Tuesday, July 12, 2011

Reforming America’s Health System through Innovation and Entrepreneurship

Key words: Health reform; consumer-driven care; health savings accounts; high-deductible plans; patient-physician relationships; electronic medical and health records; disease management; multispecialty; ambulatory care centers.

July 12, 2011-
In 2005, I wrote the following article for the Journal of Practice Management. You may find it interesting in light of what has happened since – the passage of the Accountable Care Act in March 2010, the ensuing debate on whether to retain or repeal the Act, and the pivotal role of the Act in determining the outcome of the 2012 Presidential election.

America’s attempts for healthcare reform are gridlocked. Health-care special interests are reluctant to abandon profitable activities, and American culture—distrust of centralized federal power, belief in self-improvement, desire for choice, and belief in equal access to medical technologies—is slow to change. Physician entrepreneurship and innovation, coupled with consumer-driven healthcare and public-private partnerships, may break the present gridlock.

I recently interviewed 40 national healthcare stakeholders (defined as those whose full-time jobs are in health-care) about their ideas for health reform, and these interviews form the core of my book Voices of Health Reform.1 In selecting interviewees, I crossed the ideological spectrum from single-payer advocates to health- care market enthusiasts; subjects included academics, policy
wonks, government insiders, practicing doctors, physician executives, health plan leaders, hospital CEOs, disease management experts, and supply chain company executives.


These stakeholder interviews led to the following conclusions:

• In the short term, a single-payer system isn’t in the cards. Among stakeholders, including single-payer proponents, there’s little confidence that government is up to the job of running such a system. Nor do they think taxpayers are willing to foot the bill for a government takeover.

• American healthcare may be about to go off the financial cliff. With health inflation exceeding general inflation by a factor of four to eight times over the last five years (with a 45 percent overall climb in costs during those five years), private coverage by employers has eroded from 80 percent to 56 percent (private coverage constitutes 54 percent of the total market); hospital bad debts have doubled (with an increase of 40 percent in the last nine quarters); and the number of uninsured has increased 2.4 percent each year (to the current level of 46 million).

• We are in the midst of a rapidly evolving and uniquely American system—a public-private collaborative consisting of a rich, witch’s brew of massive federal increases for Medicare drugs, government-sponsored pay-for-performance programs, promises for a national electronic medical records (EMR) system, and a wave of private consumer-driven care initiatives, now joined by banks and financial institutions. The December 2003 Medicare Act creating health savings accounts launched this wave.

• Although many stakeholders are relying on and waiting for a “seamless interoperable” electronic solution to ut costs, improve quality, and induce efficiencies in the system, nobody seems to know how to persuade doctors in solo or small practices to pay for EMR systems. Without investment and participation by these doctors, such a system will be dead on arrival. Doctors in small practices, (those with 10 or fewer doctors) make up 88 percent of practicing physicians and care for most Americans. Consequently, federal financial incentives encouraging physician investment in EMRs Medical Practice Management • November/December 2005 are almost certainly forthcoming.

• Success or failure of collaborative efforts may depend on innovation and entrepreneurship in the private sector, rather than on government mandates. Although most Americans are skeptical of massive government intervention in healthcare, even conservatives recognize federal involvement as a necessary evil.

In Voices of Reform, George Lundberg, Medscape General Medicine editor, states: “We’re talking about 293 million people.Innovations tend to be limited and localized. To be effective for the masses, innovation would have to propagate like crazy.” In his interview, economist Joseph Antos, a veteran of the federal health scene, notes that 100 percent of hospitals and 95 percent of doctors must follow Medicare rules and guidelines. Medicare, Antos asserts, is the “sheriff” of the U.S. health system: “Medicare is the biggest actor in the system with a badge to back it up. It’s unwise to buck the big boy, especially if you’re an insurance company.”

How and why does the American health system differ from health systems in other countries?

• Is it because other nations have homogeneous populations who support, depend upon, and trust single-payer systems?

• Is it because Americans distrust government-run systems? Perhaps this distrust exists for good reason.

According to John Goodman et al in Lives at Risk: Single Payer National Health Insurance around the World, government systems ration high technology and stint on care for the sick; most of these systems feature long waiting lines.2 The Canadian Supreme Count in Ottawa recently ruled that “access to a waiting list is not the same as access to healthcare” and found parts of the Canadian system unconstitutional.

• Or is it simply because Americans lack a unified national vision of the way things ought to be? Scott Serota, CEO of the Blue Cross Blue Shield Association, says, “The phrase ‘U.S. Health System’ is a misnomer. The first thing we need to create is a unified U.S. health system. We have a terribly fragmentized approach to serving the needs of the American population.”

My answer to these questions is this: Our system results from our unique national culture. Since our founding 229 years ago, Americans have shared the following characteristics: a distrust of centralized federal power; a belief in the virtues of self-improvement; a desire for freedom of choice; a belief in equality of opportunity, not results, for all citizens.

These characteristics may explain why Americans: prefer a multiplayer to a single-payer system; reject federally mandated universal coverage; want to make their own healthcare decisions; seek equal opportunity access to new medical technologies; allow market- and public-based institutions to co-exist and compete; and permit doctors to practice where they want.


Given these American cultural characteristics, innovation and entrepreneurship, as defined by management theorist Peter F. Drucker, may offer the best hope for reforming the health system.3,4 Drucker makes the following key points:

• The American entrepreneurial economy distinctly differs from the more socialistic European economies. American organizations must be able to make decisions based on proximity to performance, the market, technology, society, environment, and demographics. In Europe, on the other hand, distance from the market of centralized systems makes innovation and responsiveness difficult.

• The American economy has made a profound shift from a managerial to an entrepreneurial economy, generating millions of American jobs in its wake and outpacing Europe in growth. The American economy is now growing at 3 to 4 percent a year, while Europe’s growth rate remains stagnant at less than 1 percent. Certainly the American health industry’s growth rate is robust. The industry now consumes one of every seven dollars of our economy, and generates one of every 11 jobs.

• Entrepreneurship and innovation are especially successful when there are demands for change, structural changes in industry, demographic shifts, and changes in perception. In the case of consumer-directed care, the market is shifting: from HMOs and PPOs to CDHPs (consumer-directed health plans); from doctors being paid by third parties to doctors being paid by patients; from a relatively young country to an aging and more affluent nation; and from passive patients
to assertive consumers. Entrepreneurial strategies include being there “fustest with the mostest,” which is how a Confederate general explained his successes in winning battles with limited resources; to “hit them where they isn’t,” the Wal-Mart strategy of placing stores where their competitors aren’t; dominating ecological niches, such as ophthalmologists’ franchises for laser short-sightedness corrections or cataract assembly line lenses replacement; and delivering true values to customers—seeing patients on time on the day they call, offering free coffee and even snacks to patients, enhancing the office décor, offering free videos and movies while waiting, featuring competitive pricing, or one-stop disease management, and providing documented proof of superior quality and outcomes. Reece/Reforming America’s Health System through Innovation and Entrepreneurship 3


What are the current opportunities for innovation for physicians, based on proximity to patients and what’s going on in rapidly changing medical markets? Physicians are ideally suited to be innovators and entrepreneurs; here are some examples of “closeness to market” drawn from Voices of Health Reform.

• Lucien Wilkins, MD, is a retired gastroenterologist turned real-estate entrepreneur. In his practice as a gastroenterologist in Wilmington, North Carolina, Wilkins observed rural patients presenting with advanced colon cancer; there weren’t many specialists in rural regions of the state. After retiring from practice, he saw a solution to the distance-from-care problem: moving specialty clinics to where patients worked, lived, and played. Wilkins and a real-estate firm began building “Big Macs” (multispecialty ambulatory care centers). Nine such centers are now being built and have been warmly received by physicians and communities.

• Barry Passett, a former hospital executive near Washington, D.C., partnered with physicians to form HealthScribe, one of the first companies to outsource doctor-generated dictations to India for overnight transcription.

• Allen Wenner and John Bachman, family physicians in Columbia, South Carolina, and the Mayo Clinic in Rochester, Minnesota, combined forces to develop and test the Instant Medical History, whereby patients could create their own narrative medical histories by using a simple “yes” or “no” algorithm based on the patient’s age, sex, and chief complaint.

• William Gold and Victor Villagra, medical directors for Blue Cross/Blue Shield of Minnesota and Cigna, respectively, pioneered the development and implementation of comprehensive disease management programs staffed by nurses.
• Randall Moore, MD, president, CEO, and chairman of American Telecare in Minneapolis, took disease management a step further. He has developed audio and visual monitoring bedside units that allow doctors and nurses to talk, look at, and monitor home-bound patients. In this case, “technological closeness” to these patients dramatically reduced hospital readmissions. This use of technology is especially useful for patients with chronic congestive heart failure.

• John Casaillas, CEO of the Medical Banking Project, believes the most significant innovation in the near future will be the creation of HSA-linked debit cards for patients who are members of consumer-driven health plans. These cards are being developed by banks and health plans and will be introduced within two years. They will allow physicians to be assured of payment at the point of care.5


In a Voice of Health Reform interview, Brian Klepper, president and founder of the Center for Practical Health Reform, says that healthcare costs are crossing thresholds of affordability for mainstream Americans. These costs are pricing out healthcare coverage for increasing numbers of employers and employees, individuals, major corporations (e.g., GM), and governments (particularly state governments subsidizing Medicaid).

Employers are responding by dropping coverage for workers or by switching them to high-deductible plans with lower premiums; employees of small businesses and individuals working out of their homes are “going bare.” The federal government is cutting Medicare and Medicaid reimbursements.

The best and most constructive way for physicians to prosper in this darkening competitive milieu is to capitalize on their proximity to patients, knowledge of disease, and awareness of consumer needs through innovation and entrepreneurship. Physicians should also be heartened by the fact that electronic innovations—such as automated history taking, eligibility checking, assured payment at point of care through use of debit cards, removal of utilization and other external controls, automated identification of the proper codes, and the ability to prescribe, fill refills, schedule visits, and conduct virtual visits through email— should free up time, eliminate dictation, and allow them to complete work at the time of the visit and get home on time.

These are just a few of the silver linings on the dark clouds that loom ahead. It is better to light the end of the tunnel with innovative entrepreneurial activities than to curse the darkness. ¦


1. Reece RL. Voices of Health Reform: Interviews of Health Care Stakeholders at Work, Options for Repackaging Health Care, Including Single-Payer and Consumer-Driven Reform. Independence, Missouri, Practice Support Resources Inc., 2005.

2. Goodman JC, Musgrave GL, and Herrick DM. Lives at Risk: Single-Payer National Health Insurance Around the World. Lanham, Maryland, Rowan and Littlefield, 2004.

3. Drucker PF. Innovation and Entrepreneurship: Practice and Principles. Perennial Library, Harper & Row, 1986.

4. Drucker PF. Post-Capitalist Society. New York, HarperBusiness, 1993.

5. Kingson JA. Health Care at the Swipe of a Card. New York Times


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"My answer to these questions is this: Our system results from our unique national culture. Since our founding 229 years ago, Americans have shared the following characteristics: a distrust of centralized federal power; a belief in the virtues of self-improvement; a desire for freedom of choice; a belief in equality of opportunity, not results, for all citizens."
Couldn't agree more – but we also need to remember that health care system in the USA are complicated and before even starting to implement any of IT solution there are so many other complexity issues that must be solve before even starting.

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