When it comes to innovation in healthcare, medical devices and the Internet get most of the attention. But much of the real work of change is taking place on the more basic levels of healthcare delivery and finance.
Executives of two new companies and one older, more established firm gave their views on these changes in a panel discussion at the Alumni Healthcare Conference.
Chip Tooke, president of Lumenos, a company that bills itself as "the antidote to managed care," described how his firm is building a place in the area of defined contributions.
"We are in the business of building a product that we are selling to employers, large and small, a product that stands next to an HMO, that gives an employer an opportunity to offer an alternative to an HMO plan," said Tooke.
"A key part of the problem," said Tooke, "is that consumers, as they pay for healthcare services or receive healthcare services, are not involved in a typical economic transaction.
"Our approach is to get a fair amount of that spending, the front-end spending for consumers, out of the hands of the employer or the HMO and into the hands of the consumer, and set up an economic model that makes sense.
Shifting spending power to the consumer
"[If] we can shift some of the dollars of healthcare spending to the consumer, [if] we can make information and technology available to the consumer using the Internet," he continued, "then we can establish an economic model that is meaningful from the consumer's perspective."
There are three components to Lumenos' approach to consumers, said Tooke. The first involves technology and the Internet: "It [the Internet] is this remarkable tool that we have out here that allows us to move information, as well as do transactions down to the consumer level."
The second, he said, is the proper alignment of economic incentives, with defined contributions as the vehicle. The third component is consumer health empowerment: "By bringing healthcare information and technology down to the consumer level, consumers armed with an economic model that makes sense can engage in the purchase of healthcare in the same way that we purchase other things in our economy."
In talking to employers, said Tooke, he is hearing a very consistent theme: "'We don't want to pay any more money. We want to get out of the business of buying healthcare for our employees. What we want to do is shift a good amount of the spending on the front end to consumers, provide them with a tool — that being the Internet — and provide them with access to information and technology that enables them to be prudent consumers.'
"We also hear, pretty consistently, that nobody wants to be first. They'll tell you under darkness that defined contributions and consumer empowerment is a place they'd like to go. But they pretty consistently say that 'We don't want to be first, we don't want anybody to think of us as being first.'
"That, to some extent, slows down the evolution."
Nevertheless, Tooke said, he expects to see a number of large employers engaged in pilot programs in benefit year 2001, testing consumer response in anticipation of rollout in 2002.
"We are actively, aggressively selling the product to large and small employers," said Tooke. "There is wide acceptance and understanding of the concept of defined contribution. We consistently hear that, 'Our employees will love this,' but it's not at all uncommon to hear that 'We have 40 other number-one priorities in the HR/benefits area, and we have to figure out how to work this in."
Self-directed healthcare
John Danaher, president of HealthMarket, a "self-directed healthcare" exchange, was next on the panel. "We like to think of ourselves, just like Chip's company, as part of this e-benefit, e-coverage space," said Danaher.
"Fundamentally, what we're trying to take advantage of and leverage are all those trends that Chip just talked about: the movement from defined benefit to defined contribution, the softening of the economy, the movement of consumers to access quality information, the rise of the Internet, etc.
"We're really trying to take advantage of that sweet spot by creating a company, by creating a product, that takes the financial purchasing power and also the clinical decision-making power that previously was held by insurance companies and putting it in the hands of consumers.
"We have built the operating system for what we think is the next generation of health insurance."
Danaher described the three components of HealthMarket's operation. The first is the exchange, which aggregates quality and price information on physicians, hospitals, and other healthcare providers that can be accessed by consumers and employers. The second is a series of "episodes of care" designed to let patients spend insurance funds as they deem appropriate.
The third element is what Danaher called "clinical and financial decision support." "What we are fundamentally trying to do is take people who have traded with a stockbroker all their lives and migrate them to a Charles Schwab experience," he said.
A cottage industry?
The final panelist was Thomas Frist, CEO of HCA — The Healthcare Company, the U.S.'s largest hospital operator with some 200 hospitals and other healthcare facilities in 24 states, plus England and Switzerland.
"We do four-to-five percent of just about anything you can do in healthcare," said Frist. "So we can quickly get the pulse on anything that is happening in the industry — the Internet, genomics, etc.
"This is an unusual industry," he continued. "When I started in 1968, this was a cottage industry. Today, it's just as much a cottage industry, even though it's made giant strides toward the other sectors of the economy, the other 85% of the economy.
"The reason why — and this is something very key — is that this is a tax-exempt, not-for-profit industry, and therefore we don't have to run as fast. We can muddle along slowly and not have to worry about our competitors. It is very inept, lethargic, not obese, but just a system that can't react, that isn't set up [to respond to] the many things you're discussing — the Internet, etc. — and how you can get the full productivity out of them. It's going to take a decade or so.
"I don't want the system to change," added Frist, noting that it provides an umbrella under which companies like his can take advantage of consolidation and shared services to improve operational excellence.
"If we can take an industry," he said, "and drive the cost down in the nonclinical areas, by bringing the Internet to play, by bringing technology to play, by consolidating it, it's a quality issue but it also frees up capital, in the form of physical space, in the form of salaries, wages, and benefits.
"This is a very important issue. All the indications are for very dramatic results."
There are countless examples and opportunities for improvement over the next few years, said Frist, "if you really own a base of hospitals and have a base of information to drive behaviors."
"The power of information will drive this, long term," he said. "The Internet, in my 35 years, is the first chance to bring true, significant productivity to this inefficient healthcare system.
"We're a long way off, but we're making strides."
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