Posts Tagged ‘Health Care Reform’

The Two-Edged Sword of Healthcare Reform for Pharma

The Economist recently published a report on the cost impact of healthcare reform in the US.

Healthcare Spending TrendsThe data shows that the fundamental idea of bending the cost curve by changing the way healthcare is reimbursed — moving from a fee-for-service to a fee-for-outcomes — is actually working. Hospitals are actually doing fewer unnecessary tests than they previously did. According to the report, before Obamacare, hospitals did as many tests and procedures as they could, because that’s how they made money.

Now that the focus is on patient outcomes —  keeping patients out of the hospital and feeling better after they’ve been discharged — costs are going down. Bundled payments for procedures is limiting out-of-control expense growth.

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Keeping America Well

The internet has revolutionized retail. In travel, consumers use self-service websites to search for destinations, compare offers and purchase a vacation. Amazon has replaced the knowledgeable bookstore owner with breadth and convenience. Yes there are trade-offs, but most consumers are willing to exchange professional expertise for price and convenience on non-critical decisions.

But not so with healthcare. Yes, consumers go online when they have a health question, but sometimes they leave more confused than before. Convenience yes, but expertise? Questionable.

If you ask Dr. Roy Schoenberg, CEO of American Well Systems, he’ll tell you why. “In the consumer’s mind, healthcare is not online portals or health risk assessment tools. Healthcare is about talking to a doctor.” We receive healthcare when we explain our symptoms to a physician, he or she diagnoses the problem and then recommends a remedy.

There’s still a convenience problem, however. Often at the point of need, many of us can’t get in to see our doctor. It may be 2:00 a.m. and your child is crying, or you are experiencing pain and your doctor’s calendar is booked for the next three weeks.

But what if you could log on to the internet (convenience) and talk live with a physician (expertise)? And what if that physician could call up your health records as the connection was being made? And finally, what if this “doctor’s visit” was covered by your health insurance (price)?

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Opening salvo

Obama signing healthcare reform billRegardless of your point of view on healthcare reform or the much-discussed legislation, the Patient Protection and Affordable Care Act (PPACA) is now the law of the land in the United States. Our friends in every corner of the healthcare sector are scrambling to understand what reform means for them and how to take advantage of new opportunities or mitigate new risks to their business.

Any time there is a significant change in the business rules of engagement, whether it’s tax policy or new regulations, company executives look for loopholes or workarounds to maintain their competitive positioning and avoid additional burdens. With the passing of the healthcare reform bill, general counsels and consultants everywhere are looking for ways to avoid complying with the new law.

Don’t do it.

The right response is not to dodge, hide or obfuscate. At this point, with healthcare costs projected to rise to nearly 25 percent of GDP in the next 15 years if we don’t intervene, we need to rethink the industry. Like the industrial revolution that laid the first transcontinental railroad, created the auto industry and put a man on the moon, we need a healthcare revolution. We need an innovation revolution.

The only way out of the healthcare morass in the United States is through innovation.

An incremental approach to insurance reform and consumer access will have a commensurate incremental effect on the cost curve. What we need is to dramatically rethink how to prevent and diagnose disease, how to treat chronic illness and how to compensate physicians. We need to apply technology in new ways to bring targeted therapies to market quicker and to package the latest in behavioral change theory to create wellness programs that become part of our pop culture. And we need to understand how even little nudges and informal social support can have a big impact.

Every sector in healthcare has a role to play, from providers and health insurers, medical device and pharma companies, large employers and government agencies, teaching hospitals and research institutes to entrepreneurs and venture capital firms.

This blog, The Difference Makers, is my personal journey to find those entrepreneurs who are applying innovation to health and healthcare. I want to see if big problems require big solutions or small solutions. I’m curious about whether the diffusion of innovation in healthcare follows the same curve as it does in technology, and whether the market economy, the public economy or a combination does a better job of meeting the needs of the patient. And I’m curious about what it means to put the means of health production in the hands of the consumer.

Innovation + Entrepreneurialism meets a Big Challenge. It’s worked before. Let’s see what happens this time.

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