UsableMarkets

The internet is awash in blogs about healthcare. Many we enjoy (many we don’t even know about, sadly), but there is one that UsableMarkets loves above all others: Health Populi. Written by healthcare economist Jane Sarasohn-Kahn of THINK-Health, a strategic health consultancy, the blog manages sober (and enlightening) reflection on healthcare news and events, including the fast-growing Health 2.0 movement.

Jane, much to our pleasure, agreed to be interviewed via email. Read on as she discusses physician rating systems (our favorite topic), transparency in healthcare, and what she’s learned from her years as a healthcare economist.

UsableMarkets: The hardest question first. Why are the costs of healthcare goods and services (fees for doctors, insurance, pills, etc.) getting more expensive, faster, than other goods and services?

Jane Sarasohn-Kahn: First, as a wealthy country, the U.S. chooses to spend more on health technology. There is a direct correlation between health spending and wealth. Technologies diffuse more quickly in developed than in developing nations. Some economists believe that new medical technology (including pharmaceuticals) could account for at least one-half of spending increases.

Remember the adage, “If you have a hammer, everything you see starts to look like a nail.” If there’s a CT scan in a community, it will be used to capacity! There are also fast-growing costs associated with chronic illness. America’s diabesity (diabetes+obesity) epidemic is costing us more in co-morbidities, and this will exacerbate in the future without a major public health initiative to stem the fattening of America.

In addition to these factors, the general mantra about cost-drivers in the U.S. includes the aging of the population and the practice of defensive medicine to fend off malpractice lawsuits, which is a fairly non-existent cost-driver in other countries.

UM: If nothing is done to reform the healthcare system in the US, what will that mean in 10 to 20 years from now? In other words, is this really a problem, or just a hot presidential campaign topic? If this is a problem, just how bad is it, comparatively speaking?

JSK: The U.S. is unique with its employer-based health system. Six in ten Americans receive health insurance at the work place. Health care cost growth in the U.S. is overwhelming businesses, and not just Old Economy companies like autos and steelworkers, but the jobs of baristas at Starbucks. Howard Schulz, CEO of the company, has said he spends more on health care than he does on coffee beans.

For a growing number of employers, the cost of health care per employee has begun to exceed the profits generated by employee. This situation is unsustainable in the near-run. It’s crisis time already in post-industrial regions of the country like Michigan and Ohio. See what’s happening with labor negotiations at the autos where retiree benefits are being spun off from the liabilities of the businesses. We won’t have an auto industry in the U.S. within a decade if Ford and GM don’t change their models (with respect to both autos and health plan liabilities!).

Medicare’s fiscal stability is also in danger well before the Social Security system’s is. This is not just presidential politics; Americans have to get real about health costs now. Our global competitiveness has been at risk for some time due to health cost liabilities of business. Even with a weak dollar overseas, our exports aren’t where they should be. We really are at a disadvantage due to our obsolete health system design.

UM: My impression is that Health Savings Accounts (HSAs) and the like have back-fired because they make healthcare seem more expensive. In other words, paying a flat fee (often taken out of someone’s paycheck) and then a token fee (the co-pay) at the doctor’s office, seems less expensive than when you actually see the total costs, as you would with an HSA. If price transparency is important to reforming healthcare (and perhaps it’s not), then how do you keep that transparency from frightening people when they see the real costs?

JSK:When I just said that “Americans have to get real about health costs,” this is what I’m intimating. We’ve allowed health prices in the U.S. to grow much higher than those in other OECD countries because of the fragmentation in the system and the lack of transparency to the payer … both plan sponsor and consumer.

Insured Americans are experiencing sticker shock now because we have been largely shielded from these prices. But ask those without insurance, and they have already been dealing with this — with increasing credit card debt or bankruptcy. It’s those people without insurance who have essentially been subsidizing those lucky enough to have it.

There seems to be something generational going on now. Gen X and Gen Y/Millenials as a younger cohort appear to “get” the fact that they’ll need to take care of themselves. There is some consensus emerging there that the social-economic institutions of Medicare and Social Security (and the larger pension system of old) won’t be a real safety net when today’s younger workers age. Thus the crisis will hit Baby Boomers, who haven’t saved nearly enough for health care in retirement. The Employee Benefits Research Institute has calculated that a couple both age 65 today living to average life expectancy could need as much as $295,000 to cover premiums for health insurance coverage and out-of-pocket expenses during retirement. A couple who lives to age 95 could need as a much as $550,000.

UM:I’ve spilled some ink over doctor rating systems. Consumers like rating systems as a way to evaluate potential doctors, but, all-in-all, how important are rating systems to bringing transparency to the healthcare marketplace? Are there other benefits (outside transparency) physician rating systems could provide?

JSK: Rating systems are important for overall transparency and openness. Ratings have to be authentic, they have to be real, and they need to be balanced. A good start is happening at Vitals (www.vitals.com). See their “trifecta” or what they call their “360 degree” ratings model of providers, which brings together peer reviews, consumer recommendations, and empirical (performance and background) data.

What ratings do for providers who watch them is motivate providers to transform themselves, to change, to be better in the eyes of consumers and their peers. This has happened to some extent among hospitals who have been exposed to ratings.

UM: One thing I’ve noticed is that it’s difficult to find robust patient feedback data about individual doctors. For example, in looking for a pediatrician in Brooklyn (not a small city) just finding one doctor who has been rated seems like a miracle. Do you think patients are reluctant to rate their doctors? If so, why? If not, why is it difficult to collect this data in one place?

JSK: I see that this is changing. Patients haven’t had a voice or a medium through which to “vote.” In just the past year, we’ve seen more opportunities for consumers to speak out about their providers’ quality from the patients’ points of view in online communities. We’re reading and reacting to patients’ stories online, people talking about how they’re treated in various clinical settings. Social communities and ratings sites are proliferating in this new era of user-generated content.

The challenge is going to be: who will “weave” these various sites together so the consumer will have a comprehensive view of providers in, say, Brooklyn. There’s a business opportunity there, to be the Master Weaver of consumer health stories and ratings.

UM: If you could devise a rating system for doctors from scratch, what would it look like? What measures would it include that others don’t (like Zagat in California)?

JSK: Zagat will deal with the lower hanging fruit of consumers’ qualitative perceptions. That’s not the whole story, it’s the easier bits. Consumers need hard data on quality and outcomes, and they need pricing data.

Walk into a Minute Clinic, and you’ll see a menu of services such as vaccinations and lab testing, and a list of prices. That’s great, the clinic is clean, the wait is short. But am I safe there? Even if it’s in my beloved Target store, I need to know more than services and price — I need to know about quality, infection rates, hospital admission rates, patient outcomes. I want to know these data about “people like me” — female, of a certain age group, with particular conditions and co-morbidities.

We’re a decade away from this, but we’re moving in this direction.

UM: You’ve been a health economist for some time. What are some of the big lessons you’ve learned from studying the US healthcare market?

JSK: My most visceral lessons have come from personal experiences: first, watching my own parents deal with their respective illnesses and how they wrestled down the health system. Both of my parents were outstanding patients — first, they were in good health when they were diagnosed with their individual health challenges. Second, they partnered with their doctors so their outcomes were optimal; there was trust and communication with their providers. What Chuck and Polly Sarasohn taught me was that we are first individually responsible for our health. Then when we get sick, we need to seek out the best providers we can find: through word of mouth, studying of the medical literature, empowering ourselves however we can.

The second Big Lesson occurred when I worked with the National Health Service as an American living in London in the mid-to-late 1980s. Mrs. Thatcher was Prime Minister, and she was attempting to bring some private-sector market basis into the NHS. But the Labor Party, and even some Tory Party members, had trouble with anything that even hinted at privatization — even for food and hotel services in hospitals.

What I saw in medical centers such as St. Thomas’s and Guys’ Hospitals — the Mass Generals and NYUs of the UK — was that even in physical plants that weren’t pretty or ultra-modern, with medical technology that wasn’t as new as that in Mass General or Mayo, the patient outcomes were equivalent or better than those in the U.S. That got me thinking about the role of appropriate technology and cost-effectiveness in the late 1980s, and I haven’t stopped obsessing about that since.

As an economist, I’m also concerned about the innovative life sciences sector in the U.S. This is one of our nation’s only positive line items in terms of trade surplus. Yet we’re in the process of losing our strategic footing in this area.

If I were Health Care Queen, I’d put some major focus here, turbocharge and fund up the FDA, the NIH, and biomedical research institutions. If we’re going to be at 20% of our GDP for health care, I’d like to see more spent on research and development and less on waste and administrative costs.

Here’s what else I’ve learned: having worked with every kind of stakeholder group in health care in the U.S. and Europe, I strongly believe we must stop demonizing the various players in health care. I ascribe to the phrase, “Divided We Fail.” We truly are all in this together.

UM: Thank you Jane.

As always, thanks for listening.
~alex