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:
- 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.
- 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.
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.
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.
These NY Times articles are worth reading. The optimist in me sees how medicine is on the cusp of being transformed for many. The pessimist sees how far we have to go.
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.
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.
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.