Panel: Healthcare Innovation Has Lagged, But Future Could Be Bright

“Healthcare stinks at innovation, period.”

That statement, from Frank Byrne—formerly president of St. Mary’s Hospital in Madison, WI, and now an advisor to the healthtech-focused VC group HealthX Ventures—was probably the most provocative one made during a panel discussion on healthcare and potentially transformative technologies held on Thursday in Madison. The forum was part of WTN Media’s annual Disruptive Healthcare Conference.

Byrne said there are plenty of avenues open for organizations that provide care and ones that develop technology for use in hospitals and clinics to make valuable innovations, and some of them are already succeeding. (More on that below.) But first he wanted to grump about the lost opportunities so far.

Byrne said that over the past four decades, all of the “disruptive leaps” in healthcare have been driven by changes to payment and reimbursement models.

One of these leaps was the advent of diagnostic related groups (DRGs), he said, which established set reimbursement levels for the treatment of Medicare patients for each specific diagnosis. These DRGs have been used by healthcare providers in the United States since 1982. Byrne said the introduction of DRGs and fixed payment amounts led to hand-wringing by some of his fellow leaders at hospitals, including the one he worked for at the time.

“All the hospital lemmings were saying ,‘Woe is me. The sky is falling. We’re going to go out of business. How can we possibly get paid a fixed rate? Our patients are different. Our patients are sicker [than those at other hospitals],’” Byrne said. “So what did they do? They invented payment scams and dodges. It’s like a pea in a shell game.”

As an example, he said, hospitals learned that under certain circumstances, they could send a patient to a long-term acute care facility and still receive the full DRG payment from the government.

“That’s the history of innovation,” Byrne said. “Moving a patient down the street so you can get paid—how inspiring is that?”

But despite what Byrne views as an underwhelming track record, he said that today, leaders at healthcare organizations have an opportunity to “create the future,” whether they work inside a hospital or in another setting.

One group that he mentioned favorably is Avia, a Chicago-based for-profit consortium whose current membership includes 22 health systems from across the country. Avia was also represented on the panel, by P. Nelson Le, the organization’s medical director. Avia helps lead a selection process in which executives from care providers that belong to the consortium convene to discuss some of the major problems they’ve been encountering in day-to-day operations.

“Every single day, [executives at hospitals] probably get three phone calls and five e-mails from software vendors who say, ‘Hey, we can solve all your problems and make coffee in the morning,’” Le said. “Avia seeks to help its members determine which products “are really going to pan out in the long run,” he said.

Once the health systems belonging to the consortium have identified a problem that they feel is both important and addressable, Avia starts looking for companies that might be able to provide solutions. One past example of a key problem was improving how post-acute care elective surgeries are assessed.

After evaluating dozens of interviews and product demonstrations, his organization narrows the field and brings finalists to Chicago for a pitch competition similar to ABC’s “Shark Tank” television show, Le said. The winning company then goes to work … Next Page »

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Jeff Buchanan is the editor of Xconomy Wisconsin. Email: jbuchanan@xconomy.com Follow @_jeffbuchanan

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