Skyrocketing costs are being driven by bureaucracy.
This chart looks remarkably similar to a chart that tracks the growth of the administrative class in higher education. And that’s no accident. As the physician who shared the chart writes:
[The chart] outlines the growth of administrators in healthcare compared to physicians over the last forty years. And, it includes an overlay of America’s healthcare spending over that same time. Take a look at the yellow color. A picture is worth a thousand words, isn’t it?
You see, when you have that much administration, what you really have is a bunch of meetings. Lots of folks carrying their coffee from place to place. They are meeting about more policies, more protocols to satisfy government-created nonsense. But, this type of thing in healthcare isn’t fixing things. It’s not moving the needle.
What moves things is innovation.
Innovation, indeed. But it’s not easy to innovate in stagnant, hyper-regulated, captured sectors.
In Tyler Cowen’s 2011 book the Great Stagnation, he argued that the areas that were stagnating the most are education, healthcare, and government. Writing about Cowen’s book in his Wall Street Journal blog, Kelly Evans says:
A particular challenge we confront is that our progress as a society — chiefly, in extending and improving lives — is now at a point in which it appears to be undercutting our potential for further advancement. Part of this, Mr. Cowen observes, stems from well-meaning efforts to do more with education, government, and health care that instead seem to have backfired and left us with noncompetitive institutions closer to failing us than to serving us well.
With respect to healthcare, this chart gives us an indication of why these efforts are backfiring: The more an industry becomes like a regulated utility, the more administrators are required to enforce the regulations and administer the programs. And they, as well as the programs they administer, are expensive. All manner of distortions follow, and the costs of healthcare go up proportionally.
There also seems to be perverse incentives associated with subsidy: The more resources you dump in, the more expensive that industry becomes. You might shift the costs around on unsuspecting groups (like taxpayers), but in almost every case we see premium hikes and tuition increases in both of these industries, despite (or rather because of) the truckloads of federal largesse.
But they will have to stop at some point — one way or the other.
The US healthcare system has become something of a Frankenstein monster, with pieces stitched together ad hoc by regulators and special interests. The ACA seems to have ignored most of what really needed fixing and doubled down on the worst aspects of our system. Price transparency, affordability, innovation and competitive entrepreneurship have all gotten worse, not better. And the beast has grown to take over more than 17 percent of GDP.
(And if you think 17 percent is about right, consider that in Singapore healthcare takes up less than 3 percent of GDP.)
The trouble with any further healthcare reform is that a massive coalition of special interests in multiple sectors has formed as a husk around the entire industry — a care-tel, if you will — and they will be very difficult to dislodge.
Best Buy is known as the largest specialty electronics retailer in the U.S., and a key part of its growth strategy is centered on digital health initiatives.
In the past year, Best Buy has spent roughly $1 billion on acquisitions to expand its healthcare services, according to Forbes. The company’s expansion into healthcare has helped it overcome broader declines in consumer electronic sales, according to Bloomberg.
Senior care is Best Buy’s niche in the healthcare services market. One million seniors are using the company’s health offerings, and Best Buy’s goal is to expand its services to 5 million seniors by fiscal 2025, according to MarketWatch.
“Today, most of the seniors we serve are utilizing easy-to-use mobile phone products and connected devices that are tailored for seniors and come with a range of relevant services,” Best Buy CEO Corie Barry said during an earnings call Nov. 26, according to a transcript from Seeking Alpha.
Ms. Barry also shed light on how Best Buy plans to expand its healthcare business. She said the company plans to scale its “five-star service” that connects seniors with caregivers, dispatches emergency personnel and more.
“We also expect to advance our commercial business where the services we provide for seniors are paid for by insurance providers. This includes services such as remote monitoring based solutions that provide meaningful insights to improve timely care and reduce the cost to serve frail seniors,” she said.
The company could generate as much as $46 billion in revenue from its commercial health business over the next 10 to 20 years, according to Bloomberg, which cited Morgan Stanley estimates.
In the course of a single year, a homeless man named Steve in Phoenix, Arizona, visited the emergency room 81 times. Only 54 years old, Steve is coping with a daunting array of medical conditions: multiple sclerosis, cerebral palsy, heart disease, and diabetes. Because of his health and reliance on emergency rooms, his medical costs averaged about $13,000 per month that year.
Thanks to an innovative housing program run by the nation’s largest health insurer, UnitedHealth Group, Steve no longer sleeps outside — a crucial prerequisite to improved health. He is one of about 60 formerly homeless people covered by Arizona Medicaid who now receive housing and support services in Phoenix, John Tozzi reported for Bloomberg Businessweek. The UnitedHealth housing program, called myConnections, represents the growing recognition across the health care system that improved health cannot be achieved exclusively by traditional clinical models. Getting patients off the streets is often the first — and most important — step to helping them heal, physically and mentally.
“Patients like Steve wind up in the ER because they don’t fit into the ways we deliver health care. . . . [The US system] is not set up to keep vulnerable people housed, clothed, and nourished so they’ll be less likely to get sick in the first place. —John Tozzi, Bloomberg News
“Patients like Steve wind up in the ER because they don’t fit into the ways we deliver health care,” Tozzi explained. “The US system is engineered to route billions of dollars to hospitals, clinics, pharmacies, and labs to diagnose and treat patients once they’re sick. It’s not set up to keep vulnerable people housed, clothed, and nourished so they’ll be less likely to get sick in the first place.”
MyConnections was the brainchild of a partnership between UnitedHealthcare (a division of UnitedHealth) and the Camden Coalition, a New Jersey–based nonprofit dedicated to improving care for people with complex health and social needs. The partnership was established in 2017 at the same time Jeffrey Brenner, MD, founder and executive director of the Camden Coalition, announced he was leaving the nonprofit to lead myConnections. He is now UnitedHealthcare’s senior vice president for integrated health and human services. UnitedHealthcare provides managed care to about six million people nationwide, according to company filings. It does not get reimbursed by Medicaid for housing assistance.
Brenner hopes myConnections will show that both a health care and a business case can be made for investing in a Housing First (PDF) model. Tozzi reported that UnitedHealth “aims to reduce expenses not by denying care, but by spending more on social interventions, starting with housing.”
At the Residences at Camelback West, a Phoenix apartment complex of 500 apartments ranging from studios to two-bedroom units, up to 100 apartments are set aside for UnitedHealth Medicaid members enrolled in myConnections. The rest of the units are rented out at market rates. Five health coaches use an on-site office to serve as case managers and counselors for the myConnections residents. The coaches make sure that their clients remember medical appointments, and arrange transportation for them and sometimes accompany them to the doctor.
Since receiving housing and health coaching from Brenner’s team, Steve’s average monthly medical costs have dropped from $12,945 to $2,073. An analysis of the first 41 participants in Phoenix shows that “housing and support services proved cost effective for the 25 most expensive patients, reducing their overall costs dramatically,” Tozzi reported. But total spending for the other 16 increased, highlighting the complexity of this work.
“The return’s only going to work out if we target the right people,” Brenner told Tozzi. The myConnections team selects patients who are enrolled in UnitedHealth, are homeless, and who have annual medical spending greater than $50,000 mostly because of ER visits and inpatient stays. Those high-cost patients are UnitedHealth’s best bet for recovering the cost of its housing investment.
UnitedHealth is starting with 10 subsidized apartments in each new city where it’s introducing the program, including in places where there might be hundreds of homeless Medicaid members on its rolls, Tozzi reported. MyConnections will be in 30 markets by early 2020.
In its home base of Oakland, California, health system Kaiser Permanente has invested $200 million in an affordable housing project, Hannah Norman reported in the San Francisco Business Times. Its help is not targeted exclusively at Kaiser members, instead aiming to benefit any residents who live in communities it serves.
The initiative was championed by Bernard Tyson, the late chairman and CEO of Kaiser, who died unexpectedly this month. In a New York Times remembrance, Reed Abelson noted that Tyson was committed to addressing social determinants of health in the places where Kaiser operates. “He had the organization examine broad issues like housing shortages, food insecurity, and gun violence and their impact on health and well-being,” Abelson wrote.
Tyson, who was the health system’s first Black chief executive, served as chair of the Bay Area Council, a business association dedicated to economic development in the San Francisco region. His chairmanship culminated in a major report (PDF) that documented the severity of the homelessness crisis and recommended ways to address it, Norman reported.
“We don’t believe as a mega-health system that our only lane is medical care,” Tyson said in April. “It’s a critical lane, but it’s not our only lane.”
Kaiser announced its $200 million housing initiative, the Thriving Communities Fund, in January. Since then, it partnered with Enterprise Community Partners, a nonprofit organization focused on affordable housing, and the nonprofit East Bay Asian Local Development Corporation to invest a total of $8.7 million ($5.2 million from Kaiser) in Kensington Gardens, a 41-apartment building in East Oakland. “The trio of organizations plans to keep the residents in place and the rent steady at $1,597 per month for a studio and $2,250 for a two-bedroom,” Norman wrote. “Some residents receive federal housing benefits, including Section 8, to help cover the cost.”
The Kensington Gardens purchase is part of the Thriving Communities Fund’s strategy to keep rents steady and to make health and safety upgrades such as seismic upgrades and new roofs.
Kaiser’s Built for Zero initiative committed $3 million over three years to a data-driven, county-level approach to understanding the dynamics of homelessness. Built for Zero tracks the homeless population in a county from month to month to understand “who they are, what they need, and even how many of them are repeatedly visiting emergency rooms,” Norman reported. Fifteen Kaiser communities, including eight in California, are participating in the program.
Headlines at HLTH 2019 included a peek behind the curtain at the secretive healthcare division of tech giant Google from ex-Geisinger CEO David Feinberg, Uber’s newly inked deal with Cerner and a preventive health push by Facebook sparking renewed data privacy concerns.
On the government side, outgoing head of CMS’ innovation center Adam Boehler suggested industry will be pleased with his replacement and CMS Administrator Seema Verma promised further Medicaid deregulation and “humility” in government.
But the four-day conference last week also covered some broader themes, including retail’s presence in the industry, the rise of telehealth and voice tech and the challenges of interoperability. Here are six of the biggest takeaways from Las Vegas.
Executives from Walmart and CVS taking to the main stage at HLTH to tout their initiatives.
Walmart’s VP of transformation, Marcus Osborne, talked up the company’s first health superstore in Dallas, Georgia, which opened this fall. The center provide patients with primary care, dental care, vision care and psychiatric and behavioral health counseling, with the goal of providing an integrated healthcare experience in the traditionally underserved area. Lab services and imaging are available on-site, as are nutrition and fitness classes.
“When you give consumers options, they engage more,” Osborne said. “The healthcare system is designed to be complex when it should be simple.”
A primary care visit at Walmart Health Center costs a flat fee of $40. For an adult, getting a dental checkup and cleaning costs $50, and an eye appointment is $45. Therapy services are $1 per minute.
The store pits the Bentonville, Arkansas-based retailer directly against CVS Health, which is expanding its own health-focused clinics, called HealthHUBs, to 13 new markets by the end of next year.
Brick-and-mortar behemoths’ attempts to position themselves as the front door to healthcare are spurred by the increasing push of consumerism in healthcare.
“With the emergence of this retail health consumer, we’ve got to make healthcare more integrated than it’s been for several years now,” CVS CEO Larry Merlo said.
But engagement is notoriously tricky, and consumerism can only take the industry so far. Healthcare startups providing a new way of accessing or managing care, like digital chat startups allowing consumers to talk via text with a remote physician or chronic care management companies, are struggling to establish trust with the consumer.
Hank Schlissberg, president of care manager Vively Health, a subsidiary of DaVita that assumes full risk for its population, compared the sea change in the industry to what’s happened with companies like AirBnB.
“I sleep in someone else’s bed. I shower in their shower. And we’ve convinced ourselves that’s totally normal,” he said. “All I want to do is provide people with free healthcare. And convincing people of that is much harder than we expected.”
Natalie Schneider, VP of Digital Health for Samsung, agreed, telling Healthcare Dive consumers are “routinely irrational” and don’t act in their own best interests. But “we’re seeing policyholders, health plans and others in healthcare not only account for this irrationality, but also capitalize on it” through incentives like providing a reward immediately following a healthy behavior.
The wearables trend is a key example, experts said. Payers and providers alike are increasingly turning to the tech in an effort to engage consumers in wellness, fitness and preventive care activities. However, the ROI of trackers, whether from Apple Watch, Fitbit, Samsung or others, is still unproven.
“We’ve seen a lot of technologies and they’re often not that smart and very rarely wearable,” Tom Waller, who heads up the R&D lab of athleisure retailer lululemon, said. “We’re still patiently waiting for that perfect contextualization of data that will give us both a physical and emotional insight, and that we can use to augment an existing behavior to nudge someone in the right way.”
“At the end of the day, these patients are consumers, and consumers have been trained over the last 10 years to decide what quality they want, to decide when they want it and how they want to get it,” Robbie Cape, CEO of primary care startup 98point6, said. “Healthcare hasn’t caught up to that.”
Two rules to halt information blocking from HHS are expected to be finalized any day now. Despite the regulatory pressure, industry is “still a ways from true interoperability,” said Ed Simcox, CTO and acting CIO of HHS, due to a slew of factors like a lack of economic incentive for EHR vendors.
The rules would impose a slate of new requirements on healthcare companies. Payers in federal programs would have to provide their 125 million patients with free electronic access to their personal health data by the end of next year; healthcare companies would have to adopt standardized application programming interfaces allowing their disparate software systems to communicate; and any player found information blocking could be fined up to $1 million per violation.
Google Cloud’s director of global healthcare solutions, Aashima Gupta, warned that although the government might mandate new standards, that doesn’t mean industry will be able or willing to immediately adhere to them.
Additionally, the government is still playing catch-up to technology, and interoperability is no different, Pranay Kapadia, CEO of voice-enabled digital assistant Notable, told Healthcare Dive. The rules are the “right thing to do, and then there’ll be an evolution of it, and then there’ll be another evolution of it.”
”This problem is much bigger than big tech or government or health systems or innovators,” Gupta said. “It’s an ecosystem problem. No player can do it alone.”
Despite the private sector’s uncertainly, Don Rucker, the head of the Office of the National Coordinator for Health IT, said interoperability had fostered price and business model transparency in every other U.S. industry over the past few decades.
“Healthcare is just about the last one to resist,” Rucker said. “I don’t think that will be much longer.”
Telehealth was unsurprisingly a big focus at HLTH, with themes touching on expansion to complex care needs, followup visits and chronic care management and barriers like state physician licensure.
It’s an “efficiency mechanism” that can help a lot in areas like primary care, Teladoc COO David Sides told Healthcare Dive.
Voice-enabled tech was another focus of chatter in Las Vegas. The technology, which allows physicians free use of their hands while enabling them to take notes or write a script, for example, is currently experiencing heavy hype from industry and Silicon Valley as a way to streamline the heavy EHR and documentation requirements on physicians.
Talking is an “important element to how people interface with things,” Notable’s Kapadia said. “You have to think of things from a human perspective.”
Suki also announced at HLTH it expanded its relationship with Google’s cloud computing business. The digital assistant’s CEO, Punit Soni, told Healthcare Dive industry could expect to hear about two “very, very large deployment announcements” with health systems in the near future as providers become more comfortable levering the software to cut down documentation time for clinicians.
A slew of players rolled out initiatives targeting social determinants of health in Las Vegas.
Uber Health is now available for providers to schedule non-emergency rides for their patients via Cerner’s EHR platform in a bid to provide better access to transportation for underserved populations. The one-year-old NEMT division of San Francisco-based Uber has roughly 1,000 partnerships across payers, healthcare tech companies and providers such as Boston Medical Center.
“You need to develop a benefit that serves the needs of your distinct population,” Jami Snyder, director of Arizona’s Medicaid and CHIP programs, said. The state recently partnered with ride-hailing company and Uber rival Lyft to provide rides for eligible Medicaid beneficiaries.
Kaiser Permanente rolled out a food insecurity initiative to connect eligible California residents with CalFresh, the state’s supplemental nutrition assistance or food stamp program. The integrated, nonprofit health system plans to reach out via text and mail to more than 600,000 Kaiser Permanente health plan members with a goal of getting 100,000 enrolled in CalFresh by spring 2020.
If the program is successful, Kaiser plans to expand it to the rest of the country, CEO Bernard Tyson, noting “healthcare across the ecosystem of health plays a very small part” in outcomes. “Things like behavior, genetics and where you live has a bigger impact.”
On the preventive health side, Facebook launched a consumer health tool. Users plug in their age and sex in return for targeted heart, cancer and flu prevention measures, with information supplied by healthcare groups like the American Cancer Society.
The pilot for the $7 billion tech behemoth will be evaluated for six months to a year before being expanded to other preventable conditions to make consumers their “own health advocates,” Freddy Abnousi, Facebook’s head of health research, said. “The lion’s share of health outcomes is driven by social and behavioral variables.”
CVS is similarly working to combat SDOH factors by leveraging its reams of consumer data, Firdaus Bhathena, the retail pharmacy giant’s CDO, told Healthcare Dive. If someone doesn’t pick up their prescription, “there’s a number of ways we can engage with them,” including by text message or speaking to services in the local town, to see if transportation to the pharmacy, a lack of funds or some other issue is stopping the person from receiving the medication they need.
Much of the industry runs today like non-healthcare companies ran 50 or 60 years ago, according to entrepreneur Mark Cuban.
“For that reason, they’re ripe for disruption,” Cuban said at HLTH.
Investors and startups alike are taking note. Venture capitalists, eager to fund new medical solutions and methods of care delivery, pumped $26.3 billion into more than 1,500 healthcare startups in just the first 10 months of 2018.
Providers looking to invest in new solutions or acquire startups are looking for a relatively mature corporate structure and an alignment with existing priorities in-house, according to Dan Nigrin, SVP and CIO at Boston Children’s Hospital.
“It starts with our organizational strategy,” agreed Rebecca Kaul, VP at the MD Anderson Cancer Center. An attractive startup presents “something that really drives change,” she said. “If you’re pitching a solution that isn’t at a given time part of our strategy, it may not be the right time for us to connect.”
Highmark Health CEO David Holmberg told Healthcare Dive its physicians lead system-wide conversations in what areas need investment. “Ultimately, that’s how you’ll get things to scale.”
Intermountain Healthcare is similarly interested in ways to manage and inject value into its operations. “We’re not interested in point solutions,” Dan Liljenquist, SVP of the Salt Lake City-based nonprofit provider said, adding he deletes and blocks emailed pitches he receives. “We’re interested in technologies that obviate the need for clinical interventions, that help people solve their own problems, and the way to do that is not a point solution but in a systemic, creative way.”
Payers have similar priorities and seek out companies to invest in that could provide value down the road. Cigna Ventures, which recently invested in precision medicine company GNS Healthcare, looks for new tools across the areas of insight and analytics, digital health and retail and all-around care delivery and enablement, for example.
“We’re looking for companies that are innovative and looking to solve important problems,” Tom Richards, global strategy and business development leader at Cigna, told Healthcare Dive, noting most companies start with a more focused solution and then expand.
For example, chronic disease platform Omada Health, which raised $50 million in a 2017 funding round led by Cigna Ventures, started with diabetes, but has since expanded its care management services to hypertension, Type 2 diabetes and behavioral and mental health.