Health Care and the need for ‘free market’ dynamics

I haven’t posted for a long time, because most of the recent news, trends or policy debates just don’t seem interesting or to move the ball forward.    This op-ed in the Wall Street Journal captured my attention enough to warrant a post.   The title is Health Care and the $20,000 Bruise.   (paywall).   It is a (yet another) vivid description of how screwed up the health care financial/payment system is.    The physician op-ed author describes how the hospital billing department added an unnecessary $10k item to his son’s bill and the many efforts he had to go (reading CMS manual!) to get them to remove it.   Their insurance carrier did not catch it.     My strong belief is that in order to drive value (better health outcomes for the same/lower cost) in health care, there must be the feedback mechanisms of a real and scale marketplace.    That means buyers (in this case consumers) and sellers (providers) need to engage meaningfully in the dialog around value — price, quality, outcome, convenience and more.    The current framework of third party payers — either commercial or govt. — just doesn’t work.   Despite all of the excitement around the movement from fee for service to ‘value-based’ contracts, I suspect it is going to take consumers getting involved to make a real difference.    It is not going to be easy — for either the consumer or the system.      I know I have been personally spending a lot more time on my medical bills, EOBs, HSA payments and the limited value I receive from my health plan — but I will save that topic for a later post


I support this … from Dr. Ben Carson

“Not surprisingly, a practicing physician has un-PC thoughts on health care:

“Here’s my solution: When a person is born, give him a birth certificate, an electronic medical record, and a health savings account to which money can be contributed—pretax—from the time you’re born ’til the time you die. If you die, you can pass it on to your family members, and there’s nobody talking about death panels. We can make contributions for people who are indigent. Instead of sending all this money to some bureaucracy, let’s put it in their HSAs. Now they have some control over their own health care. And very quickly they’re going to learn how to be responsible.”

The Johns Hopkins neurosurgeon may not be politically correct, but he’s closer to correct than we’ve heard in years.”

as reported in WSJ from his speech at WH prayer breakfast. Love this guy!

Roadmap to Value in Health Care Delivery

Health care is a critical issue for a bunch of very good reasons:

  • the rising cost of health care is squeezing our personal, state and federal budgets.    We are spending more and more but don’t seem to be getting the type of health care we want — more convenient, on my terms, with better health outcomes.
  • as a rich society — our ability to provide an adequate social safety net is key to how we feel our society is doing — and access to health care is a crucial part of the social safety net — and yet many don’t have access to health insurance.   Can’t we do better?
  • health care is nearly 20% of our economy.    unfortunately a ton of that spending is of little to no or negative value, which hurts our overall economic growth and competitiveness.    other industries self correct through markets – but the health industry doesn’t.
  • Democrats (price controls) and Republicans (accountability and market forces) have very different approaches and hence want to either talk or demagogue about it, depending on your perspective
  • being able to solve both the access and the affordability part of the equation will improve our economic security — both for us as individual citizens and for the nation’s competitive position in the world marketplace.

Paul Ryan said in his convention speech last night that it was time to have a political discussion about the future of Medicare — and he is right on that.    I hope we can have an informed discussion.    Unfortunately —  there are many basics folks need to understand in order to have an informed discussion.

I strongly encourage anyone who wants to have an opinion on what we should do to improve our health system — including Medicare — to read this short pamphlet co-authored by Denis Cortese — former CEO of Mayo Clinic and chairman of the IOM Roundtable on Value & Science Driven Healthcare — where I was a roundtable member.      You can download it here, (go to bottom of page for download link).   Title is Roadmap to High-Value Healthcare Delivery.

I don’t want to summarize it – take 20 minutes and read the whole thing — it really will help you be informed on this crucial political and economic topic.    Improving Value (Value = Patient Outcomes / Total Cost) and aligning incentives to accomplish is the roadmap.     Warning — there is some math and charts in this pamphlet — but don’t let this get in your way.

When are we (society) going to acknowledge the need for this critical conversation?

Healthcare executives know and frequently recite that the majority of health care expenditures in a given year are from an incredibly small number of patients.    I don’t believe our U.S. citizenry generally understands neither this fact nor its implications.     I have heard various numbers over the years – 5% of patients account for more than 50% of the spend or as this WSJ article (sorry subscription required) on “The Crushing Cost of Care” reports — 10% of Medicare beneficiaries account for 64% of Medicare hospital spend in 2009.    There are two main drivers for this concentrated spending distribution – people with chronic conditions (more accurately multiple chronic conditions) and as demonstrated by the WSJ article – end of life care.

I don’t claim to know the right answer or even how to frame a constructive dialog about end of life care. (Check out the comments to the WSJ article as a depressing start).   Personally I have had to deal with several family members end of life issues and they are incredibly emotional and challenging without having to consider economic consequences.  However, I believe and have frequently written that ‘health care’ is an economic good.  As such, we (society) don’t have a limitless ability to supply ‘free’ health care.   Our country is nearly broke today – and when one considers existing entitlement spending projected into the future, especially on health – we know we can’t afford it without some change.    Furthermore, our current framework of indirect payments and complete lack of transparency of costs to both physicians and patients exacerbates the problem.

Neither political party is being responsible regarding this issue.   The Republican sound bite about “death panels” is inappropriately used as a political weapon that shuts down public education and constructive dialog – and ultimately makes the problem worse.   The Democrats fail to acknowledge that the current system is simply unsustainable economically and as a result forces the ultimate economic trade-offs to a faceless bureaucracy (the wrong place) and gives credence to the Republican argument.   Both sides are being disingenuous if not dishonest – which is not helping society learn how to deal with the amazing benefits/possibilities/costs of modern medicine and the inevitability of death and the moral dilemmas for doctors, patients and families that result.

Framework for future of medicine — from Health Evolution Partner conference

Last week, David Brailer’s Health Evolution Partners (where I’m currently an Operating Partner) held its annual conference in Laguna Nigel, CA.   What makes this conference really interesting is they get leaders from major companies across the health economy — health delivery system, research, big pharma, payers, tech — and add in a bunch of disruptive, small companies in the same setting which stimulates a diverse variety of interesting dialogs.      Folks are both inspired and enabled to take some concrete actions to either collaborate, do business or simply be smarter for having participated.

The first night had a quick fireside chat with David Agus and then a later panel which had Eric Topol and Bob Galvin on it.   Agus and Topol are leading researchers in genetics — but have a pretty different perspective on where to focus.   It would have been fun to see them on the stage at the same time.      Both have books out (I’ve finisherd Agus’, started Topol’s).    Here are my takeaways:

  • Agus is promoting a ‘systems biology’ approach to understanding and treating health and disease.    Genes are important — but we won’t find the answer by just improving our understanding of the genetic variations.    Our body is a complex system — which has many redundant capabilities and adapts to inputs.   We really don’t know why certain treatments work — but we should follow the evidence even we don’t understand the causal pathway.    I initially learned about ‘systems biology’, P4 Medicine and the challenges of building computational models of our body from Lee Hood in Seattle.   You can watch Agus at the KhanAcademy here.
  • Topol appears to be more firmly in the camp of truly understanding our genes will lead to the ability to treat and prevent disease.    This focus is similar to Frances Collins head of NIH.   In addition, Topol’s focus in his book (and other talks) is that technology convergence and consumerism will necessarily drive medicine through the digitial revolution that will unlock value.   Naturally I share his enthusiasm for consumerism and technology — but so far I’m in the ‘systems biology’ camp as the more likely framework to right.
  • Galvin made a key points about our need to be skeptical about technology as the solution to our cost problem and that we needed to focus on consumer/patient behavior.   He described the need for incentive systems and feedback loops to consumers to drive better outcomes.

Jeff Trent (founder of TGEN and whose team is doing some great work) later characterized the differences between Topol and Agus in a way I found interesting as:

  • Agus believes common sense trumps technology
  • while Topol believes technology will trump common sense.

The discussion matters (one is not right and the other wrong) because it should impact where our research dollars and programs go.    While average citizens don’t get involved in understanding and caring about our research priorities — they should.   In his book, Agus also shows how a ‘systems’ approach really should influence our health regimen and approach TODAY.    I agree.

TEDMED — further thoughts

There was no way I could keep up with the stream of incoming thoughts and people that I experienced at TEDMED.   Plus TEDMED had their own blog — which provides better coverage than I can do — so here is the official blog…which is worth a scan.

I learned a lot from TEDMED — I was particularly interested to learn about my microbiome.   The speaker — Jonathan Eisen — suggested it should be considered an organ, just like our skin.    His blog on the topic is here.

There were many thought-provoking questions:

  • the real impact of bias in the way data is published and shared from clinical trials.
  • the evolutionary future challenge of drug resistant bacteria — and whether it should impact treatment today and how
  • using gaming/crowdsourcing to figure out the right structure for a protein (go U of Washington)

One observation — which is further exemplified by the 20 grand challenges selected out of over 40 choices — is that there are SO MANY worth causes (diseases, fixing science in so many ways, engaging consumers etc) that real progress is on core issues (my definition — like getting a value driven, consumer centered health delivery system) is diminished as folks push their worthy agenda.    As Mike Leavitt said while Sec. of HHS — it is not that we lack political will – it is that there is too much political will that stops progress.

I was also struck by the many ‘chance’ encounters I ended up having with thoughtful, motivated and energized folks.  That is one of the great benefits of working in the health sector — the breadth and depth of the talent tackling the problems.     I hope the community really makes some progress in the coming year.

TEDMED 2012 — first thoughts

I’m attending TEDMED 2012 in Washington DC and I will try to add thoughts/insights each night.     The goal of TEDMED is awesome — to unlock imagination to inspire innovation.    It brings together folks from all sorts of different disciplines who care about improving the health of our society — an ambitious goal!    Jay Walker, who is now the owner/driver of TEDMED says he wants to build a community and a place for that community to come together.

Even though I’ve only listened to one session so far — I’m already convinced the conference will open my mind to both new ideas and new challenges — which is great.     There was a compelling talk by Rebecca Onie about the genesis of Health Leads — which basically unleashes the capabilities of college kids to support the basic health needs of underserved folks in the health delivery system (getting heat, appropriate food and other basic needs) which are the foundation for healthy living.    It accomplished its goal of being an inspirational talk.

I ran into a number of folks from the industry I already know – -but I also met a bunch of new folks doing interesting things or just trying to learn.   They all want to make a positive difference.   Here is one worth learning about —

Thoughts from HIMSS 2012

I am not normally a big fan of large trade shows –with all the hustle and bustle, it is hard to generate real insights or have meaningful interactions. This year, I got off to a good start because of two keynote speakers at CHIME – Ken Blanchard on leadership and change and Lowell Catlett on economics and consumerism. Blanchard helped crystallize some concepts around leadership styles and behavioral paradigms that will be very valuable in my new role as advisor to growth companies in the private equity world and Caradigm. Catlett — who ironically made a strong impression on me as the keynote speaker at my first CHIME a few years ago —  made a compelling case for “why this is a great time to be in healthcare and technology in America”. He is totally right and his basic logic is:

  • Wealth – cost of housing, food, transportation as a percent of disposable income is the lowest – ever!
  • Demographics – percent of the population entering the higher demand care years is large,  growing significantly, and has the money to pay for their preferences
  • Big data – there is so much room to understand what works, design new solutions, improve outcomes and lower cost, it is unbelievable.   
  • Consumerism – consumers/patients clearly want different experiences than available today – and innovators will combine big data, feedback loops, preferences and rearrange how services are delivered to meet this new demand.

Amid the noise on the HIMSS floor, overabundant influence of the regulatory machine and increasing downward cost pressures of our macro-economic reality, I remain very optimistic about the ability of innovators and entrepreneurs to build successful, sustainable and scalable businesses that improve health outcomes, reduce costs and deliver better consumer experiences. I have learned over the years that real change is harder and slower than I would like it to be – but it is clearly happening. As I have written before, policy makers could do many things to improve the focus on real ‘value’ in health delivery by getting the incentive systems right. What I confirmed through many interactions with health system executives and vendors alike – is that they are driving focus on delivering improved ‘value’ in preparation for however the payment system evolves. The consequence of focusing on ‘driving value’ is a clear demand for having a data strategy that goes beyond installing an EMR.  The organization needs to be able to have a ‘data fabric’ that connects many activities within the institution, with other delivery orgs, with payers and enables them to sustainably drive metrics, derive insights and improve workflows and then connect back into the EMR/ERP transaction systems.  This creates a number of opportunities for technology, content and services companies.  While many organizations are stuck in the weeds certifying Meaningful Use, many are ready to focus on the next stage and, hence, there is buyer bandwith to support the opportunity.

Given that it is a “great time to be in healthcare and technology”, this is an exciting time to be part of health focused, growth private equity fund to pursue change and opportunity.    There is nothing like exposure to interesting businesses across the supply chain spectrum – payments, revenue cycle, training, comparative analytics and more to begin rationalizing key components for value creation and the variety of approaches to assembling them to scale.  The ability to look across the breadth of pain points and innovation and connect it to investment theses around the impact of meaningful data sets and consumerism is where true value will be derived.

Sustainably innovating in health is different than other industries, due to the lack of many market signals (price transparency, consumer preferences, supply side flexibility).  There is an interesting discussion here.  The real challenge for entrepreneurs is how to find ‘beachheads’ to begin driving ‘value and innovation’ within today’s framework that will evolve and scale as the incentives change.