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Why We Need Health-Care Business Innovation More Than Ever

As the health-care debate rages on—bringing with it a government shutdown—here's how technology and innovative thinking can help ease the pain.

The CNN headline speaks volumes: "Government shutdown: Get up to speed in 20 questions." And the debate continues. A huge part of the debate stems from the policy and the politics around our health-care system and the costs associated with it.

What continues to be missing from the debate is the way health-care "business" is conducted—and can be modified for better results. For proof, look no farther than yesterday's rollout of the Affordable Care Act, as described in this New York Times story:

"Heavy volume contributed to technical problems and delays that plagued the rollout Tuesday of the online insurance markets at the heart of President Obama’s health care law, according to state and federal officials, who were watching closely for clues to how well the system will work and how many people will take advantage of it."

When it comes to innovating business models for health-care delivery, it appears we have failed to keep pace with clinical advances, and surprisingly with most other industries.

Here I want to share with you, in part, what I wrote in one of my books, Sustained Innovation (May 8, 2007) about this very topic. Although some of the data I am sharing here may have changed slightly since the book was first published, the fundamentals remain the same.

The Critical Issues

Let’s analyze the health-care delivery system from the perspective of information flows. We have a wide variety of players: doctors, hospitals, insurance companies, employers, government, and researchers, all operating in an environment that makes up a complex supply chain. And for this complex supply chain, transparent business models and processes need to be established to enable collaboration.

Health-care services have spent less than one-tenth what banks and other industries have spent on technology investments to create better information flow and cross-boundary collaboration. Various studies have yielded this alarming picture:

Every year, medical errors cause 98,000 deaths (some studies suggest the number is twice that) and one million injuries.

Medical errors kill more people each year than breast cancer, AIDS, or motor vehicle accidents.

Thirty to forty percent of the money we spend on health care—more than half a trillion dollars a year—is spent on costs associated with "overuse, underuse, misuse, duplication, system failures, unnecessary repetition, poor communication and inefficiency."

One-fifth of medical errors are due to the lack of immediate access to patient information.

Some 80% of medical errors were initiated by miscommunication, including missed communication between physicians, misinformation in medical records, mishandling of patient requests and messages, inaccessible records, mislabeled specimens, misfiled or missing charts, and inadequate reminder systems.

Three out of every 10 tests are reordered because results cannot be found. Patient charts cannot be found on 30% of visits.

The problem is that vital information is missing throughout the entire supply chain. What information is available must be transferred laboriously by paper; databases in hospitals and doctors’ offices are often unable to talk to each other, because there are no data standards.

In some settings, doctors and nurses spend as much time on paperwork as they do treating patients. Did you know that the 130,000 pages of Medicaid and Medicare rules and regulations are three times the size of the Internal Revenue code? Did you know that a Medicare patient arriving at the emergency room must sign eight different forms?

When all of this is resolved, and we think it will be eventually, the real innovation will not be about new health-care technology or policy. It will be how the medical community rewires the way it works and collaborates by innovating business models with streamlined organization, processes, and automation.

Health-care Delivery

We have to start believing that patients should have access to their medical records and be full participants in the health-care process. This means that health-care services must maintain systems that provide full accessibility to physicians, clinicians, and patients respectively.

Legacy health records and medical delivery systems were never designed for transparency and portability. Actually, they were designed precisely with the opposite intent. The result has been a collective system that isolates information from the people who need it to make faster, better decisions.

This chaos literally costs billions of dollars annually in bloated health -are expenses.

For example, today a hospital can easily develop better patient information management that gives better control over the dissemination of patient data and expedites decision making, resulting in:

Reduced patient errors through electronic physician order entry.

Elimination of transcription errors.

Reduced pharmacy errors because all prescriptions are sent electronically.

Reduced dosing errors in pediatrics, where dosing is calculated by weight and age.

Having fewer patient errors means lower costs and better outcomes.

The Promise of Tomorrow

We are accustomed today to seeing twice as many office staff as medical personnel in a doctor's office. That will change. There will be fewer visits to the doctor; information will be exchanged electronically. There will be fewer repeat tests. Doctors on rounds in a hospital will have everything they need to know in a small device hanging on their belts. Patients will have access to their medical records online, and so will the emergency room. But all this will require change, and change is not easy.

Actually, we already have the technology we need. For example, we already have EHRs, electronic health records, which capture every piece of information about a patient and are accessible to qualified medical personnel online. In an emergency, the patient doesn't have to remember drugs he's taking and nobody has to track down a manila folder.

Nevertheless, when studies indicate that only about half of all patients get widely accepted and uncontroversial advice from their doctors—such as taking aspirin for heart conditions—it's time we consider something new. Moreover, if we had a national, intraoperative, medical information network, we would be able to see patterns in the aggregate data. We could learn, for example, whether a certain test is actually worthwhile in a certain situation. The quality of health-care would go up and the cost would go down.

Although some progressive health-care providers have begun to transition to digitization, enabling faster and more complete access to patient data, we still have a long way to go toward achieving seamless process and business innovation in health care.


"Can Innovation Actually Be Measured?"
"The 3 Pillars Of The Innovation Economy"
"Why Innovation Matters In Politics And The Public Sector"

[Image: Flickr user Serge Melki]

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  • William Bennett

    I agree with the premise that systems will bring much needed improvement and efficiencies to the industry. On the other hand, the industry is using a business platform that is 100 years old and continues to embrace it for status quo . Big issues are the delivery and financing of healthcare and until that gets addressed we will continue to see dysfunction, disappointment and dissatisfaction on the part of those that pay the bills - employers and employees. The job is not to address "how do we afford healthcare" but "how do we make healthcare affordable"?

  • Anthony Reardon

    Nice effort Faisal,

    I have to say, I disagree with most of your premises and conclusions in this article, but that is not uncommon. Everyone tends to come at the issues from different perspectives, and that is actually fundamental to the problem in itself.

    Someone give me a whiteboard and some dry erase markers, lol! Let's break this down.

    When the government talks about the cost of healthcare, what they are actually referring to is the cost of government subsidized healthcare- things like Medicare. It's a simple issue of tax revenues (with all associated pressures) and whatever they can do to drive the cost down (to stretch the revenue further without raising taxes/ to have a viable system that can even afford to pay for the commitment) not to mention what could hypothetically be done to lower or even eliminate the taxation.

    This is very different than what employers think of as the cost of healthcare. Their concern is the taxation, of course, and more specifically the cost of insurance premiums to provide healthcare as a benefit to their employees. It is hugely expensive and the cost is growing at geometric proportions on almost a yearly basis.

    It's also different than what most patients view as the cost of healthcare. They are primarily concerned with taxation again, but more specifically the increasing out of pocket expenses- whether this is paying higher insurance premiums, paying more of their premiums if employer provided, and increasing out of pocket obligations like copays and deductibles. It's taken a while for a lot of people to realize insurance companies are passing the buck onto them- that to keep their premiums down to something affordable, they are actually less insured, and should actually be saving a larger portion of their income to cover their healthcare costs.

    Yet, this is still different than what most healthcare providers view as the cost of healthcare. Essentially, for them it is primarily the cost of doing business. That cost is pretty much relative to any other business, but with some unique peculiarities. Healthcare providers in general get paid increasingly less than they used to even though most people seem to assume the opposite. For the most part, insurance companies negotiate what they get paid, and even though we see premiums going up, what they see is either static compared to the inflation of standard business costs, or even going down. From their perspective, they're struggling just to stay in business because they are actually not getting paid enough. Plus, patients tend to think they can pay their doctor last among their financial priorities, so physicians find themselves bearing more of the cost of doing business while they wait to bring in out of pocket money from patients.

    There's obviously a lot more to it, but bottom line is if you follow the actual money that goes into healthcare let's say as it is paid to insurance companies, what you will find is a lot less goes out to actually pay for the healthcare services. Insurance is a middleman operating with their own margin, and for them it is like financial banking- even setting aside the for profit insurance companies, you're probably talking at least 10% minimum off the top that never even reaches healthcare.

    When you talk about technology, a lot of that is driven by insurance companies trying to negotiate to pay even less per service. It's also an area the government is looking to for essentially the same reasons as far as Medicare for example. It's awfully romanticized to be a key to better healthcare in general, and it does serve those purposes (though the points you made I find somewhat exaggerated), but even more significantly it is a huge booming for profit industry. Most EHR vendors see converting physicians from paper to paperless as a gold rush not unlike what you see across the board in other enterprise management systems etc. If you look closely you will find few such vendors genuinely concerned with lowering costs or better healthcare outcomes- to them these are mainly just selling points. For instance, if you take a look at practices that adopted EHR early and are already "optimized" you would probably find they feel mostly unsupported and neglected by their technology vendors- because from the IT standpoint there's just too much new business to be had out there.

    So the Obamacare site crashed. I don't think that's really indicative of their state of technology adaptation- at least to the degree you lead off with that point. We just saw the same kind of thing happen when the stock market shut down- a glitch that eventually amounted to revealing a shortage in capacity. The extra capacity can be bought ahead of time, but pretty much the norm to plan not to have too much (save money).

    Back to the cost of health insurance, much like auto and other kinds of insurance, when they have to pay out more than they were hoping to, they turn around and raise the rates (and do more to get money out of them like pulling teeth). They basically don't want old folks coming on board with pre-existing conditions etc, and having to pay their "huge" medical bills with only a small sample of premium schedules claimed. So the basic idea of mandating insurance for everyone- especially those that don't have it already-  while proposed as a moral benefit, is a business move that is quite innovative. Financially speaking, the idea is to spread the sample of premium schedules to the majority of people that won't really have major healthcare costs, the money then going to the utilizers, and leveling off the costs to allow for "affordable" premiums for most people.

    It just doesn't happen if it is not mandatory. People that get by without health insurance would not pay. There's also been a big movement where employers have stopped offering medical insurance as a benefit. So you force them to pay in and the insurance financial system is healthier for it. If people or companies opt-out, then you tax them with fees and bring in money anyway. Then, for the people who simply cannot afford the reduced cost insurance plans, you subsidize them further with other tax revenues.

    No doubt it is a massive problem. It's understandable why politicians are split. There are major stakeholders to gain and lose on both sides. I think what we need is better systems thinking and that goes along with what you are saying about looking at the problem from a business perspective. When you say we should look at the perspective of information flows between different parts of the system I can agree, but I disagree with pretty much every example you point out as critical issues. That kind of prioritization is part of the problem- defining the problem wrong and asking the wrong kinds of questions. The better integration of technology into healthcare is not really addressing the root cause of the problems, but rather more like treating the symptoms IMHO.