Can Connected Health survive the political economy of health care?
Tuesday, June 24, 2008
| Matthew Holt
About the author - Matthew Holt is the founder of The Health Care Blog and is co-founder of Health 2.0.
In recent weeks a few tangentially related events have got me thinking.
First, I was reminded by an industry veteran that insurers tend to get interested in care management when the underwriting cycle is going against them--that is when they're not able to put prices up as fast as their medical costs increase. PriceWaterhouseCoopers' study last week suggests that the recent reductions in the rate of premiums in the last few years are over.
Secondly, the disease management industry is still reeling from the apparent failure of Medicare Health Support. Last week, the insurance industry (barely) staved off cuts in payments to Medicare Advantage plans. Everyone seems to agree that they're paid more per enrollee than the standard government FFS program, and the insurance lobby has been pleading that it can't do it for less money. Despite the waste and misdirected incentives in Medicare, it appears that finding savings is not easy.
Thirdly, Joe Kvedar pointed out here last time that primary care advocates are pushing for the medical home idea. But payment recommendations for Medicare Part B come from the little known and specialty-society dominated "resource-based relative value scale update committee" (see here). And of course, hospitals in America (including big academic systems such as Partners!) make most of their profits off "service lines" such as orthopedics, cardiology, radiology, etc, -- all of which have affiliated drug, device and technology suppliers which are even more profitable.
All this should remind us while that the majority of spending in the system goes on the "wrong" things, there's an entire superstructure built around that spending.
The concept behind connected health, like those behind the medical home, disease management and electronic medical records, is that an investment of current dollars in tools and techniques designed to better manage patients today will yield both better outcomes and lower costs tomorrow. Estimates from luminaries like Jack Wennberg and Don Berwick that 30% or more of health care spending is wasted suggest that we ought to be able to save a fortune.
Unfortunately, two things are true. First, thus far, the limited attempts to actually save money by "doing the right thing" haven't apparently saved much if any money. Second, and much more damaging to the long term prospects of Connected Health, if those savings do become apparent, they will have been created by an increase in dollars spent on primary (and pre-primary) care--such as early prevention remote monitoring programs. Which of course means that the savings will come from a correspondingly greater reduction in spending on specialty and hospital care.
While on a micro-level no one can argue with, for example, an online monitoring program preventing an elderly congestive heart failure patient's hospital admission, on a macro-level fewer hospital admissions and fewer procedures mean less money for hospitals and surgeons. So as the current pilots of connected health start delivering data we must be prepared for two results.
Either little money will be saved, in which case appetite for the programs will dwindle. Or lots of money will be saved.
In which case the forces behind the status quo in current health care spending will start to focus their attention on preventing this upstart idea from radically transforming the current distribution of dollars. To me, the second is the likelier of the two alternatives. I'd love your feedback as to whether my analysis seems correct, and if so, what "political" moves those supporting connected health need to make to prepare for the scrutiny that awaits.