Health tech's radical promise to patients: Pay doctors for results, not treatments

In recent decades, the health care industry has made remarkable progress in the understanding, detection and treatment of disease, primarily thanks to technological advancements. Given that the majority of Americans are healthy most of the time, one might expect that medical progress would dramatically reduce the cost of health care due to preventative education, early detection and more effective treatments.

Yet despite this abundance of new testing and treatment methods — or perhaps because of it — the cost of health care has skyrocketed, while over the same period general price inflation has been tame. The question remains: Are we really getting the full value for what we’re paying?

The current healthcare system is built around paying for treatment. A good doctor is reimbursed the same as a bad one. But an alternative is to consider paying for outcomes. What someone gets paid should be based upon the result — did the patient improve? By how much? How is it measured? And what did it cost?

The challenge of course is that this is an enormously difficult chasm to cross with hurdles in information, analytics, technology, and incentives. So what are the hurdles? There are some of many key challenges we must overcome before we can fully adopt a value-based care system:

1. Embracing capitation and its implications. The world is quickly moving to one where payments per member are capped, and payers/providers (which are increasingly converging) have to manage that basket of dollars across the full insured population. It means treating patients systemically, taking the long view of care and health, and optimizing systems and networks versus encounters. That involves incorporating different views of risk (the risk of not taking preventive action) that don’t get enough credit today. It means aligning incentives across patients, physicians, delivery networks, payers, and manufacturers.

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2. Patient data integration and analytics. Electronic Medical Records are a major step forward, but they are not a silver bullet. Like ERP systems two decades ago, phase one is just about capturing information electronically and getting basic workflow. But patients change doctors, change health plans, see generalists and specialists in different locations, and occasionally data gets dirty. Some information is economic (claims), some information is clinical (EMR), and some data is elsewhere or missing. The challenge for anyone participating in this space is to pull it together and make enough sense of it so physicians, case managers, employers, or benefits plan designers can make sense of individual patients and make better decisions. Then the patients need to be tracked over time so systems can measure, iterate, and improve. It is the promise of population health management systems to start organizing this information to make impact.

3. Measuring and establishing value. Part of the challenge of doing this right is understanding what to measure and how to measure it. We need more advanced instrumentation of what quality and care really mean. We need to incorporate science, real world evidence, patient-reported outcomes, and clinical information into new measures that accurately capture value and improvement in care and wellness, not just health care activity.

4. Modeling, simulation, and management. We need to mine the wealth of data at our fingertips and become predictive in our decision making. We should be able to spot and intervene with many high cost patients before they become high cost. We should be able to simulate the effect of new treatments on new populations and use that to accurately inform risk sharing models among economic participants. We should be able to optimize our networks for quality while controlling for risk.

5. Patient engagement. If the system can take the long view of patient health, then the patient should as well. We should extend static patient satisfaction measurements and engage with the patients in a systematic way using digital technologies and analytics to help them measure their health. Transparency needs to be a tool of empowerment for care providers and receivers.

As a private equity investor, I believe the health care industry is rapidly catching up to other industries in delivering value through the intelligent use of data, analytics, and engagement of all participants. We can transform the industry if we focus on outcomes and use technology to align incentives. With the changes afoot, there are tremendous benefits coming to all of us if we do this right.

J.T. Treadwell is Managing Director at private equity firm Symphony Technology Group, where he focuses on analytics and healthcare technology. He has led a variety of Symphony investments, including health care IT companies Evidera, Symphony Performance Health, and Symphony Health Solutions. He has also led investment in Shopzilla (now Connexity), Sigma Cubed, and Teleca (now Symphony Teleca).