Apr 28, 2014, 9:30 PM ETPanel

Health Care Delivery in the 21st Century

$2 billion was invested in digital health in 2013, focusing on six principal areas: electronic health records (EHRs), big data, digital medical devices, wearables, population health management, and consumer engagement.
Four of the six primary investment areas are consumer-oriented, though true consumerism is currently limited by a lack of price transparency and patient ability to understand costs.
Venture capital firms are prioritizing "saving money" over traditional profit, aiming to solve the $800 billion in waste identified within the U.S. healthcare system.
Early consumerism has emerged through public and private health exchanges, where defined contribution models force individuals to make purchasing decisions for the first time.
Companies like Castlight utilize a B2B2C model to provide price transparency, allowing patients to compare costs (e.g., $3,000 vs. $200) and quality ratings (e.g., 4-star rating) for services like emergency care versus clinics.

The median price of FDA-approved cancer drugs has risen rapidly in constant dollars, exceeding the rate of overall medical inflation and creating an unsustainable trajectory.
Incremental cost increases in new drugs often exceed incremental value gains, indicating diminishing returns and pricing that is disconnected from value.
High-cost treatments, such as Hepatitis C drugs, have a theoretical population cost of approximately $250 billion in the U.S., though actual spending is lower due to delivery system inefficiencies.
Out-of-pocket costs for certain cancer drugs have historically equaled the median monthly income of Medicare beneficiaries (e.g., $2,200 for Zaltrap therapy), driving healthcare-related bankruptcies.
Orphan drug regulations, originally designed to incentivize treatment for rare diseases, are increasingly used to segment broader markets (like specific genomic alterations in cancer) to justify unlimited pricing with limited efficacy data.
Hospital acquisition of physician practices is partly driven by the 340B drug discount program, which allows hospitals to capture a spread between reimbursement rates and mandatory discounts on drugs administered in office settings.

Healthcare spending accounts for 17% to 18% of U.S. GDP, with the "excess cost burden" (spending rising above GDP growth) serving as a key metric for economic impact.
The shift to managed care in the mid-1990s reduced the rate of cost growth temporarily but failed to alter the underlying slope of the cost curve long-term.
Recent data suggests a deceleration in healthcare spending growth, attributed to both the recession (cyclical) and delivery changes, though prices are beginning to accelerate again.
Technological advances (e.g., minimally invasive surgery) often increase the quantity of procedures performed, potentially offsetting per-unit cost savings and maintaining upward pressure on total spending.
Electronic Health Records (EHR) adoption has created significant capital burdens for small practices ($75,000–$150,000 per practice), driving a secular trend of independent physicians joining hospital systems.
The dual-eligible population (Medicare/Medicaid beneficiaries) represents $300 billion in expenditures and is the focus of state waiver programs to manage the "sickest of the sick" more effectively through integrated HMOs.

Academic medical centers are pivoting from pure innovation to implementing behavioral economics strategies to improve chronic disease management and patient compliance.
Pilot programs using financial incentives (e.g., lotteries) aim to increase patient adherence to medication regimens for conditions like heart disease and diabetes.
The GE "Healthy Cities" program in Cincinnati successfully coordinated self-insured employers, providers, and insurers to implement pricing transparency and increase Patient-Centered Medical Home (PCMH) adoption from near zero to over 300 sites.
The Cincinnati initiative reported $200 million in savings from reduced hospital admissions and readmissions in 2013 alone, attributed to improved care coordination and reduced unnecessary care.
Readmission penalties and shared-risk models between hospitals and payers are creating direct financial incentives to prevent hospital readmissions and manage care outside the hospital setting.

Approximately 80% of physicians are projected to be hospital-employed by 2020, driven by the inability to compete financially, the high cost of EHR implementation, and the desire to avoid administrative burdens.
Critics argue that many "paper transformations" (acquisitions where doctors remain independent in practice but gain a hospital logo) result in higher reimbursement rates without corresponding quality or cost improvements.
There is a growing consensus that medicine is becoming "industrialized" and "retailized," requiring business discipline and metrics to remain competitive in the global economy.
The "medical home" model is expanding to better direct patients to the appropriate level of care, prioritizing low-cost, high-access environments for routine care over expensive tertiary centers.

The Affordable Care Act (ACA) is characterized by panelists as an "Accessibility Act," focusing on expanding coverage rather than solely affordability, with subsidies remaining a critical component for patient access.
Medicaid expansion under the ACA was adopted by approximately 27 states, though debates continue regarding long-term sustainability as federal matching rates decrease.
Increasing cost-sharing (coinsurance) is identified as a counterproductive strategy that reduces utilization of essential, high-value care, such as cancer prevention drugs and mammograms.
The Congressional Budget Office projects that current delivery-side advances and cost-saving measures could reduce healthcare spending by $1.2 trillion over the next decade.
Panelists anticipate a future where value is measured by outcomes rather than volume, though challenges remain in standardizing "quality" metrics across different medical disciplines and regions.
Disruptive innovation in technology (e.g., targeted cancer therapies) is expected to drive up demand and volume, necessitating a sharp focus on implementation efficiency and aligned incentives to control costs.