Can Connected Health survive the political economy of health care?

Tuesday, June 24, 2008  | Matthew Holt


About the author - Matthew Holt is the founder of The Health Care Blog and is co-founder of Health 2.0.

In recent weeks a few tangentially related events have got me thinking.

First, I was reminded by an industry veteran that insurers tend to get interested in care management when the underwriting cycle is going against them--that is when they're not able to put prices up as fast as their medical costs increase. PriceWaterhouseCoopers' study last week suggests that the recent reductions in the rate of premiums in the last few years are over.

Secondly, the disease management industry is still reeling from the apparent failure of Medicare Health Support. Last week, the insurance industry (barely) staved off cuts in payments to Medicare Advantage plans. Everyone seems to agree that they're paid more per enrollee than the standard government FFS program, and the insurance lobby has been pleading that it can't do it for less money. Despite the waste and misdirected incentives in Medicare, it appears that finding savings is not easy.

Thirdly, Joe Kvedar pointed out here last time that primary care advocates are pushing for the medical home idea. But payment recommendations for Medicare Part B come from the little known and specialty-society dominated "resource-based relative value scale update committee" (see here). And of course, hospitals in America (including big academic systems such as Partners!) make most of their profits off "service lines" such as orthopedics, cardiology, radiology, etc, -- all of which have affiliated drug, device and technology suppliers which are even more profitable.

All this should remind us while that the majority of spending in the system goes on the "wrong" things, there's an entire superstructure built around that spending.

The concept behind connected health, like those behind the medical home, disease management and electronic medical records, is that an investment of current dollars in tools and techniques designed to better manage patients today will yield both better outcomes and lower costs tomorrow. Estimates from luminaries like Jack Wennberg and Don Berwick that 30% or more of health care spending is wasted suggest that we ought to be able to save a fortune.

Unfortunately, two things are true. First, thus far, the limited attempts to actually save money by "doing the right thing" haven't apparently saved much if any money. Second, and much more damaging to the long term prospects of Connected Health, if those savings do become apparent, they will have been created by an increase in dollars spent on primary (and pre-primary) care--such as early prevention remote monitoring programs. Which of course means that the savings will come from a correspondingly greater reduction in spending on specialty and hospital care.

While on a micro-level no one can argue with, for example, an online monitoring program preventing an elderly congestive heart failure patient's hospital admission, on a macro-level fewer hospital admissions and fewer procedures mean less money for hospitals and surgeons. So as the current pilots of connected health start delivering data we must be prepared for two results.

Either little money will be saved, in which case appetite for the programs will dwindle. Or lots of money will be saved.

In which case the forces behind the status quo in current health care spending will start to focus their attention on preventing this upstart idea from radically transforming the current distribution of dollars. To me, the second is the likelier of the two alternatives. I'd love your feedback as to whether my analysis seems correct, and if so, what "political" moves those supporting connected health need to make to prepare for the scrutiny that awaits.

 

Member Comments


(See http://www.ahita.org/blog/?p=33 for a longer response.)

I don't think you have to worry about option number one. Prevention and wellness have clear benefits. Technology will serve to make prevention and wellness more effective and, as time goes on, cheaper to implement. In the linked article, I mention a third-party health insurance administrator that has demonstrated 8% savings over 3 years using consumer-oriented Web-based tools to enhance compliance with screening and nationally accepted clinical guidelines.

As for option two, I don't see how "the forces behind the status quo" (presumably hospitals and hospital networks) can stem the tide of consumer-oriented technology. Once the benefits are well known, consumers (at least some of them) will purchase the technology themselves and employers will find the temptation irresistible. This will drive down costs so that the consumer and employer markets will expand year after year.

One wild card is Medicare. An OMB report on disease management a few years back concluded that effective disease management reduced annual costs of chronic illness and helped people live longer. Unfortunately, instead of dying from a chronic illness, well-managed patients live more years (using up some of the savings) and end up dying from cancer in greater numbers, resulting in huge end-of-life expenses (using up all of the savings and then some). I hope that Medicare's severely constrained finances don't introduce the moral hazard of letting people be sicker so they'll die sooner.

Byron Davies

Chair
Arizona Health IT Accelerator

Working with a for-profit start-up on novel approaches to remote patient monitoring and feedback. Working with a non-profit to accelerate the adoption of health IT -- especially electronic health records -- in Arizona.

 

Posted by: Byron Davies
6/26/2008

 

I have had to decide whether I am going to wait for the government and insurance companies to solve this problem or to "just do it". IN Hawaii, we have been providing a private pay "technology-enabled advanced medical home" with remote patient monitoring, video housecalls, and a web based virtual acer team to a small number of patients, sometimes in private homes and sometimes in care homes. Patients love it. Families love it. Has anyone noodled about how to drive this from a consumer perspective?

Daniel Davis

CEO
Interactive Care Technologies

long history of clinical informatics, web-based telemedicine, technology enabled chronic care management.

 

Posted by: Daniel Davis
7/6/2008

 

Good point Daniel.
I spent yesterday trawling one of the analyst sites on "remote patient monitoring" and was gratified to see that the market is growing with a CAGR over 20% despite the lack of reimbursement. Two conclusions: 1) it must be working 2) the payers see the cost-benefits and don't need to wait for reimbursement legislation to catch-up.

There is clearly an opportunity for consumer marketeers to offer propositions over and above the insurance premiums that most people are still able to pay. These propositions will be targetted at the wealthy and many of us in healthcare who believe in equal access will be uneasy.

An active consumer driven market should be welcomed because it should become quickly clear which propositions work and which do not work as well. On the other hand we will likely end up with a variety of proprietary solutions which are difficult to integrate in the mainstream.

The payers need to step up to the pitching plate and take a decisive lead. This will drive standards, accessibility for the majority, and reduce cost for the long term. We have been talking the talk, now it is time to walk the talk with scaleable solutions.

Chris Johnson

VP Business Development
Cypak

 

Posted by: Chris Johnson
10/3/2008

 

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