Improve Healthcare Quality and Reduce Costs by Aligning Incentives

By Daniel R. Matlis

During the last Microsoft Health and Life-Science Conference, I had the privilege to participate in an enlightening discussion with stakeholders (or special interest groups, depending or the news network you watch) in Healthcare Reform.

The panel represented a board spectrum of constituents and included (in alphabetical order):

  • Jeff Brown – Director IT, Partners Healthcare
  • Deighton Liverpool – Director,  IT , American Association for Cancer Research
  • Okey Okuzu – Director –  US Managed Markets Strategy & Innovation, Novartis Pharmaceuticals Corporation
  • Arman Ozgun – Managing Partner, Netsoft USA
  • Chad Pomeroy – VP Innovation & eBusiness, WellPoint

The session provided ample opportunity to discuss and highlight key challenges and opportunities of the US healthcare system.

In my opinion, the underlying problem with the current Healthcare system is misaligned incentives.  That is, each stakeholder is incentivized and compensated based on different and often conflicting benchmarks.

For example:

  • Research institutions seek public and private funding to conduct focused research
  • Life-Science companies seek to recoup and profit for the high risks and costs associated with bringing new products to market
  • Health Insurers seek to manage and lower healthcare costs and make profit
  • Healthcare providers seek to improve patient outcomes and reduce costs while minimizing litigation risks
  • Technology companies offer enabling platform to automate and “smart-up”  healthcare

What if we found a way to align incentives and gain synergies from all these stakeholders? 

Imagine, if you would, a model where each stakeholder is a link in the healthcare chain, and gets benefits from others in the ecosystem.

In this environment:

  • Research institutions could partner with Life-Science companies early in the discovery process and feed new compounds to Pharma R&D. 
  • Another benefit is looking blockbusters from the trash bin.  In other words finding new uses for compounds that did not show promise with the initial target (Rogaine and Viagra were side effects)
  • Hospitals could provide de-personalized patient information to build better models toward the road to virtual clinical trials and targeted “personalized medicine”
  • Insurance companies could lower costs and make better treatment decisions based on appropriate diagnostic tools and “pay for outcome” model (Geisinger already offers Heart Surgery warranty which has lowered costs as well as 30-day readmission rate 44%) 

These do not even take into considerations the benefits associated with bringing medical records to the electronic age or applying Lean and Six Sigma techniques to a very inefficient Healthcare model.

According to a recent reports, patients in the American Healthcare system received the recommended care only 54.9% of the time. By contrast, your car, phone and PC are built to meet requirements 99.997%. 

In my opinion, aligning incentives for healthcare stakeholder would yield lower healthcare costs and improved patient outcomes.

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