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Two Approaches to Health Care Reform

Simone, Joseph V. MD

doi: 10.1097/01.COT.0000346842.23876.6e
Simone's OncOpinion

With the new administration committed to health care reform, there is no shortage of experts offering their opinions on what needs to be done, what can and can't be done, and how to do “it” in a time of economic constriction. In fact, health economists seem to be at the forefront of the op-ed brigade. Some economists and policy wonks are re-treads from the failed Clinton Health Plan in the early 1990s and others are newer to the public discussion.

There is no question that the current economic weakness will have a major impact on any plan that emerges. Some believe that the process toward health care reform will not even begin until the end of President Obama's first year at the soonest. Nonetheless, it is likely that the discussion will continue unabated.

In the past few weeks I have had the opportunity to review two approaches to health care reform and to speak with their authors. Both ideas are at the same time interesting, provocative, and difficult to execute, but each promises improved care and cost savings.

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First Proposal: New Legislative Approaches to Improving Quality of Care & Reducing Cost through Medicare

The first appeared in the January-February 2009 issue of Health Affairs, “Medicare's Future: Cancer Care,” by Lynn Etheridge, a health care policy expert at George Washington University. The plan recommends new legislative approaches to improving the quality of care and reducing cost through Medicare. Parts of this proposal will be familiar to oncologists.

Etheridge bases his recommendations on several facts. We already know a great deal about what works and what doesn't in cancer care, but we have the opportunity to know much more. By developing a richer body of knowledge, effectiveness research can provide more accurate and useful data that can be used to determine appropriateness of therapy.

In order for this to work, however, one needs a much better clinical knowledge base. So he proposes new technologies to collect the clinical data needed by Medicare by specifying data elements, databases and registries, and research studies. Among other things, this eventually would include rapid-learning networks with bio-banks containing genetic and environmental information in an electronic health record. (Kaiser Permanente is already doing this.)

As an extension of the data effort, he also proposes a national quality reporting system for cancer care and provides some recommendations of how this would work.

Lastly, he recommends a new Medicare payment system. He states that the current payment policies “perpetuate unproven, poor quality care.” For the latter, he suggests several models for consideration, including an evidence-based system like that being used by the Geisinger Health System that bundles payment for episodes of care.

The Geisinger staff, for example, agreed to 40 actionable evidence-based practices for cardiac bypass surgery. Geisinger agreed to go at risk for achieving top-rate outcomes and would not charge beyond a global fee for any related care 30 days before and 90 days after the procedure. The results improved the already excellent outcomes; the arrangement saved money for payers and more than paid for implementation.

The idea, of course, is that if Medicare were successful in such an endeavor, other payers would follow.

However, there are many potholes, some that may become fatally deep, along this road to reform. (One could probably say the same for any attempted reform.) My top two concerns: building the large database as recommended is a super daunting task, despite the advent of CaBIG. The author recognizes this and that is why legislation mandating such an action would be needed; but mandating doesn't mean achieving, at least in a reasonable time frame.

Second, I agree that the current reimbursement system is terrible. It rewards technology ahead of medical care. But the forces aligned against any change are formidable—manufacturers of medical instruments and pharmaceuticals and professional associations head a long list.

I will say, however, that the ideas themselves have substantial merit and are hung on the right values. Even if some parts could be accomplished, we would be ahead.

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Second Proposal: That Newer Technology, Facilitated User Networks of Focused Services, and Value-Adding Models Can Be Applied to Health Care

The second proposal for reform arises from business research. Clayton Christensen and Jason Hwang, MD, who are at the Harvard Business School and the Innosight Institute, respectively, have written an intriguing paper, “Disruptive Innovation in Health Care Delivery: A Framework for Business-Model Innovation” (Health Affairs, Sept.-Oct. 2008, pp 1329–1335) and book, The Innovator's Prescription: A Disruptive Solution for Health Care, (2009, McGraw-Hill).

The authors' basic premise is that changing entrenched business models is almost impossible from the inside. Lasting change that “disrupts” the old order usually comes from a new entity with a different business model, usually from an upstart company.

Examples include the following: Japanese auto makers entered the US market with small, low-cost cars that Detroit disdained using more efficient production methods. They found customers who could not afford US cars and established a foothold. This eventually enabled them to offer cars that competed directly with US models at lower cost and higher in quality. Honda and Toyota then moved into Detroit's territory by making luxury cars and small trucks more efficiently and beating Detroit at its own game.

Another example is the introduction of the personal computer. When the prevailing business model was the minicomputer which required special expertise to operate and was too expensive for the average consumer or small business to own and maintain, IBM established a new subsidiary located far from the main headquarters with the charge of building an affordable PC, even though it might cut into their main business of building and servicing large computers. (This is a rare example of a disruptive technology arising in a main line company.)

Other companies that made larger computers failed to recognize the power of the PC, did not adapt to their introduction, and eventually went out of business. Wal-Mart has driven Sears to the brink of extinction by their low-cost, more efficient model. Canon came out with low-cost copiers that anyone could afford, while Xerox stayed focused on high-cost business machines, eventually losing out.

The core of these successes was the “value proposition,” usually consisting of better access (for a much broader range of customers) at lower cost and more efficiently. It ignores, at the beginning, wealthier customers looking for high-end goods or services.

The authors state that the business model for health care has not changed in decades, and for general hospitals it has not changed for a century or more. They also state that trying to contain health care costs with no other changes in the system will fail, just as cutting costs has not helped General Motors. IBM and Canon succeeded by using new technology.

Despite a spate of technological advances in health care, the costs have increased instead of reducing cost and improving access and efficiency (see below for the reason). They believe that existing hospitals and practices often are “a jumbled mixture of business models struggling to deliver value out of chaos.”

Christensen and Hwang state that the current health care business model is the cause of the high cost. General hospitals must maintain a diverse and expensive labor force even when it is doing relatively simple and innately inexpensive procedures.

Christensen and Hwang point to the success of MinuteClinics in pharmacies that provide very limited services but very cheaply. Shouldice Hospital in Ontario does only hernia repairs very efficiently and at half the cost. Specialty ophthalmology, cardiac, and cancer hospitals often deliver care more cost-effectively and efficiently.

The premise is the newer technology, facilitated user networks of focused services, and value-adding models can be applied to health care. But as in all the historical examples, the entrenched legacy institution will strongly resist changing its business model.

Another handicap to any change is the fragmentation of the health care market, the lack of a retail market (it's not easy to shop for efficient, lower-cost care), regulatory barriers, and a perverse reimbursement system.

Whether any part of these proposals will gain traction in the new administration is unknown. But these are important ideas and should be taken seriously by those of us who care for patients and operate in a practice or other institution. They can open our minds to different ways of thinking about the structures we have all grown up in, structures that may crumble under the weight of the cost of care unless something dramatic is done.

© 2009 Lippincott Williams & Wilkins, Inc.
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