Trend #3

From Sick Care to Well Care

How new business and reimbursement models are needed to drive change

“We have been in the sick care business for 100 years,” says Johnson & Johnson’s Peterson. “But what we really want to be in is the well care business.” 

That goal is now within sight, thanks to the recent flowering of innovation. Spot the first signs of heart disease with smartphone EKG monitors, home blood analyzers, and other mobile diagnostic tools, and the healthcare system (either with live doctors and nurses or intelligent software) can then step in with guidance and encouragement for changes in exercise, diet, and medications. That could dramatically reduce the number of angioplasties or bypass operations.

Similarly, regular remote monitoring of blood glucose, weight, and other parameters can catch the first signs of diabetes, leading to interventions that prevent the disease from progressing—thus slashing the enormous toll the disease takes in patients’ lives and healthcare costs. And quick, inexpensive genome sequencing can identify DNA changes that lead to cancer in its early stage, when treatments are generally much less invasive and more effective.

Much of the required technology already exists. And the evidence from a number of programs shows that people will change their behavior with the right information delivered in the right way. Even something as simple as text messages with tips and encouragement has been effective in helping people quit smoking.

But such a shift to prevention over treatment presents a huge barrier: how will companies make money? Already, there are challenges in getting reimbursement for the costs of the technology and network of doctors needed for remote monitoring and telemedicine. More important, saving thousands of dollars per person in avoided emergency room visits means thousands of dollars less in revenue for the hospitals.

Similarly, preventing even a fraction of major surgeries like bypass operations would cut payments to hospitals and doctors by hundreds of millions of dollars. “The challenge is that a lot of the payment mechanisms don’t value cost reduction,” says Rebecca Cofinas, founder and CEO of AristaMD, a digital health company working to improve specialty referrals.

In theory, insurers could make money by investing in prevention. Small amounts of money spent now would save far more money later because of fewer expensive surgeries or other care in future decades. In practice, however, people switch insurance companies so often that it’s likely another company—not the original insurer that made the prevention investments—would reap the savings. One example: child obesity.

Intervening early can indeed prevent later healthcare problems, bringing major cost savings. But while trying to explain the benefits of helping kids lead healthier lives and lose weight to a large insurance company recently, “I got one of the most upsetting responses,” recalls Joanna Strober, co-founder and CEO of Kurbo Health. “They said: ‘but these kids don’t play sports, so actually they cost us less because they get fewer injuries.’ They are concerned about immediate cost savings rather than the longer term savings of keeping a child healthy. The assumption is that someone else will pay the costs of treating diabetes or other diseases associated with being overweight in the future.”

Solving this incentive problem requires a step that the Centers for Medicare and Medicaid Services (CMS) has already begun to take: changing the reimbursement model from fee-for-service to paying for value. Or more generally, selling healthcare as a service, rather than as a series of separate products.

“They are concerned about immediate cost savings rather than the longer term savings of keeping a child healthy.

Joanna Strober, Co-Founder and Chief Executive Officer of Kurbo Health

What if healthcare were more like a music subscription, for instance? People could pay a flat monthly fee that included unlimited access to most routine services, much like an Apple Music subscription allows unlimited listening. That may offer an incentive to go in for regular preventive care, reducing the chances of serious illnesses later.

These are all exciting ideas, says Johnson & Johnson’s Stoffels: “We have such an opportunity to change the world from the healthcare perspective, but also such a challenge to make it all happen—bringing all of these worlds together and creating impact for the patient.”

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