Negawatt power  is a theoretical unit of power representing an amount of energy (measured in watts) saved. The energy saved is a direct result of energy conservation or increased energy efficiency. The term was coined by the chief scientist of the Rocky Mountain Institute and environmentalist Amory Lovins in 1989, arguing that utility customers don’t want kilowatt-hours of electricity; they want energy services such as hot showers, cold beer, lit rooms, and spinning shafts, which can come more cheaply if electricity is used more efficiently. Lovins felt an international behavioral change was necessary in order to decrease countries’ dependence on excessive amounts of energy. The concept of a negawatt could influence a behavioral change in consumers by encouraging them to think about the energy that they spend.

The healthcare parallel would be a “Negaclaim™” — i.e., an unnecessary claim avoided. This isn’t about simply denying care. Just as consumers aren’t interested in kilowatt hours, patients aren’t interested in claims — they want health restored and diseases prevented, which can be done more efficiently and effectively. When individuals are fully educated on the trade-offs associated with interventions, they generally choose the less invasive approach. A nice byproduct is that the invasive approaches are frequently more costly and medically unnecessary. The following are a few of many examples of how unnecessary care can be eliminated while improving the patient experience:

• Day-to-day and chronic disease care: One of the key reasons Direct Primary Care (DPC) has proven itself to be the Triple Aim  leader is that a proper primary care relationship involves time spent with patients to explain trade-offs of various medical options.  Without incentives to push for “more,” DPC providers have demonstrated that they can reduce unnecessary utilization by 40-80%. By contrast, “hamster wheel” primary care has effectively turned primary care into 7-minute, drive-by appointments that leave little time to do anything but direct patients toward additional costly items, whether it’s ordering a prescription, test, hospitalization or specialist visit. In many cases, those could be avoided with a robust primary care relationship.
• High Cost Procedures: Leah Binder wrote about what major employers such as Walmart, Loews, Pepsico and others are doing to reduce risk to their employees while also saving money, in What We Can Learn From Walmart: How Our Healthcare System Can Save Lives and Dollars. Employees found that 40% of the transplants that were recommended by local hospitals were deemed medically unnecessary by top physicians at the Mayo Clinic and other nationally renowned facilities. Employees were thrilled to avoid risky (and expensive) procedures. It also sent a great message to employees that their employer valued them enough to send them to the best medical centers in the world for second opinions.
• End of Life: Quality of life is affected dramatically by the end-of-life decisions we make. This was outlined in How Not to Die. The system is oriented to do more even if it is at odds with quality of life. Doctors themselves recognize this when they are the patient, as described in Why Doctors Die Differently. While quality of life is the driving factor for patients and families, there is a second-order benefit that the procedures that reduce quality of life are typically very expensive.

The problem in healthcare has been that providers have incentives to do stuff because of the flawed reimbursement models that dominate our present healthcare system. Respected studies such as from the Institute of Medicine demonstrate that there is more than $750 billion in waste. PwC stated that more than half of healthcare spending is waste. Incentives have driven providers to encourage more interventions, and consumers have been led to believe that more is better even though, in many cases, less is more.

That has added a challenge for health insurers. The general perception is that health insurers reflexively deny claims (sometimes getting in trouble for that). This has resulted in health insurers having the lowest Net Promoter Score of any industry. Consumers have clearly decided that health insurers aren’t doing this for consumer benefit. Fair or not, they have concluded it’s simply for the financial health of the insurer. Clearly, health insurers need a different approach if they want to improve their image and the health of their customers while ensuring their financial viability.

One incentive that has changed revolves around the Medical Loss Ratio (see Aetna’s explanation here).  In contrast to “customer service” reps focused on claims, an investment in patient engagement can have the same or greater effect on reducing claims while qualifying as a healthcare expense. Enter patient engagement.

Patient Engagement Is the Blockbuster Drug of the Century
Leonard Kish made the case that if patient engagement was a drug, it would eclipse all blockbuster drugs before it. Kish cited results of studies showing benefit when patients were successfully engaged in their health.

Compared to those not enrolled in the study, coordinated care “patients have an 88 percent reduced risk of dying of a cardiac-related cause when enrolled within 90 days of a heart attack, compared to those not in the program.” And, clinical care teams reduced overall mortality by 76 percent and cardiac mortality by 73 percent.

Rather than reflexively denying claims and building up a mountain of ill will, insurance companies should invest resources in helping their customers get engaged in their health. Their customers would, in effect, “self-deny” their own claims.

Note that when I describe patient engagement, I’m including family members and caregivers. Did you know that families provide care valued at more than $450 billion per year  – more than our total spending on Medicare! Thus, much of what is outlined below speaks to caregivers (particularly with elderly patients), not just the patient. Having more resources/tools as a caregiver would be welcomed, as most of us have no clinical background and are thrown into a caregiving role virtually overnight.

[Disclosure: My patient relationship management company is one of the organizations providing patient engagement tools to healthcare providers, which is why I'm familiar with these examples.]

Just about every myth has been debunked about how patients of all types supposedly won’t get engaged in their health, whether it’s low-income diabetes patients, native American populations or the elderly. However, providers are largely failing in their efforts at engaging patients as they haven’t had the incentives, tools or training.  Provider-patient communications guru Stephen Wilkins points this out clearly in a few pieces.

Despite less than stellar results that Wilkins highlights, the initial attempts by providers at engaging patients are welcomed just as a muddy puddle of water in the Sahara Desert is welcomed. However, much more can be done.

Catalyzing Patient Engagement in Health Plans’ Best Interests
A wave of new requirements and challenges have crashed on top of providers. Insurers could help if they focus in the right areas and are mindful of the challenges. JAMA recently wrote a piece highlighting one facet of patient engagement — shared decision-making (SDM). Physicians aren’t going to magically take on this challenge without a change.

The brevity of visits constrains the opportunities to address these elements of SDM. Furthermore, clinicians are not adequately trained to facilitate SDM, especially eliciting patient values and preferences for treatment.

[Note: Resources to train clinicians on patient engagement are emerging. One would expect that a host of continuing education courses will emerge. One example is HIMSS (the professional association for healthIT), which released a seminal book on patient engagement.]

In the places where providers have successfully achieved the Triple Aim objectives with challenging patient populations, they have had payment aligned with outcomes. Teams were unleashed, led by doctors, to get creative about how to tackle the challenges. While doctors are vital, they use non-physicians for a substantial part of the interaction with patients. It turns out, for example, that doctors and even nurses can be less effective at effecting behavioral change in patients than non-typical care team members. Rather than being relegated to low-level tasks, medical assistants and health coaches play a vital role in the successful models. Once again, while the goal is an improved health outcome, there is a second-order benefit that being more effective lowers costs by avoiding complications, and the medical assistants and health coaches are generally paid less than doctors and nurses. Unfortunately, in a typical fee-for-service reimbursement model, these types of services typically aren’t compensated despite their impressive results.

Dr. Rob Lamberts described this problem in detail in Washington, We Have a Problem. He summarizes the conflict between people’s desires and healthcare’s flawed reimbursement framework.

This is why, I believe, any system that profits more from people with “problems” than those without is destined to collapse. Our system is opposed to the goal of every person I see: to stay healthy and stay on as few drugs, have as few procedures, and avoid as many doctors (and drug companies) as possible.

Health insurers have implicitly viewed their customers as adversaries by creating a claim-denying framework as the default. The smart health plans will figure out how to harness the consumer goals. This isn’t some fanciful dream as it has been demonstrated (profitably, I might add) by the physician-entrepreneur organizations outlined in The Hot Spotters Sequel: Population Health Heroes.

This isn’t about minor tweaks to a fundamentally flawed model. Rather, as one physician-entrepreneur put it, too many models are “putting wings on cars and calling them airplanes.” Rather, it’s supporting proven models where they have rethought care delivery – here’s how one physician-entrepreneur describes rethinking care delivery from the ground up (video).

While financial rewards are important, most physicians are not motivated primarily by money but by autonomy, mastery and purpose. In the successful models, the physician-entrepreneurs created their own autonomy and recognized that the focus of their mastery and purpose had to fundamentally shift. A nice byproduct was the growth of “Negaclaims” as the educated and empowered patients better understood the significant risks of overtreatment and errors.

Too frequently, health plans have tried to micromanage clinical processes. With proper financial incentives combined with a move toward enabling clinical teams to become masters at driving patient engagement, the health plan is much more likely to achieve the desired outcomes. As the Stephen Wilkins pieces referenced above illustrate, clinicians haven’t been trained or rewarded directly or indirectly for encouraging patient engagement. It should be no surprise that most haven’t achieved mastery in helping their patients achieve patient engagement. Instead, the language of medicine has been punitive and demeaning, talking about “non-compliant” patients as though they were petulant criminals. That doesn’t further the partnership between patients and their care teams, which is necessary for optimal outcomes.

Previously, I outlined the strong business case for patient engagement. Those who have understood that business case have moved on to practice the 7 habits of highly patient-centric providers. It’s clear that past efforts by health plans to reduce claims have fallen short and created ill will and sub-optimal health outcomes. Putting the patient/member at the center need not be a marketing gimmick. Rather, it’s central to the notion of “Negaclaims” and to a winning strategy in the fee-for-value era.

As a swarm of small innovations led to the transformation of farming, so too is a rapidly building wave of innovative new care and payment models leading to similar breakthroughs in healthcare. The winners in the next epoch of healthcare will be those that have agility in contrast to the lumbering nature of traditional healthcare systems.

In old line models, attempting a new care or payment model meant long planning and development cycles. The cost and complexity of testing new models prevent many from being tried. Demonstrating how healthcare hasn't experienced the benefits of modern, cloud-based software, the leading HealthIT vendor is known to charge $100 million and up for its software and it takes a year or two to start realizing any benefit. [See also Health Systems Spending Billions to Prepare for the Last Battle]

Iterative Testing And Refinement Will Prevail
There's a striking parallel between the transformation of healthcare and what happened with advertising campaigns as a result of traditional media getting disrupted by digital media.

Once upon a time, because the stakes were high with large ad campaigns, 90% of the effort around an ad campaign was in the planning/building of a campaign — i.e., creating ads, focus grouping creative/promotions, planning where to place ads, etc. When ads were created and it was decided where to run the ads, marketers sat back and watched to see how it would play out with little ability to change the course of a campaign.

Today, as little as 20% of the marketing effort is done upfront before putting elements to the test. The Internet is much more effective at testing offers and ad creative than a contrived focus group. Likewise, smart marketers can tap very sophisticated tools to optimize their ad spending so that the actual place ads run can be radically different than what an ad director may have thought initally.

I'd expect a similar transition to happen in healthcare. As Dr. Farzad Mostashari (National Coordinator for Health IT) said, "what's transformative isn't just harvesting & analyzing Big Data — it's instrumenting what we do, testing predictions, A/B trials..."

It's well understood that the mega healthIT systems (e.g., a $900M implementation was announced not long ago in the Northeast) take a couple years to implement. The reason for the long implementation, in part, is due to all of the decisions that have to be made regarding customization. The stakes are high as it's only logical to do system-wide changes when 100's of millions are at stake, leading some healthcare providers to have weak operating results as a result of healthIT costs as Zina Moukheiber reported. The market leader is noted for its customizability. However, once customized, it's also noted for its rigidity. That is, if a workflow changes, it's a major project to change the supporting healthIT to support the new workflow.

Where processes are well understood and predictable (e.g., surgeries), applying a manufacturing mindset is very appropriate. It's akin to setting up an assembly line at an auto plant at great expense. Once that is done, it can be used for a long period of time and is worth the upfront investment. The danger comes in when it comes to chronic disease management (where more than 75% of healthcare dollars are spent). With accountable models and recognition that the patient or family members have the greatest impact on outcomes (i.e., not healthcare professionals), setting up a rigid system is a recipe for disaster.

If there's one thing we know for certain, it's going to take iteration for many years to hone how to tackle chronic conditions as it involves complexity of the variety humans present to the healthcare system. In an agile system that has modern software economics (i.e., dramatically lower cost), it's feasible to do smaller scale tests. If they prove successful, they can be expanded. Listening to a recent podcast from the Institute for Healthcare Improvement on reducing readmissions echo'ed this point — i.e., addressing an issue like this will take a series of changes vs. one silver bullet.

The rigid mega healthIT systems are a vestige of the "do more, bill more" model of reimbursement, particularly given that healthcare is a supply-driven market (e.g., MDs who own a stake in imaging equipment order scans at three times the rate of MDs who don't). Spending nine figures doesn't sound as bad when you have capital projects planned in excess of $1 Billion. Perhaps we should refer to the legacy model as the "build more, do more, bill more" model. Any health analyst will tell you that the cure for healthcare's hyperinflation is NOT building more healthcare facilities. It would be as if a fire department argued that the way to solve a wave of structural fires was to buy more fire fighting equipment. Indeed, that might help, however there's a much more cost-effective approach such as having buildings inspected for fire prevention capabilities.

In their book, The Innovator's Prescription, Clayton Christensen and Dr. Jason Hwang point out how applying technology into old business models has only raised costs. Thus, buying new technology isn't a silver bullet if it's put into an old business model. Rather, the new technologies need to go hand-in-hand with agile, new processes. The organizations who optimize their approaches for a more agile model will prevail.

Images are courtesy of Jason Hwang, M.D., M.B.A. Co-author of The Innovator's Prescription.

Dramatic Gains From New Care And Payment Models
Innovators such as Iora Health, WhiteGlove Health and Qliance rethought the care delivery and payment models from the ground up. Their results have been impressive. For example, Qliance has Net Promoter Scores higher than Google or Apple, while reducing the direct costs of healthcare (i.e., their service coupled with a high deductible wrap-around policy) 20-40%. More impressively, they have reduced utilization of the most expensive downstream costs (surgical, specialist and emergency visits) 40-80%. Iora has reported similar outcomes with some of the toughest patient populations out there. [See "David Clause" in Obamacare Ready to Slay the Healthcare Cost Beast for more on the outcomes Iora and Qliance have reported.]

The next wave of innovators are taking advantage of second-mover advantage as the wave of healthtech startups provide them off-the-shelf software that is an order of magnitude less investment than the first wave of innovators. It's a couple orders of magnitude less expensive than legacy healthIT. More importantly for the innovators is the speed that they can not only stand up the new technology but also easily iterate based on real world experience. Rather than months or years, it's hours or days. This is a key component of IT agility. They also make the most of investment others make rather than be threatened by them. A simple example: WebMD is used by over 100M consumers per month. Clinicians can curate information that they think will be useful for patients from WebMD and others (e.g., medical societies) who've made large investments in consumer-friendly content. Healthcare can no longer afford to reinvent the wheel. [See Khan Academy Approach to Solve Wicked Problem in Healthcare for examples of new approaches taken.]

Change is already happening faster than many expected. Oliver Wyman's recent paper highlighted the rapidity of the market shift in The ACO Surprise (PDF). When I was presenting to the Pioneer ACOs over the summer (see summary here), it was already apparent to the pioneering organizations that their new models required new systems. They went on to state they didn't expect to get anything for the new requirements from their traditional healthIT suppliers for at least the next two years. Meanwhile, the market shift is taking place much quicker than that.

New York Digital Health Accelerator Is A Model To Emulate
Zina Moukheiber highlighted a program that is a key plank of perhaps the largest effort in the country to reinvent healthcare delivery and payment.

The New York Health Home program was designed to make obsolete the traditional uncoordinated and unaccountable "system" that has cared for Medicaid patients in New York. Managing a $50B budget gives Dr. Nirav Shah (NY's state Commissioner of Health) the clout to attract hundreds of companies that want to enable the reinvention of healthcare. Dr. Shah and other leaders in New York's public and private sector recognized that with an entirely new set of objectives a new set of technology requirements naturally emanates from that. Through the New York Digital Health Accelerator (NYDHA), they are supporting the growth of agile startups to meet these new requirements. [Disclosure: My company was one of the 8 companies selected for the accelerator program.] Just two months into the program, there are pilots and deployments with the accelerator companies underway in the leading healthcare providers in New York.

The graphic below depicts the transition from the slide rule to the mainframe and then back out to mobile devices. Dr. Shah's comments in the video above echo'ed the shift from an old "mainframe" method of healthcare delivery to a more distributed "smartphone" model.

New business models require new technology. As David Whitlinger (head of the New York eHealth Collaborative) highlighted in the video above, his organization has built a state health information network but what it needs are the applications riding on top of that network to realize its full value. The startups in the NYDHA will be the first to get access to the statewide network due to their agility in taking advantage of the state's health information exchange.

However, the DIY Health Reform movement has recognized that the flawed fee-for-service reimbursement model has been responsible for healthcare's hyperinflation. Some of the most interesting healthcare provider startups such as MedLion, National Surgery Network, and One Medical Group are using information technology (IT) rather than expensive equipment/facilities to differentiate themselves and affordably deliver superior health outcomes.

In an earlier article — Healthcare Disruption: Pharma 3.0 Will Drive Shift from Life Science to HealthTech Investing — I discussed how Health Information Technology has primarily been applied to administrative functions such as claims processing rather than core clinical functions such as decision support. In contrast, today's innovative healthcare providers recognize the changing dynamic of healthcare requires a fundamental rethink of the customer experience as has happened in many, many other industries.

With one third of the workforce being permanent freelancers, contractors, consultants and entrepreneurs, individuals are compelled to directly buy healthcare rather than rely on their employer as they have in the past. The percentage of people directly buying their own healthcare will approach 50% as more employers opt out of providing health benefits as they get priced out (most have already reduced the percentage of the health premium they cover). Thus, consumerism is beginning to pervade healthcare like never before. In response, the aesthetic of providers' websites matters much more. For example, the website of Benchmark Capital-backed One Medical Group would make Philippe Starck proud (see screenshot below).

Of course, it needs to go beyond aesthetically pleasing websites. Whereas technology has historically brought incremental administrative efficiency in healthcare, organizations such as Qliance and OneMedical have utilized technology for radical transformation. It's no coincidence that they are backed by the founders of Amazon, aQuantive, Dell, Expedia, and venture firms such as Benchmark — all organizations that used technology to disrupt entire industries. Qliance evaluated 240 different U.S. based electronic medical systems before rejecting them as too billing centric rather than patient and health outcomes focused. Instead Qliance is creating competitive advantage by custom developing their software systems using off-the-shelf and custom-built software.

The aforementioned organizations are all disruptive startups bringing dramatically lower costs and better outcomes. What's going on at the large health system level where there's greater complexity including legacy processes and systems? Let's look at one example from the heart of Silicon Valley — Stanford Hospital & Clinics.

This was our opportunity to come up with ideal ways of working, not simply to replicate our very poor processes when we put in the new systems — because that's just a really expensive copy machine.

Stanford Hospital & Clinics is implementing a traditional health Information Technology system from one of the leading Health IT vendors — Epic Systems. Epic is appropriately named as, by all accounts, the implementations and cost are also epic. All the Epic projects I've heard about are eight and nine figures for the cost of the software and implementation. The scale of projects sound similar to the early days of Customer Relationship Management where it could only be implemented by very large organizations. The market leader for Customer Relationship Management was Siebel and those projects regularly ran seven to nine figures (reportedly 10 figures in the case of Epic's Kaiser implementation) which is obviously out of reach for small and medium sized organizations.

Disruptive pricing didn't come from Oracle or other large client-server vendors to extend this important category into smaller organizations. Instead it came from cloud-based Salesforce.com dramatically bringing costs down. Perhaps more interestingly, Salesforce created an open ecosystem inviting 3rd party developers to address the wide array of customer requirements for particular job functions and industries.

Healthcare has a similar diversity of conditions and communities that will necessitate a 3rd party ecosystem. I would predict that as the closed nature of legacy client-server Customer Relationship Management systems created an opportunity for Salesforce, the legacy client-server Health IT vendor systems are similarly closed and will create opportunities for modern, open architectures from a new generation of tech startups.

By definition, the legacy systems have been optimized around the flawed fee-for-service model that pervades healthcare today. In contrast, the disruptive new care and payment models that are exploding around the country require a new ecosystem of technology platforms. Out of necessity, the new healthcare delivery models have demanded custom built software, but this should change as those models reach critical mass. A market for off-the-shelf software for the next generation of HealthTech will develop.

A pharma executive explained to me the need to focus more on health technology. "Based on the 'patent cliff' in healthcare and the need for continued research and development, promotional budgets are becoming tighter; technology offers a less expensive way of interacting with our customers. Simultaneously, while many physician offices have been reticent to adopt technology, the incentives being put before them are now changing their perspective on technology ... pharma companies have an opportunity to take advantage of this." She went on to explain how that "no see docs" (i.e., physicians generally barring pharma reps from meeting with them) may be more open to new technologies delivered through reps that can help achieve better outcomes.

The scale of the plans for new business models emerging from major pharma, health product/device and health plan organizations will have these previously complementary organizations increasingly competing with each other. Perhaps more interestingly, they will begin competing with the very healthcare providers they have offered their products/services to. The notion of coopetition is familiar to those in tech but will likely become a term that is no longer foreign in healthcare. Just as we've seen Media become more like Merchants, I'd expect we'll see healthcare suppliers acting more like providers. We've already seen healthcare providers become health plans.

Newspapers provide a cautionary tale for healthcare providers. It was the non-obvious competitors that have cratered the newspaper businesses. In this related article, I draw parallels between the behaviors I observe today with health systems and the behavior of newspaper companies in the second half of the 90′s. Consider that the byproduct of Denmark's shift to a focus on outcomes over the last couple decades has resulted in half of their hospitals closing as they are simply not needed anymore.

Healthcare providers must reinvent themselves or they'll meet a similar fate to the Denmark hospitals that are now closed. A key part of their reinvention will be enabled by a new generation of technology solutions.

Primary care physicians consistently state that 2/3 of patient office visits could be done remotely via phone or email, but they are disincented from doing this with the convoluted reimbursement models of present day health insurance. If doctors don't see the whites of your eyes, they won't get reimbursed so the result is people taking half their day to get to/from their doctor's office, sit in a waiting room, wait in the exam room and then get 7 minutes with their physician not to mention dealing with all the billing hassles.

Instead, modern day Marcus Welbys are available via electronic means. For example, one physician operating in this new model shared how he hasn't seen a patient with Shingles in five years. His patients simply take a picture of their symptoms with their smartphone and email it to him to verify that they have Shingles. In a few minutes, he can order a prescription and everyone has saved time and money rather than waiting days to get into their doctor. After all, what location is more convenient than one's home?

Some Direct Primary Care providers such as WhiteGlove Health and Organic Medicine Now take it a step further and make house calls that harken back to the days of your family doctor stopping by your house just a few decades ago. Beyond that, they provide simple, yet sophisticated, technology tools for further patient convenience and savings that allow them to cut administrative overhead by 80% compared to a typical medical practice. Rather than patients filling out mountains of paperwork for what seems like the hundredth time, all patient-provider interactions can be done at the patients' convenience whether it's filling out forms, scheduling appointments or requesting medication refills.

Marcus Welby wouldn't recognize mainstream medicine today. In Welby's time, we didn't insure the equivalent of a car tune-up but we do that in most health plans today. Nor did we have insurance middlemen who add no value sitting in between you and your family doctor. Two related items should be done to save individuals, businesses and government a huge sum of money on healthcare.

Make Primary Care More Accessible
IBM and other large employers have studied healthcare costs around the world. IBM alone spends roughly $2 billion per year on healthcare. The findings of their studies came to a surprisingly simple conclusion where countries were getting the best bang for the buck from their healthcare spend: More primary care access led to a healthier population which, in turn, led to less money spent. MedLion, profiled as The Most Important Organization in Silicon Valley No One Has Heard About, has shown they can deliver high quality care with prices that are affordable for low-income workers. This model is referred to as Direct Primary Care (DPC) or Direct Patient Centered Medical Homes (D-PCMH).

As we've seen in Massachusetts, health reform exacerbated a shortage of primary care physicians. Even before that, half of primary care physicians said they would leave medicine if they could. The biggest reason was not being able to practice medicine the way they were trained as a result of insurance-driven productivity goals. A secondary reason was monetary — primary care physicians are the lowest paid physicians. A nice byproduct of Direct Primary Care practices for the primary care physicians is they can practice medicine the way they were trained and by cutting out the 40% "insurance bureaucracy tax" they are taking home significantly more income.

Imagine if we scaled models such as MedLion's and other DPC pioneers such as Qliance nationally. It would be a boon for primary care providers who want to operate free of insurance, as it validates a model that has proven to yield better health outcomes while lowering costs dramatically. Fortunately, one of the least known elements of the new health law may be the most important. It's the Direct Primary Care provision allowing the separation of insurance from day-to-day healthcare to save 40% off the cost of primary care. See Health Insurance's Bunker Buster for more. Showing the bipartisan support for this element of the health reform, a GOP Representative who fought against reform and is an MD has proposed a bill to utilize the Direct Primary Care model with Medicare recipients. This leads into the next item.

Demand A Standard Wrap-Around Insurance Policy
For Direct Primary Care (DPC) to work best, it is paired with a wrap-around insurance policy to cover non-primary care items. Widespread use of the Direct Primary Care model would give insurance companies something that can allow them to underwrite a wrap-around policy to complement what is being delivered via the Direct Primary Care package. This would accelerate the development of independent Direct Primary Care practices as long as they offered the same baseline services (they are free to add things above that to differentiate their service). National scale is critical, as insurance companies can't underwrite for something that is wildly variant. This gets health insurance back to its strength and what insurance is so good for — rare stuff you hope never happens versus insuring the equivalent of a car tune-up.

In summary, a couple simple steps can save hundreds of billions and save primary care in this country which many view as a dying profession. The only downside to this plan is some healthcare providers are resistant to change, but this is a small price to pay for reviving the economy and putting the country on a path where healthcare costs won't bankrupt the nation.

To be fair, there were some digital investments made, including hiring top-drawer talent. However, over time, the digital teams were marginalized and ultimately the talent that had the capability to transform these organizations left for opportunities where their hands weren't tied. In other words, the commitment wasn't deep enough to effect a true transformation.

Now consider healthcare in the U.S.: There's a clear understanding that the industry must shift its focus towards outcomes from "do more, bill more" orientation. If ever there was an industry that should understand that it's more effective to address underlying conditions than treating the symptom, it should be healthcare. Or, as a famous early newspaper publisher stated, "an ounce of prevention is worth a pound of cure." Prevention-focused countries such as Denmark have dramatically lowered the need for hospitals. Once at 155 hospitals, they are at less than a third of that today. I find this easily-known fact is news to healthcare providers I speak with.

Whether they don't know these facts or are ignoring them, the fact is there are incredibly large capital investment projects on the docket for many health systems. Since 62% of hospitals are mission-based, non-profit organizations, it's astonishing that they are more focused on capital projects than addressing the overall health of their communities. No one has made the case, for instance, that chronic conditions that consume 75% of the $2.6 trillion tab in the U.S. is best addressed by building more buildings. Some make the case that there's a growing healthcare real estate bubble while costs of chronic conditions continue to expand.

In healthcare, it's as though we are building better firehouses and investing in more firefighting equipment while we do the equivalent of leaving oily rags around, letting kids play with fireworks on dry hillsides, and building structures with one exit. We may have the best "firefighting" tools and talent in the world but we'd be much better off if we prevented those "fires" from starting in the first place.

Dr. Ted Epperly recently finished his term as the head of the American Academy of Family Physicians and runs the Family Medicine Residency of Idaho program, which includes 80 physicians serving over 20,000 patients. On a tour of his facility, he stopped to comment on the scene in the waiting room of their biggest clinic, something that's typical of the many doctor's office waiting rooms we've all experienced. He described the scene as a failure compared to the vision of what he's planning on implementing.

In Epperly's vision, he describes a dashboard that pulls from the registry of all of their patients. Rather than reactively waiting for someone to present himself or herself in the clinic, he envisions a system that proactively is monitoring the array of conditions his patient population experiences. For example, it will ensure diabetics are having regular foot and eye exams and blood glucose levels are being consistently monitored. If someone hasn't scheduled an appointment already, it will proactively reach out to him or her rather than waiting for some health crisis.

Epperly has been a leading proponent of a concept in healthcare called the Patient-Centered Medical Home (PCMH), akin to the philosophy that Denmark has adopted so successfully. In many respects, the Patient-Centered Medical Home is simply an updated version of the Marcus Welby model of medicine with more of a team-based model coupled with technology.

While some may have noticed that there are several Patient-Centered Medical Home pilots that were included in the federal health reform law, there's a little-noticed facet of the law the CTO for the United States, Aneesh Chopra, points out in this video segment. That is, if the payment models that reward positive health outcomes over activity proves out in the eyes of the Actuary for Medicare and Medicaid program to be cost savings, there is carte blanche authority to expand these models broadly to entire Medicare population. This could rapidly expand the deployment of the Patient-Centered Medical Home concept and accelerate the need for the associated HealthTech. The video below explains this in more detail and explicitly speaks to the opportunity for startups.

Another healthcare provider plans to send home patients with an array of personal biometric devices. The output of these devices will be a more complete view of an individual's health. There's an explosion of personal biometric devices ranging from personal blood pressure monitors to some being built into clothing and widely deployed in places such as Denmark.

For the cost of a small wing of one of these new Taj Mahal structures, healthcare providers could have a team of innovators working on scenarios such as those described above and many others. Those that avoid sticking to the old tried and true methods of differentiation that worked in the past will be light years ahead as the transformation of healthcare takes hold. If they don't, employers who are paying the bulk of healthcare costs are taking matters into their own hands and building their own onsite clinics.

Whether the innovation comes from within or from non-obvious competition such as employers or pharma companies, there's a distinct advantage in having a blank slate where cost effective systems and models of delivering care can be delivered. For the providers, they'd be well advised to develop their own innovation teams unfettered by the current model so they can develop models that will ensure the provider's long-term survival.

Employers fed up with the annual "get less for more" health story when they get annual health plan updates have taken matters into their own hands. This has created one of the hottest sectors of the economy — onsite clinic providers. These are companies such as Concentra and CareHere providing corporations with primary care onsite at employer workplaces. Each of the onsite clinic provider CEOs I have spoken with have shared that their business is growing 100 percent annually. Reportedly, 20 percent of employers with over 1000 employees are implementing onsite clinic programs.

Faced with healthcare's hyperinflation which is hurting their competitiveness, employers have been trying an array of solutions. Led by IBM's study of their $2 billion annual health expenditure, the overwhelming evidence comes to a surprisingly simple conclusion: more primary care = healthier population = less money spent. Ben Franklin was right. An ounce of prevention is worth a pound of cure. Time and again, it's been shown that proactive primary care can reduce the most expensive downstream healthcare costs — surgeries, scans, emergency department and specialist visits — by 40-80 percent. Rather than waiting for small issues to become full-blown medical incidents, proactive primary care can make a big difference.

As a board member of the Healthcare Delivery Innovation Alliance, I have had the privilege of talking with the disruptive innovators. They're proving that employers don't have to endure the "get less for more" program anymore. Larger employers are finding onsite clinics have the same cost and health benefits as Direct Primary Care models, but it goes beyond just direct costs.

Where Do The Savings Come From?
In the U.S., we tackle healthcare in a way that would be the equivalent of having the best firefighters and firefighting equipment in the world and then we would pay firefighters more if there were more fires. Thus, you might find firefighters implicitly encouraging kids to play with fireworks on dry hillsides and allow buildings to be built with only one exit and no sprinklers. Consider that many hospitals are stuck measuring their occupancy like a hotel. That is, higher occupancy is perceived positively similar to the fictional firefighter hoping for more fires so they get paid more. Instead, the key to slaying the healthcare cost beast is to view expensive interventions such as hospitalizations (other than child birth) as a failure rather than something to be optimized. In the "do more, bill more" model we've been afflicted with, we get exactly what we reward. That is, full blown medical conflagrations that are lucrative for healthcare providers but devastating to healthcare budgets that we all ultimately pay for directly or indirectly.

One other benefit employers realize with onsite clinics is that their employees aren't wasting half a day going to a doctor's appointment. Not only is the clinic nearby, but the need to even go to the clinic is reduced. In the flawed fee-for-service model, a doctor can only be paid if you visit their clinic. Not surprisingly, many doctors will optimize for the patient to come to their office as frequently as possible as it allows for more billing events. In contrast, Direct Primary Care and onsite primary care physicians share the fact that as much as 2/3 of clinic visits don't require a face-to-face encounter. Rather, phone or electronic communication is sufficient. For example, one doctor shared how he hasn't seen a patient with Shingles in 5 years. These patients simply take a photo with their camera phone, email it to him and he can easily tell it is Shingles. He can then call in a prescription, saving everyone time and money.

Fortunately, onsite clinic providers aren't incentivized by convoluted health reimbursement models that reward the most expensive care possible. Both Direct Primary Care and onsite clinic models are rewarded for value and outcomes, rather than mere activity. Further, the smartest of these recognize who the most important member of the care team is — the individual. After all, the individual is the only person who goes to 100 percent of their appointments and the 99+ percent of their life spent away from the clinic is when they return to or maintain their health. Having implemented HealthIT systems in dozens of health systems, it's evident from a systems perspective that the patient is treated as a vessel to attach billing codes to rather than an equal member of the care team. It should be no surprise that legacy HealthIT is optimized around the flawed model, rather than the new models. Entire new categories of software emerge as healthcare providers recognize the most important member of the care team has largely been ignored.

The organizations that treat the individual as a member of the care team practice a "Collaborative Care" model that is making a real dent in healthcare costs. For the more difficult issues, such as obesity and substance abuse, the Collaborative Care model extends to other care providers. In other words, not only is the patient-provider connection important, but the provider-provider connection is also critical. For example, after a few years of trying various approaches, a large media company's onsite provider assigned health coaches to their employees and had rewards and penalties for following care plans. The coaches coordinate between the primary care physician (who is also rewarded for individuals sticking to care plans) and the individual to great effect. There's the dual win of a healthier employee and less money spent. Emerging technology solutions are making this much easier, so the entire care team (individual, coach and doctor) are in sync to achieve the health goal.

In summary, the most successful onsite providers are rewarded for being patient-centered, accountable and coordinated. In contrast, the flawed "do more, bill more" reimbursement model that is still pervasive implicitly rewards a provider-centric, unaccountable (e.g., it's good news when a sick patient comes back more frequently) and uncoordinated model. For traditional healthcare providers, they should heed the warning that providers are making newspaper industry mistakes. As more employers learn of the great benefits from a well-executed onsite clinic model, they will continue this Do it Yourself Health Reform trend that is happening one employer at a time.