     It is more like the Chicago Teachers Union saying vouchers and charter schools can’t work — despite all the evidence that they do in the communities that have tried them.

After 60 years of a largely single payer, government run system in England the Cameron government has proposed real reforms that would move their system to be way more ‘market-friendly’, innovative in health delivery and empowering of consumer choice than Obamacare.    I prefer their treatment plan tothe authors.

We need a real political dialog in this country about the best framework to get more “value” from our health care expenditures — public and private.    The framers and spin handlers of Obamacare did not stimulate that objective debate….which was a huge disappointment and a lost opportunity.

Thoughts on the Supreme Court decision on Obamacare

~ neupert ~ 2 Comments

One can’t have a serious health blog and not discuss the Supreme Court decision to uphold most of Obamacare.    My initial reaction was real disappointment — because I truly believe the law is a bad law and bad for the future of our country.   I am not a lawyer and Roberts’ logic seems somewhat tortured, but after reading several legal blogs on the topic — I believe Roberts was sincere and apolitical in his reasoning and I support the outcome and the process.

As I have written previoulsy, the real problem is Obamacare does little to solve the true health care crisis in our country.   Worse, the political dialog regarding Obamacare has done nothing to educate the citizenry about the dysfunctional health system which could have enabled a more sustainable set of solutions.

There are three pillars — Access, Cost and Quality — that are part of any discussion for improving our health care system.   They are all important and intertwined.   Obamacare primarily deals with Access (individual mandate, pre-existing conditions, insurance exchanges etc.) but it does nothing meaningfuj and systematic to improve either Cost or Quality.   The biggest issue in our healthcare system is economic — we are not getting sufficient Value out of our huge healthcare spend (Value = quality of health outcomes – cost over time).   For example, the IOM and other experts believe that 30+% of our $2.2 trillion of spend is wasted — that is $750B annually!!!    The only sustainable solution to increasing Access is to make health care more economically affordable, which requires an improvement in Value, which requires changing the way the system is organized and incentivized.  Obamacare does not do this and in fact, probably makes things worse re: affordability and sustainability.   Increased Access to insurance within the current framework obviously does not drive or improve affordability — or we would not have the unsustainable health care cost trend we do.

I will develop further the themes of Value and affordability in future blogs.  This WSJ op-ed is a good start.   My strongly held personal belief is that free enterprise, marketplaces and competition amongst providers and payers is much more likely to improve Value and affordability than more government rules and bureaucracy.

Which leads me to my biggest concern resulting from the Obamacare political debate…which is; is our country headed more toward socialism vs. our traditional strength of ‘free markets and free peoples’.    As Chief Justice Roberts noted in his opinion — it is not the job of the Supreme Court to “protect the people from the consequences of their political choices.”