American ingenuity working with the US military turned radar into a decisive practical navigational system that helped the Allies win WWII. American ingenuity working with NASA created the Apollo moonshot telemetry guidance system that became the foundation of our digital economy today. There is a long tradition of private sector innovation and the US Government working together to scale transformative innovation.
There is an opportunity to help solve the US healthcare dilemma that political leaders have not yet considered. Over $750 billion of the current $3 trillion-plus healthcare spend is unnecessary and wasted. Just under half of this waste is due to physician and hospital overuse, misuse, and incompetencies, and the other half is due to poor management of drug usage in both acute and chronic care– in other words, this half is due to avoidable drug-impacted medical costs. Reduction of just a portion of this waste is more than enough to cover the uninsured and underinsured populations, improve healthcare, and reduce premiums for all Americans, while solving the political dilemma in Washington with no additional cash infusion.
How is it possible to save such a magnitude of money?
A total of 37 million of the 55 million Medicare patients and 21 million of the 72 million Medicaid patients are covered under the Fee for Service model, in which the federal government and individual states assume risk. The remaining Medicare and Medicaid populations are managed by private insurers. In many states, Fee for Service Medicaid patients cost three times more than managed Medicaid patients, due to abuse and lack of management and oversight. It is a well-established fact that private insurers are better managers of risk than the government. In order to create real healthcare reform, private insurers must pass most or partial risk to physicians and hospitals. The government, including CMS, has effectively demonstrated the institution of guidelines to improve quality, to create payment reform models, and to establish innovative risk models such as ACOs and Bundled Payments that reduce overall cost and improve overall quality of life for patients. In order to capture significant cost reduction, it is imperative that the Fee for Service population be rapidly converted to managed Medicaid and Medicare while employing scientifically valid cost and quality metrics.
The standard deviation when measuring the quality of physicians is much larger than the standard deviation of airline pilots, although both populations are responsible for human lives. According to extensive research, seventy to seventy five percent of all physicians in the United States are competent, high quality, cost effective clinicians who carry out appropriate actions at the appropriate times, regardless of their financial arrangements. These quality physicians diagnose conditions correctly the first time, refer patients to quality specialists when necessary, admit patients to hospitals when warranted, follow-up with the patient as is necessary, and are available when needed by the most critical patients. Embodying these competencies allows a physician to be classified as quality and cost effective. Chronically ill patients, which make up five to seven percent of the US population, currently consume fifty percent of US healthcare dollars. In order to realize substantial cost reduction, it is imperative that these seventy to seventy five percent quality physicians care for these patients through a preferred physician network model.
Five to seven percent of the total US population falls within the chronically ill care pool. This population is currently poorly managed in the care continuum due to the fragmented nature of care, the lack of a single point of accountability, and the lack of effective risk/reward models. These patients typically take between 15 and 20 pills per day and suffer from multiple chronic diseases. When these chronic patients undergo comprehensive medication review at the point of care, it is often determined that the overall quality of life of such patients is superior with 30% to 40% fewer medications, as many of their medications are doing more damage than good. This situation becomes even worse when these chronic patients do not adhere to a daily routine of taking their prescribed essential drugs. Chronic patients are also in need of close continuity of vital sign monitoring at home and timely care coordination, as many of these patients lack family support and are lonely and/or depressed. As a result, chronic patients consume the majority of avoidable hospital visits, ER visits, and re-admissions, which comes at a great expense to risk bearers.
If these patients are cared for by quality physicians under effective risk/reward models, while also employing a technology-enabled decision support system within the patient’s home through an integrated platform, substantial improved outcomes can be achieved. Such technology innovation should incorporate identifying essential medications at the point of care, weekly organization of these medications through disposable electronic pill trays, electronic monitoring of adherence and vital signs, and timely care coordination at home through visiting physicians/nurses. A comprehensive platform as such, coupled with the right risk sharing model assumed by a single entity, will substantially reduce avoidable drug-impacted medical costs (estimated $450 billion).
Political leaders must understand that private sector technology ingenuity and innovation is capable of playing a much larger role in helping solve the US healthcare cost dilemma. There is enough money within the current healthcare spend to build a healthcare system that would significantly improve quality of care! What has thus far prevented adoption of innovative cloud-based platforms and risk models is the complexity of regulations, special interests, antiquated business practices, and status quo healthcare leadership.
If other regulated industries such as financial services and telecommunications can transform their old practices and bureaucracy and become admired innovators, then why can’t healthcare do so too?
Co-authored by former Apple CEO John Sculley, RxAdvance Chairman and by Ravi Ika, RxAdvance Founder & CEO.