If we were truly open market?

Where can open market help? Clearly we can gain transactional cost savings by allowing global insurance carriers to offer their products. Global prescription filling is another source of savings. How about increasing the physician pool? Although not proven, if we were to accept technology aided telemedicine as an option, we could easily double the number of physicians.

Let us set the baseline (all data points are based on informal research with Google as the dominant research platform). The healthcare expenditures are roughly 3 trillion annually in the U.S. There are about 15 million workers in the healthcare field including about three quarters of a million physicians. Healthcare costs are skewed in terms of a life cycle view, the first 6 months and the last 6 months of life consuming a major portion. Healthcare costs are also skewed with reference to complex cases – about 16% of patients consume over 50% of the costs. The average encounter time between a patient and physician is roughly 12 minutes and more than half of the diagnosis are inaccurate. Accurate diagnosis, specifically identifying the complex cases early, will save us at least 25% of the costs for treating complex cases. The cost of “overseas physicians” are significantly lower (about a third of the cost of physicians in U.S.). If we do the math (average cost of a US physician is about 200,000 dollars per year), the net savings therefore is in the hundreds of billions (about 300 billion based on my back of the envelope calculations). In addition the increased encounter time can reduce erroneous diagnosis further reducing healthcare costs. Sadly, United States is encumbered by a highly polarized and irrational political system. Technology will not be used to make such major strides. I hope I am wrong.

Is healthcare delivery models a good metaphor for IT Project Management?

After thirty years in IT, I still wonder about metrics and measures for managing technology. A useful metaphor for IT Project Management can be drawn from health care, the life cycle of health care for an individual starts with enormous enthusiasm and joy at the early stages (birth to pre-school), where expenditures are not questioned. Planning sets in and health care insurance models are on auto-pilot during the middle years, and towards the latter stages, particularly the tail-end, the expenditures sky-rocket once more. IT Projects mirror this to an extent – initial stages are optimistic, rosy, all extra expenses magically treated as investment for the future, the middle stages reflect planning and control, but towards the end, completing it successfully overrides budgetary estimates. The result is overruns and significant mismatch between budgets and actuals. How many of your projects follow this metaphor? Most of us build IT to a budget – a metaphor very difficult to accept in healthcare.

Renewable Medical Waste

I hosted a business forum at the Pasadena Convention Center. One of the speakers, Tom Bang, CEO of TrinovaMed discussed RMW (Regulated Medical Waste) – a $10B world wide market. TrinovaMed has a streamlined process that not only reduces costs, but they are also eco-friendly (low carbon footprint) and safe. One of the reasons I invited Tom at the Forum was to explore opportunities in India, where the United Nations has teamed up with the Indian Government in a $40 M pilot across five states.

Private-Public partnership is critical to address this market segment. The public component will provide the R&D funding, project opportunities, and rules for managing medical waste. The private sector, as evidenced by Tom’s company will ensure that the free market will facilitate innovation.

Social Networking – Are There Real Benefits?

Facebook, Twitter, LinkedIn, you name it – we have it. Each of these are networks, we can create networks within these entities(I call these meta-networks). On the positive side, meta-networks have led to creation of social linkages that seek freedom of expression as evidenced by the events in Iran which could easily have been suppressed without these meta-networks. On the negative side, we have privacy violations with Facebook showing us what can happen when greed meets freedom.

Perhaps a good use of social networks is to realize the dream I had in my previous blog – a vast social network that becomes the virtual insurance and arbitrator of healthcare. And in my infinite wisdom, I referred to Facebook. Facebook, why did you become greedy?

Learning the hard way

Everywhere we turn, we are confronted with rising healthcare costs. My son, who has some history of Asthma, was denied coverage with us on the family plan when we had to switch coverage (after expiry of COBRA benefits). Naturally, the carrier offered separate coverage for him at a substantially higher cost. I chose the high deductible option making the coverage I have almost like a stop-loss insurance. In other words, I am for all practical reasons carrying my own insurance.

You will most likely contest any hypothesis I may make, so please permit me to dream. Assume a million like me formed a virtual social enterprise. That would give us a budget around 12 billion USD. Suppose further that we were able to carve out volunteers who would work a specified set of hours for reduced premiums (almost like a renter-manager in small apartments). Suppose further that we created a vast social network (no major investments: facebook will do fine, thank you). Since I am dreaming, nothing will stop me from assuming that a few amongst us are more inclined to contribute more time, experience and energy to this noble enterprise. These selected few negotiate contracts with physicians (my dream physicians are honorable and charge ethically), develop a global drug network (I mean the good kind of drugs – even in dreams I cannot think of evil), develop a self-claims process (I can do this – so this part of the dream is real), and reduce the administrative costs to near zero. We of course initiate health awareness programs (yoga is not a dream), we propagate that eating right, thinking right, and stress free life is essential. Needless to say of course that none in our network will be called to put in long stressful hours of work.

If I achieve this, what have I established? Have I made a dent or set a trend at least? Have I shown a way for all of us to think of healthcare differently? Or even to dream this is a dream?

EHRs Products Are Still Immature

Many feel that the “electronification” of medical records will lead to significant savings. Nothing can be farther than the truth – the reality is that while Electronic Health Records (EHRs) provide the structure to organize health related information, to make it really count, the practitioner has to adopt it as part of delivering care. There is a significant difference between EHRs and Electronic Medical Records , but for the purposes of this blog, we will use the phrase EHR to simply identify medical data in electronic form.

While EHRs will improve the efficiency of delivering care, they will have minimal impact on the efficacy of care unless they are incorporated into the process of delivering care. It is very clear that delivering better care has an order of magnitude more significant impact on healthcare costs than simply focusing on the administration of healthcare. Studies have shown that of the 2.7 trillion dollars in healthcare expenditure, improving efficiency will impact less than 15% of the costs. The focus of EHRs should be on delivering better care. While the challenges of integrating data across different disciplines and practitioners is really daunting, merely integrating data will not help improve the efficacy of care. Real improvements can only come if practitioners are given easy mechanism to interpret the data. Taking into context that the amount of time spent in interpreting the data is reducing each year, the ability of EHR vendors to facilitate interpretation of data will be crucial to delivering better care.

EHRs vendors today ignore the role of qualitative data (or practitioner’s notes). These notes play a very significant role in improving the quality of care delivered as these notes (along with the other empirical data) show the patients history. Integrating these notes across multiple disciplines and different timelines is extremely challenging. First the notes are unstructured and nearly free-form, and second, the depth and range of issues covered vary from discipline to discipline and from practitioner to practitioner. Despite these difficulties, EHR vendors should provide easy mechanisms to add some degree of structure to these notes and provide simple tools to collaborate across multiple disciplines. Semantic and fuzzy logic systems may lend some degree of relevance to this area, but much needs to be researched in this place. The main point of this blog is that EHRs are a distant ways from becoming a mature technology.

Selecting the Right EMR Solution

Physicians are faced with choice of increasing the use of technology. Specifically, they are assessing the benefits of using EMR. EMRs fundamentally change the workflow within the practice, and therefore, it is critical that the choices should not just be on the technology but on the long term objectives sought with implementing EMRs. Like all investments, the life-cycle costs and benefits must be assessed. Efficiency improvements from EMRs include reduced costs due to improved billing, improved appointment setting, and integration with other systems (example: e-Prescribing). Effectiveness of care improvements includes improved patient-physician interaction and patient centric quality of care. It must be noted that improvements in efficacy will far outweigh the improvements in efficiency, but they are harder to measure.

While there are 300 plus vendors, there is no simple mechanism to select the right one. Tax incentives are available, and in fact some vendors are offering free tools and services in exchange for the tax benefit. However, selecting the right vendor is a still a daunting task. The basic steps in selecting and implementing EMRs is to first understand the existing practice workflow, specify the goals, identify the requirements, and translate the requirements to desired features. Now the EMR tools can be compared against the desired features, ranked and scored to identify the top 3 to 5 EMR vendors. Choosing amongst the specific vendors and implementing them usually requires technical expertise. Fortunately a pool of EMR consultants are cropping up to help proliferation of EMRs.

The selection criteria centers around practice related features, vendor stability, and technology architecture. Practice related features include the ability to do quick charting/chart organization, interface with specific systems (hospital, lab, practice management, equipment), facilitate coding and billing/payment, facilitate appointments, manage referrals, educate and communicate with patients, e-prescriptions, and track progress.

Technical features to be considered include ability to use remotely – from home, hospital, ability to easily add new users (additional providers and staff), interface with other systems and hand-held devices like iPhone, interface with voice recognition systems such as Dragon Medical, decision support dashboards, and pre-built templates to facilitate documenting interactions with the patient. Architectural considerations are also important, including: cloud (SaaS) versus traditional installation, open source versus commercial platforms, interface with document management systems/work flow systems such as SharePoint, and interoperability with other entities (using XML or HL7 or other standards). In addition to practice related features and technology related features, vendor stability, ability to support the product, their track record, and certification for “meaningful use” are critical considerations.

For a free detailed step by step process, send an e-mail to Subbu Murthy at subbu@usourceit.com

Receivers, Givers, and Takers

I had the good fortune to hear billionaire Dr. Patrick Soon-Shiong discuss how to migrate from an “outcome” centric medical delivery system to evidence based delivery system. This immediately reasonated with my experience in managing evidence based disbaility claims. We had started with the notion of rating driven (outcome based) as opposed to evidence based like Patrick suggested. The effect of changing the paradigm is significant, and frankly, very difficult to implement given the socio-political climate here in the U.S.

Nevertheless, Patrick used the paradigm of Receivers (patients), Givers (providers and payors), and Takers (all others). The secret he suggested was to to follow the patient. So in designing electronic records, we should make EHRs as close to PHRs as possible to ensure “patient” driven use of medical evidence. He said the focus is not healthcare, but on health. He also spoke about the need to have massive data (summarized as appropriate) instantly available to both the patient and the provider to enable optimal decision making. The latter, he contended, will improve the specific medical treatment provided, and thereby improve outcomes. After all, 5% of patients account for over 55% of the healthcare costs. He suggested that decision makers must always ask what additional information is needed that will lead to a different decision. His key inputs that reasonate with my objectives are:

1. Inter-operability of data across systems to ensure that we have “instant” access to health records and health analystics.
2. Patient in the loop technology and universal records to trend and develop optimal care.
3. Quantitiative, predictive, preventative and unbiased care – not dependent on rating codes and financial restrictions.
4. The role of EHR with a focus to enhance the quality of care.
5. Expanded notion of the cloud – “service oriented science”.

All these are valid points, and I will be incorporating his ideas into my work. His coalition for connected healthcare NCHI is an organization worth following.

The Role of TPAs in Self-Insured Healthcare Plans

Third Party Administrators (TPAs) are “outsourced” administrators, and vital to our vision of reducing healthcare costs. The role of TPAs in self-insured employers is to administer the claimant-provider-payee interaction. In self-insured companies, the claimants are employees covered by the plan and the payee is the employer itself. This is unlike the fully insured plan, where the employer pays an insurer a premium to provide healthcare coverage. Ideally, a TPA would provide not only savings in administering the claim due to economies of scale, but also lower the cost of a claim by bringing in a pre-negotiated price structure with providers, and more important, provide claim review to reduce errors by omission or commission. Good TPAs provide a optimum balance in reducing claims costs and providing high degree of employee satisfaction.

Before discussing some of the challenges, it is is important to point out, that over 55 percent of workers with health insurance were covered by a self-insured plan. It is astonishing to note that 89 percent of workers employed in firms with 5,000 or more employees were covered by a self-insured plan.

TPAs are highly fragmented (although there is a move towards consolidation). Of the approximately 1400 TPAs managing healthcare claims, there are about 1000 TPAs who manage less than 10,000 lives. Only a few dozen manage more than 50,000 lives. Smaller TPAs simply become a one-off outsourcing for employers who underwrite their healthcare costs. This poses challenges of quality, efficiency and costs. Therefore chosing a TPA is not a simple task. A subtle challenge is the business model most TPAs follow – they charge per each insured “life”, and hence they are incentivized to save claims processing costs – not the cost of a claim. It is not to say that TPAs do not attempt to reduce the cost of claim. In fact, most use simple rules such as a dollar limit above which all claims are reviewed by experts. The more sophisticated TPAs set different thresholds for different types of claims. Despite these systems, arbitrary limits and rules for auto-adjudication has led to significant losses.

A road map for future blogs on this topic is provided below:

How does a TPA work, and how technology can help them do better?
How to select a TPA, and how to set the appropriate Service Level Agreements (SLAs) to manage them?
The future of TPAs as impacted by the increased role of consumerism in healthcare.

Administrative costs in healthcare

If you notice my vision, it is to use technology to reduce the healthcare administration costs. Frankly, a bit narrow, as improving efficacy in healthcare management and better life styles lead to far better savings that just saving administration costs. Nevertheless, reducing administrative costs by even 1% would be saving several billion dollars.

Medicare has administrative costs of 3 percent (or 6 to 8 percent if support from other government agencies is included), compared to 14 to 22 percent for private employer-sponsored health insurance. The raw administrative costs per patient are as follows: $509 per primary beneficiary for Medicare, and $453 for private insurers (Andrew Gelman). The referenced article is about statistics and not healthcare, although, the analysis is about comparing the benefits of the public option.

My first reaction was that their numbers were low (I expected administration costs to be $1000 per beneficiary) and I thought that they were not including the sum total of all administrative costs. To calculate all administrative costs, a rough order magnitude calculation is as follows (over the next several months, I will validate these numbers):

1) Total healthcare costs excluding disability claims is around 1.5 trillion dollars.
2) Providers and assistants cost about $312B
Note: Average provider makes a burdened salary of $200,000 annually and there are about 800,000 providers, 2 million nurses (at $70,000 annually) and 200,000 technicians at ($60,000 annually)
3) Pharma, Devices $300B
4) Hospitals and emergency centers $500B
5) Miscellaneous costs exclusing administration $150B

This leaves about $240B for administration – a number that seems to agree with the referenced article. If technology can reduce this by 40%, then it will amount to a savings of 6% overall to the healthcare. This points out that as a technologist, I feel that should we achieve this very difficult goal, it will be a great contribution to healthcare. But it is also humbling, if we all got healthier, then the savings are significantly more. A point that we as technologists should not forget.