Affordable Care Act and Changes in Uninsured

A press release about a Gallup poll that provides details about the number of uninsured individuals in the United States.  The number has gone down from 17.3 percent of the population to 13.8 percent of the population.  The article then provides information on several states that have had more substantial decreases in the percentage of the population that is uninsured.  In those states, hospitals have seen the proportion of patients in emergency departments or general admissions decrease.  In addition, Medicaid has increased coverage.  The hospitals have improved financially.  A key question is whether this is a causal relationship.  Even more importantly, if the law's implications are put into jeopardy by a current supreme court case and there is no contingency plan, then it is truly not clear what will happen to hospitals' financing positions.   

Comments from a Student Organization Event

[As you read this, remember that these words were meant to be spoken.  Not every sentence is necessarily complete and some repetition is useful in the spoken word that may not appear in a purely written form.]

Opening Remarks for Unlocking Healthcare Innovations and Investments

21-February-2015

To begin, I would like to welcome everyone to the today’ symposium on Unlocking Healthcare Innovations & Investments. Today was organized by the Health Care Business Association students, and I am very impressed by what they have put together.  Other sponsors include the Johns Hopkins Carey Business School, the Johns Hopkins Bloomberg School of Public Health, the Johns Hopkins Alumni Association, and Sage Growth Partners (a growing healthcare strategy, technology and marketing firm focused on solving the complexities of healthcare in both provider and payer settings.)

With introductions out of the way, let me offer a few thoughts about investment and innovation in health care.  You will find that I tend to refer to investment in innovation in health care as I think that the two are inseparable at this point.  Of course there are some things that work well that are worth further investment, but there is lots of room for investment in innovation so I will focus on the two together.

When I am asked to set the stage for today’s type of discussion, I usually try to tie in something from popular culture.  For today, I will quote and then paraphrase some lyrics from the song Closing Time by Semisonic. Until I looked for the lyrics to make sure I had the absolutely correct wording, I had forgotten just how old the song is.  It dates back to 1998.  Think about all the innovations in health care in the 17 years since that time—SARS had not happened; Ebola was not in the news; measles outbreaks were rare; Medicare Part D and several other innovations to Medicare and Medicaid have happened since; iPhones had not yet been invented; there were no “health apps”.  Also, 17 years ago was already a decade after the first time I took a course about the United States health care system in the fall of my sophomore year.  In 1988, we were just five years after the first major change in how Medicare paid hospitals; we were just passing the Medicare Catastrophic Coverage Act which would face repeal a year later; and we were approaching a time of rapid new pharmaceutical development.

Having a view of 17 years since the song I am about to quote and 27 years since my first course on the US health care system, provides me with a lot to think about in terms of where innovations are necessary, what might work and what might not, how to evaluate those potential innovations, and how we might incentivize and value investment in those innovations. 

In any case, a line that comes up more than once during Closing Time and serves as the line I will quote states, “Every new beginning comes some other beginning’s end.” In health care we could paraphrase to say, “Every innovation comes from some other innovation’s obsolescence.”  The rhythm might not work as lyrics, but let’s ponder that for a moment.  And let me repeat it: “Every innovation comes from some other innovation’s obsolescence.” 

How is this helpful?  I want to set up a juxtaposition of what we have and what we hope to get from the health care system to drive our thinking about the opportunities for investment in innovation. 

Those of us seated here this morning recognize that those opportunities are nearly endless.  That is part of what makes health care an incredibly exciting industry.  And, if we extend from just “health care” to anything having to do with individual or population health, the list of opportunities for investment in innovations to replace other obsolescent innovations grows even longer. 

The long-term horizon on health care gives insight into the fact that this message is not entirely new.  For many years, decades even, we have heard about what must be done in order to make the system work better and cost less with an impending sense of crisis.  Of course, I could have written exactly the same sentence about the sense of crisis when I took my first blue book exam in my first class on the US health care system at the start of my sophomore year at Penn State.  There were high and supposedly unsustainable levels of expenditures.  Rapid inflation.  Overutilization.  And consumers who found it challenging to distinguish between necessary and unnecessary care. 

I’ve already listed a few changes in the past quarter century.  Some relate to the consumer issue.  For example with health apps, there is much more information and it is much more easily accessible to individuals who are acting more and more like consumers when they are patients.  This may help consumers become “smarter” or learn how to use available information better.  However, sometimes the amount of information is so large that instead of differentiating between useful and not so useful care, consumers are faced with differentiating between useful and not so useful information. Innovations in financial incentives may rapidly increase the reward for better care and a better ability to understand and seek appropriate care.

Also in the 27 years, the federal government has continued to pay for more of the costs and to pay for the costs for a greater proportion of the population, and the private sector has entirely new roles.  More of the coverage that is financed by government ultimately goes through the private sector.  There are new public-private partnerships, and there are areas in which investors have found it profitable to bring their money and invest in talent to make money and improve outcomes.  All of this makes now a great time to consider the opportunities for investment in innovation in health care. 

Now, let’s ponder a little more deeply why the United States (and really the world’s) health care systems and economies make the present an incredibly rich time for innovation related to healthcare and ultimately anything having to do with individual or public health.  In other words, what past innovations are becoming obsolescent and creating opportunities and needs for new ones?

My list of reasons is certainly not comprehensive.  With the intellectual talent in this room, we could spend the entire day just listing and elaborating on challenges to individual and public health and the health care that we rely on, alongside our behaviors, to maintain and improve health.  Among my list of reasons you will find some that are clearly a matter of choice within the population and by the government, some that are inexorable given basic demographic forces in the United States and around the world, and some that are due to the system that has been set up for delivering and financing care in the United States.  Let me briefly discuss five opportunities for investment in innovation.

The first comes from public health.  In the news late last year and early this year more than at any other time in the past several decades has been the threats that arise from parents choosing not to have their children vaccinated.  With a sufficiently large proportion of individuals unvaccinated in an area, the herd immunity that protected the previously small number of unvaccinated individuals begins to disappear.  The reasons for the choice not to vaccinate are many.  I am not here to discuss or debate those reasons.  However, I want to acknowledge the threats that arise to population health from the choices of individuals.  An entire series of innovations could address mechanisms of delivery that are perceived to be safer and mechanisms for communication that are more successful in bringing to light the risk-benefit comparison for vaccination.  A return to higher levels of vaccination would decrease demands on the public health system that is forced to track and attempt to convince to vaccinate, decrease expenditures treating measles, and minimize the risk of death from measles.  All of these goals would be worthy of investment if an innovation in this area were on the horizon.  In this case, new innovations are motivated by the perceived obsolescence of vaccinations as we have known them in a subset of the population. 

A second opportunity for investment in innovation also comes from public health.  Conditions like HIV, SARS, and Ebola have captured the world’s attention as conditions that were either new to humans or that seem to return to humans on a regular basis.  The opportunities to innovate by developing vaccinations, developing cures, and implementing improved ways to control are many.  The potential economic consequences, in both high-income and low-income countries, are sufficient that if new methods and strategies for control are developed there will be plenty of opportunity for investment.  A key question for interventions for this set of threats is whether there is a way to make the investment profitable for a private corporation or whether there will have to be government investment or specific incentives to create the opportunity for private profit.  In this case, the opportunity for innovation comes from the obsolescence of the ways in which we deal with infection and the rapidity with which we learn about new disease.

Third, the population is aging. The ratio of the number of individuals who are at what has traditionally been thought of as “working age” relative to the number of individuals who are at what has traditionally been thought of as “retirement age” continues to shrink in the United States and around the world.  The ratios are moving to levels previously unseen. The changes create numerous opportunities for investment in innovation. 

Innovations could increase productive and healthy life years for older individuals.  This could be associated with consuming more in traditional post-retirement age.  It could also be associated with keeping individuals in the work force for longer periods of time.  The market implications of keeping individuals in the workforce longer may have an important impact on the health and economic outcomes of the labor market for the rest of society.  This makes the value of investment in innovation in this area challenging to calculate. 

There are also opportunities to maintain current length and quality of life in more efficient and less costly ways that can be cost-effective and beneficial to society. The economics may be as favorable as extending life and health at a higher level of expense.  Controlling costs for current health outcomes would benefit society, particularly taxpayers, while also directly benefiting older adults and their families who would face lower out-of-pocket expenses and perhaps smaller opportunity costs of their time with better care management. 

Also related to aging is the opportunity for investment in innovation related to dementia care—or better yet prevention or cure.  The demands that are being placed on the United States economy as a result of dementia are huge.  The psychological and social costs are growing as quickly as the economic costs.  Anyone who can find a way to slow or prevent the process will have the potential to reap incredible returns on their investment. 

Each of the opportunities for innovation having to do with aging come from the obsolescence of an economic and cultural system in which a specific age was deemed to be the “right” age for retirement and our systems of caring for those who are frail are overly expensive with large burdens for the individuals, their families, and society.

A fourth opportunity for investment in innovation, this time more specifically in the United States, comes from employers and their employees finding a greater proportion of the total compensation for workers going to health insurance and health care even among the relatively healthy working age population.  So whether there are new treatments, new guidelines, new measures of quality, or new incentives to use the best care possible in as timely a manner as possible, the need for investment in innovation is clear.  The obsolescence here is in aspects of the ways we have financed insurance and provided care. 

A fifth opportunity for investment in innovation comes from the notable increase in the incidence of chronic disease that is related to many things including earlier identification, earlier treatment, an expectation of long-term savings (that do not always materialize), and earlier treatment triggers.  All of these call for innovation in how we manage conditions, how providers interact with patients, which providers interact with patients, and the tools and information we give patients to manage themselves.  The obsolescence here might be thought of as being a function of our understanding of how to prevent and manage chronic conditions and how to manage health versus the rest of our lives. 

I have provided a list of five opportunities for investment in innovation related to health care and to promote individual and population health.  Each of these deals with the obsolescence of something in our health, economic, or social systems.  The opportunities could result in new treatments, new ways of managing care, new behaviors, new facilities (designed with the patient and health management in mind in ways that we have never seen before), new communications, or new social norms. These are just a subset of the opportunities for bright minds who focus on design, or on looking for sources of funding, or on the flow of funds from taxpayers to government to educators and providers, or on the flow of funds from individuals to insurers to providers, to think creatively about how to improve the organization and financing of the health care system.

Where will we find the bright minds working?  Healthcare innovations have come from both the private and the public sectors.  Just because we are sitting in a business school does not mean we completely eliminate the idea that government has something to contribute to innovation.  Rather, we recognize that there is a role for government in supporting those who cannot pay on their own as there is a common good in a healthy population. The key question is how to best balance the public and private sector opportunities to provide funds for innovation.  That balance will come through the public sector focus on research, or building infrastructure, and on educating medical care providers.  And the private sector focus on bringing products to market including pharmaceuticals and medical devices, emphasizing design principles in new products and facilities, new ways of organizing care and new ways of managing care.  To encourage these investments, the government has a role in structuring the assessment of and incentives for potential investments while the private sector determines how to structure investments to maximize the probability of producing a positive outcome. 

The lessons in innovation and investment and not only for present and future health care leaders.  These are important for all industry leaders. Of course, there are some businesses that are designed around keeping individuals or the population as a whole healthy and preventing the need for health care.  There are other businesses that are designed specifically to provide health care to unhealthy individuals.  Both are concerned about health—whether the goal is just to slow the decline in health or the goal is to stabilize health or the goal is to return the person to near perfect health as quickly as possible for as long as possible.

An additional reason for all businesses to be concerned about health is the school’s mission to teach business with humanity in mind.  As we think about the phrase, we recognize that healthy businesses are located in healthy communities.  Thus, all businesses should take an interest in the health of their workers, the health of their customers, and the health of the surrounding community. Productivity decreases with less healthy workers.  And unhealthy consumers have less discretionary income to spend on non-essential goods and services. 

This does not mean that all businesses should using their creative energies toward innovation in health and making investments in health care.  But the interest in health and health care among business leaders should be both broad and deep.

  

I anticipate we will find today’s discussion of investments that have been and can be made and innovations that have occurred and may occur inspiring no mater where our careers take us.  Whether we plan to be directly in health care, in a related industry or simply in an industry that relies on health.  We will hear from leaders who are in the private sector at present but who have had career experiences in both the public and private sector at the cutting edge of innovation and investment in the health care system and in public health. 

We will find the stories inspiring because we admire people who experiment.  We admire people who bring resources to bear on taking risks. And whether the innovations are truly game changers or incremental stepping stones on the path to the future, we admire those who have found ways to push us and our economy ahead.

We will find the stories inspiring whether we hear about successful results or the challenges of and the process of learning from failure.  Sometimes the best and most important lessons we learn in our careers and for our businesses come in the form of failures.  And I anticipate that the inspiration will be what may help to drive someone in this very room to bring on the next major innovation or choice to make an investment somewhere in their career that helps to move the US health care system toward a trajectory that is more sustainable and results in a healthier population over time.

So now it is closing time for my comments.  Let us move on to listening to stories of innovations that come from some other innovation’s obsolescence. 

Endoscopes and Drug Resistant Bacteria

There has been significant coverage of infections due to drug resistant bacteria related to the use of an endoscope.  One example of this coverage comes from from the Wall Street Journal.

The gist of the situation is this.  A medical device is used to help get a view of specific internal organs as a diagnostic procedure.  The device can have bacteria from the gut on it when it is removed from the patient.  There are directions for cleaning and sterilization that, if followed correctly, can make the device clean for use for the next patient.  However, at least a part of the standard procedure is performed manually and it has to be done meticulously and absolutely correctly in order to make the device completely safe for the next patient.

When the cleaning is not done correctly and the bacteria from the gut (where they can live safely for the person) end up someplace else, it causes an infection.  The bacteria are drug resistant as they create enzymes that break down the antibiotics.

How does this relate back to health care financing?

Someone has to make an assessment of the value of the device.  The device must be purchased and then it is use and its use is reimbursed.  This is part of the value proposition.

However, if the FDA, and other regulatory bodies, recognize the danger and can structure payment system incentives that make it costly to clean the device incorrectly that will help to limit the misuse of the device.  Potential penalties can also create an incentive or innovation with respect to the device or with respect to its post-use processing.  Anyone who can figure out how to make the device safer and commercialize that change can make a substantial amount of money.

Not using the device does not seem like a good option given that the Wall Street Journal article describes it as being used to diagnose diseases of the liver, bile ducts, and pancreas.

Thus, it will be interesting to see how strongly the FDA warns providers and patients against the use of this device and then to observe whether the manufacturer or users (as UCLA is said to have already gone beyond what the manufacturer recommends for cleaning and decontamination) are the first to find a way to innovate and improve the outcomes associated with this device.  

ICD-10 Debate

An article talking about the upcoming implementation of ICD-10 raises some interesting questions about how the implementation of a new coding system will impact providers.  

The change from ICD-9, a system to which providers have become accustomed, and ICD-10, a system with 5 times as many codes.  The ICD-9 system has 13,000 codes.  The ICD-10 system has 68,000 codes.  Certainly, detail can be a good thing in terms of trying to characterize the exact nature of the problem for the patient and the exact nature of the procedure code. The key is that people have to learn how to use the codes.  Providers have to learn the codes.  Providers have to implement software systems that incorporate the codes.  

For large providers who have large amounts of staff the switch to a new system can be fairly straightforward.  Send the staff responsible for coding for training and keep the training up so that they hone their skills and knowledge.  In addition, if payers penalize for using the incorrect code, larger providers are likely to have sufficient cash flow cushion to brace themselves for a delay in reimbursement--and perhaps even for no reimbursement.

In contrast smaller providers do not necessarily have staff dedicated specifically to this and the providers may not feel that they have the time to dedicate.  Smaller providers also may not have the resources to update their information systems and may not be able to brace for delays in cash flow.  

The problem at a system level is that with some providers prepared for the October 1 mandated change (already two years after originally planned and some two decades after the system was first developed) and other providers not prepared there is a political process that will determine how and when movement occurs.  For those providers who have prepared for the switch, the resources spend on preparation seem like wasted resources.  For those who have not prepared, the resources needed seem daunting.  (Although the article points out that documented costs have been lower than expected.)  And the uncertainty that is caused by not knowing what will happen is also costly.

One suggestion is to have both coding systems available simultaneously.  That will shift the costs of change (or failure to change) to the insurers who need to manage the reimbursement.  

Given that all but one expert on the panel mentioned in the article was in support of moving ahead it seems likely this will occur.  It will be interesting to see what the time for additional public comment yields and what ends up happening on October 1.   

Whole Foods and Health Care?

There was a recent article discussing the possibility of Whole Foods beginning to offer health-related retreats and health care to the general public.  Whole Foods is a store that offers many organic and minimally processed food options.  As the online article points out, Whole Foods has also been characterized as "whole paycheck," a very expensive option for the food and health and beauty items they sell.  The article notes that the opportunity to start a new line of business may be limited because of the current financial pressures being faced by the company as general grocery stores begin to offer options to compete with the products that Whole Foods offered at a lower price.

For the moment, suppose that Whole Foods does have the funds to start this new line of business.  There are some interesting questions to ponder.

First, one suggestion is short weekend retreats regarding health and diet.  One question is how this would differ from anything else that is being done by others in this part of the market already?  And would there be anything about an affiliation with Whole Foods that would make this line of business particularly profitable?  No simple answers there.  But if consumers view Whole Foods as a trusted source of information about healthy products and health in general then this may be a very profitable area as long as consumers have the disposable income and choose to make an investment in their own health this way.

Second, the article discusses the possibility of clinics much like the in-store clinics at Walmart and CVS.  The key here is that the article mentions what is very similar to other in-store clinics, the urgent, non-emergent care issues.  The other thing that is mentioned with respect to the in-store clinics is consultation about chronic conditions.  It is this latter point that interests me the most.

For years, there has been the suggestion and some evidence that receiving care from a single provider who can understand and perhaps coordinate care for a person's chronic condition (or for some individuals conditions) has value.  The one provider, usually a primary care provider, would then have an idea of all the medications, all the other providers being seen, and all the regimens that have been given to the patient.  The opportunity to coordinate care is expected to help to limit complications and to control the cost.

Having someone to ask questions about chronic conditions is a good thing.  Having someone to ask questions about a chronic condition whose practice style might be in line with the philosophy of Whole Foods and who has a focus on nutrition could, perhaps, be a very good thing.  The ultimate question is whether or not this would be in concert with or somehow become a problem when paired with primary care provided by someone else.  Or would the provider at the Whole Foods become the primary care provider for the chronic care patients who stop in?

Then, how would this be paid for?  Would insurers cover it? Would prices be set higher than other in-store providers and continue to attract patients?

It will be interesting to see if Whole Foods proceeds with this idea and what comes of it.