If You Can't Beat Them, Fund Them!

This post was originally featured on EMRandHIPAA.

In Where Does It Hurt, Athenahealth CEO Jonathan Bush explicitly calls out a number of businesses that are disrupting hospitals. Specifically, these businesses are performing a single function – e.g. labs, imaging, birthing, urgent care – at a much lower cost with higher quality than general-purpose hospitals. These modular businesses are disrupting hospitals by ruthlessly focusing all of their operations around a single service line to optimize quality and reduce costs. This stands in stark contrast to hospitals, which generally try to be all things to all people (the antithesis of entrepreneurship and general business practices).

I’ve previously outlined how healthcare providers are struggling as they shift to risk-bearing reimbursement models. They’re straddling two dramatically different business models as they try to transform their businesses from fee-for-service to risk-bearing. Inverting a business with thousands of employees and billions of dollars worth of assets and processes is nearly impossible. This is even more challenging in a highly uncertain and fast-changing regulatory environment.

But what if there was a better way?

In the Innovator’s Solution, author Clayton Christensen describes how multi-billion dollar companies such as Apple, IBM, Johnson and Johnson, and Intuit have disrupted themselves. When faced with disruptive changes in their respective businesses, these incumbents disrupted themselves by:

• Funding a separate operating division with its own P&L
• In physically removed location
• With dedicated employees who have no responsibilities to the old business model.

This formula by no means guarantees success, but it creates an environment in which the disruptive division can potentially save the business as a whole, so long as the disrupting business has the operating freedom to disrupt the parent. Employees shouldn’t be bound to the processes, assets, and values of the old business model.

How can providers disrupt themselves?

How can providers, in particular large hospitals and health systems, adopt Christensen’s disruption framework? By funding their disruptors! This strategy drives value across a number of dimensions:

1) Hospital management will have the opportunity to learn about the operational expertise necessary to modularize their existing operations at a lower cost

2) Hospital management will have access to insider information about their own disruption that they would otherwise lack. They can in turn use this information to make smarter decisions about their own businesses, and potentially buy out the disruptees if they become too disruptive.

3) Drive inbound referrals from the periphery to the hubs

4) Generate a financial return

A practical example

My company, Pristine, recently spent some time learning about urgent care centers. We wanted to sell urgent care centers a lightweight telehealth platform so they could beam specialists and hospitalists into the urgent care center. This would allow the urgent care center to generate more revenue by avoiding “leakage” while also generating more revenue for the consulting specialist, guaranteeing more referral traffic to the host hospital, and providing the patient a more convenient experience. All parties would win. The idea was perfect in theory, except…

We discovered that non-hospital owned urgent care centers generally dislike hospitals, and are in fact too proud of the quality of care they provide to patients at much lower cost. These urgent care centers know that they’re disrupting hospitals, but are holding that against the hospitals as a reason not to align interests. Similarly, the hospitals view the urgent care centers as a competitive threat and have no desire to do business with them.

The more I think about this situation, the more I’m convinced that hospitals should invest in their disruptors. A financial tie will massage the hard feelings that exist and create an opportunity in which community resources can be most effectively coordinated across the continuum of care. As we move towards risk-based models, hospitals will need to drive patients to the most capitally efficient cost center that can diagnose and treat the patient.

What are your thoughts? Do you know of any major health systems investing in their disruptors? Or of any health systems that are outright trying to disrupt themselves by establishing modular service lines themselves? (Banner Health and University of Arizona are doing this to some extent!)

Why Are Telemedicine Systems So Expensive?

This post was originally featured on EMRandHIPAA.

Like many other enabling-technologies in healthcare, telemedicine has vast unrealized potential.

If we make location completely irrelevant and can deliver care virtually, we can address the supply and demand imbalance plaguing healthcare. The benefits to patients would be enormous: lower costs and improved access in ways that are unimaginable in the analog era.

However, one of the many roadblocks to adoption is the cost of the legacy technology powering clinical telemedicine use. In this post, I’ll outline why the telemedicine systems are so expensive, even in the era of Skype and other free video-conferencing systems.

The Telemedicine Industry Is Old…School

Telemedicine as an industry has existed for about 15 years, although uses of telemedicine certainly predate that by another 10-20 years. A decade and a half ago, the foundational technologies that enable video-conferencing simply weren’t broadly available. Specifically, early telemedicine companies had to:

1) Develop and maintain proprietary codecs
2) Design and assemble hardware (e.g. proprietary cameras) and device drivers
3) Deploy hardware at each client site and train end users on its management
4) Build an expensive outside sales force to carry these systems door-to-door to sell them
5) Endure long, grant funding-driven sales cycles

Though some of these challenges have been commoditized over the years, many of the legacy players still manage and maintain the above functions in-house. This drives up costs, which in turn must be passed onto customers. Since many customers initially paid for telemedicine systems with grant money (that telemedicine technology companies helped them write and receive), the market has historically lacked forces to drive down prices. Funny how that seems to be a recurring theme in healthcare!

But, there’s a better way

Today, many startups are building robust telemedicine platforms with dramatically lower cost overhead by taking advantage of a number of technologies and trends:

1) Technologies such as WebRTC commoditize the codec layer
2) The smartphones, tablets, and laptops already owned by hospitals (and individual providers) have high quality cameras built into them
3) Cloud providers like Amazon Web Services make it incredibly easy for young companies to build cloud-based technologies
4) Digital and inbound marketing enable smaller (and inside) sales forces to succeed at scale.
5) To reduce the cost of care, providers are increasingly seeking telemedicine systems now, without wading (and waiting) through the grant process of yesteryear.

In short, telemedicine companies today can build dramatically more cost-effective solutions because they don’t have to incur the costs that the legacy players do.

Why don’t the old players adapt?

The simple answer: switching business models is exceedingly difficult. Consider the following:

1) Laying off hardware and codec development teams is not easy, especially given how tightly integrated they are to the rest of the technology stack that has evolved over the past decade

2) Letting go of an outsides sales force to drive crafty, cost-effective inside sales is an enormous operational risk

3) Lobbying the government to provide telemedicine grants provides an effectively unlimited well to drink from

Changing business models is exceedingly difficult. Few companies can do it successfully. But telemedicine is no different than all other businesses that thought they were un-disruptable. Like all other technologies, telemedicine must adapt from legacy, desktop-centric, on-premise solutions to modern, cloud based, mobile and wearable-first solutions.

The Health Insurance Demand Problem

This post was originally featured on EMRandHIPAA.

A family friend was recently admitted to the hospital after a traumatic motorcycle accident in Colorado. He’s not in great condition, but he’s hanging in there. In light of having just written this post about the cost of highly acute care, I couldn’t stop pondering about his health insurance.

Health insurance is a bizarre creature. Unlike other forms of insurance, people actually want to consume what they’re insured against, defying the very premise of the insurance model!

Confused? Let’s dive in.

No one wants to consume traditional insurance

People never file claims for traditional forms of insurance unless something bad has happened, like car or home accidents, natural disasters, or death (covered by life insurance). In some of these cases (like minor fender benders), the insured customer often elects not to file a claim in order to avoid a premium increase. When people do file traditional insurance claims, that means something sufficiently bad has happened, and the insurance system kicks in place to recoup the damages.

People do want to consume healthcare insurance

Healthcare insurance is a wildly different animal. Only a small percentage of total hospital admissions are highly acute, catastrophic cases. A large majority of the care delivery system services non-catastrophic cases, from preventive care to counseling, scheduled (and elective) surgeries, and skin rashes, for example. Patients want as much (non-catastrophic) healthcare as reasonably possible, and they want their insurance companies to pay for it.

This is a classic principal-agency problem. The person making financial decisions isn’t bearing the cost of those decisions; in fact, the person making financial decisions is empowered to blindly spend without thinking. To make matters worse, many healthcare providers encourage patients to consume costly diagnostics and procedures with little regard for value, knowing that insurance companies will pick up the tab.

Realigning incentives

As it currently stands, this system breaks most of the basic assumptions of capitalism: the principal-agency problem, pricing information, and ability to compare producers/providers.

Reducing demand and utilization of healthcare resources is impossible. Since patients are currently incentivized to demand unlimited care without caring about cost, supply will always find a way to satisfy demand. So, how can we realign the incentives to fix the system?

The only way to reduce demand is to make patients accountable for their own healthcare expenses. With the insurance customer suddenly conscious of the cost and value of their subacute healthcare consumption, providers will be incentivized to compete and offer lower costs.

Thus, insurance companies should provide patients “catastrophe-only” plans. These plans would fully and generously cover highly acute care needs, like trauma, cancer, or stroke care. However, like a vehicle insurance plan without comprehensive coverage, the cost of treating the medical equivalent of a keyed car (e.g. a purely speculative blood test) would fall to the individual.

As CEO of a company in the healthcare space, it pains me to know that I’m contributing to the healthcare incentive problem by providing employees with a traditional healthcare plan. But until healthcare insurers offer catastrophe-only plans, patients will continue to blindly consume. In fact, even the Affordable Care Act failed in this light; the national and state-based exchanges don’t offer a single catastrophe-only insurance plan. They are all bundled and are ripe for unbundling.

You Better Stay Healthy, Or Else...

This post was originally featured on EMRandHIPAA.

As I read Jonathan Bush’s new book, Where Does It Hurt?the most salient problem that Bush discusses is that hospitals can’t effectively measure or attribute their costs. As a result, they can’t make good decisions since they don’t know how to attribute costs and revenues.

Although this has been widely known for sometime, the implications of this are particularly interesting. Since hospitals don’t know how much it costs to actually deliver care (especially multi-faceted, complicated care), their various revenue streams are effectively subsidizing their expenses in an almost random manner. Accounting for costs and attributing revenue is nearly impossible.

Bush notes that more focused care centers – such as standalone labs, imaging centers, and minute clinics – can afford to offer many of the same services as hospitals with equal or greater quality at a lower cost. They can achieve this because they have dramatically less operational overhead than hospitals and have staff performing the same core basic functions repetitively. Indeed, practice makes perfect.

There are hundreds of companies all over the country building healthcare practices based on this very premise: labs, imaging, procedures, home health agencies, ASCs, birthing centers, cath labs, urgent care, retail clinics, and more. Focused-centers are slowly eating away at hospitals by providing better services at lower costs.

Today, hospitals make enormous profits by dramatically marking up routine procedures and services. But that won’t continue forever. As the ACA pushes patients towards high-deductible plans so that patients act more cost consciously, they will seek the more affordable alternatives. Patients will not agree to pay a $300 ER copay and $2000 MRI when the urgent care center down the street offers a $99 copay and $400 MRI. As patients make better decisions, hospitals will lose some of their easiest, most profitable revenues: extremely marked up lab tests, images, procedures, etc.

What will hospitals be left to do when their easiest, most profitable revenue vanishes? They will shift focus to what they do best: performing miracles. Hospitals will compete for high-end services such as-complex surgeries and intensive care. However, because routine services subsidize the hospital’s overhead, they currently offer surgeries and intensive care at a “discount.” When hospitals can no longer subsidize their complex care with routine care, hospitals will raise prices for the highest acuity services that can’t be performed elsewhere. If you thought acute sickcare was unaffordable, think again. The cost of complex care is going to grow dramatically in the coming years.

Understanding Apple Health

This post was originally featured on EMRandHIPAA.

Apple recently announced Health and Healthkit as part of iOS 8, and initial responses have been mixed.

At one extreme, the (highly biased) CEO of Mayo Clinic called Apple Health “revolutionary.” At the other, cynical health IT pundits claim that Apple Health is a consumer novelty and won’t crack the enigmatic healthcare system. As a cynical health IT pundit myself, I’m more inclined towards the latter, but have some optimism about Apple’s first steps into healthcare.

For the uninitiated, Apple Health is a central dashboard for health related information, packaged for consumers as an iOS app. Consumers open the app and see a broad array of clinical indicators (e.g. as physical activity, blood pressure, blood glucose, sleep data). You can learn more about Health and Healthkit from Apple.

The rest of this post assumes significant understanding of modern health IT challenges such as data silos, EMPIs, HIEs, and an understanding of what Health and Healthkit can and can’t do. I’ll address what Apple Health does well, ask some questions, and then provide some commentary.

Apple Health does a few things well:

1) Apple Health acts as a central dashboard for consumers. Rather than switching between five different apps, Health provides a central view of all clinical indicators. In time, Health could help patients understand the nuances of their own data. By removing friction to seeing a variety of indicators in a single view, patients may discover correlations that they wouldn’t have observed before. With that information, consumers should be able to adjust behaviors to lead healthier lifestyles.

2) Apple Health provides a robust mechanism for health apps to share data with one another. Until now, health app developers needed to form partnerships with one another and develop custom code to share information; now they can do this in a standardized way with minimal technical or administrative overhead. This reduces app lock-in by enabling data liquidity, empowering consumers to switch to the best health app or device and carry data between apps. This is a big win for consumers.

Unanswered questions:

1) How does Apple Health actually work? Apple provided virtually no details. Does the patient need the Epic MyChart app on their phone? Is there custom code integrating iOS to Epic MyChart? Is there a Mayo Clinic app that is separate from Epic MyChart? If not, how does Apple Health know that the consumer is a Mayo patient? Or a Kaiser Permanente patient? Or a Sutter Health patient?

2) Does the patient give consent per data value, or is it all or nothing? How long does consent last? Must consent be taken at the hospital, or can the patient opt in or out any time on their phone? Who within the health system can access the consented data?

3) Given that there are hundreds of EpicCare silos and dozens of CareEverywhere silos, how does Apple Health decide which silo(s) to interface with? Does data go to an HIE or to an EMR? If to an HIE, can all eligible connected providers access the data with consent? If a patient has records in multiple HIEs and EMRs (which they likely do), how does Apple Health determine which HIE(s) to push and pull data from?

4) Does Apple Health support non-numerical data such as CCDAs? What about unstandardized data? For example,PatientIO allows providers to develop customized care plans for patients that can include almost any behavioral prescription. Examples include water intake, exercising at a certain time of the day, taper schedules, etc.

5) Can providers write back to a patient’s Health profile? Given that open.epic doesn’t allow Epic to send data out, how could Apple Health receive data from Epic?

7) How will Apple handle competing health apps installed on the same consumer’s phone? For example, if I tap “more diabetes info” in Apple Health, will it open Mayo Clinic’s app (and if so, to the right place in the Mayo Clinic app?) or the blood glucose tracking app that came with with my blood glucose meter? Or my iTriage or WebMD app?

8) Is Apple Health intended to function as a patient-centric HIE? If so, what standards does it support? CCDA? FHIR? Direct?

Comments:

1) The Apple-Epic partnership is obviously built on open.epic, which Epic announced in September of 2013. It’s likely that Apple and Epic reached an agreement around that time, and asked the public for ideas on how to shape the program to get a sense of what developers wanted.

2) The only way to succeed in health IT is to force the industry to conform to one’s standards, or to support a hybrid of hybrids approach. Early indicators show Apple (predictably) trending toward the former. Unfortunately, Apple’s perennially Apple-centric approach inhibits supporting the level of interoperability necessary to power an effective consumer health strategy. Although Apple provides a great foundation for some basic functions, the long term potential based on the current offering is limited. What Apple has produced to date provides for sexy screenshots, but appears to fall short of addressing the core interoperability and connectivity issues that plague chronic disease management and coordination of care.

3) In a hypothetical world at some indeterminate point in the future, there would be a patient-facing, DNS-like lookup system for provider organizations (Direct eventually?). Patients should be able to lookup provider organizations and share their data with providers selectively. Apple Health provides a great first step towards that dream world by empowering patients to see and, to some extent, control their own data.