Michael Abrams

Michael Abrams, MA, is the co-founder and managing partner of Numerof & Associates, a firm that helps businesses across the healthcare industry define and implement strategies for winning in dynamic markets. He has more than 25 years of expertise working helping clients navigate an evolving healthcare landscape, across hospital systems, payers, and Fortune 500 pharmaceutical, device, and diagnostics companies. He has co-authored several books and has been featured in leading business journals and news outlets.

 that states and tribes may sponsor the importation of certain drugs from Canada, but the reality of the promise behind this policy that importation will meaningfully reduce consumers’ overall health care spend is questionable.

Research has indeed shown that prices for Canadian drugs are typically 

 cheaper than drugs in the American market. However, savings still might be miniscule. One reason is that some of the most expensive classes of drugs, like biologics and intravenous products, are excluded from the program, and these offer the greatest savings opportunity. Those drugs that are included have tight margins to begin with, so potential savings are likely smaller than research would suggest. 

Then there are the costs of the program. After factoring in the costs incurred by the entity sponsoring the proposal, the manufacturer’s testing costs, the actual importation costs, and the costs to repackage and label the drugs according to US standards, savings could be pocket change at best.

Further, there’s no guarantee that whatever savings may be left will be passed on to consumers. Payers are permitted to retain no more than 15% of revenue that is in excess of their clinical care costs, but if imported drugs produce savings for payers, they will only be required to pass those savings along if they fail to find a way to spend them on clinical services. It’s quite probable that drug importation would in fact have no impact on consumers in the short-term, and even a negative impact in the long-term.

The infusion of lower-cost drugs into the American market poses a competitive threat to US pharmaceutical companies. Manufacturers struggling to beat out Canadian prices will be incentivized to compensate by slashing other parts of their budget, with research and development (R&D) likely being the first place they turn. It is through R&D that we discover first-of-its-kind therapeutics for conditions otherwise left untreated, meaning a budget cut to this space could effectively squash innovations that could improve, if not save, thousands of American lives.

The possibility of drug importation saving consumers some money isn’t worth its risks. This is especially true when you consider that drug prices account for only 15 cents of every dollar spent on health care.

Consumers’ frame of reference for health care costs is often tied to the price of prescription drugs. When they walk up to the pharmacy counter to pick up their prescription, prescription prices even after insurance often hit them right between the eyes. It’s a health care cost issue that’s become quite popular because it affects more people, more frequently, and it’s a target for politicians on both sides of the aisle for that very reason.

If the goal is to lower the overall cost of health care, focusing on getting drug prices down is the wrong target. Far more money is squandered because incentives in the broader health care system are wholly misaligned. Health systems have reason to order a plethora of tests, prescribe heavily, and keep patients coming back even though their goal should be quite the opposite, and all this talk about drug importation is pulling public focus away from that very concerning issue.

If politicians truly want to save consumers money, they should be targeting the foundation that today allows for opacity in health care cost and quality, and tying costs to quality to hold both providers and manufacturers accountable for patient outcomes. Eliminating that would unleash a healthy dose of competition less likely to jeopardize much-needed innovation, plus unlock more health care savings than the pennies off the pharmaceutical dollar that drug importation may or may not bring.

The intent behind the calls for drug importation may be positive, but importation in and of itself is far from the way to execute on that goal. Reducing consumer health care costs requires more extensive reforms than all of this non–value-added activity. It requires fundamental change of the broader health care system, of which pharma is only a part.

Articles

Michael Abrams, MA, is the co-founder and managing partner of Numerof & Associates, a firm that helps businesses across the health care sector define and implement strategies for winning in dynamic markets.

Contributor: Drug Importation Would Have Little Impact on Producing Consumer Savings

A few short months after Google came under fire for not being forthright about 

 — its data-sharing partnership with Ascension – 

 vendor Epic Systems warned hospitals that it would 

 with the company’s cloud-based system, aligning itself with the many individuals who felt the partnership violated patient rights.

This was for optics, and a strategic decision to boot. Just days later, CEO Judy Faulkner asked hospital executives in an email to stand with Epic against the Department of Health and Human Services’ proposed interoperability 

. In the email, Faulkner said that while those at Epic, “ … fully support helping patients have access to their data,” unintended consequences of the proposed rule might be “ … that health care costs will rise, that care will suffer, and that patients and their family members will lose control of their confidential health information.”

Certainly, all these are possibilities without the right controls. And that’s just the point — the issues Epic and others have raised about interoperability can all be managed, but we can’t justify more of the status quo because of it.

After all, it’s taken a substantial amount of time to get this far. EHRs came into being in the 

, and only now are we aggressively discussing them in terms of a barrier to patient empowerment.

Indeed, timing is everything. Patient empowerment and all that goes into it — affordability, quality, or, in fewer words, “value” – is having a moment right now. Consumer frustration with a system that refuses to acknowledge patients as customers has finally come to a head. The public is demanding greater insight into this opaque industry, and legislators are responding with incremental action.

We’re seeing this in health tech with the interoperability rule. We’re seeing it in the 

, and we’re definitely seeing it in care delivery.

In all instances, demands for reform seek greater transparency and accountability; two things our current system sorely lacks, and two things healthcare organizations would be wise to adopt. The shift to value is coming — more quickly than most realize – and those that prepare for the new reality now will be in a much better position culturally and operationally than those still trying to stonewall the inevitable.

Interoperability should have happened a decade ago, but eventually, it is going to happen. Consolidation has only put increased pressure on EHR vendors to create easy-to-use, compatible software to ensure patient information doesn’t fall through the cracks during the acquisition process. And as consumers become even more accustomed to having what they need at their fingertips, they will not just expect the same from healthcare, they will demand it.

Consumers aren’t going to settle for constant skirmishes between reformers and defenders of the status quo. Interoperability is key to what patient advocates want to see in healthcare: a competitive market, a value-based system and empowered patients.

The freedom provided by interoperability accomplishes each of those things. Without interoperability requirements, manufacturers are in control of who gets to see what data and under what circumstances. Interoperability puts patients back in control. It frees health systems to shop around for the best value in their EHR, without being locked into their vendor by proprietary data management features. It stands to increase patient health literacy, and to Epic’s concern about app developers taking advantage of this information, that might actually have a positive impact on population health.

In sum, what we’ve recently seen from Epic is reminiscent of the resistance we’ve seen from others in the industry. But this won’t go on forever, with legislative efforts starting to focus on fundamental issues and manageable concerns inching us closer to the final destination: Value.

Epic Carries on an Industry Tradition: Resistance Masquerading as Patient Advocacy

The healthcare industry is ripe with opportunity. It’s a $3 trillion market whose customers mostly feel they pay too much for what they get. The growing linkage of provider reimbursement to cost and outcomes creates room for innovators whose product or service can lower cost or improve outcomes. This is why we’ve seen significant moves from the likes of Amazon, Apple, and Google, as well as the creation of an abundance of healthcare startups.

Unfortunately, many of those new startups are having to close up shop. 

, which hoped to provide nursing homes with telehealth tools to prevent older adults from having to visit the hospital unnecessarily, is among the latest, though there are 

Shuttering startups has serious implications for the healthcare industry, with increasing closure rates discouraging further innovation that the industry, and especially consumers, still need and want. Most are failing due to one or more of the following common mistakes:

Some innovators who find a fresh way to add value in care delivery get caught up in adding additional “bells and whistles” to the core product or service — features that may be technically elegant but are not really important to buyers. This is especially true of engineering or science-driven organizations that fail to realize that in the healthcare space, outcomes and impact matter more than elegant supplemental capabilities.

One way to avoid investing too much time and resources in the development of potentially unnecessary features is to look at the startup’s offerings through multiple critical lenses. Startups must make sure that any new feature serves a purpose aside from simply being “cool,” and to do that, they must think about the value-add for payers, health systems, consumers, and clinicians, from product design onwards.

2. Not accounting for stakeholders’ complex needs, motivations and purchase criteria

Accounting for multiple perspectives is critical, because even if a product or service delivers substantial value to consumers, they won’t be able to experience it if the startup can’t initially prove to investors how they can benefit from supporting them. Similarly, startups will have a hard time selling their product/service to providers if they can’t demonstrate that it improves some aspect of the care experience.

To potential stakeholders, economic value is just as important as clinical value. Hospitals will be intrigued by how the startup’s offerings could improve the consumer experience, but at the end of the day — and especially as we move away from fee-for-service and toward risk-based arrangements where hospitals are held financially accountable for their actions – hospital chief financial officers want to clearly see the connection between purchasing the product and a better bottom line. The strongest cases will be made using data-based evidence of cost and outcome improvements.

3. Underestimating the slow pace of industry change

Lastly, it’s absolutely essential to know whether the healthcare market is ready for the startup’s product or service. We know from our 

fourth annual State of Population Health Survey

 that progress toward value-based care hasn’t taken off quite as rapidly as many have hoped it would — in fact, progress seems to have stalled. The majority of hospitals still derive just 10% of their revenues from contracts in which they are accountable for cost of care and outcomes. Interest in startup tools that can ease their transition to risk-based arrangements is there, but as they aren’t under much pressure to make that shift 

, they also aren’t under pressure to invest in the startup products/services to help them do so 

That’s unfortunate for all parties — startups, hospitals, clinicians and consumers. If the timing isn’t right, efforts may be wasted and technology that could make a significant difference in care delivery overlooked and possibly forgotten. Other innovators may also be discouraged by this now common phenomenon, and as a result hesitate to bring to market ideas that could dramatically improve care.

Startups have the power to bring fresh perspectives and innovative solutions to some of our most pressing healthcare problems — but they need to avoid these common mistakes. If they’re able to do so, we may finally see reduced costs, increased quality, and perhaps long-awaited progress toward improved population health.

Shuttering startups has serious implications for the healthcare industry, with increasing closure rates discouraging further innovation that the industry, and especially consumers, still need and want.

All of Us Are Impacted by These 3 Healthcare Startup Mistakes

The migration of care from inpatient (IP) to outpatient (OP) and ambulatory surgery center (ASC) settings is revolutionizing healthcare delivery. Beginning with cataract and cosmetic surgery more than a decade ago, the list of ASC procedures has grown to include endoscopy, colonoscopy, anterior cruciate ligament and shoulder repairs, sinus and cataract surgery, and most recently total knee arthroplasty.

Several factors have enabled this evolution, including: the growing sophistication of surgical tools and techniques; new pain management and diagnostic techniques; a boom in the development of OP care delivery options; consumer demand for convenience and access; and changing perspectives on site-specific reimbursement.

This transition is good news for consumers and employers as it promises to lower costs, improve access and convenience, and, if done right, deliver better outcomes. For hospitals, this shift means that many high-volume, profitable services are likely to go to other players, continuing a long-term trend.

Hospitals have been experiencing declining inpatient admissions over the last 20 years

. Between 2006 and 2016, IP revenue for community hospitals declined from 62% to 52% of total revenue. During the same period, OP revenue increased from 38% to 48% of total revenue

. Care migration is an irreversible trend, not a temporary headwind.

Providers who are still concentrated in acute care will need to diversify across the care continuum to address revenue erosion. This will be particularly difficult for large consolidated systems that remain tethered to their legacy business. Below, we take a closer look at some key steps health systems can take to sustain and grow their business in light of care migration.

Diversifying across the continuum of care: Keys to success

Before an organization can determine how to diversify its business model across the care continuum, management should address 3 critical questions:

What are the unmet needs of the market area?

 While most hospitals currently conduct a mandated community needs assessment, these are often pro forma efforts that are not used for planning purposes. These efforts must be made sufficiently robust to inform future business decisions and identify opportunities to capture revenue. Such an assessment may provide a clear case for an unmet need or a neglected population segment that can be profitably served.

What is the competitive landscape in the market area?

 Identifying competitors and understanding the services they offer will provide keen insights into service gaps across the continuum of care and opportunities for differentiation. Understanding the competitive landscape may help determine the future of repurposed infrastructure for ancillary services like physical therapy, wellness centers, pain management, or behavioral therapy. Alternatively, disposing of underutilized space and a smaller local footprint can be complemented through joint ventures or partnerships with community ASCs or commercial clinics.

What are the core strengths of your organization?

 Understanding the core capabilities and strategic objectives of the organization will help to determine the potential lines of business the organization wants to be in. For example, a provider well known for oncology treatment may extend that core strength by investing in additional outpatient components like nutritional counseling related to chemotherapy.

Addressing these questions will position providers to participate in care migration by offering services that align with patients’ needs and capture revenue that can grow their business.

Develop integrated processes for triage and referral

Providers that expand their service offerings across the care continuum increase the number of touchpoints for patients, and the likelihood of patient retention. In order to use lower intensity points of care effectively, providers must develop evidence-based guidelines for triage. Likewise, referral mechanisms for connecting patients with complementary services must be developed. Both must be monitored to assess appropriateness of triage and referral, and to evaluate patient response.

For example, while a provider may refer a patient to an ASC for knee replacement, during triage the patient can be referred to pain management and physical therapy offerings from the provider. The result is multiple points of patient engagement while also referring the patient to the least costly site for their surgical procedure.

Taking these steps will allow providers to go to market with a care model that addresses patients’ unmet needs, creates competitive differentiation, and ensures convenient access to appropriate sites of care. The next step is to secure contracts with payers and employers that will leverage those efforts.

To ensure premium contracts from payers and employers, providers need to standardize care paths by managing variation in outcomes. Using cost and outcome data, providers will have a way to monitor and improve processes for care delivery, cost, and quality management. More importantly, this will allow providers to determine what financial and quality targets they can profitably meet and how much risk they can accept in negotiating future contracts.

1. Chapter 3: Utilization and Volume. In: American Hospital Association. 

. American Heart Association; 2018:27-34. https://www.aha.org/guidesreports/2018-05-23-trendwatch-chartbook-2018-chapter-3-utilization-and-volume. Accessed May 30, 2019.

2. Chapter 4: Trends in Hospital Financing. In: American Hospital Association. 

. American Heart Association; 2018:38. https://www.aha.org/guidesreports/2018-05-23-trendwatch-chartbook-2018-chapter-4-trends-hospital-financing. Accessed may 30, 2019.

The migration of care from inpatient to outpatient and ambulatory surgery center settings is revolutionizing healthcare delivery.

Author | Michael Abrams

Articles

Contributor: Drug Importation Would Have Little Impact on Producing Consumer Savings

Epic Carries on an Industry Tradition: Resistance Masquerading as Patient Advocacy

All of Us Are Impacted by These 3 Healthcare Startup Mistakes

Coming to Terms With Care Migration