Healthcare IT Strategy

The following is the comment I posted to,

Kent Bottles: Is It Really Impossible to Control the Cost of Health Care in the U.S.?

Kent, your narrative should be mandatory reading for all those in Washington whose vision of reform stands in stark contrast to the piece. Then, before they are allowed to propose or vote on their vision, they should be forced to explain why their vision doesn’t address these issues.

In my non-luminary opinion, here’s where I think the reformists have failed. The notion of spending funds that don’t exist, to fix things that may not be broken, without fixing those that are could only come from Washington.

Permit me to over simplify things to make a point. When I look at healthcare, I see a three legged stool; pharma, the payors, and the providers—the three P’s. Not exactly in a pod, each working to their own benefits and operating under different business models—models which are in conflict. For example, many hospitals operate as not for profits, which conflicts with the for profit sectors.

I believe the present reform effort will increase the conflict. Why? Because the legislation is siloed—it looks a lot like the word ‘soiled’ which might also be part of the problem. The legislation does not seem designed to address healthcare as in integrated industry. The way reform is positioned, each nudge that is put to one leg of the stool will cause a reaction, an unfavorable one, to the other legs. It is a little like doing an experiment, changing multiple variables at once, and hoping for the best.

Two sides of the stool, the payors and pharma, have behemoths running the show. Among the behemoths, the business models in pharma are quite similar and the same holds for the payors.
I think it is important to distinguish between the business of healthcare (the dollars and cents) and the healthcare business (the clinical side). The provider segment is highly fragmented. There is no behemoth provider cartel. The business of healthcare, is the side most in need of reform. Each of the thousands of providers operates under their own business model. None of these businesses was designed to be interoperable—I do not use this term in the same sense being used by the ONC and CMS.

The business of healthcare, with all of its inefficiencies, is designed to operate within its four walls and across a limited geographical radius. The long term goal of healthcare reform, I believe, is to make the provider side appear as one giant services provider. Just because consolidation sort of worked for steel, the airlines, and the automotive industry does not mean it will work for delivering healthcare.

My final comment has to do with the payor side of healthcare, and I’ll start by acknowledging that this one is more than a little provocative, one for which I have not thought through a workable solution—I’ll leave that to those of you who aren’t grasping for metaphorical tomatoes to throw. I could be convinced to skip the rest of my comments if for a moment I thought that the business model of the payors was—let’s cover everyone who needs care for a fair cost. Ignore for the moment that my statement is naive.

We know that on a small scale it is possible for people to self-insure, to meet their needs without having to rely on payors. I’ll frame my final comment with a question—where is the value-add to healthcare from the payors?

Here is my issue with the current model. You want to go to the movie, you hand me ten dollars for an eight dollar ticket, and I pay the movie theater on your behalf and pocket the two dollars. In this instance I am merely the middle man, I manage the transaction. The theater gets no marginal benefit, and you get no marginal benefit.

Not complex enough? Let’s say someday millions of people want to go to the movies and a ticket will cost them eight dollars. Anticipating that, everyone pays me a dollar a day so that when the time comes they can go. On that day, I pay for movie tickets for those who want to go, pocket the difference, and I keep the money for those who don’t go.

In my small mind, that’s how I view the payor leg of the stool. I think the payors relish reform. I think the more they complain about how badly this will hurt them the more they may like it. It reminds me of the Uncle Remus story in which Brer Rabbitt pleading with Brer Bear and Brer Fox not to throw him into the briar patch.

What industry wouldn’t be salivating if they could find an additional thirty or forty million customers overnight? What if you could charge them a monthly fee and make the co-pay so high that you might not have to cover major medical claims? Does this sound absurd or does it sound a little like the mortgage banking industry? Fess for no service. I am not saying that this will happen in every case, but I do not think one can argue that this will never happen.

Circling back to how to reform reform. From my vantage point, the most advantageous reform idea would be to force multiples of payors to compete in every state. Competition could do wonders for cost control.

A final thought. Earlier this year a House committee passed legislation on “can’t fail” businesses. The Financial Services Committee voted on an amendment that would let regulators dismantle a firm, limit mergers and acquisitions, and force an end to activities deemed systemically risky. The financial industry opposed the measure, as part of legislation to overhaul Wall Street rules. This could be another opportunity for the camel—Washington—to get its nose further under the healthcare tent. There is nothing that limits the legislation to financial services. Call me a cock-eyed pessimist, but what is there to prevent Congress from deciding that the payors need to be dismantled, thereby ushering in a federal payor model? That would give them two legs of the stool. What if…?