Healthcare Industry Concepts Rise from the Grave


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 … Next Page »

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Lisa Suennen is a managing director with GE Ventures and former managing member of the Psilos Group, as well as the co-author of Tech Tonics: Can Passionate Entrepreneurs Heal Healthcare With Technology? and author of the blog Venture Valkyrie. Follow @venturevalkyrie

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4 responses to “Healthcare Industry Concepts Rise from the Grave”

  1. Susan says:

    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?

  2. Hestia says:

    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.