Xconomy Asks the Experts: Can Technology Innovation Really Lower the Cost of Healthcare?
Last week I was struck in particular by a comment that one reader appended to my post about the formation of a $100 million West Health Investment Fund by San Diego philanthropists Gary and Mary West.
The Wests say they created the fund (and are providing the entire $100 million themselves) to invest in “cutting-edge” medical technologies that offer “the potential to substantially reduce” healthcare costs. The comment left by my one skeptic argues that advancing new medical technologies will accomplish virtually nothing to lower health care costs.
“High health care costs are tied up not in technologies, but in administration and delivery of care,” the reader wrote. “It’s a people & process problem, not a tools problem.”
I thought it was an insightful comment. So insightful, in fact, that I decided to ask several healthcare leaders to respond. After all, haven’t innovations in medical technology historically driven healthcare costs higher—not lower? As luck would have it, I was able to put the question to several healthcare leaders at a downtown reception that was organized to celebrate the formation of the new West Health Investment Fund.
The experts I cornered were Eric Topol, the cardiologist, chief academic officer for Scripps Healthcare and director of the Scripps Translational Science Institute; Don Casey, CEO of the West Wireless Health Institute and manager of the new West Health Investment Fund; and David Gollaher, CEO of the California Healthcare Institute, an independent research and advocacy group that aims to advance the interests of California’s biomedical community.
Q&A with Eric Topol:
Xconomy: I’ve got a reader who says technology is the wrong area to focus on when it comes to lowering health costs. He contends that escalating costs are really the result of people and processes.
Eric Topol: I don’t agree with that.
X: Well, I’ve heard you talk about how moribund and ossified the medical community is, and FDA regulations and so forth.
ET: This puts out a grand challenge. It says, “Hey, we’ve got a different way to do it.” There’s a new order of business, and it’s to have innovative technology, but to concentrate on a way to make it much more affordable.
X: So how do you do that? Technology innovation, as you say, traditionally makes health care more expensive. Not less expensive.
ET: They’re not necessarily more expensive. But that’s what the companies charge for it. So that doesn’t have to be the way we go forward.
X: So you’re saying this is a different business model?
ET: Yeah. For example, that ECG AliveCor, where you can do a cardiogram for nothing, or with a [GE] Vscan (miniature handheld ultrasound) you can do an echocardiogram for nothing. These are very inexpensive tools. But they replace very expensive ones. They exemplify frugal innovation. We’ve never seen technologies like this, that can replace [existing medical technologies] that are standardly used in millions of people every year and at a very high expense. So it is still about technology.
Q&A with Don Casey
Xconomy: Is technology the wrong area to focus on when it comes to lowering health costs? Aren’t escalating costs really the result of people and processes?
Don Casey: It’s about how do you focus on delivering an outcome that in aggregate lowers the cost of healthcare. It’s absolutely essential that you begin to integrate the technology in the entire care pathway, so that you deliver change. So I agree with it. I think the comment is spot on with respect to needing to improve processes of care delivery.
X: So new technology has to be not only safe and affective, but also lower healthcare costs?
DC: Actually, you’re giving me a better quote than I would’ve given you. We think traditionally that venture funds have looked at healthcare investments along an axis of safety and efficacy. We think it’s got to be safety, efficacy, and value. And if you don’t deliver a value equation, to be honest, we think it’s going to be irrelevant in five years. I mean does the world really need a fifth statin now? There are wonderful statins today. Now if there’s a major breakthrough, great. But why should society invest 800 million to a billion dollars to invent a fifth statin? I think it’s got to be much more about how do we look at the business of healthcare, and provide technology that can change the paradigm.
Q&A with David Gollaher
Xconomy: If you have a fund that’s investing in innovative healthcare technology, is that really where we need to go in terms of lowering health costs?
David Gollaher: One way to think about it is that we have a huge legacy system called American healthcare that works in the way it does, and it hasn’t really changed its fundamental structure in 50 years. However, we have seen large fields in our economy that have been upended, disrupted by technology breakthroughs. You can look at whole flocks of businesses that used to exist that are high, intense service and inefficient businesses, say travel agents, booking hotels, record stores. All these things have been disrupted fundamentally and very quickly, partly by technology and partly by human behavior around the technology.
Healthcare is larger and more embedded and there are professional layers and so forth, but I think if people can start to look at business models where the businesses make money by lowering costs and keeping quality the same, or improving quality, that those kinds of things can catch fire. I was just talking with Eric Topol about this.
This has to be done. We can’t spend 40 percent of GDP on healthcare, because there won’t be enough workers to pay for it. And that’s where we’re headed. I hope this can be a slender tip of the wedge in trying to pry open the riddle of healthcare.