Category: Healthcare

This post was originally published for the Health Policy$ense blog of the Leonard Davis Institute of Health Economics.

Along with being Interim Chair of the Department of Medicine at the University of California and ranked by Modern Healthcare as the most influential physician-executive in the U.S., Robert Wachter, MD, is the author of 250 articles and 6 books, the latest of which has become a New York Times Best Seller. Entitled The Digital Doctor: Hope, Hype and Harm at the Dawn of Medicine’s Computer Age, the book is being hailed across the country as the most compelling one yet written on its subject.

The Digital Doctor, which was the subject of Dr. Wachter’s recent talk at the University of Pennsylvania’s Leonard Davis Institute of Health Economics (LDI), explores a dramatic, real-world case in which a child received a 38-fold overdose of a common antibiotic. Wachter uses that example to illustrate some of the unforeseen consequences of health IT and how it is influencing all aspects of health care. We spoke with him about the accomplishments and unexpected consequences of health IT, the process of writing the book, and new ideas that might deserve more attention from health care leaders and policymakers.

Imran Cronk: How did your views on the pitfalls and promises of health IT change or evolve during the research, interviewing and writing process for this book?

Robert Wachter: My passion for writing this book was drawn from my own experience, which was terrifically disappointing. That came from a lot of angles: my own experience clinically, my   work in patient safety, and from seeing the way IT seamlessly fixed all the other problems in my life. I thought, “Health care is dysfunctional and clunky. I need to understand what has happened.” In the research, I came to believe that the dysfunction was almost predictable and even a natural outgrowth of the complexity of the problem, as well as the different and only partly integrated activities of diverse stakeholders.

As I got toward the end of the book, though, I had this epiphany. It dawned on me that this is all going to work out. You can feel like that with children if they’re screwing up. “Does today’s problem in first grade mean my kid’s going to be a heroin addict on the street?” [Laughs] Then you see these glimmers of “oh, that’s a success” and “that’s a success.” I can actually see how, as the kid matures, he’s eventually going to become a normal and valuable human being.

We’re definitely not there yet. Part of the goal of writing the book was to be honest and make clear why we’re not there and what the problems are – without sugarcoating them and getting stuck in the hype. It was like “OK, I get it, here’s what everybody needs to do. Here’s what the path looks like.” Then it really became a question of “How long is this going to take? Is that 30 years or is that 10? It’s certainly not two.” It became clear to me that to get to that place requires better choices and deeper understanding by a lot of different parties. I ended up in a much more optimistic place than I was when I started.

IC: What was the actual process of writing the book like?

RW: It was an interesting process. One of my trepidations when I decided to write it was that I’m not an informaticist. I know it to some extent as a clinician and administrator and in the work I do with patient safety, but my fear was that I would get into these very deep weeds and my lack of a deep understanding of the technical aspects of informatics were going to thwart my ability to understand and then tell the story.

It turned out to be a profound advantage, because I think you can get lost in the techno aspects. I came to understand that the fundamental problems here are not technical. Certainly, you need to work out the technical pieces, but these are fundamental business and organizational problems, as well as psychological, clinical, ethical, and financial. These are all areas I’m comfortable with, so in some ways it made me the perfect observer for all this.

I came in agnostic. What I was not agnostic about was my disappointment. It was clear [health IT] was not working out the way everybody had promised. Then the story sort of told itself. I sat down with my head just spinning with all of these insights from all of my interviews and my own thinking about it, and it kind of flowed in a way that was very exciting. It was an incredibly fun and, in some ways, magical experience. It all came together and little light bulbs went off, both in terms of my own understanding and in terms of making the writing work for the reader.

IC: How did you conduct the research and interviews for the book?

RW: I interviewed about 100 people and I was careful to be as broad as I could, to get people from a lot of different perspectives. Themes just emerge — you have a list of questions, but the interview just takes you where it takes you. There’s a richness that comes from not feeling like you have to get the answer tomorrow, but that the answer will emerge organically. You start with a big block of clay and you’re chipping away at it, and eventually you’ll have a statue. That’s the way it felt. The interviews are so much fun, if you like to learn and you’re open to it. At some point you have to stop and say “I have to write” which is hard.

I was on sabbatical. It took about a year — the first four months was in San Francisco while doing my day job, so it was really busy and hard to find the time to get things moving and start the interviews. I was in Boston for six months, which was not only to be on sabbatical and be in an incredibly rich environment with a lot of smart people around, but also to be stationed on the east coast. I came down to Philly and Washington and made some trips to various places — Epic headquarters, IBM headquarters, and spent a couple of days driving across the country with a primary care doctor to Dubuque, Iowa.

Being in Boston in particular, there were so many smart people around. Having a day where I would interview John Halamka first thing, Ashish Jha in the late morning, and Atul Gawande in the afternoon, and MIT artificial intelligence experts, and so on. There are a lot of smart people thinking about this from a lot of different angles around there. That was a tremendous luxury.

IC: How did it feel to complete the book?

RW: I remember the day at the end of October where I kind of set down my pen and my word processor, and turned to my wife who was helping me edit it, and I said, “Honey, I think it’s done.” I’m now thinking about this topic for a year since then, and I have read through it in various ways over the year. I don’t think I’d change a word. It really felt like, at the end, it was the place I’d wanted to be and said what I’d wanted to say. That was a very good feeling. It would have been quite crummy to feel like I rushed it.

IC: Health IT is changing so rapidly. What developments in the months since The Digital Doctor was published give you concern and/or reason for optimism?

RW: One reason for optimism is that the pressure for interoperability has grown substantially. Interoperability is really not a technical problem — it’s a political problem. If you are a vendor or a purchaser of IT, and even from the standpoint of most hospitals and health systems, you’ll say that you want to connect to everybody, it’s God’s work, and it’s the right thing to do.

But that’s not what determines whether you’ll do it. It’s hard work, it’s politically challenging work. The economics of it are not obviously beneficial to either party. So you’re only doing it if you’re made to. It could be that the legal or regulatory environment changes, or the business environment changes so that there’s an economic advantage to doing it, or you’re shamed into doing it — there are all sorts of mechanisms to get organizations and people to do stuff they don’t naturally want to do. Pressures for interoperability were growing when I wrote the book, but things have escalated markedly. That’s very good. I think it’s a crucial next stage to figure out how to get all these machines to talk to each other, and I think that will happen within the next several years, in part because important players like Congress, like journalists, even to some extent health systems, have determined that it’s got to be so and it’s time to make it happen. That’s a positive trend.

One trend that was emerging when I wrote the book was the entry of Silicon Valley into the world of health IT. It was conspicuously absent for a long time, since it made more sense to build the next Snapchat than to build the next health IT app. One of the unanticipated virtues of HITECH — $30 billion to try and make EHRs ubiquitous — was that it legitimized health care as a digital market for Silicon Valley and software companies. So we are beginning to see some cool things coming out of digital innovation shops, and the combination of the pressure on interoperability — which is linked to the pressure to create open platforms and abilities for third party IT tools to link into existing EHRs — those twin pressures create the opportunity for hugely exciting and truly disruptive innovations. Everybody talks about “this thing is Uber for health care” and “this thing is Airbnb for health care” — who knows? But none of that can happen until the innovator community gets excited, students in business schools get excited, computer science majors get excited and see health care as a viable market where you can make a profit and, by the way, do some good. That’s clearly what we want to have happen. That was only partly true when I was writing it, and it’s become more true recently.

I think the privacy and security breaches have become greater, not only in health IT but also in other fields. That’s the scary part of this — in some ways, it’s the dark side of something great. We’re going to have all these systems linked together, and you’ll be able to see patients’ records anywhere, and have big data with patient records, not just in your one building but in very large health care systems. That’s all very exciting, but if you’re a hacker in China or North Korea, it’s also exciting for you. We have not figured that one out, so that’s the scary part of the good part of having data aggregated. Those are the trends I spoke about in the book, but if anything they have grown since then.

IC: Along those lines, what developments or ideas haven’t we seen yet that you think should be a larger part of the health IT conversation?

RW: The health technology conversation can’t just be about technology. I’ll read where people will talk about, “We have this new sensor or monitors that tracks a patient’s heart rate every minute, and it’ll send it to their primary care doctor who will use it to manage his or her patients more effectively.” It’s like, what planet is that? It’s not one I’m familiar with. These sort of silly conversations about data being good for data’s sake and how wonderful it’s going to be if this happens or that happens, without even the slightest clue about the health care ecosystem. Really, patients and families are going to be able to use that to manage themselves this way? Really, a primary care doctor’s going to be getting data feeds on 2,000 patients and do something useful with that? How’s that going to work?

I think we’re beginning to get more sophisticated and mature conversations about the role of technology as an enabler. The purpose here is not, “Does technology do something spiffy?” but how does it actually work to improve health and health care? That’s inevitably going to take new business models, new staffing models, new specialties and workforce evolution. That’s what we got so wrong in the beginning. We just had this idea that you just produce a piece of technology, stick it out there, and it’s all good. There are a thousand examples of how crazy that is.

I think the alerts were the most interesting and scary example of that — “Wow, how great is it going to be in a computerized environment, when the doctor is about to do something wrong, or there is some information that the doctor should have, we’ll fire an alert!” Well, that sounds great. And then you say, “Oh, the doctors are getting millions of alerts. They’re normal human beings. They will ignore them just to get their work done.” Nobody really talked about that, but of course three minutes into using these tools you say, “Why didn’t we think about that?”

We have a set of complex problems to solve, and the solutions may be new technologies, but until you ask the question of “How is this actually working in real life with real people?” you will never get to the answer. I think that’s where we have to go.

The healthcare payment landscape, which is more accurately described as a sobering wasteland of ineffective status quo arrangements and failed attempts at reform, has heralded a winner in the form of bundled payments. These are lump sums given to acute and post-acute providers to cover the costs of care across the continuum in one bucket, from which providers will share in savings that are supposed to derive from more effective and lower-cost care.

The Center for Medicare and Medicaid Innovation (CMMI) is working hard to spread the model across the nation, in accord with its stated goal to tie 90 percent of reimbursements to quality or value by 2018. Earlier this month, CMMI announced proposed rules that would require hospitals in 80 geographic areas to participate in 5-year bundled payment demonstrations for knee and hip replacements. These rules concern almost all hospitals – not just the hospitals that are already confident in their abilities to manage cost and quality under value-based arrangements.

Such a program has the potential to catalyze real change. CMMI, and its talented and ambitious people, should be commended for “walking the talk” and pushing the agenda forward on value, quality and incentives. Requiring broad hospital participation in a new model of care financing and delivery is never easy and rarely popular, but it is an effective means to an important end. That CMMI is willing to go out on such a limb for a new idea suggests that bundled payments are showing real promise.

Michael E. Porter, the Harvard Business School professor who developed the Five Forces framework back in the late 70s, has explored the concept of value in healthcare in books and papers over the past decade. Earlier this year, he and co-author Robert S. Kaplan explained in a working paper how bundled payments will transform healthcare financing and delivery. The lengthy, well-written treatise defines bundled payments and outlines a sensible playbook for implementation. One contention warrants further examination, however:

“Eventually, value-based bundles should be fully risk adjusted for the variations in outcomes and costs caused by co-morbidities, such as diabetes and cardiac conditions, and patient risk factors, such as age and obesity. At present, we often lack sufficient data and experience to do so, but limiting bundles to less complex patients and other practical steps can allow widespread introduction of bundles as risk adjustment improves.”

I have doubts that limiting bundles to less complex patients is the right way to improve quality and reduce costs of care in places where those results are most needed. Provider groups that are participating in bundled payment initiatives are focusing on high-volume procedures for which a high degree of coordination with post-acute providers already exists. An analysis from Thomas Tsai and colleagues at the Harvard School of Public Health found the following:

“Postacute care explains the largest variation in overall episode-based spending, signaling an opportunity to align incentives across providers. However, the focus on a few selected clinical conditions and the high degree of integration that already exists between enrolled hospitals and postacute care providers may limit the generalizability of bundled payment across the Medicare system.”

It seems that most of the bundled payment action involves providers who are already delivering highly-standardized, tightly-integrated care across the continuum for patients undergoing high-volume and high-cost procedures. While the CMMI proposed rules will rapidly expand bundled payments beyond these blue chip healthcare systems, the demonstration is still limited to 90-day episodes of care that start with a knee or hip replacement in an acute care setting.

Although it is good that providers are being rewarded for their efforts to create more effective processes and better outcomes for important procedures, one wonders to what degree the benefits of the bundled payment program will reach patients who have different healthcare needs, such as diabetes or heart failure, that cannot be measured in discrete episodes of care and might involve numerous providers beyond the primary, acute, and post-acute care continuum.

These chronically ill patients are major drivers of healthcare costs. Analysis of the 2009 Medical Expenditure Panel Survey indicates that the highest-spending one percent of patients accounts for almost a quarter of healthcare spending and that the five percent of highest-spending patients account for almost half of spending.

With such high concentration of health costs and consequences among few patients, should we not focus our efforts on the most complex and sick patients first if we want to make the greatest impact on overall cost and quality? I believe we should.

Setting the expectation for providers and payers that the highest-cost and most-complex patients are the right pilot population for bundled payments will compel more rapid adoption and use of care coordinators, community health workers, and other emerging approaches to patient support. The focus would be set on preventing health events and readmissions concerning the patient who has four chronic diseases, sees six different providers, takes eight medications and lacks access to convenient transportation.

Under the current bundled payment programs, providers are spending more energy ensuring that the cost of elective orthopedic procedures and post-acute rehabilitation doesn’t deviate too much from a target price. It’s a nice goal, but it does not address the larger challenge in healthcare.

This reasoning applies to healthcare provider incentive programs far beyond bundled payments including pay-for-performance. As Richard Fuller and Norbert Goldfield, researchers in 3M’s Clinical and Economic Research unit write: “Exclusion from incentive programs may remove [complex, high-needs] patient populations from the radar of cost-cutting administrators but will also ensure that attempts to improve their care will not be a top priority.”

Including the toughest patients first in bundled arrangement is not the path that will make most providers shimmer like stars, but sometimes the band aid has to be ripped off all at once to see who steps up to embrace complexity and lead real change.

In the second part of this post, I will present a modest proposal for a different kind of bundled payment – one that prioritizes and meets the needs of complex patients with chronic disease.

The most interesting healthcare debate this month concerns the $84,000 price tag for Sovaldi, the breakthrough Hepatitis C drug from Gilead Pharmaceuticals. The national conversation happening right now touches on drug patent incentives, sustainable growth in national health spending, equity and access to care, and more.

The insurance industry is forming coalitions to protest the high cost of the drug and the price has (to put it lightly) piqued the curiosity of Congress. Oregon’s Medicaid program has outlined a plan to control costs by rationing Sovaldi to the sickest patients. Patient advocates have cried foul over the high barriers to access.

Gilead is digging in its heels, contending that the $1,000/day cost of the 12-week course of treatment is necessary to recoup the costs of research and development. Although this is not the first time that a high-cost drug has provoked this conversation, the breakthrough nature of the treatment adds to the ethical complexity.

Our national drug development industry is based on the free market, so the numbers must create the parameters for ethical decision-making. Gilead’s conventional justification for pricing Sovaldi at $84,000 per course of treatment is the $11 billion that Gilead spent to acquire Pharmasset, the small firm that researched and developed the promising drug. Critics point out that Pharmasset priced the drug at $36,000 per course of treatment and question where the additional $48,000 of value comes from.

$11,000,000,000 divided by $84,000 is equal to 130,952 fully-insured treatments to break even. There are nuances to this calculation, such as the 23.1 percent discount for Medicaid programs, which amounts to 195,743 Medicaid treatment to break even. Quick research finds that one-quarter of chronically-infected Hepatitis C patients in the United States are covered through Medicaid or the prison system. Weighting for this distribution of coverage yields an approximation of 147,149 treatments to break even. Let’s be generous to Gilead and round up to 150,000 treatments to break even.

There are 3.2 million people in the United States chronically infected with Hepatitis C. However, that does not mean that all of them can and should be treated with Sovaldi. Oregon, for instance, has proposed to treat only those patients who are at risk for stage three or four fibrosis, also known as cirrhosis. According to data from the CDC, between 5 and 20 patients per 100 infected with Hepatitis C will develop cirrhosis within 20-30 years – the time for treatment is now or past due given that many people were infected in the 1970s and 1980s.

For the sake of simplicity, let us assume that 10 patients out 100 infected will require the treatment in order to avoid death resulting from complications such as liver cancer or cirrhosis. These treatments will take place within the first few years of Sovaldi’s launch in the United States. That rate equals 320,000 treatments and total revenue of $26.88 billion, yielding Gilead a 144 percent return on investment during the initial sales period in the United States market alone.

This enormous return on investment will happen before international drug sales are measured and before the treatment of new Hepatitis C patients who enter the high risk realm in the United States down the road. Furthermore, the return on investment does not take into account the remaining value of the Pharmasset portfolio of research that Gilead acquired for $11 billion. Although Pharmasset’s focus was Hepatitis C, the firm also worked on treatments for HIV and Hepatitis B.

On the other side of the coin, Gilead may be pricing Sovaldi so high due to the specter of strong competition from firms such as AbbVie and Merck that are preparing to enter the Hepatitis C market. The pricing strategies for these new entrants are still a mystery, but even if Gilead’s market share were only reduced to half of the market described above, the return on investment would be severely constrained. When net present value and ongoing costs of manufacturing, marketing and distribution are factored into the equation, Gilead actually appears quite vulnerable.

My limited view on the situation is this: Gilead will hold the price at $84,000 (for privately insured patients) long enough to recoup the initial investment of $11 billion before reducing the price to contend with the entry of competitor drugs. However, the treatments from each of these pharmaceutical titans will likely continue to run into the thousands of dollars. The industry seems to be shifting away from pricing based on the need to recoup investments and toward pricing based on “value” to the healthcare system in terms of reduced utilization of expensive treatment in the future.

Perhaps I’ll research and write a post about how cost-effectiveness impacts drug pricing and willingness-to-pay from insurers and patients. That would be interesting to explore!

Daniel Pink’s TED Talk on human motivation is eye-opening. He shows that people who are incentivized with rewards to solve problems more quickly – when those problems require creative thinking – actually perform poorly compared with people who are not incentivized for speed and accuracy. Here is the most amazing moment from his talk:

“Last month, just last month, economists at LSE looked at 51 studies of pay-for-performance plans, inside of companies. Here’s what the economists there said: ‘We find that financial incentives can result in a negative impact on overall performance.’” 

“There is a mismatch between what science knows and what business does. […] If we really want high performance on those definitional tasks of the 21st century, the solution is not to do more of the wrong things, to entice people with a sweeter carrot, or threaten them with a sharper stick. We need a whole new approach.

Pink was not discussing the healthcare industry in particular, but his comments reflect spreading concerns about the effectiveness of physician pay-for-performance plans being rolled out by insurers and health systems across the nation. Wrote Andrew M. Ryan and Rachel M. Werner in Harvard Business Review, “…to the extent that health care providers have responded to pay-for-performance programs, that response has been narrowly focused on improving the measures for which they are rewarded.”

The care that clinicians provide for patients is neither simple nor mechanical. Fitting cash rewards that are effective for linear, low-involvement tasks onto multi-dimensional and high-involvement physician decision-making sounds like a disastrous model that will reward narrow diagnosis and treatment at the expense of appropriate treatment that considers a wider range of diagnostic and procedural options.

Let us back up for a moment to consider how pay-for-performance is defined and how these programs are being administered in the current landscape. The Robert Wood Johnson Foundation says that pay for performance “refers to initiatives that provide financial incentives to health care providers to carry out improvements focused on achieving optimal patient outcomes.”

Notable to observe in this definition is that the programs are focused on improvements leading to better outcomes as opposed to just better outcomes. To my knowledge, this focus on process instead of the traditional preference for outcomes is due to the difficulty of proper risk-adjustment that measures “observed over expected” outcomes accurately. Providers who receive lower bonuses in pay-for-outcomes programs would complain that they see sicker patients than other providers see.

Prominent pay-for-performance programs include California Pay for Performance, the Massachusetts-based Alternative Quality Contract, and initiatives from CMS such as Value-Based Purchasing, the Premier Hospital Quality Incentive Demonstration, and the Physician Group Practice Demonstration. For example, an analysis of the Premier Demonstration led by Rachel M. Werner showed that short-term quality improvements were not sustained over the course of the five-year demonstration.

Although studies measuring the impact of pay-for-performance programs on quality are mixed, none of this is to say that providers should not be rewarded for meeting quality or patient satisfaction benchmarks. However, we must also be must be wary of translating clinical uncertainty and intuitive decision-making into rigid, codified process models. Remember the lessons from Daniel Pink described earlier: performance might suffer, along with patient outcomes, if it is still true that healthcare requires creativity and intuition in favor of recipes and cookbooks.

Future pay-for-performance programs should be designed with limited goals and should seek input from affected providers to improve the chances of success. This collaboration will become more important as pay-for-performance programs expand to account for a wider range of healthcare diagnoses and treatments.