The real fight for ‘health reform’

Last week ‘health reform’ was in the news because of the three days of hearings in the Supreme Court.   I believe the Obamacare law raises some very fundamental questions about the scope and role of the Federal government.    I was delighted that the country is finally having a conversation about the core issues raised by the law – a debate that should have happened during the legislative process.

Here are some of my favorite posts:

However, I found this WSJ article detailing the nasty battle between UPMC and Highmark to be way more telling about the future of the health delivery system.   There are many dimensions to the battle over customers, physicians and dollars that are interesting.   One paragraph in the article I found particularly fascinating:  “Early talks between the companies hadn’t gotten far. Highmark has said UPMC initially sought a 40% increase in its hospital rates. Mr. Romoff doesn’t dispute that but says it was a fair boost to make up for inadequate payments under the old pact with Highmark.”    Pricing power matters a lot in the health economy and having a good brand and substantial market share dramatically increases pricing power – which has been UPMC’s strategy.   What is unique about the health marketplace is that there are limited checks and balances to this market power – at either the payer or provider level, because the consumer of the service is not engaged and empowered to ‘shop around’ for value.

My view is – without pervasive price transparency, ubiquitous quality reporting and material economic incentives for consumers to be smart shoppers (where applicable) – ‘health reform’ will unfortunately lead to neither increased ‘value’ in the health economy nor bend the cost curve.

p.s. update — Highmark CEO fired.   Not germane to the discussion — but felt the update necessary.

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.

vNext for Neupert on Health

Last fall my wife and I became empty nesters and last month I fulfilled my long held promise to her of retiring from the ‘start-up’ lifestyle we have lived during our 24+ years of marriage.   I want to be engaged and making an impact on the health ecosystem – just with a different work-life balance.   I am delighted to have joined David Brailer’s Health Evolution Partners growth equity fund as an operating partner to help identify and grow innovative companies in health.   The health delivery system and overall ecosystem have a long way to go to become ‘digital’ and to benefit from the power of real-time data, ‘industrialization’, and consumer engagement.    The economic health of societies across the globe needs the health sector to adopt these changes and tools and faster!

 

Closing comments on Microsoft and Health Solutions Group:

I went back to work at Microsoft for a second time in 2005 after a seven-year absence where I was the founding CEO of drugstore.com.  One crucial lesson learned at drugstore.com was the role that government has in setting the rules of the game. So I decided I wanted to learn more about the government side of the business, and ended up on the President’s Information Technology Advisory Council. Because I was still chairman of drugstore, they made me co-chair of the health subcommittee.  And at that time, I got to learn from the IOM, from HHS, and from a lot of experts around the country that people die every day in our health delivery system because of inadequate information systems. That just seemed wrong and that more needed to be done to change it.

 

I decided to go back to work and try to make a difference.  I realized that to really make a difference in ‘digitizing the health economy’ required a company like Microsoft that would have the scale, tenacity, patience, and capabilities to build scalable health platforms.   We formed a ‘start-up’ unit inside Microsoft to capitalize on the observation that health is a big and growing segment that’s been under-invested in information technology.

 

Interestingly enough, during my first week on the job in 2005, Craig Mundie and I went to a GE Healthcare 2015 workshop hosted by GE CEO Jeff Immelt and Sir William Castell. Sir William had actually helped motivate me to go back to work with his inaugural speech at the Pacific Health Summit the summer before that talked about the need for completely different paradigms around early detection and prevention. Then to be able to participate in this two-day conference of 50 leaders in Crotonville, New York, in my first week backed formed a set of impressions that were inspiring and valuable.

 

Health has always been a part of my life, as it is with everybody. Everybody has personal stories. Healthcare information technology became a passion for me when I observed that health is fundamentally an information management problem, and for whatever reason, there wasn’t the class of systems inside of health organizations that enabled users to leverage real-time data for insight and action. It’s not because the technology suppliers were bad; it’s because the economic infrastructure doesn’t reward the kind of innovation that is rewarded in other industries. It’s a complicated problem and I recognized it would take many steps and time to change it.  My inspiration was to leave a better health system for my kids.

 

And that’s why most of my previous blog posts are centered around the idea that it’s not just about creating a better widget; you have to create a marketplace of incentive systems that allow and motivate people to adopt technology in a different way.   I intend to maintain this them in my blog going forward – as I find so many people operate with unexamined assumptions about the role of incentives and policy frameworks in driving health outcomes.

 

I’m proud of many things we’ve accomplished since starting the Health Solutions Group. We’ve built a trusted brand in an environment where people would have bet against us. Five years ago, people thought we were crazy to talk about personally controlled health records. Today it’s the law. So we’re helping to move the world in the right direction. And the fact that we’ve done it in a way that’s cooperative and collaborative with the rest of the industry is great.

 

The benefit of the new joint venture  between Microsoft and GE is that it allows us to move faster and accelerate our vision. I think it’s clear that customers expect Microsoft to play the role of platform, enabling a best-of-breed environment that allows them to choose from multiple vendors. It’s great to have GE, a first-tier application vendor, say, “Yes, I believe in an open environment, and I’m also going to invest in modifying my technology stack to go take advantage of this and to move forward.”

 

The vision of this joint venture — the vision that Microsoft has had of a connected, data-driven, health infrastructure — I see it happening. I think the only question is, “Does it take two years or 22 years?” It’s somewhere in between; it’s a matter of how fast reform can happen. I think more and more people will start to find ways to reap the benefits of bundling (as Zeke Emanuel wrote about in the New York Times), more prescriptive care pathways, and technology that lowers costs and improves patient outcomes.

 

So, it’s clear it’s going to happen. It’s just a matter of when. And whether the U.S. will be a leader or some other country leapfrogs the U.S. in capabilities.    I am confident the JV will have a major role to play in liberating the data, driving insight, empowering users and the health system alike to improve patient outcomes.