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Curing Patients While Lowering Costs. A Matter of Transparency and Partnership.

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McCombs TODAY is highlighting research that will be discussed at the Innovation in Health Care Delivery Systems Symposium, including this perspective from Andrew Whinston and Lizhen Xu from McCombs, along with Jianqing Chen of the University of Calgary, and Michael Yuan of Ringful Health.

Four researchers have turned the health care model on its head in order to identify ways to make medical treatment more effective and efficient. Is their approach, which would require significant behavior changes Professor Andrew Whinstonon the part of both patients and health care providers, feasible? Professor Andrew Whinston believes the time is right to find out. "We already see changes in the wind for the U.S. health care ecosystem," he claims. "The motivations to change are strong on all sides of the equation."

Whinston, Xu, Chen and Yuan began by looking at two fundamental defects in the patient/provider relationship that prevent the efficient allocation of health care resources.

1. Neither patients nor providers have enough information about each other.

Due to privacy issues, hospitals and doctors generally lack the full picture of a patient's health history and living habits required to prescribe the most appropriate treatment. On the other hand, patients lack the information they need about the expertise of hospitals and doctors to choose the best possible option.

2. Neither patients nor providers are motivated to give 100% effort towards the mutual goal of an efficient cure.

This is what business professors call a moral hazard. A hospital or doctor generally gets paid regardless of the efficiency of the treatment, and a patient does not have a direct financial stake in following the prescribed treatment exactly as ordered. Neither party can guarantee the other is doing everything possible to reach a cost-efficient cure.

Xu characterizes these two defects as classic causes for market failure, which is exactly where the U.S. health care market is today. "From a business school perspective, we are interested in the market aspects of health care delivery," he explained. "Can we circumvent the effect of information incompleteness and moral hazard, by restructuring the way the market operates, using economic incentives and new technologies?"

A new partnership model for health care.

The team proposes a computerized medical history data base that is shared among well qualified hospitals and doctors. Before seeing a doctor, a patient submits a request to the central system where hospitals and doctors can assess the patient's medical history and symptoms. Remote diagnostic tools might also be used. See Denmark Leads the Way in Digital Care (NY Times) for an example of this technology.

Yuan suggests that the most logical place for managing health records would be Health Information Exchanges (HIEs). "Currently most HIEs are supported by government grants," he said, "but they need to find a sustainable business model to operate on their own in the future. Our model would provide a revenue stream for HIEs, allowing them to operate privately, rather than through government managed systems."

The next step is to replace the traditional health care patient/provider relationship with a new method of choosing and paying for treatment. Here's where their proposal throws traditional notions of health care out the window:

  • Step One: A patient submits a request for treatment that would go to several potential health care providers.
  • Step Two: After reviewing the patient's health history, different health care providers would recommend proposals for treatment plans, with cost schedules. They would in effect be offering a contingent contract--if the patient isn't fully cured, part of the payment would be refunded to the patient.
  • Step Three: Patients would choose the plan that offers the most suitable option for cost, outcome and compliance requirements.

Patient compliance would be a big issue. After all, if a hospital is going to be financially responsible for curing a patient, the patient has to be held responsible for carefully following the treatment plan. Whinston says patient compliance could be monitored through certain wireless devices.

"While it may sound like science fiction, or perhaps Big Brother, many studies have shown that instant feedback and social support is very important to patients being able to follow treatment paths," he explained. "There are a few startup companies that have made progress in this space, including Austin-based Ringful Health, who will be represented at our seminar by Dr. Michael Yan, their CEO."

Innovations in the making, a pilot program ahead?

Whinston rejects the notion that these proposals are too difficult to implement. He points out that insurers have already started providing incentives for patients to be complaint with healthy life styles, including progressive employers and health plans such as Whole Foods. For instance, United Health and YMCA have just announced a partnership to help Type 2 Diabetes patients stay faithful to a more healthy life style.

"Progressive providers like the Mayo Clinic have a long tradition of evaluating patients before admitting them for treatment," Yuan added. "The idea is they will only treat patients for whom significant outcome is attainable. This is very much in line with the research we propose." He believes the new health care bill will significantly change Medicare reimbursement for health care providers, encouraging them to adopt outcome-based approaches.

"This can begin with a project focused on a single disease condition such as diabetes or asthma," Whinston concluded. "We would like a pilot program with a local health care provider to show the potential of an outcome-based delivery system. Our country needs a system based on the right market principles, eliminating incomplete information and moral hazard. Right now, we don't have that in the U.S. and the results have been disastrous."


#1 So the proposal is for

So the proposal is for everyone to put out their entire medical history just like our credit rating? Further, it is suggested that healthcare providers follow the Mayo Clinic model of admitting only those patients for whom significant outcome is attainable. Basically, that is what you have in the UK, and it stinks. While social support and instant feedback is important, it needs to come from your friends and family and those who care about you (including your personal physician), not from some government or insurance agency. Are we going to implant medical history chips in all our children? That's a wireless device.

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