Making Health Care Cheaper: Innovating For and Beyond the Safety Net

Jane Sarasohn-Kahn

First posted 8/18/11 on Health Populi

The big opportunity for investing in health innovation is in cost-reducing technologies, according to the seven essays that make up Innovating More Affordable Health Carea supplement to the Stanford Social Innovation Review, sponsored by The California HealthCare Foundation (CHCF).

The big disconnect in getting innovation adopted in the U.S. health system is the misalignment between risks (what stakeholders bear them) and rewards (what stakeholders reap them), mentioned by Stefanos Zenios and Lyn Denend in their essay on investing for the safety net. “Most investors don’t expect to fund big, unbounded opportunities in low-resource environments,” they explain.

Michael Goldberg with Mohr Davidow Ventures put it succinctly:  ”The investors we represent don’t look to us to do their humanitarian work.”

What investors look at, top-line, are the management team and experience, the technology/intellectual property of the venture, and the market potential or size. They recognize two types of investors in health: venture capitalists and companies. The latter have reason to invest in start-ups: they can extend their current portfolios, greenfielding their businesses as existing products and services mature. As such, they have more flexibility when analyzing ROI for innovation in health.

One of the success factors in health innovation is keeping things as simple as possible with the greatest impact possible, as learned by Chaim Indig and explained in his column, Lessons from and Innovator. In this case, the innovation is Phreesia, which allows physicians to achieve efficiencies in daily workflow. That means greater productivity and ultimately a sweeter bottom line for physician practices, which the AMGA told us this week experienced thinner margins in the past year.

Physicians are the locus of innovating at the point-of-patient care. Dr. Arnold Milstein of Stanford University talks about going beyond the Hippocratic Oath toward a Physician Charter: “the wise and cost-effective management of limited clinical resource.” In this way, physicians are the new health economists. But Zenios and Denend remind us earlier in the supplement that changing physician behavior is not easy.

Health innovation is also about patient engagement. The World Health Organization reminds us about the slow motion catastrophe that 75% of the world’s population is now dying due to causes fromnoncommunicable diseases (NCDs), largely borne by lifestyle behaviors of eating too much, not moving about enough, excessive drinking, and smoking. In their discussion on Foundations as Investors, John Goldstein of Imprint Capital Advisors and Margaret Laws of CHCF call out the broader context of mission investing beyond health to touch on key factors that impact NCDs such as poverty, education, and air quality. Clearly, health innovation goes way beyond health “care.”

Health Populi’s Hot Points:  While reading and pondering the 23 pages of smart thinking in this publication, I kept returning to C.K. Prahalad’s paradigm of the fortune at the bottom of the pyramid. As I discussed in Health Care at the Bottom of the Pyramid, Prahalad was a big influence on my worldview when he taught at the University of Michigan.

I wrote, “Health care at the bottom of the pyramid will need to bolster primary care. That’s also true for people in the ‘rest’ of the pyramid. And that care will be delivered through novel channels beyond the traditional doctor’s office to close the gap between the have’s (with medical homes) and the have-nots (without traditional PCPs to care for them). Primary care will happen at the workplace, in schools, churches, pharmacies….”

The health economy is inextricably woven, enmeshed, into the nation’s macroeconomy. We’ve seen this play out in the jobs creation during the current recession, where very few jobs have been added to the workforce — except in health care.

It’s not just the so-called safety net populations whose health care needs reinventing. Employers and health plan sponsors continue to face health care double-digit cost increases driven by inefficiencies and lack of total quality approaches.

New payment models that reward the delivery of high-value health care are being adopted in both the public and private sectors, driven by both policy (the Affordable Care Act and Medicaid innovations at the state level) and by the market. Accountable care, broadly writ and defined beyond the ACA legislation, is getting traction. What I see playing out in some local health markets goes beyond accountable care “organizations” to morphing to “Accountable Care Communities.” This gets to the crisp comment written by William Rosenzweig of Physic Ventures who believes, “Odd-bedfellows partnerships can actually success when the partners have a shared sense of vision, mission and values.” It’s in these “odd” partnerships between public and private sectors, health, food, transportation, education, entertainment, and other local resources when health-magic and innovation that works for people happens. That “public sector” and “innovation” can be used in the same sentence is due in large part to the energetic contributions of Todd Park, who is lauded in the essay by Carleen Hawn, CEO of Healthspottr.

We are all in the safety net, now.

Jane Sarasohn-Kahn is a health care economist writing at Health Populi.

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