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Private Sector Innovation Driving Healthcare Transformations


An event hosted by the American Enterprise Institute highlighted companies in the private sector that are working on novel ways to transform healthcare and bring better value to patients.

Although the United States offers world-class healthcare, that care is often wasteful. While the government is trying to address the problem through the use of incentives to providers for higher-value care, the healthcare sector could benefit more from the type of entrepreneurship exhibited in other industries, according to speakers at an event hosted by the American Enterprise Institute (AEI) that explored the ability of the private sector to transform the healthcare sector.

From the consumer perspective, “the system is, essentially, maddening,” said James C. Capretta, resident fellow and Milton Friedman Chair at AEI. He highlighted the complex and opaque nature of insurance, the lack of price transparency, the endless and redundant paperwork, and the fragmented systems of care that can actually be harmful to patients’ care.

The American healthcare system largely operates as it did 2 or 3 decades ago, he added. While the information technology revolution has transformed other American industries, it hasn’t really touched the health sector.

The speakers at the AEI event represented companies in the private sector that are working on novel ways to bring better value to patients.

First was Mario Schlosser, the CEO and cofounder of Oscar Health, a consumer-focused, technology-based health insurer. He believes in a consumer-driven market and that the insurance company is well positioned to enable that.

“One version of the healthcare system in the future would have to be to give individuals more choice as to what kind of networks they want to buy, what kind of all-in healthcare experience they really want to buy and pay for,” Schlosser said.

The problem is the current tools available are too blunt, and there needs to be more leeway to create better benefit designs, he said. Oscar looked at its relatively healthy 40- to 50-year-olds and observed that those with a low deductible had little reason to search for alternative sites of care. They could just go to the urgent care clinic if they needed care. But once the deductible increased and patients faced a greater out-of-pocket cost, they started to look at ways to access lower-cost care. As the deductible increased, a patient’s use of telemedicine also increased.

While the increased use of telemedicine was a good result of higher deductibles, Oscar also found that patients with a higher deductible were also more likely to put off a minor surgery that they might need.

Schlosser said there needs to be more freedom—within reason—to play around with benefit design.

“We have to think harder about the blunt tool of the deductible and see what predeductible benefits we can load into plans,” he said. For example, some services and care could be covered until $1000, then patients face an out-of-pocket cost for a bit before they are covered again. “These are all things we are thinking about experimenting with but run, at times, into regulatory issues. So, we don’t have complete control of our plan designs.”

Following Schlosser, Hill Ferguson, CEO of Doctor on Demand, further explained how telemedicine can be used to reduce costs and improve access to care. He outlined how the current physician shortages—which are only expected to get worse—will cause massive problems. Already, the average time to see a physician is 18 days. On top of that, the office hours are typically 9 am to 5 pm, Monday through Friday.

The lack of convenience around primary care is causing a trend of patients moving away from having a primary care physician (PCP). Almost 30% of all American adults don’t have a PCP, and there are big differences by generation. Close to half of millennials don’t have a PCP, Ferguson said.

Doctor on Demand is trying to solve those challenges. It has taken the 18-day wait time and reduced it to 4 minutes. Instead of typical office hours, patients can get access to a PCP or a psychiatrist 24 hours a day, 7 days a week, 365 days a year. Plus, the cost of a visit is just $50 compared with the average $150 for a traditional PCP visit.

One of the health plans Doctors on Demand works with monitored the quality of care for 2 years and found the company had a lower antibiotic rate compared with the traditional office (38.9% vs 40.9%, respectively) and a similar 14-day readmission rate after an emergency department (ED) visit (1.6% vs 1.4%).

Schlosser and Ferguson came to healthcare from strong technology backgrounds, and the fact that they, and others like them, were now involved in improving healthcare was something to celebrate, according to Bob Kocher, MD, partner of Venrock, a venture capital firm.

“They were the people engaging us on our phones to play Candy Crush,” he joked. “And they gave that up to apply their skills to help healthcare suck less. And that is a great thing.”

He said that there has been a renaissance in creativity and imagination in healthcare over the last 8 years. While change has been taking longer than expected, there has been progress with improved access to care, growing demand for services, slower growth of costs, and better quality. But while the growth in costs has been slowing, they remain a problem.

“The problem is healthcare costs the same as a Toyota Corolla every year for a family,” Kocher said. “That’s unaffordable.”

On top of that, there is still a $1000, $2000, sometimes even $5000 deductible and there’s no transparency around prices.

Part of the issue is the way the insurance model has been set up and used in the United States, according to Clint Flanagan, MD, founder and CEO of Nextera Healthcare. People expect their insurance card to get them access to care the same way a membership might for the gym, but it could take days or weeks to see a doctor. The result? People go to urgent care or the ED.

“We shouldn’t have urgent care in this country,” Flanagan said. “The reason we have urgent care is because it’s hard to get in to see your primary care doctor.” And the ED should only be for emergencies, not for treating an ear ache, he added.

The way health insurance is used in the United States is the equivalent of having auto insurance and using it when the car needs gas or the tires need to be rotated or for any other maintenance that is done to the car.

“Insurance is not made for that,” Flanagan said. “Insurance is made for when the house burns down. Insurance is made for when your car gets totaled. Insurance is made for when you need a stent in your heart or a total knee [replacement]. Using insurance to pay for low-cost primary care doesn’t make a lot of sense.”

Nextera approaches healthcare like Netflix. Patients or employers pay a monthly fee and the physicians take care of them, no matter what hour of the day, in either an office setting or a virtual visit.

What Flanagan found was that patients started visiting more and there was more trust in the relationship. Physicians were seeing improvements in obesity, diabetes, cholesterol, and other areas of health. ED visits decreased 40% to 50%.

Nextera also offers on-site clinics for some of the larger employers, which has made an impact on absenteeism, presenteeism, hiring, and retention.

“It creates efficiencies that are much, much different than we have in the existing system,” Flanagan said.

As the lone employer to speak, Hassan Azar, senior vice president of total rewards at US Foods Inc, explained that his goal is to “ensure all employees have access to effective tools to manage their health and that of their families.”

The company offers a variety of options for employees to be more engaged in their health. For instance, employees can use a connected device to share blood glucose levels with a diabetes coach, and they also have access to health advocates to create a care plan and a second opinion vendor to make sense of a recent diagnosis. Employees can even perform physical therapy at home using a connected device.

“A few years ago, one of these services were available,” Azar said.

But these programs are highly valued by employees, who appreciate a new model of care that provides convenience, personal treatment, and guidance.

“Employers have a continued interest in innovation and disruption,” Azar said, and they will embrace disruption that helps them meet the goals of the triple aim: improved health, improved experience, and controlled costs.

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