It’s time we got honest about healthcare innovation

Like many healthcare leaders, I’m preparing to descend on Las Vegas next week for HLTH USA . There will be lights. There will be talks by Howie Mandel, Andy Roddick, Chelsea Clinton, Arianna Huffington, and Nick Jonas. There will be a performance by Ashanti and Fat Joe. There will almost certainly be professional massages and a puppy petting area. And there will be an interminable wave of hype about how our innovation is changing healthcare for the better.

Coincidentally, yesterday the Washington Post published a feature story on declining life expectancy in the US. I encourage you to read it. During the 20 years I’ve worked in healthcare, deaths among working age adults from diabetes have increased by a third. Deaths from liver disease have increased by half. Deaths from hypertension have nearly doubled. All while billions of venture dollars have flowed into healthcare innovation.

How do we explain this gap between innovation investment and the outcomes those investments are designed to drive? The generous explanation would be we’re learning what works and doesn’t, and it’s still too early to see the fruits of most investments. But I think something else is going on.

I think many, maybe even most, of our healthcare innovation is not designed to improve health. Improving population health would generate enormous value, but it’s incredibly hard. An easier path to returns is to exploit market inefficiencies. And we’ve seen lots of these:

• Charging PMPM or PEPM fees for members who are seldom engaged in any meaningful way.
• Using digital tools to engage the sliver of the population with the highest agency and getting paid as if their outcomes are representative of the general population.
• Documenting diagnosis codes in Medicare Advantage, driving CMS costs (which are our company’s revenue) significantly higher than what those same members would cost CMS in traditional Medicare.
• Using a provider visit to drive patients to medications when the real business profits are driven by those medications.
• Setting up a process to support physician practices in billing for new CPT codes even when those services don’t really help most of the patients receiving them.

Some of these businesses are still chugging along. Others have imploded spectacularly when customers or regulators realized they were actually making our healthcare system worse, but generally after early investors have already netted a sizable return. In my personal journey, I’ve been privileged to work on some initiatives that delivered significant improvements and health in a sustainable business model. But if I’m honest, most of the initiatives I’ve been a part of helped some individual patients but largely saddled our healthcare system with higher costs not justified by the clinical gains we generated.

I’m fortunate to know numerous incredibly bright healthcare entrepreneurs, innovation customers, and investors, and 95% of those entered this field because they want to make the system better. But we’re all collectively trapped in a system that rewards exploiting inefficiencies more than driving real value. An entrepreneur can build sustainable unit economics improving patient health but can build sustainable unit economics faster by getting revenue for a product that’s less impactful but cheaper to deploy. An investor can get a return from investing in companies transforming patient lives, but the return will be higher if their portfolio companies are able to generate revenue without taking on the costly work of significantly improving patient health.

How do we fix this? I don’t have definitive answers, but I do have some ideas.

• First, recognize that we are the market. As entrepreneurs, investors, and healthcare innovation customers, we determine what market norms are. Individually, we’re each just a drop in the ocean, unable to move against the tide. But collectively, we are the ocean. We are the tide. And if we collectively decide to change market norms, we have the power to do that.
• Second, recognize when business models are generating positive financial returns for the company and negative financial returns for customers and/or society. Many of the business models I listed earlier are familiar to many of you. But in our desire to believe we’re doing good things for society, our narratives often focus on a handful of individual patients we’re helping without stepping back and asking what our impact is at scale with clear eyes. If it takes an implausible set of assumptions to believe the dollar we’re getting from a customer or the government is generating a greater return for them, we need to be honest with ourselves about that.
• Finally, we need to do the work of educating customers and regulators on these dynamics. This is the hardest part by far. All innovation is a leap of faith. And it takes capital and time to generate the results necessary to justify that faith. There’s a siren song that tells us to hide hard truths about a clinical model that doesn’t work because we need those customers and revenue to build a clinical model that does work. It’s a necessary evil when capital is so tight. But once an organization becomes wedded to a business model of easier returns, the inevitable requirements of hitting the next round become so great that this bridge to a new and distinctive clinical approach just becomes a bridge to the further expansion of the same broken model. We owe it to our own ideals to be direct with others about what is and isn’t working in our system.

These three steps are hard. And success will be partial at best. But the glass-half-full part of me looks at the $1 trillion of waste in our country’s healthcare system and recognizes fixing even 0.1% of that is $1 billion in savings. Helping 0.1% of the 130 million Americans suffering from chronic disease is making a meaningful improvement in 130,000 lives. Even though those numbers are a fraction of their wholes, I still struggle to wrap my head around that magnitude. We’ll never be perfect as an industry, but we can be better, and the impact of that would be extraordinary.

For those of you coming to HLTH, I’d love to continue this conversation there. And for everyone, please share your reflections and ideas in the comments – I’m excited to move our industry forward together.