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Healing Health Care through Disruption

Innovation times

Posted by JR Reagan on September 12, 2013

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A social media post asked the question “What if hospital prices correlated with outcomes?” Though the question didn’t provoke much of a response, medical payments based on outcomes rather than services are just one of the forces that could disrupt health care in America.

Within our current system, the majority of doctors, hospitals, and other providers receive payment from patients, or are reimbursed by insurers or other third parties, only upon delivery of a service or services—say an office visit, an x-ray, or blood test. The only way to bill more is to do more: crowd more patients into a day, or perform more tests and procedures. This fee-for-service model does nothing to improve quality of care, discourages anything except face-to-face communication between patients and providers, and often leads to unnecessary tests and procedures.

According to Bob Kocher, M.D., “The U.S. is not getting its money’s worth in health care.” In Health Care Reform: Trends Driven by the Evolution of U.S. Health Care Policy (Castlight Health), Kocher notes that despite the facts that as a nation, we spend more on health care per capita than anywhere else in the world, and have new hospitals and cutting-edge technology, patient outcomes in the U.S. “are on par with Cuba and Slovenia.” Kocher is a partner at the VC firm Venrock, serves on numerous boards, and was formerly President Obama’s Special Assistant for Healthcare and Economic Policy on the National Economic Council.

Shaking up the system

Paying for patient outcomes, rather than for services rendered, is a model many think will transform health care. It’s a model being tried out by major hospitals and insurers, as well as pharmaceutical companies.

Since successful outcomes are dependent on more than just medical treatment (what if a patient doesn’t follow orders, or lives in an environment that’s detrimental to recovery?), defining what constitutes successful outcomes is an important beginning.

In Michigan, a group of hospitals has done just that. They partnered with a health insurance provider to designate mutually agreeable patient outcomes, with successful outcomes to earn higher reimbursements for the hospitals.

Another insurer inked an outcome-based deal with a pharmaceutical company to track the number of hospitalizations and ER visits avoided by patients with MS using the drug-maker’s therapy for the disease. As more hospitals and insurers adopt outcomes-based models, the entire payment model for pharma companies will need to adapt.

Federal initiatives, too, are pushing for outcomes-based payments. Through the Affordable Care Act (ACA), Medicare—the single largest payer for hospital services—will gradually shift from payments for volume to payments for improved care and patient satisfaction.

Opening closed doors

Increased visibility will help patients make more informed choices in the not-to-distant future.

Already, many consumer ratings services include limited reviews for doctors and hospitals at the local level. Would-be patients can identify and see reviews for emergency rooms, doctors open on Saturday, or family practitioners.

One of the nation’s largest health benefits companies devised a modern take on the “word of mouth” recommendation. Working with Zagat, the company developed an online 30-point scale for patients to rate physicians based on trust, communication, availability, and environment, as well as share feedback with others.

An online customer review network provide even more in-depth information about physicians and hospitals in its recently released American Hospital Quality Outcomes 2013, which includes outcomes and results collected over a five-year period.

Say goodbye to the waiting room

Innovative new models of medical treatment are popping up around the nation, too. Both WhiteGlove Health, which offers services in seven states, and Seattle-based Qliance, charge a monthly membership fee for everything from primary care to diagnostic tests to minor surgery.

Virtual visits with doctors are now accepted by some insurers and employers. By consulting with a physician via a webcam or smart device, a patient can get a simple diagnosis (and sometimes a needed prescription) at a much lower cost than a visit to a traditional office or an ER.

Mobile apps offer “infinite possibilities” in health care. In the first of two April 2012 interviews with Healthcare Informatics, Harry Greenspun, M.D., Deloitte Services LP’s senior advisor for healthcare transformation and technology, explained the enormous potential of such 4G apps. In part two of the interview, Greenspun discussed the promise offered by applications like remote monitoring, as well as other challenges and opportunities of mobile health care. He concluded, “What we need to move toward is a simple way for people to understand the cost and quality of their care, and what the experience is like. Much like people can do with restaurant and product reviews, we need to move into this in healthcare, with comparing real quality measures, and this data does exist.”

The consumerization of health care

I seems that we’re finally heading toward an environment that will allow us to shop for health care much like we shop for other consumer services, with more choices and visibility when it comes to price and quality.

It’s an environment that could ultimately lower the cost of health care, too. According to 10 Myths of Health Care Reform, an infographic from Dr. Paul Keckley, Deloitte Consulting LLP and Executive Director for the Deloitte Center for Health Solutions, the Affordable Care Act (ACA) “fundamentally alters the center of gravity from a paternalistic system in which patients are told what to do, to a consumer-directed system in which individuals bear more responsibility for their own decisions. Therein, cost reduction might be achieved most significantly.”

ACA or not, Keckley concludes we need a national discussion on health care, stating:

The big question in health reform is this: Is our system performing at a level that’s commensurate with the value it adds in communities, companies, and households, and if not, how can the value gap be bridged? It’s about cost versus results, perception versus reality, platitude versus pragmatics, theory versus practice, and wants versus needs.

In other words, are we getting our money’s worth?


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