Healthcare Industry Concepts Rise from the Grave

9/7/10Follow @venturevalkyrie

There was a great article authored by Gregory Huang and posted on Xconomy last week called Party Like It’s 1999: 10 Old Tech Ideas That Are New Again. The article was basically about the top 10 things that are hot right now but are, essentially, “back to the future” developments in technology that had a history of being tried before and failing. The list included a host of technology-based products and services including: group buying sites (e.g., Mercata), tablet computing (e.g., Microsoft Tablet PC), B2B exchanges (e.g., Alibaba) and internet-based personal service sites (e.g., Webvan), all of which had a day in the sun that ended much like a visit by Frosty the Snowman to Acapulco—badly and with little hope of return, or so people thought (and often hoped) at the time.

It struck me that we are in an era of alleged new discovery (re-discovery?) in healthcare that looks just like what is happening in technology. If you look at many of the concepts that are at the center of what people believe are the pathways to reform our healthcare system, the vast majority of them have been tried and failed before. As Yogi Berra said, “Deja Vu all over again!”

Similar to the technology reincarnations discussed in the Xconomy article, the reasons for failure of these healthcare concepts were varied. Timing was part of it in some cases, technology limitations the cause in others. Sometimes the reason for failure was cost and often times it was misaligned financial incentives. In any event, here is my own back-to-the-future list of old healthcare ideas that seem to be coming back, this time in much fancier clothing.

1. Payment Reform is what it’s called now. It used to be called capitation and/or provider incentive payments. The idea of “reforming” the way that the healthcare system reimburses providers by making them financially accountable for their outcomes and incentivizing them to produce good quality care has been around a long time. There was a lot of talk about this, particularly in the 1980s and 90s, culminating in a significant number of provider financial disasters when they found themselves without the tools to manage care effectively to ensure that a fixed budget payment system worked. California is one of the few locales where provider sub-capitation lived on through to this day, refusing to die like the guy in those old Halloween movies. Everywhere else? Pretty much dead. But rising from the grave here it is again as we see a healthcare reform law that supports provider financial responsibility for outcomes (e.g., responsibility for hospital readmissions for 30 days post discharge) as well as its counterpart, pay-for-performance. Those words are the same as they were in the 1990′s, but now we’re trying to figure out how to make them meaningful through regulation (adopt an electronic health records system and use it meaningfully or suffer the financial penalty). It will be interesting to see how this experiment works out the second time.

2. Accountable Care Organizations (ACOs) is what they’re called now. They used to be called provider-owned HMOs or sub-capitated IPAs. This one bears watching, as it failed in a fantastic flameout of misery the first time around. ACOs are touted right now as the grand solution from on high that will solve the care coordination problems of the chronically ill. The idea is that a highly integrated physician network will have an all-encompassing primary (and some specialty) care system that ensures people with serious illnesses get precisely the right care at the right time in the right amount. Conceptually it’s a good idea. When it was tried out before in the 1980s and 1990s it was a disaster, intrinsically related to Item No. 1 above. The result of the first wave of risk-bearing physican organizations was widespread denial of necessary care and a host of TV shows about evil insurance companies and altrustic doctors a la St. Elsewhere. This time around there is a significant leap forward in technology (electronic medical record systems, remote monitoring systems, etc) that can, theoretically, enable effective just-in-time sharing of data about a patient to improve care coordination and minimize unnecessary care. The big risk here is whether or not this will really change provider or patient behavior in a way that produces the goal of better care at lower cost. Time will tell. As a skeptic, one of my concerns is that it could lead to a new era of….

3. Medical homes without walls is what it’s called now. It used to be called Physician Practice Management (“PPM”). Many of you will shudder at the uttering of the words “physician practice management.” The very term conjures up horrific memories of those companies that used to buy up medical practices, install administrative leaders and bureaucracies who oversaw the delivery of care in factory-like rigor, and sucked the souls out of physicians (along with the cash out of their pockets). Some of these companies were well-meaning but ineffectual (the culture clash between physicians and financial managers was too hard to overcome) and some of them were downright amazing for their ability to wreak havoc on physicians’ livelihoods (can you remember FPA and MedPartners? Anyone? Bueller?). There are a few that have successfully survived and thrived, such as US Oncology. However, the general field of PPM was shunned by venture capitalists and others in the financial market. Today, in an effort to establish so-called Medical Homes in areas that are not based on a staff model enterprise (such as Geisinger or Kaiser), the concept of creating an overarching structure to connect independent physicians and groups under a common umbrella has risen like a phoenix from the ashes. No one dares utter the words “physician practice management,” but I can hear the whispers in the wind as practices are getting acquired (or kinda sorta acquired) at a record pace once again. You can call raw dead fish “sushi” and sell a bundle of it, so maybe we can make this whole PPM thing work right this time around. For me the jury is way out on this one.

4. E-prescribing is what it’s called now (and then). Back in the late 1990′s there was a flurry of technology propagated for use by physicians to improve patient care. Some of the hot things at the time were a slew of electronic prescribing products on newfangled things they used to call Palm Pilots and now called smartphones. Part of the explanation for this failure is the same as the general reason cited in the Xconomy article: these smartish phone thingies were too new, the processing power of the time was too rudimentary and the apps were lacking. Tens of millions of venture dollars were invested in companies that failed because the products cost physicians a bunch of money and did not provide the physicians themselves any clear financial return. They were also perceived to be more work than simply writing a prescription the old fashioned way. Oh, and they were illegal in some states–always a buzz kill. Today we have laws favoring e-prescribing and significant technology advances that enable it to work smoothly. Today the products are typically free to providers and reimbursed by others with a stake in the gain, such as payers, so this has overcome a significant barrier to adoption. Further, there has been massive consolidation in this field, with only a few of the strong surviving (e.g., Allscripts). This one is probably here to stay this time around and justifiably so because it just makes clinical and financial sense.

5. Consumer engagement is what it’s called today, but it used to be plain old patient education. Companies such as WebMD and DrKoop.com started out in the mid-1990′s to provide patients with information about health issues so they could become more engaged in taking care of themselves. The idea was that patients, armed with print-outs of articles, would go to their doctors and get them thinking better about treatment plans. Kind of worked, mostly didn’t. Many of these companies still provide this information, except they realized that they needed actual business models for that whole prosperity thing to work and that advertising was not likely to be a robust enough source of financial sustenance for the long-term in most cases. Today WebMD, ADAM (recently acquired by Ebix), and others garner the majority of their revenue from activities other than engaging consumers and they have been joined by a plethora of other information-rich websites hosted by a myriad of hospitals, insurance carriers, e-health companies. Perhaps most importantly, there has been a widespread recognition that the availability of information alone does not prompt consumers to get truly engaged in taking care of themselves. Rather, there need to be clear and compelling financial and other incentives to do so. By marrying information, personalization and financial incentives, the new generation of companies (some of which started as different companies with the same names) is exploring interesting new ways to engage consumers in their own health care. We are seeing an explosion of Health 2.0 style companies focused on this very thing. Maybe too many such companies, in fact. I suspect there will be a significant winnowing-out of these new entrants as new ideas facilitated by new technology are tested.

6. Healthcare Information Technology (“HIT”) is what we call it now. It was, for a while, called “e-health” back in the 1990s. VCs rushed like lemmings to fund companies, now long dead, which focused on providing a wealth of Internet-based services to physicians, hospitals and consumers (see above). The healthcare field, previously dominated by huge companies like Perot Systems and HBOC (now part of McKesson) was suddenly being pecked at by the underdogs (now the dead dogs) of the early Internet (remember the original MedScape or Mediconsult.com?). When that bubble burst, e-health investors may as well have been wearing a scarlet “A” for “A former success story.” Healthcare partners were bounced from venture firms like LeBron James’ basketballs. It became very uncool to invest in healthcare-related information technology through the early 2000s and no one was buying it anyway. Physician practices and hospitals made it pretty clear that they had no intention of investing the billions of dollars necessary to facilitate the adoption of technology that, in their view, had no clear value proposition to their organizations. But wait…you’ll pay me to install technology? Adopt an electronic medical record system (EMR) and I’ll get tens of thousands of dollars? Hey, that sounds a lot different. With the advent of the ARRA stimulus money and the concomitant passing of incentives to adopt (and penalties for failure to adopt) EMRs and other provider-focused technologies, the story has changed. Once again it is cool to be an investor in HIT (the term “e-health” has gone the way of the dinosaurs). I have actually had several life science VC firms ask me about how they can break into this area, which they have previously shunned like lepers. What a difference a law, backed up by cash, makes.

There are many other examples of the old becoming new in healthcare. Physicians using tablet computing was a short-lived craze in the 90′s; once a failure, now an iPad revolution. The strange newness of online shopping made PlanetRx and Drugstore.com failures even while on-line shopping is widely accepted now, 10-12 years later, as an adjunct to bricks and mortar brands. Even the concept of federally-driven health reform itself is a revisiting of an idea that was hotly debated in the Clinton era–the simultaneous comeback of healthcare reform and Hillary Clinton may or may not be coincidental! Depends on whether you’re a conspiracy theorist or a realist, I suppose. Anyway, the point is, as they say, the more things change, the more they stay the same. One can only hope that getting a healthcare do-over is the pathway to learning from history and not to just repeating it.

Lisa Suennen is Managing Partner at Venture Valkyrie Consulting, a firm providing advisory services to companies, organizations, and private equity firms in the healthcare field, and the co-author of Tech Tonics: Can Passionate Entrepreneurs Heal Healthcare With Technology? Follow @venturevalkyrie

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  • Susan

    I agree with most of what you have written. We are thinking of purchasing software that will enable us to perform EHR for our clients. My question is, could we benefit from the proposed EHR subsidies retroactively?

  • Hestia

    Excellent article; your point about accountable care organizations and medical homes is exactly right. Most communities can’t support such organizations that the number of clinical executives who can manage such organizations is vanishingly small.

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