Apr 26

Puget Sound High Value Network’s Pursuit of Value

The April 25th “Hold Us Accountable” event in the Fairmont Olympic Hotel’s Spanish Ballroom was quite an event. The ballroom was packed- I’m no crowd estimate expert but it seemed like several hundred people, all treated to a grilled chicken lunch and what only a few years ago would have seemed an unlikely panel of competing health systems.

The Puget Sound High Value Network was formed via a competitive process by Washington State’s Healthcare Authority (HCA), a state agency responsible for Washington State’s Public Employees Benefits Board (PEBB), a health program for state employees, teachers, and others.  In recent years, PEBB has been proactive in trying to address the healthcare needs of its members, both in terms of the costs and the quality of health benefits offered. The significance of this event goes beyond PEBB members because it is a bellwether of the movement of health services purchasers to move risk from purchasers to providers, thus providing economic incentives to control utilization (and in theory to improve quality). The tag line of the event was “Why Heath Care Systems Want Employers to Demand Quality and Costs”. That italicized “and” is significant.


The featured speakers included Dennis Weaver, MD, an Executive Vice President of The Advisory Board Company, and Nathan Johnson, Chief Policy Officer for Planning and Performance for the HCA. Both described the industry trends toward formation of “accountable care” networks in which healthcare providers take on some of the risk for the costs of care for their populations. The panelists included:

  • Gary Kaplan, MD, CEO of Virginia Mason
  • David Knoepfler, MD, Chiefe Medical Officer of Overtake Medical Center
  • Christopher Kodama, MD, President of Multicare Connected Care
  • Bob Malte, CEO of EvergreenHealth
  • Sany Melker, MD, Executive VP, Seattle Children’s
  • Andrew Thurman MD, President, Edmonds Family Medicine


The major themes I heard from the speakers and panelists included –

  • standardizing best evidence-based practices for higher quality
  • convenience of access for patients
  • a belief that better quality lowers costs and leads to better outcomes
  • the achievement of creating a multi-enterprise network that provides beneficiaries choices of providers and geographic locations.

There was little time at the end for questions, but the first one was provocative-  with the prevalence of high-deductible plans, how are they ensuring that patients don’t avoid early care, thereby increasing risks of worse outcomes? The responses were that some preventive visits and tests are free.

This was an upbeat, kumbaya event, with everyone seemingly marching in unison to the prevailing movement by health services purchasers to “value-based” care.  The providers on the panel continually described the importance of quality. The purchasers clearly want lower costs. The central premise of this approach is that better quality = lower costs.  The unasked question- because it is hard and complicated to answer, is how will patient outcomes be measured? When value is defined as outcomes over cost,  it’s too easy to just look at lowering the denominator (cost). Increasing the numerator (outcomes) is critically important, and few – if any- healthcare institutions and payers have the infrastructure in place to measure real patient outcomes rather than process standardization metrics.

This was an optimistic moment that I hope continues to produce the great outcomes that are expected. We’ll be watching.

Jan 16

David Bowie and the Cancer Moonshot

Screen Shot 2016-01-16 at 8.24.24 PMIn the remarkable first fortnight of 2016 we learned of the death by cancer of David Bowie, oddly coincidental with the release of his final, astonishingly precient music videos “Backstar” and “Lazarus“. Two days later, during his final State of the Union Address, President Obama made the historical analogy of the Kennedy administration’s space program:  “Sixty years ago, when the Russians beat us into space, we didn’t deny Sputnik was up there.  We didn’t argue about the science, or shrink our research and development budget. We built a space program almost overnight. And 12 years later, we were walking on the moon. ”  He then announced the Cancer Moonshot, to be championed by Joe Biden, who recently lost his son to cancer.   The President said, to bipartisan applause, “For the loved ones we’ve all lost, for the families that we can still save, let’s make America the country that cures cancer once and for all.”

This was the same week as the annual J.P. Morgan Healthcare Conference, at which Patrick Soon-Shiung MD, a pharmaceutical billionaire visionary said “Our knowledge in the science of genomics, proteomics, immunology and immunotherapy has advanced and converged at an unprecedented speed, making now the time for the rapid deployment and orchestration of immunotherapy for the benefit of millions of cancer patients. The Cancer MoonShot 2020 Program, the National Immunotherapy Coalition and the QUILT Program are designed to do just that, bring together a diverse group of visionary leaders and stakeholders to pool resources and bring to patients a dramatic improvement in cancer care.”

Unlike the Apollo Moonshot program, this one is not primarily being driven by federal funding. At best, the role of the federal government will be to facilitate cross- industry collaboration, and in my wildest dreams, have the FDA playing a helpful role in accelerating access by patients to the most advanced diagnostics and therapies. The use of the term “cures” has made many in the industry nervous. Cancer, after all, is now understood to be a broad category of disease with hundreds of different disease profiles. Landing a space ship on the moon pales in comparison with the sheer number of human cells (30-100 trillion in each of us) each with a full set of our genomic kit.

Yet it is a tribute to the imagination and creativity of Screen Shot 2016-01-16 at 8.28.35 PMour species that we can set this goal. I cannot think of a better use of our resources than to find cures for a disease that kills nearly 8 million people a year worldwide. Many now suspect that among the causes of cancer is the deterioration of the molecular mechanisms for repairing our DNA. One possible outcome of the efforts to find cures for cancer may be to rejuvenate our DNA maintenance capabilities.

David Bowie was a master of reinvention, as anyone who looks at the diverse personas that he created and moved beyond over the course of his career. I like him best at the end, and regret we will not be able to see where he would have gone next.

In my lifetime there have been many great musicians who have succumbed to cancer. I created this Spotify playlist to celebrate the creative contributions of some of those whose lives were cut short by cancer and whose art touched my life. It was with sadness and respect that I added David Bowie to this list. It underscores the urgency to take action.


May 07

The Health Innovators’ Multiscale Dilemma

It wasn’t the first time I was discouraged by a speaker at a forum on health innovation, and it was only when my friend Bonnie turned to me as we were applauding and said “That was depressing” that I realized what had happened.

It was actually a very fine lecture at the University of Washington by Joseph Gifford, MD,   CEO of the Providence Accountable Health Organization. He explained the risks to each financial stakeholder in the healthcare financing chain.  “You  can’t understand the lake unless you understand the spring up in the mountains” was one of his more pleasant and memorable one-liners. His refrain, however, was not so pleasant:  “It’s all about cost, cost, cost.”  Dr. Gifford sees a lot of pitches. He made it quite clear that there is not much appetite within his ACO for funding innovations that improve quality or the patients’ experience unless it demonstrably saves money, and fast.

Dr Gifford’s message to innovators was to “know who has the risk and is served by your innovation”.  Both conditions must be met.  The most important insight I got from Dr. Gifford was this:  “Innovation value is captured by the entity that bears the risk.” He cautioned us not to waste our time selling innovations to entities who cannot capture the value the innovation brings to other stakeholders. Nearly missing from this talk was mention of patients as risk-bearers, but his point on value capture still stands. He also said that quality (i.e., quality metrics) “is table stakes”, not a differentiator.  I hope he’s wrong about that. He repeated  “It’s all about cost, cost, cost.” He went on to point out that  “there is extreme resistance to paying any more in hopes of getting slightly higher quality”. Boom.

“Entrepreneurs must understand who has the risk and how the money flows”. Damn. That means each piece of the value chain has to optimize for their own little piece, system-wide costs are not their problem.  What’s most disturbing is that this is the perspective of a highly intelligent physician leader and CEO of an Accountable Care Organization, the silver bullet of health reform.

Influenza Virus (Image courtesy of dream designs at FreeDigitalPhotos.net)

Influenza Virus (Image courtesy of dream designs at FreeDigitalPhotos.net)

Here’s the problem. Just as biological processes occur at multiple levels- from molecular to systemic, the cost structure of healthcare is an evolving multiscale system that no one quite understands. We pay smart people to optimize their organization’s piece. Nobody is accountable for the performance of the whole system. Two weeks ago I was at another healthcare forum and a health benefits consultant dismissed a question about the expenses of end of life care as mostly “irrelevant” to employers, because it’s a Medicare problem.

Multiscale diagram Bar-Yam 2004

The illustration above is from a seminal article by Yaneer Bar-Yam on “Multiscale analysis of the healthcare and public health system: Organizing for achieving both effectiveness and efficiency” (2004)  It was drawn years before the Affordable Care Act, before the HITECH Act, and before the mass adoption of smartphones and consumer digital health. It still mostly reflects the world described by Dr Gifford’s lecture. The payers divide the large scale flow of money from employers (or the government) into smaller financial flows to healthcare systems and healthcare providers. Information about what services were performed goes back, and services are rendered to the patients.  Bar-Yam likens what happens in this system as “turbulence” just as in physical systems of fluid dynamics. “Turbulence occurs when a simple coherent flow is broken up into many smaller flows. It can be observed in the swirls and eddies in a fast -flowing river…”

Contrasting with this turbulent healthcare system is a hypothesized “high efficiency healthcare system” in which a stronger public health capability is deployed to improve health and wellness of the population through regular vaccinations and routine diagnostic tests.

Screen Shot 2015-05-07 at 3.42.05 PM

Today we’re about 10 years beyond the time these analyses were first developed. Some of these ideas are now being tested via the Affordable Care Act, albeit with the strum and drag of a partisan knock-down/drag out culture war over the future of healthcare. I wish the nature of this debate were not so ideological because the stakes are just too high.

The analysis of cost in the system across many dimensions and organizational boundaries is needed before we really get a handle on how to optimize the effectiveness of our healthcare system. The National Institutes of Health has announced a funding opportunity that  “seeks to promote interdisciplinary collaboration among health researchers and experts in computational approaches to further the development of modeling- and simulation-based systems science methodologies and their application to important public health challenges.”  I believe we are in the early days of applying multiscale models to the understanding of the cost structure of our dysfunctional and misaligned healthcare environment.  It may provide new insights into the creation of service “bundles” that avoid the “cost,cost,cost” myopia of smart health administrators.  It may also offer new ways of looking at a constellation of other services that are valuable to the system as a whole.

The Health Innovators’ Multiscale Dilemma

The “Innovators’ Dilemma” theory described so well by Clayton Christensen, explains how large organizations can “fail by doing everything right” by optimizing according to their traditional cost and profit structures and thereby miss the disruption from below as upstarts work their way up the value chain. Ever since I first saw this I have wanted to be a disruptor because it looks like a lot more fun.

Screen Shot 2015-05-07 at 3.53.23 PM

What I find is most energizing about working in a health startup is the clarity that comes from having only opportunity ahead.  As the poet said, “When you got nothing, you got nothing to lose. You’re invisible now, you got no secrets to conceal”.

In my view, the most exciting and least depressing thing about our chances to positively disrupt the  healthcare system is the active participation of individuals- i.e., patients, consumers, caregivers. Consumer technologies are increasing the flow of information to everybody and are creating new service models (Uber anyone?). It is already all around us.  We’ve watched as the retail, transportation, and entertainment industries have embraced (or resisted) customer empowerment. Healthcare is one of the last bastions of paternalistic, easy-does it gradualism and may eventually give way.

Dr. Gifford is right that innovation value only exists when there is an entity that bears the risk and also captures the benefits. I got it. Health innovators who save their institutional customers money will have an easier road than those who don’t. But keep an eye on the consumer. It’s ultimately our future.

Ed Butler





Jun 26

What does the Digital Health Platform Competition Mean for Startups?

In May and June 2014 we saw announcements from Apple, Google, and Samsung about aggregating the health and fitness tracking data from wearable devices and smartphones. These announcements  serve as validation that the convergence of personal fitness tracking data with clinically relevant biometrics is accelerating and that the smartphone and wearable devices are at the center of this new world of health IT

healthkitAs a part of Apple’s iOS8 rollout will be the  “Health” app offering a dashboard of health and fitness data to consumers, along with a developer product called “Healthkit”.   The announcement included mention of two of healthcare’s top brands- Mayo and Epic as collaborators. The Mayo collaboration is not surprising as they frequently and non-exclusively collaborate with many health IT companies. Epic on the other hand was a surprise, at least to me, because of their traditional walled garden culture.

GooglefitAlso in June, Google announced “Google Fit” at its annual developer conference I/O. It is a competing vision for mobile aggregator of fitness data from multiple devices and services. Google’s development partners include Nike, Withings, Adidas, Runkeeper, and other fitness app companies. Google’s approach seems to be focused on the fitness segment rather than clinical implications touted by Apple, but with Google’s development of glucose-sensing contact lenses I predict that clinical apps will be incorporated into the platform. Google is consistently one of the most innovative large companies in the world and through their Android success have deep experience in working within an open ecosystem.

Samsung Just days before Apple’s developers conference, Samsung announced Simband, a “reference design” describing their concept of “what a smart health device should be”. Explicitly “not a product”, the Simband reference design will allow developers to create apps that can send data to the Samsung Architecture Multimodal Interactions (S.A.M.I) as a data broker. It promises to be a secure, open, and diverse data platform. Samsung has partners too, must notably the University of California San Francisco (UCSF), via its Digital Health Innovation Lab, an accelerator space for startups. Samsung is calling Simbaud a “platform” even if it is not (yet) a product. That’s the beauty- and peril- of calling something a “platform”, even if it exists only as a reference design.

What does this mean for health startups?

It largely depends on what your technical capabilities are, where you are located, and especially who your initial customers are. Customer segmentation is the key to deciding for whom to develop first. Who are your target customers and what platform will be the most natural fir for them-  not in 2014, but in 2015-17, when this battle of the personal health data aggregators will play out.  I do not think this will be a “winner take all” battle, as each platform will continue to have a core niche of users who have made their smartphone choices and are unlikely to switch unless their vendor makes them look elsewhere through a major change in UI (as Microsoft did with Windows 8). The winners of the smart watch market will have a lot to do with it as well, if consumers ever adopt them at scale.  But there will definitely be a winner in the consumer health aggregation platform category. The winning platform will gain the greatest share of those developers who survive by solving real problems for (paying) customers and by retaining them as they go through their multiple device upgrade cycles.

It is encouraging news to digital health startups that each of these consumer IT giants is looking to open up their development platforms to an ecosystem of external partners. They all realize that in this early state of the industry that nobody knows which apps will hit and which (as most do) will flop. So it’s everyone into the pool, and let the customers decide who wins.

Feb 01

Personal Health Records and the Seeds of Disruptive Innovation

April 26, 2004  President George W. Bush gave a speech to the American Association of Community Colleges in which he said “…Within 10 years, every American must have a personal electronic medical record,” Bush said. “That’s a good goal for the country to achieve. The federal government has got to take the lead in order to make this happen by developing what’s called technical standards.”

The HITECH Act of 2009 was signed by President Obama in February 2009, and made available some $30 billion over time to  hospitals and medical professionals who satisfied regulations for “meaningful use” of certified electronic health record technology.  This year the industry is beginning implementation of Stage 2 Meaningful Use that slightly ups the adoption bar for patient access to their own records. It requires 10% of a provider’s patients to actually view online, download, and transfer their health information.

The adoption of EHRs by healthcare institutions, however, is not the same thing as having a personal health record. The generation of EHRs currently deployed were designed for the provider organizations, not the patients who must deal with many providers over the course of their lifetimes. To realize the vision elaborated 10 years ago requires a Patient-centered record – one that can go with you throughout your life, rather than having fragments of information locked up in dozens of systems within different provider enterprises.Bluebuttonicon

To partially address this need a new specification has been evolving over the past few years known as “Blue Button”.


First implemented by the Department of Veteran Affairs, the tool has been used by millions of Veterans.  In June 2013, Todd Park, the current U.S. Chief Technology Officer and former Silicon Valley entrepreneur, said that over 88 million Americans now have access to their data via Blue Button and over 1 million have used it. The first iteration of the Blue Button specification fell short of what is needed to spark the development of functionally useful personal health record applications. The next generation specification, known as Blue Button+,  is intended to provide patients an easy way to directly transfer their data from provider systems into personal systems. It has a data structure that can be displayed more elegantly and also incorporated into new functionality. The data to be included is promising. The 2013 Blue Button+ Implementation Guide includes the following sections:

Blue button plus sections

The disruptive potential of Blue Button+ can be seen in the diagram below:


This architecture has the patient (Ellen) initiating a transfer from 3 of her providers’ systems to an application she has authorized.

The reason this technology will be disruptive is that it empowers patients to get their own data from different provider systems and into their selected consumer apps.  For example, this could allow startups and others  to create smart phone apps that also combine personal fitness trackers, personal health diaries, photographs, you name it, so that the consumer, Ellen, has it all in her pocket.  The patient who sees 3 doctors and visits 2 hospitals over 10 years (not uncommon in this age of changing jobs and health plans) can trigger the aggregation of their own medical records.

If widely implemented, this may eventually lead to the market disruption pattern documented in the works of  Harvard’s Clayton Christensen. The now dominant health information technology vendors may have to look over their shoulders at the startups that begin to climb the value chain, delivering useful and low cost solutions to market segments previously underserved by the established players.

And yet… is it real?  After the disastrous rollout of the Affordable Care Act’s crucial Health Insurance Exchanges we all have to pause and wonder if the federal government is capable of executing any complex information technology initiative. Last February, with great fanfare, the Blue Button+ Implementation Guide was announced, along with competitions for new Blue Button+ apps and a promise that a Blue Button Connector would be rolled out by the end of 2013. The Blue Button Connector will be a tool for consumers to find their health data to download and resources to make this possible. However, Mobihealth News reported that Lygeia Ricciardi, director of the ONC’s Office of Consumer eHealth , said at the Consumer Electronics Show in January 2014 that the Blue Button Connector rollout is delayed. She said that a beta may be available in late February 2014.

On the bright side, this is still primarily a technical specification. Unlike the Health Insurance Exchanges, the BB+ spec is not a big government IT project. Software to process apps that can use this data can be written by anyone with the coding skills.  It remains to be seen whether the  electronic health record vendors will make it work. This is why the data sources listed in the Blue Button Connector will be important to monitor.

As the enterprise electronic health record systems are opened up the data can be applied in new ways – under each patient’s control- to provide more tools for navigating their lives. These seeds of disruption offer consumers more informed choices, better tools, and over time can change the face of the healthcare industry.

The 10 year-old presidential vision of a personal health record for every American is getting closer. We should continue to expect resistance, both passive and active, from some industry stakeholders who want to use electronic health records as a “lock-in” strategy for customer retention. The role of federal leadership in developing technical standards, recognized by President Bush a decade ago, as implemented through the HITECH regulations, may yet create the seeds of  new innovation in health consumer empowerment.

Ed at meetup 2

Ed Butler is a founder and lead organizer of the Seattle Health Innovation Forum. He is currently conducting market research related to the convergence of personalized medicine and population health management.

Dec 06

FDA and 23andMe- is there a Hubris Gene?

Most readers of this blog may already know that 23andMe is an innovative Silicon Valley company backed by Google Ventures that has been providing affordable genetic tests to consumers indicating their genetic risks for certain diseases.  It explicitly does not provide diagnoses.  The recent controversy around the FDA’s crackdown on 23andMe has been very instructive.  There are important public policy issues surrounding FDA’s Warning Letter to 23andMe as outlined by Ezra Klein’s blog.  I think this episode can also be seen as a cautionary tale both entrepreneurs and the regulators.

I had been planning to get the 23andMe test before the November 22 Letter came out but because it was expensive enough at $99 I kept putting it off. In the first few days after the FDA letter, 23amdMe was still offering the service, so I ordered one.  It came a few days later to my mailbox:

23andme box

Before submitting the test I had to agree to the terms and conditions, that included these important caveats:

23andMe terms

Fair enough-  they are saying that this is not medical advice (I knew that already), and an acknowledgement that the genetic information I get will be incomplete and possibly in error.  They’re saying that if I can’t handle the information then don’t do it. I accepted the conditions and consented to have my results included in their growing crowd-sourced database that will be used by researchers to accelerate the pace of discoveries and cures.

Next I opened the box and found the test tube.  Looks pretty safe, doesn’t it?

23andme tube

I waited 30 minutes after eating or drinking anything and then mustered enough saliva to fill to the indicated line on the tube. I then screwed the top on and mailed it off to 23andMe’s processing center in Los Angeles.  I had been looking forward to getting the results until I saw 23andMe CEO Anne Wojcicki’s post  December 5th saying that customers who purchased the kits after November 22 (like me) will not have access to the promised health related results.  No discount, either, on the $99 unless I want a full refund and agree to cancel the test entirely. I am disappointed both in 23andMe and in the FDA. I understand why 23andMe had to back down, but am still disappointed not to get their interpretation of the data. I will get my unanalyzed DNA dataset and the ancestry information only. My disappointment with the FDA is that they over-reacted to what is still essentially an information service. I am curious about the assertion that this is a dangerous “device” and wonder if they have exceeded their mandate.

Hubris is a part of the human condition that has been documented since the bronze age. It is an overconfident pride. FDA’s letter asserts that “if the BRCA-related risk assessment for breast or ovarian cancer reports a false positive, it could lead a patient to undergo prophylactic surgery”.  Patients do not do their own surgery. Before prophylactic or any other surgery a discussion would take place with the medical team. That is a good thing for consumers, and yes, it is disruptive to a paternalistic medical culture to have an activated patient asking questions about the evidence. The FDA declaration that this Personal Genome Service is considered a Class III medical device- the most restrictive classification-  seems to me to be an unreasonable escalation of what should have been the exploration of an open question. As Duke University’s Misha Angrist wrote of the FDA letter, “it reads like the letter of a jilted lover”.  Hubris indeed.

As David Dobbs pointed out last week in the New Yorker, “if the F.D.A. indeed insists on making 23andMe prove beyond doubt the validity of every single correlation, no genetic-testing service will be able to economically deliver medically relevant genetic information directly to consumers. It will destroy the industry and leave medical genetics in the hands of a medical establishment that has already failed to give people an easy way to obtain and use the elemental information in their own spit.”

What about other medical decision support services?

I have had similar questions about the “Meaningful Use” of  Electronic Health Record systems incentivized by the Center for Medicaid and Medicare Services via the 2009 stimulus package. Even though such systems automate clinical workflows and offer clinical decision support information to providers they are not subjected to FDA requirements for pre-market clearance and adherence to design controls of regulation-inspired “quality management” systems. This was in part because within HHS there was an internal debate balancing the FDA’s mandate with the need for speed in the implementation of the 2009 American Reinvestment and Recovery Act (ARRA). Fortunately for the public, there was enough internal pushback that the FDA regulators were held at bay. Had Electronic Heath Records been held to Class III standards, many of the products then, and now, on the market – especially the market leaders at the time- would likely have received similar letters as did 23andMe last month.

Lessons for Innovators

I see 3  lessons for entrepreneurs from the unfortunate drama of 23andMe vs FDA:

  1. Take the FDA seriously, even if you think it’s crazy that they think your product is a medical device.
  2. Find your local or regional biotech trade association and work with them to better understand the regulatory climate and how to be effective within it.
  3. Explore regulatory climates in countries outside the US. Most of the world’s growth in the next decade will be outside the US. The rapid growth of mobile internet access opens new opportunities for medical information services.

I look forward to the policy discussion about the classification of  health information services as medical devices. Hopefully the FDA can find a better balance than what we have seen so far. I hope that they do it soon.  I’m really curious about what’s in my 23andMe report that the FDA won’t yet allow me to see.

Ed at meetup 2

Ed Butler

Aug 31

Is the healthcare industry ready for the consumer?

I moderated the panel/audience discussion at the Seattle Health Innovation Forum this week that explored the convergence of healthcare, wellness, and population health management. It became clear that while the health industry may not be ready for the savvy consumer, health services consumers – and many providers- are increasingly ready for a better experience.


The panel included C-suite executives from 5 companies on the front lines of the dramatic changes that are occurring in health insurance, corporate wellness programs, and care delivery systems. This included senior leaders from two of the regions largest health plans and three innovative new companies targeting health and wellness needs.

One of the themes that emerged from this discussion was that disruption of the current health marketplace is being driven by retail consumer dynamics. Individuals with higher deductible health plans are no longer shielded from all costs of care, and are increasingly armed with information about their health choices. People expect to be able to make an appointment to see their doctor as easily as they book a hotel room. Retail organizations like Walmart are introducing the convenience of drop-in clinics to their customers. The increasing reliance people have on their smart phones provides a new way for brands to interact with their customers, and many established healthcare institutions have been very slow to  respond.

Ryan Schmid, CEO of Vera Whole Health described the quantifiable savings for companies who  embrace a unified approach to health and wellness that includes on-site clinics and health coaching services. Randy Wise, VP of Marketing for Group Health Cooperative alluded to more than 6 decades of innovation that Group Health has made in uniting coverage and care delivery and in using electronic health technology with patients.  Herbert Ong, President of Healthentic presented an approach for aggregating data from providers and payers in order to measure the effectiveness of employer health benefit programs. Jo Masterson, co-founder of 2Morrow, explained the importance of mobile solutions, now that consumers increasingly depend on smartphones on so many areas of their lives. Dave Young, VP of Wellness and Consumerism of Premera Blue Cross described the impending “wave of consumerism” that the health industry as a whole is not ready for, and how his company is already implementing a strategy that incorporates deep customer segmentation as part of a population health strategy.

The audience consisted of about 70 people representing numerous health startup’s, medical professionals from Seattle area health institutions, and universities. Several physicians commented about the difficulty they and their medical colleagues face as the industry shifts service delivery and payment models. This event also included structured networking sessions that allowed participants to meet each other along themes that included finding financing for innovation, big data for precision medicine, sensor technology, healthcare reform, and the potentially disruptive role of allied health professions.  The next Seattle Health Innovation Forum will be on October 2, 2013.

Ed Butler photo

Ed Butler

Aug 14

Will healthcare price transparency drive consolidation?

People of a certain age remember a time in the 1990’s when the “World Wide Web” was cool and new and you could get a free browser from Mosaic and a supported browser from Netscape for about $45. Then a certain dominant software company that made it’s money through operating systems and office suites decided to make browsers free through bundling.  Remember? How would you have liked to be in the browser business then?

Katherine Baicker and Helen Levy have an interesting piece in this week’s New England Journal of Medicine that examines the implications of price transparency in medical markets. In “Coordination versus Competition in Health Care Reform” they describe implications for competition resulting from Accountable Care Organizations, bundled payments, and other key elements of healthcare reform.

Baicker and Levy point out that “the problem arises because bundling offers providers who have market power in one product domain (such as tertiary hospital care) an opportunity to dampen competition in other product domains (such as primary care) by requiring insurers to contract with them for both products in order to receive discounts.”

This is an  example of how the restructuring of a $2.7 trillion industry will have winners and losers. The traditional “pricing” of medical procedures, never truly based on unfettered  economic forces, may become another arena for the consolidation of healthcare institutions, with small players finding that the nominal procedural “prices” for their services disappear as fast as browser sales did in the 90’s. It is hard to compete with “free”. Certainly a time to think creatively about new business models, isn’t it?

Aug 07

Lean Outsourcing and Distributed Teams


On Monday evening (August 5, 2013)  I attended a panel discussion at Seattle’s SURF incubator on the issues startups face with distributed teams and outsourced teams. The panel was organized and facilitated by Lara Feltin, CEO of Biznik. The panelists included David Tyler, a Y-combinator grad and currently with Cloudant with teams in Boston, Seattle, Seoul, and other places; Lyle Hazle, the CTO of MyFive; Shawn Errunza, COO of Jintronics; and Georges Khoury, CEO of Attendible. Several members of the audience were also quite knowledgeable about  the topic, including the CEO of a company with employees in 12 timezones!

This was the 44th event of the Lean Startup Seattle meetup. This series was founded in May 2011 and inspired by the Lean Startup movement sparked by Eric Ries’ book The Lean Startup. This approach is characterized by iterative development guided by ongoing interactions with customers to ensure that the products and services developed are tightly focused on customer value. Having distributed teams is challenging when the product is being continuously refocused based on customer feedback. Inclusion of outside vendors via outsourcing adds another level of complexity.

Here are some of the key ideas that I took away from this session-

  1. Never outsource strategically important core competencies to outside firms. If you use contracted design and development services make sure to get written assignment of intellectual property rights.
  2. When working with remote members several teams found that having ongoing “always on”  audio and video links with remote team members valuable in simulating the close working relationship one has in an agile environment.  People laughed at the story of getting used to it when a remote employee’s dog barked.
  3. Offshore teams, whether internal or outsourced, involve cultural differences that the teams need to understand. David Tyler described his experience working with a team in Korea, where even the language used speaks deferentially and formally to people at different levels within the hierarchy. He said that Americans can inadvertently come across as rude because of our customary informality. He said it helps to have designated point persons on remote teams who are sensitive to and can manage these dynamics.
  4. Onboarding is often a challenge in growing companies and it is even more challenging with remote team members. One practice that several companies used was to have the most recent new hires take responsibility for updating the onboarding manual with details that might have changed since the last person came on. They would get the information from experienced team members but would take the time to make sure it was recorded in a shared Wiki.
  5. Systems of metrics are essential so that productivity is visible to all team members.

This session was a good example of a grassroots community of world-class talent that has formed to freely share experience about starting new companies and solving new problems. It is an exciting time to be in Seattle.

Zen rocks -ps1

Ed Butler, Agate Point founder



Jul 23

Are we asking the right healthcare price transparency questions?

The increasing popularity of higher deductible health plans have made prices relevant to an increasing number of patients. This is driving increased demands that payers and providers provide tools and data to better inform consumers of expected prices of planned procedures.

I am convinced that increased consumer participation in paying for their health care is, though painful, a necessary step towards individual empowerment. For the past 70 years the selection of providers and the services they provide have been negotiated behind closed doors among payers, providers, and sometimes employers. Business-to-business prices are often set by volume, and in the current climate payers are narrowing networks to extract even greater discounts. For uninsured individuals this is the worst of all possible worlds, because not only do they have to pay out of pocket, the rates they pay (if they can) can be the artificially high list prices that the institutional buyers do not have to pay. Greater access to competing health plans in 2014 through the individual market exchanges- and to the payer-negotiated prices is going to be much better for individual health consumers.

There are 2 basic problems with much of the current tooling and discussions about healthcare price transparency:

  1. It further reinforces the antiquated “fee for service” a la carte model. We need to be moving towards paying for health outcomes rather than building new infrastructure around the old chartmaster model. Prices for procedures should be easily accessible by consumers, but we need more bundled services with the quality of outcomes recognized for the value provided to the patients. Patients should not have to pay for the consequences of medical errors. A short hospital stay can be more valuable than a long one, just as a direct flight is worth more. Pricing is a powerful lever, so we should be thoughtful about what behaviors we are encouraging.
  2. The tacit assumption that there should be a defined, unchanging price for every procedure is disconnected with economic reality. Prices change all the time. The last-minute traveler scrunched in the middle seat of your next flight likely paid more for her ticket than the person seated in the more desirable aisle seat that was bought months earlier. Healthcare is similar to the travel industry in that we have a finite capacity and a population of potential customers with varying degrees of schedule flexibility. Standardizing procedural fees is the answer to the wrong question.

The biggest problem with the lack of healthcare price transparency is simply that the consumer does not know what the price will be. The fact that it varies from facility to facility and from time to time should not be cause for outrage. Let’s use pricing as a strategic tool in the empowerment of consumers.

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