Can you handle the stream?

HealthStreaming is something that I’ve been thinking a lot about lately. We have all kinds of streams of data that help us make decisions these days: blogs, reviews, recommendations, financial data, etc. When I look at the data we’re gathering on the health side, I see a real disconnect: its primarily billing and clinical data built for doctors, hospitals, and insurance companies rather than the information that would help me to understand and improve my health.

Its not a surprising state of affairs: the consumer is not the customer of health care today, and information is gathered to meet the needs of health insurers, employers, providers, vendors (incl. pharma) and researchers. I would assert that most of this stuff in its current form is useless to consumers.

Yet, if we want to capture the experience and personalization we see in other places in our lives, we need to create the HealthStreaming infrastructure that captures and aggregates the data that actually matters for consumers as we all make our own health choices. As we’ve seen with EMR and PHR adoption rates, platforms like Google Health or Microsoft HealthVault are unlikely to take off until the data we want to use follows us with little effort, and killer apps allow us to use them in ways that transform our lives.

So what are the pieces of data that will matter as we start HealthStreaming?

• Social activity: What are our friends eating? Where are they exercising? What treatments have alleviated their problems or made them feel better? Everyday health decisions have a huge impact…and our everyday health decisions are shaped by our social networks. Nike’s done some interesting things with Nike+ and fitness across teams starts with school sporting programs and events from marathon training to run-walks.
  
• Desired health experience: What are our preferences in a health experience? How do we make trade-offs between convenience, quick solutions, and in-depth 1 on 1 time? Do we want the world’s expert or a simple solution? Do we want the best or good enough (at a discount)? If my wife loves the gym and I’d rather play sports outside, then for the same goal, there are two very different ways we should be engaged…and companies approaching us should know this and message accordingly. My company, HealthShoppr, is focused on creating a much more targeted health experience with every appointment. Zagat’s partnership with WellPoint and BCBS MN’s The Healthcare Scoop are other entities in the space. There are, of course, a number of companies laying out the infrastructure to deliver a better experience from MinuteClinic to Myca/ Hello Health to American Well.
• Personalized health risks and solutions: Where does my health stand today? I want to know what my risks are based on my genes and my health history and activities and conditions. I also want to know what interventions or programs will make the most difference for me or solve an issue in my everyday life. Michael Roizen’s RealAge is an example of making overall risk easy to understand. Phreesia is tracking our medical history and distributing it to the point of care. On the solution side, PatientsLikeMe, DiabetesMine, Disaboom capture the wisdom of crowds from those living with a disease. Leslie Michelson (Private Health Management) is allowing individuals to buy personalized research from the world’s experts (Best Doctors has a similar service).
• Activity tracking: How many calories did I burn? How long was my training in desired zones? How many calories did I eat? Did I remember medications? When did I feel pain? What made me feel bad/ good? What’s happening as I look at specific biometrics? All of these things need to be tracked easily and recalled in a way that allows us to learn what makes a difference. People like Neal Spruce (BodyBugg/DotFit), Adam Bosworth (Keas), Nike+, FitBit, are measuring what we do. Electronics manufacturers and tech companies are helping us to record what is happening with our bodies

As we begin to utilize data coming from HealthStreaming to truly make health care consumer-centered, I believe we’ll find that most of the existing data will be supplanted by new sources more relevant to individuals and the way they live their lives (much of today’s information is heavily clinical and focused on 3rd party billing).

Where do you think the HealthStreaming opportunities will be? How will those companies look different than those in today’s Health IT community?

His premise, which I’ve been arguing for a while, and which Dr Rich has written about eloquently as Covert Rationing, is that insurance, rather than solving the problems of cost, creates much of the problems we see today.

Insurance is all about betting against negative consequences and the insurance business model is unique in that profits depend upon goods and services not being provided. Using actuarial tables, insurers place their bets. Sometimes even the canniest MIT grads can’t help: Property and casualty insurers have collapsed in the wake of natural disasters.

Health insurers have taken steps to avoid that level of surprise: Once they affix themselves to the host – in this case dual hosts, both doctor and patient – they systematically suck the lifeblood out of the supply chain with obstructive strategies. For that reason, the consequences of any insurance-based health-care model, be it privately run, or a government entitlement, are painfully easy to predict. There will be progressively draconian rationing using denial of authorization and steadily rising co-payments on the patient end; massive paperwork and other bureaucratic hurdles, and steadily diminishing fee-recovery on the doctor end.

While I approve of his overall premise that physicians, especially those practicing minor surgery or primary care, should move away from the insurance model for reimbursement, I think his rationale doesn’t address some of the core misassumptions out in the marketplace today.

But a hefty proportion of health-care services – office visits, minor surgeries – would be affordable to most Americans if the slice of the health-care dollar that currently ends up in the coffers of insurance companies was eliminated.

Its not that insurance companies, as the middleman, are making health services unaffordable by inserting themselves in the transaction and charging fees (although for small dollar services, the processing overhead can be truly phenomenal–over 50%). Its really that the type of transaction being incented by payment is suboptimal– the focus on technology instead of communication, personalized advice, and support has led to a severe underutilization of primary care services. Even more so, by removing the price discussion between consumers and providers, incentives to provide incremental services that financially benefit the provider have raised costs tremendously over time. In fact, cash prices and “usual and customary” fee schedules are largely unrelated, as Kellerman highlights

Several years ago, I suffered a sports injury that necessitated an MRI. The “fee” for a 20-minute procedure was over $3,000. My insurance company refused to pay, so I informed the radiologist that I’d be footing the bill myself. Immediately, the “fee” was cut by two thirds. And the doctor was tickled to get it.

In fact one of the biggest issues with the 3rd party reimbursement model is that innovators creating lower cost, disruptive models lose their customer base, as customers are not forced to make choices between higher cost and good enough. In essence, we’ve installed a model that systematically starves out the low cost innovators, who instead have been conditioned to always make something better and more expensive. Clay Christensen’s explanation of low-end disruption:

“Low-end disruption” occurs when the rate at which products improve exceeds the rate at which customers can adopt the new performance. Therefore, at some point the performance of the product overshoots the needs of certain customer segments. At this point, a disruptive technology may enter the market and provide a product which has lower performance than the incumbent but which exceeds the requirements of certain segments, thereby gaining a foothold in the market.

In low-end disruption, the disruptor is focused initially on serving the least profitable customer, who is happy with a good enough product. This type of customer is not willing to pay premium for enhancements in product functionality. Once the disruptor has gained foot hold in this customer segment, it seeks to improve its profit margin. To get higher profit margins, the disruptor needs to enter the segment where the customer is willing to pay a little more for higher quality. To ensure this quality in its product, the disruptor needs to innovate. The incumbent will not do much to retain its share in a not so profitable segment, and will move up-market and focus on its more attractive customers. After a number of such encounters, the incumbent is squeezed into smaller markets than it was previously serving. And then finally the disruptive technology meets the demands of the most profitable segment and drives the established company out of the market.

Indeed, less insurance, especially for low-dollar items will create consumer demand for “good enough” services, especially where they add convenience or personalization as we’re seeing with the retail clinics. Unlocking the system to a market based pricing approach will create more effective primary care approaches that can better address the issues of non-adherence to therapy and significant frictional cost incurred with each doctor’s visit.

Medicare proposed sweeping changes to the way it reimburses hospitals, outlining a plan that would essentially redistribute cash by reducing payments across the board and then giving providers a chance to “earn back” money by meeting quality-of-care thresholds.

Its not surprising to see individual providers opting away from Medicare patients with reimbursement not tracking to inflation, and with a 10% punitive Medicare reimbursement cut hanging over their heads, and noise about further requirements for installation of EMRs making their economics look even worse.

Unfortunately for hospitals, demographics dictate that a large portion of their patient population and revenue is tied to Medicare, where these unilateral decisions can be made. (Medicine and Economics blog has a great post on government’s difference from corporations and charity being the ability to use force, Covert rationing blog has a great post on how Medicare/insurance contracting is non-negotiable, and therefore monopolistic and potentially illegal)

“We think this is another step down the pay-for-performance road,” said Tom Valuck, who led the project for the federal Center for Medicare and Medicaid Services, or CMS. “That’s the heart of pay for performance — if you’re not performing, you’re not paid as much.”

As laid out in the report, Medicare would cut payments to all facilities by a flat 2% to 5%. That money would then form an incentive pool for distribution to hospitals that show the most improvement or that meet or surpass certain thresholds on a variety of quality measures. The plan, dubbed “value-based pricing,” would require congressional action to implement.

As you can see from the statements made, there is no win-win in this equation. In this case, hospitals, many operating on margins under 5% will find their Medicare reimbursement cut by 4-5% by government fiat. The government may then give back some of that money, and if they do so, there are lots of new documentation and process requirements that will further dictate how you deliver care.

The agency said the program is designed to be cost-neutral to the government, and could even save money if Congress decides not to require redistribution of all the withheld cash. Lawmakers ordered up the report in 2005 as part of a deficit-reduction act.

And here is the kicker. Under the guise of quality, Medicare may simply cut reimbursement and not give it back. After all, the report was ordered up as a way to see if they could take money out of the Medicare kitty.

In the private world, innovators get large market share shifts and laggards get to try to hold onto their share, but pricing declines and quality increases because innovators get outsize rewards, and work harder to create better value for the market to earn them.

The Medicare approach is more akin to having a rat in a cage getting random shocks to speed its journey down the treadmill. Everyone is being prodded at the same rate, regardless of the effort’s ability to address market needs, and government provides random, unpredictable shocks that redirect the herd when it realizes the course it plotted isn’t working as planned.

In entrepreneur/ IT parlance Medicare is using the Waterfall model (give them specs, lock them in, and see what you get), rather than the entrepreneur’s agile model (beta test, iterate, iterate). The difference is that in a market system, entrepreneurs are essentially a portfolio of pilot tests, allowing society to pick things that are proven to work before creating major shifts of share to promising but unproven methods or technologies. The current approach is akin to running a herd of lemmings full speed toward a perceived crossing of a gorge, and hoping that there really is a bridge there upon arrival so they don’t all fall in.

Personally, I’m excited to see Medicare play such a heavy hand– it accelerates the animosity towards and ineffectiveness of the current comprehensive insurance-based system, priming it for alternate solutions (such as Health Shoppr‘s development of a retail marketplace for health services, coming in late 2008). As a physician, I see the current approaches to be unsustainable and within the next decade, I think we’ll see a significant retreat from comprehensive insurance toward catastrophic only (potentially lump-sum payment vs. defined benefit).

That infrastructure doesn’t yet exist today, and the PHR as an aggregator of data, such as Microsoft’s newly released HealthVault won’t change that. You’re not going to see a critical mass of people go through the trouble of assembling their medical records online, unless they think its going to do something for them. In that sense, it is somewhat comforting that the backers of HealthVault have deep pockets, as it will be a while before consumers move to this platform. What’s missing? The killer app.

In the PC wars, IBM compatible PCs became a standard, not because DOS was better than Apple’s operating system (it wasn’t) but because Lotus 1-2-3′s spreadsheet ran better than the VisiCalc spreadsheet on the Apple II– propelling IBM sales in the crucial business sector.

Until that killer app rises, with incentives aligned with purchasing parties, we’ll see adoption stay at the level of the current Electronic Medical Records systems– nice, but not yet Crossing the Chasm over into the mainstream.
Fortunately, as mentioned by RWJF‘s Lygeia Ricciardi, the business models of software companies work well with the creation of a platform that creates common data and standards.
Data contained in repositories such as HealthVault’s can form the bases of powerful tools that help individuals make good choices about health behaviors.

The open platform is likely to create economic opportunities for developers of PHRs and related applications. According to Peter Neupert, Corporate VP of Microsoft’s Health Solutions Group, for every $1 Microsoft earns from its existing products, applications that build on them earn $7. It would be great for PHR developers if that ratio were to extend into the health sector, too.

So if the killer app is going to deliver most of the value, what will it be? If you believe in Clay Christenson‘s approach (Seeing What’s Next: Using Theories of Innovation to Predict Industry Change), these will have to fulfill some existing need on behalf of the purchaser–to perform a job. What might these jobs be?

Here are some of my thoughts. Please chime in with yours.

• Dashboards highlighting important trends with submitted data, and giving understandable means of addressing them (and tracking progress)–likely to require at home collection tools
• Scores synthesizing the complex information into a simple, meaningful number (e.g., Real Age)
• Connecting people with volunteer mentors, just like them, to address new diseases or improve risk factors
• Reduction in out of pocket health costs through reduced insurance premium
• Educational media (incl. games) that help people understand what pieces they think are important
• Telehealth services allowing at-home delivery of desired care leveraging the record

Clearly, as with any new platform, the PHR and HealthVault appear only mildly useful. What will be telling is what the cutting edge health hackers start doing with the platform to create next-gen applications.

The authors list many issues for the failure of the experiment: lack of a compelling business case, distorted economic incentives, passive leadership among participants, vendor limitations, software delays, and privacy and security issues as factors that played a significant role in the project’s eventual closure

Overall, it appears the lack of a compelling business case undermined the whole attempt– as participants could not rally around any one defining approach or benefit that would sustainably change any aspect of the business by creating benefits or addressing motivations of specific parties.

This is a key reminder emerging from this failed experiment– that innovation happens because it helps one party compete better. This is why innovation occurs at the fringes, rather than for the masses. Change is hard, and unless someone benefits enough to grow and change the way the marketplace works, nothing is going to happen.

For advocates of EMRs, this is a strong reminder, that nothing will happen until some providers derive significant benefit from capturing the data. What are the business models for making this happen? In my mind P4P is too mild to cut it.

They have some interesting entries, although I think they significantly constrained their field by focusing on nonprofit organizations only.

Nonetheless, some interesting ideas, so vote for your favorites.

Finalist	Country of origin
Project ECHO: Knowledge Networks for the Treatment of Complex Diseases in Remote, Rural, Underserved Communities University of New Mexico Health Sciences Center	United States
Family Coaching Clinics: A New Model of Preventive Mental Health Care UCLA Semel Institute Global Center for Children and Families	United States
Patient Opinion International Patient Opinion	United Kingdom
Saúde Criança Renascer- An integral perspective of health. Associação Saúde Criança Renascer	Brazil
Scojo Microfranchises Deliver Affordable Reading Glasses to the Rural Poor Scojo Foundation	United States
Instant Birth Control Planned Parenthood of the Columbia/Willamette	United States
Respira!: An Extremely Affordable Device for Better Asthma Care Stanford University Design School/ School of Medicine	United States
Space age medical care for use on Earth Henry Ford Hospital	United States
Rotavirus Vaccination Via Oral Thin Film Delivery Johns Hopkins University	United States
Better AIDS treatment for patients living in resource poor regions PointCare	United States

http://www.changemakers.net/en-us/competition/disruptive

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Susan Promislo said…

Hi Vijay,

Thought you and your readers might want to know that anyone can now vote for their top disruptive innovation in health and health care at the RWJF/Changemakers competition site at http://www.changemakers.net/en-us/competition/disruptive. Nine finalists were selected from more than 300 entries – voting ends Aug. 29 and three winners will be selected. Hope you all will participate – thanks.

Susan Promislo
Robert Wood Johnson Foundation

Customers want to “hire” a product to do a job, or, as legendary Harvard Business School marketing professor Theodore Levitt put it, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”

It strikes me that one of the core issues with the health system today is that we focus on systematic, top-down costs combined with delivery and payment asymmetry. We have fragmented networks of providers looking to maximize reimbursement. We have payors ranging from government to employers to insurance companies. We have lost track of why people are paying for medical care to begin with–or we are shortchanging the other expenditures that serve the same “jobs” as health.

So lets step back and think about what jobs people are “hiring” health practitioners and products to do. In many cases, this has nothing to do with wonky goals like “universal coverage”, “quality ratings”, or “cost-efficient care”. Most people care not about cholesterol or C-reactive protein or PSA levels until the heart attack or cancer words spring up. So what are people looking for when they go to the healthcare system for help?

Some pleas from my days on the wards and clinic come to mind for me:

• Make it stop hurting/ help me feel better
• I want to live
• I don’t want to lose my (loved one)
• I want to be able to _______ again
• I need to do __________ for ____________
• I want to improve my chances with ____________
• I need more time to be remembered as ___________

However, I know these are biased to a hospital/ acute care setting. And the jobs proposed by insurance companies and employers for health providers differ radically as well. Over the next few weeks, I’m hoping an exploration of the “jobs” each faction hires health providers to perform makes some of the checks and balances of the system a little clearer.

But I’d love to hear from you as well–what “jobs” do people hire healthcare to perform– and how can those be done better?

In this case, recent research (in the wake of the Avandia mishaps) that metformin was, in fact, not only cheaper but also had fewer side effects. Better and cheaper normally results in a better market share– except in pharmaceuticals where post- patent expiry, all attempts to promote a good drug disappear.

It’s an interesting dilemma, and we again see strange dynamics created by the third parties in US healthcare– this time pharmaceutical distributors (Merck Medco, Cardinal Health, McKesson). In any other business (including OTC pharmaceuticals), companies can take similar or commodity products and create brands (think about how different the oil sold by oil companies is). Do Tylenol (acetaminophen) or Bayer (asprin) have any special qualities that keep others from producing them? Clearly no, but they have a consumer brand nonetheless and are able to generate profits created through strong branding– which keeps consumers aware of the heart protection and pain relief properties of these leading compounds, and also results in modest innovations like capsules, gelcaps, and Cool Caplets. There are also some examples in Europe, where brands can be created around generics– and why Hexal commanded a strong valuation when purchased by Novartis a few years ago.

It is only where generic substitution happens with any company’s compound, as we see in the US, that we see zero investment in the promotion of the molecule. This is the tragedy of the commons– since promotion would benefit all at cost only to the advertiser and it is unclear how the advertiser would gain share, no one advertises.

For those who seek to remove all profit from medicine– think about what happens to innovation and promotion of good, commoditized treatments. How would medicine continue to respond to our increasing demands for better health and better care?

Addendum 7/18:
I think generic substitution, especially within therapeutic classes has really interesting consequences. The example of the day is Pfizer, where within-molecule generic competition dropped Norvasc sales by 45% and within therapeutic class competition with generic Zocor dropped Lipitor sales 25%. The overall impact to Pfizer– a 48% drop in profit.

Previously, pharma companies had thought that innovating within established classes was safer than developing new ones (mainly because they had proven mechanisms of action and were less likely to fail in trials).

Now, business cases around pricing and gaining market share in the face of a therapeutic area where a generic will cause market constriction may cause pharma companies to refocus their efforts on novel mechanisms of action– creating real value for innovation in the space and a move away from “me-too” risk aversion.

Addendum 8/1
The recent WSJ article on the struggles of BiDil highlight another example of generic medications losing the ability to generate additional research or promotion due to the lack of opportunity for profit–and vast markups (on order of hundreds of dollars, not 10-20%) for branded products in pharmaceuticals.

“There is no systematic reward for excellence and no penalty for mediocrity. As a result, excellence tends to be the result of the energy and enthusiasm of a few individuals, who usually receive no financial reward for their efforts.”

However, Goodman takes two aspects: price and quality too far. In citing the retail clinic, he claims that transparent pricing and quality of service allows success outside of 3rd party payment.

However, in discussions with Linda Hall Whitman, former CEO of MinuteClinic, this example falls somewhat short. 3rd party payment was a key to the financial viability of the MinuteClinic, including significant funds from BCBS MN. MinuteClinic’s success was based instead on SUPERIOR service combined with SUPERIOR quality at half the price.

There appears to be three approaches that consumer-focused innovation can improve upon to drive real adoption: 1) Out-of-pocket price, 2) Expected quality of care, 3) Expected level of service.