Health Business Blog

If any additional confirmation were needed of big pharma’s poor prospects, Sanofi-Aventis CEO Chris Viehbacher has provided it. From the Wall Street Journal (Sanofi-Aventis CEO: Exploring Health-Care Services Market)

“We are actually experimenting around with different services offerings… I don’t see any reason we should limit our business opportunity to selling pills,” [Viehbacher said.]

Viehbacher cited education programs that could aid patient compliance with prescriptions as an example of a service…

He noted that in the 1990s, drug makers dipped their toes in the so-called “disease-management” field, in which they got more involved in patient care than merely supplying pills. Viehbacher said disease management got off to a “rocky start,” but he could envision the industry taking a fresh look at the field.

Here’s what’s really happening at Sanofi-Aventis and elsewhere in big pharma:

• Pipelines are dry. New blockbuster drugs have become scarce and that’s not about to change.
• Existing products are losing patent protection.
• The tools big pharma has used to prop up sales and profitability since new product introductions slowed a decade or so ago have run their course:

1. Big price increases are no longer tenable
2. Line extensions (e.g., extended release and combination products) are being received less favorably, especially by payers
3. Expansion of indications and the development of new concepts to increase the addressable patient population (e.g., pre-hypertension, pre-diabetes) are harder to pull off
4. Medicare Part D, which extended drug benefits to senior citizens, was a short-term boost. Longer term there will be an emphasis on cost containment, which won’t be quite as nice
5. It’s getting harder to craft pacts with generic manufacturers to delay the introduction of generic products

The reference to pharma-sponsored disease management in the 1990s is an interesting one. At that time, big pharma was irritating newly-empowered managed care companies with aggressive marketing of me-too drugs that drove up costs. In order to boost utilization and curry favor with managed care, pharma companies twisted the emerging “disease management” concept into a way to market drugs. To them, DM basically meant increasing the use of brand name drugs for chronic conditions. Turned out, managed care didn’t actually want this kind of “value added service” and it was dropped.

Sanofi-Aventis and its ilk have a much bigger problem now. Their portfolio of patent protected drugs will continue to decline, as new product introductions fail to make up for expirations. It’s no longer acceptable to lose 90+ percent of revenue when a product goes off patent, so Viehbacher is probably contemplating how to surround on-patent and off-patent drugs with services that make them more valuable to the buyers. Adherence (compliance + persistency) is a natural fit. In fact it may be the only real fit. The idea is that a payer should be willing to pay Sanofi-Aventis based on the value of the medical outcome that can only be achieved when someone takes their medication appropriately and engages in other medical and non-medical activities that improve their health status.

I don’t see how a big pharma company is going to assemble the capabilities to do this. They certainly don’t have the skills or infrastructure today. If they acquire service companies (such as disease management firms) they will actually destroy value since the customers will be leery of having the fox –even an old, toothless one– guard the henhouse. Adherence and disease management models will flourish in the future, but they’ll be decoupled from the drug makers.

Johnson & Johnson is likely the main exception. They are already a consumer marketing company and have a trusted brand.

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This is a transcript of my podcast interview with Kathy Roe, a partner in the Health Law Practice group at Neal, Gerber & Eisenberg in Chicago regarding the health IT provisions of the federal stimulus law.

David Williams: This is David Williams, co-founder of MedPharma Partners and the author of the Health Business Blog. The stimulus bill signed into law last month contains over 100 billion dollars in health care related funding, including about 20 billion dollars specifically for health care IT. After reading the legislation I still have a lot of unanswered questions about how this money is going to be made available and to whom. So today I’m speaking with an expert on the topic, Kathy Roe. She is a partner in the Health Law Practice Group at Neal, Gerber & Eisenberg in Chicago.

Kathy thanks for being with me today.

Kathy Roe: Thank you for having me David.

David: Kathy, what aspects of the stimulus bill are relevant for health care IT?

Kathy: There are three, maybe even four, depending upon a person’s point of view. The one that has received the most attention to date is the portion of the bill that deals with the various funding vehicles to get electronic health records off the ground with providers around the country and begin to make real the goal of everybody having access to an electronic health record by 2014. So the first piece is the dollars.

There are two other pieces that are covered in the bill that really are critical in terms of creating that national electronic health information highway. One of those pieces is the infrastructure that the government is setting up to establish the technology and implementation standards for health information technology so that the systems actually talk to each other.

The other piece is the enhanced data privacy and data security requirements. There are many who are concerned that with more and more data becoming electronic that the risk to that data could actually be enhanced, so the bill has introduced a number of new data privacy and security requirements.

I would say those three pieces are key pieces that all work together relative to getting health information technology up and running so that we have a 21st century healthcare system.

David: When people talk about that the 20 billion dollars,  90 percent of it is not actually in the funds that are going be to be handed out now, but rather it’s starting in 2011, when they start to receive incentive payments if they are using EHRs in a meaningful way. Can you explain the philosophy behind that?.

Kathy: The monies under Medicare and Medicaid don’t start flowing until 2011. For some of the monies it’s calendar year based and for others it’s fiscal year based, so we are even talking about different parts of 2011.There are also elements of funding that go towards initiating various state grant programs and loan programs. Some of those monies are actually intended to began to flow this year. And those would relate to state planning and implementation grants to get under way activity in states relative to electronic health information exchange.

And then you also have a loan program that the government is funding  that would get under way in 2010. So those are a couple of ways that dollars start flowing earlier than 2011. With the loan program the idea is actually to make monies available to providers to purchase the technology, that at least under the Medicare incentive program they will need to demonstrate “meaningful EHR use” to qualify for the incentive. So there is some logic to the timeframes laid out in the bill.

David:  So to recap, in 2009 there are some planning grants, in 2010 there is some loan money available and then in 2011 incentives start to flow. Can you talk a little bit about ‘meaningful use’? What does meaningful use really mean? If somebody goes ahead and takes out a loan and makes an investment in an EHR system, is it clear to them what meaningful use is going to be?

Or in the end will we have unhappy folks that invested a lot but don’t qualify for incentive payments?

Kathy: I think that over time that will become clear. One thing that comes out clearly is that there are lot of studies and reports that are authorized in the bill. Some of that data collecting and analysis is to be taken into account so that every year there is a re-evaluation of the standards of what it means to be a meaningful user.

Right now what we know under the bill is that there are three components. You have to use certified EHR technology (and that has some fluency because the required certification standards will have to be adopted by HHS). There’s a question mark there but the bill clearly provides for the government to work off the efforts to date.

So you’ve had CCHIT. You’ve had HITSP out there handling certification on a voluntary basis and standards development. So while it’s not assured, the bill certainly is rooting for the government, particularly the Secretary of the HHS and the national coordinator, to build on those efforts. So you have certified EHR technology as one component. The second component, going back to the whole idea of interoperability and systems talking to each other and the technology that is used, the EHR technology has to allow for health information and demographic information to be exchanged electronically between the different players in the health care systems.

And then lastly you have to submit reports on clinical quality measures through the EHR. Here’s where the government has said outright that those clinical quality data measures will be prescribed by HHS. So I think what we will see is what we see today with the Medicare E -prescribing incentive program, where you have Congress legislate, then there are regulatory activities. Then there is a lot of guidance that came out from the government that really lays out the details of the different reporting requirements and other related elements that it takes to be a meaningful user.

David: You’ve cleared up a couple of things for me. One is about the timing: the fact that money is available now and that meaningful use, even if it isn’t well defined now, there are some pretty clear indications and precedents to guide people who are doing that. So I guess what I take from that is people shouldn’t be sitting still and waiting for further definition.

Can you give me a sense of what some of the parties should be thinking about? If I’m a hospital or physician group, how should I be thinking about the stimulus money that is coming?

Kathy: I actually think people should get moving now. While the dollars will take little bit of time to start flowing at least under Medicare and Medicaid you can certainly start planning, particularly if you don’t have EHR infrastructure in place. It is oftentimes a much larger,  much more complicated effort to get an EHR system off the ground than people anticipate.

You often have issues come one up that weren’t anticipated. It’s not only technology that you are talking about, but changes to work flows that have to be introduced. So you have a whole lot of cultural issues to deal with along with introducing new technology to use in delivering care. So use this time to investigate and begin to prepare.

One of the things would be to find out what your state is doing. There are a number of vehicles by which monies will flow from the federal government, including not only the planning grants, the implementation grants that states can compete for but also loan programs for EHR and other similar programs.

I would recommend that the providers find out what their state is doing and if nobody in the state is doing much consider becoming something of an initiator to get the process under way in a particular state, so that you are sure that your state will be a player and a recipient of dollars under these programs.

And if the state does not turn out to be a viable party to look to for leadership on this issue, then the other alternative would be to investigate what your trade association is doing or what your professional health care society is doing. They may not be eligible for the different monies but they certainly have an opportunity to participate in the standards development process either by being a member of one of the federal advisory committees or commenting and actively trying to shape these requirements for a national health information infrastructure. So bottom line, get moving.

David: What about the states themselves? Have you seen some of the states undertake initiatives already or how do you expect that to unfold? Is it going to be the HHS secretaries within the various states or what do you expect to see happening at the state government level?

Kathy: Particularly states where you already have some health information exchange under way, such as Minnesota, Florida or Tennessee, those states will be out in front trying to get their arms around what the bill has to offer for them, where they may want to take advantage of the money that is available.

As we were talking about the meaningful EHR user definition, not everything is spelled out, so for some of these programs we will have to wait to until the Department of Health and Human Services begins to issue notices in the Federal Register relative to the program requirements: What does it take to apply? What is the timeframe? As far as having seen any state taking action, one state that was out of the blocks I’d say within a week to ten days after the bill passed appears to be California.

There is an issue brief that the California HealthCare Foundation has issued that goes through various funding vehicles under the stimulus package and it talks about how California should begin to act in order to take advantage of each of the different buckets of money that will be available. That’s a public document.

David: The stimulus bill wasn’t explicitly meant to be a health care reform bill, but what’s the connection between the health IT provisions in the stimulus bill and other health care reforms that may come down the road?

Kathy: I think the biggest connection is around addressing the deficiency in health care quality and the sky high health care costs in this country, particularly relative to counterpart countries throughout the world. One thing that has been repeatedly talked about is the fact that with the increased use of electronic health records you’ll avoid duplication in tests and other services because your specialist will have the records from your visit to another health care specialist or primary  care provider and hopefully won’t feel the need to run another blood test or another radiology scan on you.

Another place is with respect to the opportunities that it offers for care coordination. Think about the chronic conditions and how health care providers tie them in through an electronic health record to reduce cost, which along with increasing access seem to be the primary focus of  President Obama’s administration. And when you talk about how will costs be addressed one of the ways that is discussed is changing the reimbursement methodology for health care providers, so you are not paying on a procedure basis, which can be thrown off course through the excess volume. Electronic health records can help move towards a payment methodology that is premised on paying for outcomes, because you’ll have data available relative to the patient and hopefully over time you’ll have clinical decision making tools to assist providers in making judgments about what is the right treatment for the patient sitting before him or her. So the focus on health information technology and focusing on it first can tie in with the reform to reimbursement and getting our cost of health care under control.

David: Kathy, what issues do you expect to address with your clients on this topic over the coming months?

Kathy: I think there will be more questions on the data privacy and security aspects of the bill. As I alluded to there is logic to the timing of the different pieces that are in the bill. Enhanced data privacy and security requirements; those generally take effect in the next year and so that‘s one piece that you get in place before large amounts of money began to flow. The other piece is the technology standards and implementation specifications. There is a real aggressive timeline there. There are several required standards that are supposed to be adopted by rule by the Secretary of HHS by the end of the year, so I think that’s where a lot of effort will be focused through the remainder of 2009,  preparing for those data privacy and data security requirements, which will entail changes in policies, changes in procedures, new training, opening of business associate agreements, as well as the activities around participating in the standards development process and trying to build upon what happened to date and make that workable at least for the immediate term. So to your earlier point, don’t penalize those folks who have gotten underway with an electronic health record.

David:  I’ve been speaking today with Kathy Roe. She is a partner in the Health Law Practice Group at Neal, Gerber & Eisenberg in Chicago. We were speaking about the stimulus law and the health care IT implications.

Kathy, thanks for joining me today.

Kathy: Thank you for having me David.

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Thanks to SimulConsult founder Michael Segal MD PhD for this guest post.

A British expert on genetics makes some claims that are likely to come back to haunt him, but also makes an important point that I think is correct. See Genetic research in a “blind alley” in search for cures for common diseases.

Professor Steve Jones, one of Britain’s top geneticists, said the belief that a few genes held the key to ridding the world of conditions such as cancer and diabetes has proved to be “plain wrong”.

In most cases hundreds of genes are responsible, and often they have less effect than other factors such as diet, lifetstyle and the environment people live in.

“Just a couple of years ago, there was real optimism that a new era of understanding was around the corner,” he said.

“That did not last long, for hubris has been replaced with concern: like Macavity the Mystery Cat, the evidence of genetic inheritance is clear, but the genes themselves are just not there.

“Of course there have been some successes, but it is the ‘cure all’ aspect of the work that has proved unfounded.

Scientists embarked on a search for rogue genes responsible for just about every modern malady, hoping such conditions could be blamed on a small set of genes – which could then lead to a cure.

But the more they investigated, the more complicated they realize finding a cure would be.

Jones’ article is here.

After the famous sequencing of the double helix, the hunt started for the genes behind the illnesses that affect most of us – stroke, diabetes, cancer – as well as multiple sclerosis and a variety of brain disorders.

The hope was (and five years ago, it was a reasonable one) that such conditions could be blamed on a small set of common genetic variants. Track them down and we would begin to understand what had gone wrong, diagnose patients before symptoms appeared, and perhaps even come up with a few cures.

That part of the analysis is likely to come back to haunt him, but this part is a good criticism:

The logic was to search the double helix for about half a million variants that could be used to set up a grid of diversity, scattered across the whole genome. This could then be scanned using a magic “chip”, which could identify thousands of changes at once to see whether one, or a few, of the molecular milestones might predispose a given individual to a particular disease. If so, the actual gene responsible could be close to the telltale marker.

The latest version of this grid, produced by what is known as the Wellcome Case Control Consortium, involves 120,000 samples, taken both from invalids and those who are perfectly healthy. It is a huge – and expensive – operation. Just a couple of years ago there was real optimism that a new era of understanding was around the corner. That did not last long, for hubris has been replaced with concern: like Macavity the Mystery Cat, the evidence of genetic inheritance is clear, but the genes themselves are just not there.

Such gene chips are actually quite a crude measure of what I expect we will find – single base substitutions that produce some common diseases.  I think the gene chip criticism is valid but the “no simple answers” part will be right in some areas and wrong in many.

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This is a transcript of my recent podcast interview with OraSure Technologies’ COO/CFO Ron Spair.

David Williams: This is David Williams, co-founder of MedPharma Partners and author of The Health Business Blog.

OraSure Technologies develops and markets point-of-care oral fluid diagnostic tests for diseases such as HIV.

I’m speaking today with Ron Spair.  He is OraSure’s Chief Operating Officer and Chief Financial Officer.  Ron, thanks for spending time with me today.

Ron Spair: Oh my pleasure David and thanks for having me.

David: Tell me about the current CDC guidelines for HIV testing.

Ron: Back in September of 2006, the CDC issued guidelines for the implementation of HIV testing, advocating that HIV testing become part of routine health care, such that when you go to the doctor and you’re in the age bracket of between 13 and 64 years old, they’re advocating that people should be screened for HIV regardless of risk factors.  So when you see your family practitioner or you present at an emergency room, an HIV test would be part of routine health care.  That’s their goal: to make this part of a routine evaluation of the general health of the population.

David: Why are they doing that now?  Why hasn’t that been the case before?  Why is now the right time to think about a change of guidelines?

Ron: The evidence indicates that the disease is no longer confined to any particular subset of the population, but has been out amongst the general population in such a way that many people who would otherwise not consider themselves to be at risk, are in fact, or have been potentially exposed to the HIV virus.

With the great strides that have been made on the treatment front and the ability to identify individuals rather quickly with our tests or other rapid tests that are out there, we can identify people, get them into care, have behavior modification and cut down on the further spread of this disease in a way that will be beneficial to society.

David: Once guidelines are put in place, they’re not necessarily automatically translated into clinical care right away.  But what impact have you seen with the CDC guidelines?

Ron: I think that’s an excellent point.  It’s not a “flip the switch” type of transition from what the past practice was to what the proposed guideline incorporates.  We have monitored similar transitions for other recommended tests, and what you see is a gradual implementation of the guidelines.

We are witnessing that.  Since September of 2006 we have seen an increase in testing, particularly in the hospitals and emergency rooms and also in physicians’ offices where there’s a move towards implementation of more HIV testing at the point of care.

David: One of the issues relating to testing and why sometimes guidelines don’t come into play that quickly, has to do with the inconvenience or reluctance that people have to have a test.  I’m thinking about if you have to have your blood drawn or even a urine sample, people might not want to do that.

I know that your products may address that partly, but can you tell me what sort of products you actually have on the market or in development for HIV testing?

Ron: Sure. We have had on the market our OraQuick Rapid HIV 1/2 test, which allows the practitioner to test an individual using their oral fluid.  That’s one matrix that we test with.  We also test with finger stick whole blood, intravenous whole blood, and plasma.

So it is the practitioner’s choice to determine the matrix to be used.  What we have found though, as you quite rightfully point out, that many people who are going for a test would prefer to have an oral fluid specimen taken.  It’s not invasive.  You’re not pricking someone’s finger or taking a needle pull from them to obtain the sample.

So in those instances where oral fluid tests have been adopted, we’ve seen a preference for them and also an increased testing volume in sites that have adopted oral fluid HIV testing.  It’s a 20-minute test, very simple, and highly accurate.

David: One of the challenges, beyond just the practitioner or the patient not being interested in the test or not knowing about it, has to do with reimbursement. What has the reimbursement situation been both on the private payer side and then for CMS?

Ron: Some of the more progressive insurance companies; Blue Cross, Aetna, Kaiser, are moving towards reimbursement of HIV testing on the private pay side.  CMS is actually taking under advisement a recommendation for broadening reimbursement and applying that to Medicare recipients.  There’s a coverage advisory that they are undertaking currently and I expect that they will have resolution to that towards the end of the year.  The comment period just ended a couple weeks ago, but clearly there is a lot of support amongst the HIV health care community for broad scale adoption and conformance with the CDC guidelines.

David: If CMS decides to cover HIV testing, will that have a big impact on the market or is it also just something that is just kind of a gradual?

Ron: It’s going to depend on the form that that coverage ultimately receives.  If they restrict it to high risk individuals, that then would be somewhat obviously more limiting than  if they were to approve a coverage that would incorporate and encompass routine testing that is in conformance with the CDC’s guidelines.  If we were to see the latter, it would be my opinion that it would have a significant impact on identifying HIV positive individuals in this country.

David: We talked about the fact that you’ve got oral fluid testing, but is there a big impact if you’re able to get the test results rapidly versus if it’s something you have to wait a couple of weeks for?  How does that change the dynamic between the doctor and the patient?

Ron: There are a number of different attributes in that relationship.  One is the elimination of the anxiety of the individual who would be awaiting their test results. Rapid, by the way, was truly spearheaded by the Centers for Disease Control.  They really made a push to implement rapid testing whenever and wherever possible.

What we have from the history of testing in the US was a sad statistic; about 35% of the individuals who were tested with blood (it was sent off to a lab and they got the results a couple weeks late  –those individuals either never came back for the results or they just were not able to be found.  So now with the administration of rapid testing, you’re having a diagnosis transmission greater than 99% of the time.  So those individuals who have the rapid test are finding out, in our case, within 20 minutes whether or not they screened positive for antibodies to the HIV virus.  Then of course further testing is warranted, but the capture rate is very, very high.

David: So if you’re able to have a higher capture rate, and also more people in for testing whether they’re at a higher or low risk, what kind of impact does that have on the epidemic?

Ron: Knowledge is so incredibly powerful with this disease.  If individuals know their status, it’s been proven in studies by the Centers for Disease Control that they will alter their behavior and take the necessary precautions to stop the further spread of the disease in most cases.  It’s also been proven by the CDC again that of the individuals who are transmitting the virus in today’s society, greater than 50% of those are unaware of their HIV status.  So by that I mean of the 56,000 or so new infections that occur each year in the United States, we’re looking at something on the order of 30,000 being transmitted by individuals who are unaware of their status.

So when you combine that and say: let’s find out who is positive, let’s implement behavior modification, we think it would have a profound impact on the incidence rate.

David: One of my long-term clients is the Forum for Collaborative HIV Research and I know that they had a Summit on Diagnosis, Prevention and Access to Care late last year where OraSure was a participant.  Can you tell me about that meeting and what the impact was?

Ron: Oh it was a great meeting!  It’s a great organization of high-level individuals from around the country who are committed and dedicated to addressing the issue of HIV in our society.  They publish reports and links to articles that are clearly in support of the CDC’s testing initiative.  We certainly look forward to working with them in the future and supporting their cause because we’re very much aligned with the thrust of their mission.

David: If a patient is going to their physician and let’s say the physician doesn’t ask them about an HIV test or doesn’t mention it, should they speak up?  Or would that be out of line?

Ron: I absolutely believe that we all have a responsibility to one another to know what our status is and so I would encourage anyone to ask their physician for an HIV test.  You don’t know what your status is until you’ve had that test.  I certainly would encourage it regardless of whether or not the physician asks you for a test or not.

David: What’s the typical price or reimbursement rate for one of these quick tests?

Ron: We sell our test into the market anywhere from approximately $11.00 – $17.00 per test depending upon the volume that our customers do on an annual basis.  Reimbursement for the test on CPT code is a little over $19.00 and of course then also there would be some reimbursement for the doctor’s time.

David: I’ve been speaking today with Ron Spair.  He’s Chief Operating Office and Chief Financial Officer of OraSure Technologies.  Ron, thanks for your time today.

Ron: My pleasure David and thank you.

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OraSure Technologies develops and markets point-of-care oral fluid diagnostic tests for HIV and other diseases. In this podcast I interview Ron Spair, OraSure’s COO and CFO, about the shift to routine HIV testing.

The CDC issued guidelines recommending routine testing back in 2006, and uptake has been somewhat slow. That’s changing thanks to activities such as the Forum for Collaborative HIV Research’s recent Summit on HIV Diagnosis, Prevention and Access to Care.

Ron and I spoke about the CDC guidelines and their impact on the HIV testing marketing, the outlook for reimbursement, and the role of quick turnaround tests such as OraSure’s OraQuick Advance HIV 1/2 Antibody test.

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David Williams interviews OraSure's Ron Spair Play Now | Play in Popup | Download

In a “CEO on the street” interview at the end of the Transforming Healthcare 2009 Summit I asked HIL Forum Founder and summit organizer Steve Wardell the following question:

Is this what you had in mind when you organized the Summit?

Steve: The magic on stage is exactly what we had in mind, because of the people we brought in, but we had no idea that it was going to catch on this fast. We’re just real lucky with national leaders and with the most topical issue you can imagine. So, we’re very lucky to have it play out this way.

David: Sounds good. I guess you were lucky. The biggest concern tonight was probably whether the fire marshal was going to come in and tell you you’ve got too many people in here.

Steve: Yes. Gosh, we had people showing up at the door;  I think, our final tally was 610 people, which is a lot more than we thought we were going to have when we started this about four weeks ago.

David: Congratulations.

Steve: Thanks very much.

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In a “CEO on the street” interview at the end of the Transforming Healthcare 2009 Summit I asked Concordant CEO Michael Levinger the following question:

What is it going to take to have successful EHR deployment?

Mike: I think it’s understanding that this is a change for the physicians and the practitioners in how they deliver clinical medicine, and that you have to deploy the systems in a way that really enables them to be successful doing what they do.

It’s not simple; it’s hard, but that’s what it’s going to take to get them the benefits of the systems.

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This is the transcript of part I of my podcast interview with Bob Stone, co-founder of disease management company Healthways.

David Williams: This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog. I’m speaking today with Bob Stone. He’s the executive vice president of Healthways, which is a leading disease management company that he co-founded in 1981.

Bob, thank you for speaking with me today.

Bob Stone: It’s my pleasure, David. Thank you for giving us the opportunity.

David: Bob, there’s been a lot of tinkering around the edges but no real fundamental health care reform in this country, despite lots of talk and attention. Why is that?

Bob: I think there are probably a couple of reasons and the first one that occurs to me is that our health care system really wasn’t developed in response to some real well thought-out master plan. I don’t know any time or place where anyone has sat down and laid out a purpose, objectives, initiatives, milestones or anything else you would expect to see in a coherent effort to construct something of such fundamental importance like how we’re going to deliver health and health care services in this country.

In fact, arguably, even our country has a better plan called the Constitution. We’ve only had to amend that 24-odd times in the last couple hundred years and two of those don’t count because it was Prohibition and the repeal of Prohibition. And so, I think what we’ve seen is a system that grew in response to perceived needs. And each of those needs was addressed in turn and did not receive or appear to receive significant thought about the impact that the solutions would have on other element of the system that had been addressed in response to the last set of perceived need.

So absent a North Star, an agreed upon purpose and a general consensus about what we want the system to do, I think that we’re in a continuous cycle of: here is a problem with a component or a function of the system, let’s fix it. And in doing that we tend, at least historically, to overcompensate in one degree or another depending on what it is we’re trying to do.

In 1945 following World War II, the perception was, I think accurately, that there weren’t enough community hospitals in the country and we saw the the federal government provided funding for the development of hospitals across the country. 15 years later, in response to the perception that it was overbuilt hospital infrastructure that was driving health care costs, we saw Certificate of Need legislation designed to retard the growth of those very facilities that we had, 15 years earlier, fostered. We’ve seen the same kind of thing with manpower policy. Now we’ve got too many doctors, too few doctors. We’ve got too many of the wrong kind of doctors. And so as the situation changes over time, we respond to, as I’ve suggested, the immediate needs without any real thought that I can detect about what the end game is that we want to accomplish.

David: So we now have a Constitutional scholar in high office. Do you think things might be different this time around?

Bob: I think we may be a step closer. One of the things that I like about President Obama is the approach that we saw, actually during the campaign, around the financial crisis, of enumerating principles. But I think, again, in the absence of an overriding single objective to which everything else must submit, that the principles that I’ve seen enumerated are really still about treating symptoms.

So we have a principle on coverage policy. We have a principle, although it’s not fully worked out yet, on payment policy. We haven’t yet quite seen a principle on pricing policy, other than discussions about using the power of the federal government to purchase, particularly in the pharmaceutical industry, to get the kinds of discounts that volume purchasing of that kind can drive. I have not yet heard a discussion that answers the question: What is it that we want the system to accomplish? How will we know that we are making progress towards that goal? What is the one thing at the end of the day that we’re going to measure to determine whether we’re heading where we want to go?

David: Bob, you mentioned a couple of times talking about objectives and I wonder if maybe the health care system is just too complicated to have a single objective. Would you be able to state one particular objective that you think should be the objective of health reform?

Bob: Well, I think that it may sound somewhat silly but I think it has the virtue of being clear and simple and easy to understand. If you look at any of the various rankings that are out there that compare the performance of our health care system with other countries –either in total or just the developed nation– if you look at the metrics that are used to compare the relative health of our citizens against those of other countries, the kindest conclusion that you come to is that our performance is poor, particularly given the level of gross domestic product that we invest in here in this country, which is the largest percentage in the world and is growing at an astronomical and apparently unstoppable pace, at least historically.

So my simple answer is that we ought to have an objective that at some defined point in the future, probably 10 years, that when the new rankings come out, we’re number one. Now, I considered saying, “We should be number 8 or number 22” but I don’t know how to justify that. We’re committed as a nation to be number 1 in sports, why wouldn’t we be committed to being number 1 in health and health care on an international basis? As I see it, it’s pretty black and white. It’s sort of like President Kennedy’s moon shot: within the decade we will be number 1 on whatever rankings there are out there on the health of our population and the effectiveness and efficiency of our health care system.

I think the advantage of having the objective is that you can then look at how you assemble the components of the system, how you pay for it, how everything interacts – through the lens of: do those decisions advance us toward that goal or do they not? And absent that kind of objective, you really don’t have the kind of clarity you need to deal with a system that’s, as you suggest, very highly complex, very poorly understood even by those who are in it, in terms of unintended consequences of particular decisions, maybe as they impact the overall goal.

David: I was going to say that initially it was a little bit audacious to say that we should be number 1. Because I think, according to the WHO, we’re about number 37. But on the other hand, it seems that perhaps it is reasonable to say in 10 years we should be number one. And then in another 10 years, maybe rather than spending twice as much per capita as the number 2 player, we should be on par. So maybe it is realistic.

Bob: You raise an interesting point about what it costs us. I think that being number one requires that we recognize that the historical reform efforts and fixes that we have put into place over the last 50 years anyway, have principally been driven on the supply side of the health equation.

We’ve made payment coverage, manpower, facility decisions, we’ve made access decisions but we’ve really not focused a whole lot of attention on the demand side of the equation except in areas like disease management over the last 10 years. Even there, frankly, I think we’d be forced to conclude that while effective in having some impact, it’s clearly not sufficient to cover the inexorable cost increases that we’ve seen in the system. We know that we are creating demand through the significant increase in the number of people with avoidable chronic disease and we are doing very little in an organized way to deprive that chronic disease engine of fuel.

And so as we look out as a company and as we look out in terms of if we had a blank sheet of paper, what would we do? We think that the system has to evolve towards a consensus goal such as the one we discussed, focused on three things and three things only. The first of those is keeping healthy people healthy. The longer we can keep people healthy, the less demand they are going to make on the system over time and the cost benefit of that ought to be significant. The second, which is a little bit more difficult, is recognizing that there is a portion of the population who is at risk for health compromise because of the personal lifestyle behavior choices that they make, and that we ought to be providing support for that population and helping them make better choices and sustaining those better behaviors. This too, over time, will significantly reduce demand on the system associated with that unavoidable demand. And then third and finally, we need to assure evidence-based care is available to those who require it.

It’s the third part of the system that everybody has been focussed on principally over the last 50 years. Very few people get up in the morning and say, “I’m going to go interact with the health care system because it’s fun.” People go to the system when they’re sick and they can’t effectively self-manage the recovery process or the disease process that they’re dealing with. But we basically ignore the healthy and the at-risk, until, of course, they turn 65 and then Medicare is the catcher’s mitt for everything that’s been avoided or denied over the previous 65 years.

David: This concludes part one of my interview with Bob Stone, co-founder and executive vice president at Healthways. In part two we’ll talk more specifically about disease management.

Transcript continues here.

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Check out the latest edition of the Cavalcade of Risk blog carnival at My Wealth Builder.

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As reported in the Boston Globe, Beth Israel Deaconess Medical Center (BIDMC) in Boston has decided to stop sharing  administrative billing data with personal health record sites such as Google Health and Microsoft HealthVault. This came about after e-Patient Dave noticed that the data in his Google Health account –which came from BIDMC– was a mess, and suggested that Dave was in dire health, indeed. I suggest looking here, here, and here for more information on the story. This isn’t an anomalous case: pretty much anyone with a complex medical history would have a similar result.

I may well have missed it in the various articles and comments, but I haven’t seen anyone explicitly draw the link between this case and the use of the same kind of claims data for pay for performance purposes. There are analogous examples of administrative data being tied improperly to specific physicians (rather than patients). This is the basis for the Massachusetts Medical Society’s lawsuit against the Group Insurance Commission, for example.

It’s not a surprise that various organizations use billing data rather than clinical data. Providers always produce billing data, because they want to get paid. And billing data is highly structured. The problem is that the information is often inaccurate and coding for billing is not the same as coding for clinical use. The shift to electronic health records won’t solve the problem that fast, however. EHR data has plenty of problems of its own: it’s often unstructured (lots of free text), and data can be entered inaccurately even when it is structured and uses standardized terminology.

The solution is not just to throw up our hands, however. Health care is too expensive and important for that. There’s good work being done by a number of local organizations including Massachusetts Health Quality Partners,  the Massachusetts Medical Society and the Massachusetts eHealth Collaborative to improve the accuracy and usefulness of administrative and clinical data, and to find ways to use them together effectively. In an ideal world, patients, physicians, payers and technologists will combine forces for the best result.

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