Archive for the ‘Healthcare as a Business’ Category

The potential for predictive data analysis to decrease patient hospital readmissions   1 comment

One of the recent cost-control measures that Medicare has been experimenting with is a planned penalty for hospital systems with high readmissions. For example, if the reimbursement data a hospital files with Medicare shows a higher 30-day readmission rate for patients it previously treated, also called “bouncebacks,” a percentage deduction will be made from all future Medicare payments to that hospital. The basis of this new rule stems from a belief that hospitals with high readmission rates are the result of inadequate care continuity practices and not the result of skewed populations being served. For this post, I will leave aside the many criticisms (e.g., for indigent care hospitals, for population outliers) of the new policy and focus on the innovation trends for helping individual hospitals lower their readmission rates.

Leaving so soon? Most quality experts believe readmissions could be reduced if high-risk patients remained as inpatients longer. (Courtesy Hospital & Health Networks)

The research group that I currently work with at Emory University’s Department of Surgery and Georgia State University’s Andrew Young School of Policy Studies view excessive readmissions as the first signs of  correctable errors in the discharge process. These errors can be broadly grouped together as systems-based and decision-related.  Systems-based errors are when a patient is not adequately prepared for discharge because of an internal system failure. For example, the process for discharge at a hospital may not properly instruct a patient on the use of home-oxygen prior to discharge. Decision-related errors are when lack of information or external pressure lead to a patient being discharged too early.

Systems-based discharge errors are currently being addressed through traditional quality improvement mechanisms now being applied in the healthcare setting. However, decision-related discharge errors represent an under-explored opportunity for hospitals to reduce their readmission rates. The general thinking is that if physicians can have a more accurate sense of the likelihood of readmission, patients can be discharged at a more appropriate time while not wasting resources by simply holding on to every patient for a longer time period.

Although approaches have varied, the common wisdom to address decision-related discharge errors has been to take advantage of the latest advances in bioinformatics (i.e., healthcare IT) and apply them in real-time to patient discharge decisions. Currently, the most developed commercial solution is Microsoft’s Amalga healthcare information management platform (3M has a similar IT product oriented more toward quality improvement offices). The basic principle of these systems is for algorithm-based analysis of existing patient data to develop and refine predictive tools for use by a physician at the time of discharge of a future patient. For example, as the system collects data on patients who ahad gallbladder surgery it will become increasingly better at predicting which future gallbladder patients will most likely be readmitted. With such information in hand, a surgeon could potentially flag certain patients as high-risk for readmission and manage their discharge more conservatively.

It is important to note that product offerings like Amalga have not been readily adopted by the mainstream healthcare information management community. Critics note that Microsoft has been struggling to establish itself in healthcare IT due to its late entry and lack of a comprehensive product line. Recent moves by Microsoft signal that the company recognizes these vulnerabilities. A 50/50 joint venture called “Caradigm” between Microsoft (an IT and platform leader) and GE Healthcare (an electronic health record industry veteran) aims to capture many of Microsoft’s latest clinical informatics innovations and package them into existing health system platforms.

Currently, these uses of predictive data analysis are in their infancy. To use a term from business innovation theory, we’re in an “era of ferment.” What I find even more interesting than the technical hurdles firms are currently struggling with is the foreseeable problem on the horizon of how we pair technical expertise (healthcare providers) with these predictive tools. This man-machine interface is easy to dismiss, but I believe that successfully addressing it will be the determinant of a successful dominant design.

Disclosure: I currently receive a graduate research stipend from the National Institutes of Health (1RC4AG039071) for work related to surgical patient readmissions and discharge decision-making.

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When industries collide: how Big Pharma and consumer goods firms are redefining food   1 comment

Last week, I had the opportunity to participate in a strategic war game. For those unfamiliar with the term, imagine a business strategy competition where four teams are posed with the same problem. The unique twist of a war game is that each team is assigned the identity of a real entity (e.g,. the management of a health insurance firm) and must justify all the decisions it makes by demonstrating consistency with the existing operations and culture of the real thing. While these can be organized as internal professional development opportunities, this particular war game — entitled “Designer Foods – who will win Big Pharma or consumer goods?” — was an Oxford-Cambridge face-off organized by Fuld & Company, a business intelligence firm.

Let the games begin

The basic premise upon which the four teams’ arguments turned was how scientifically-engineered super-foods would develop in the coming years. Specifically, would the expected explosion in health-oriented food products that enhanced wellness be led more by science-based pharmaceutical firms (e.g., GlaxoSmithKline [or GSK] and Abbott Nutrition) that lack brand recognition with consumers or traditional consumer goods firms (e.g., Nestle Health Science and Danone) who understood consumers but have struggled with regulatory concerns over their prior health claims? The intentional ambiguity of what qualified as a “designer food” and what potential scientific advances were on the horizon made the ensuing presentations and Q&A sessions highly unpredictable and insightful.

The consensus ultimately reached by participants and observers alike was that this gray area between food and medical product is developing unusually fast and not without controversy. Risks abound for a company to find itself either a) not being able to bring consumer-friendly markets to product quickly enough, or b) not being able to justify satisfactorily any health claims to government watchdogs.For example, both GSK and Abbott had substantial history in medical nutrition (e.g., infant formula, adult disease-specific supplements), but neither had successfully grown a brand in a consumer-oriented product segment. Conversely, Nestle was intimately aware of its consumer reputation as too much a “confectionary company,” and Danone was being dragged through courts on multiple continents for health claims it had later amended with its Activia line of digestive yogurt-based products.

The solution put forth by our team (and others) was that the firms gathered could best participate in this new market ecosystem by partnering with complementary firms. For example, we were assigned GSK and strongly advocated the firm formalize new product development with a consumer goods firm (e.g., Nestle, Danone, Unilever) to quickly move into the space. Our argument rested on GSK’s ability to provide “scientific credibility” to consumer goods firms’ health claims. However, not everyone agreed with this strategy. The Danone team returned in a later round to not only reject an offer to partner with a major pharmaceutical company but opted to leave the functional food market (and return to its traditional fresh-dairy products without health claims) after a game twist led to increased regulation of food products making health claims.

It will be interesting to see where the designer food market ultimately goes. One of most important findings I noted during my business research for the competition was the lack of credible products in the space. There are a number of medical food products that will soon hit the market (e.g., chewing gum to reduce blood phosphate levels in kidney failure patients); and there remain a number of essentially rebranded naturally healthy products like yogurt with active cultures. What I was unable to find were products intended for the mass market that made uniquely novel health claims. It is certainly possible that rather than a dominant player establish designer foods as a strategic growth market, the role of high-science, mass-market foods dwindles out for lack of promising development.

Disclosure: I received a share of the prize money awarded to the first place team by Fuld&Company the Oxford-Cambridge War Game simulation. As of June 2012, I am currently engaged with one of the firms above on a short-term consulting project unrelated to designer foods.

What to do about the worldwide healthcare workforce shortage?   Leave a comment

A community health worker registering patients at a rural health fair

A community health worker is seen here registering patients at a rural health fair outside Thomonde, Haiti. Community health workers are critical at serving "last mile" healthcare needs and are typically deeply embedded in communities.

It is widely acknowledged that the developing world is in the midst of a healthcare personnel crisis. Even the citizens of middle-income countries that have begun to reap the rewards of increasing standards of living and the emergence of disposable incomes are finding that local health systems lack the healthcare personnel to provide adequate care. The World Health Organization estimates that  57 countries lack the health care personnel needed to reach health-related Millennium Development Goals. Even small increases in the ratio of healthcare workers to the general population correlate with substantial declines in maternal, infant, and child mortality.

Unfortunately, progress is not being made fast enough, and the primary problem is lack of infrastructure. The consulting firm McKinsey & Co. has modeled current workforce education capabilities and estimates that $33 billion and 300 new medical schools would be needed in sub-Saharan Africa alone to meet the continent’s workforce needs. Radical changes to the existing system of healthcare workforce education are needed if health systems are to meet the demands of a world in need of accessible and quality healthcare.

The current paradigm of health workforce education across much of the world involves a massive financial and social investment into the education of highly-skilled, upper-tier medical professionals that typically requires 5-10 years of higher education. However, in a number of developing countries, substantial healthcare services have been provided with less highly trained mid-level providers.

Pharmacist providing medicine and counseling

Having trained pharmacists available at dispensaries ensures that patients receiving proper counseling on the use of medications.

Changing the workforce shortage starts with changing the paradigm. New models of healthcare workforce education need to be tried that move away from the high-cost, state-run institutions currently being used. One alternative would be to begin offering private, market-based programs that provide a more flexible path to licensure as mid-level providers. These programs could use a modified version of distance education — already popular in the developing world — and take advantage to the expanding technical capabilities of mobile networks in these communities.

The biggest obstacle to experimenting with new workforce education strategies is the regulatory environment. Many governments in the developing world still find it difficult to license mid-level providers given their unusual place in the medical hierarchy and these governments’ lack of experience with such providers. Additionally, these novel education schemes would need to be accredited as well.

Given these regulatory hurdles, a “bottom-up” approach of market creation is unlikely to work for new education models. Hence, the workforce shortage issue is ultimately a policy problem. If one is able to leverage government policymakers, these new models of medical workforce training represent a great opportunity for addressing the biggest, least recognized problem affecting global health today.

Interested in learning more? See this proposal I previously prepared on how such market-based education solutions could be implemented given the risky regulatory environment.

Is the independent medical device industry dead?   4 comments

Jerry Sanders, one of the medical device industry’s top entrepreneurs, visited Saïd Business School last month for a series of masterclasses on his role in the startup industry. Sanders’ firm San Francisco Science is legendary for its ability to identify promising innovatons that big medical device companies will pay handsomely for. Given the firm’s success, it was quite a shock when Sanders acknowledged that SF Science’s activities were being gradually run down because of what he believed to be the decreasing attractiveness of the market for independent medical device developers. To that effect, Sanders has reduced the number of deals he runs per year from greater than twenty to two active deals currently and only takes on new projects that meet an unusually high level of return for the risk involved.

To summarize Sanders’ argument, independent medical device firms — often only inventor, engineer, financial-whiz, and a few support staff — have been disproportionately impacted by the FDA’s increasing conservatism in the approval of new drugs and medical devices. Following the Vioxx recall, regulatory approval has become both more difficult and more expensive. This constellation of problems has made it near- impossible for a small medical device firm with perhaps 2-3 early-stage products to actually become commercially successful on its own. Essentially, the only option available to bring a medical device to market is to quickly identify a consolidated medical device company (e.g., Johnson & Johnson, Covidien) who is interested in adding a particular innovation into an existing product platform. This situation puts independent medical device innovators into a difficult strategic position. Rarely will more than one or two of the diversified device companies have interest in a particular innovation, but the inventor is often looking for a quick outcome that either funds him or her to progress with further development or exit and move on to something else. A desperate seller and a large, powerful buyer allows for the latter to capture much of the value generated from the deal and leaves the entrepreneur with limited upside.

Signostics' Signos Personal Ultrasound Device

Does Signostics even have a chance? (Courtesy: Signostics)

To use a real-world example from an earlier post, has the GE VScan device already beaten other handheld ultrasound competitors like Signostic’s Signos Personal Ultrasound because whatever incremental feature benefit Signostics may have will never allow the firm to compete with such an established player in a highly regulated industry? According to some of the leading lights of this industry, the only option for many of these smaller firms is early exit.

What explains Sanders’ complete exit from this industry is that the difficulties he spoke of have little or no chance of disappearing soon. The contentious state of American politics makes ambitious change at the FDA highly unlikely in the near future (although future rumblings do exist). With the increasing role of corporate influence on future regulation, it is likely that any reforms to the FDA device approval process will likely benefit large diversified device firms as much if not more than they do the smaller independent device makers. During a masterclass, Sanders noted that contrary to conventional wisdom “Big Business” (defined here as large consolidated device makers) often welcomes increased regulatory oversight because such hurdles disproportionately hurt small, new entrants to their established industries.

While incremental improvements to existing medical devices will continue to be churned out by the “majors,” the current business and regulatory environment of the medical device industry make the emergence of new, disruptive innovations far less likely.