The Stanford School of Business has a program In Healthcare Innovation as part of its executive program and each year hosts a one day “summit” event. It was planned by a team of faculty, alumni, and students who attempted to balance perspectives of payers, patients, providers, and healthcare innovators. Because the theme this year was IT-enabled disruption, I felt that I really had to to go down to Palo Alto to be there in person.
Mark Bertolini, CEO of Aetna, gave a fascinating talk on the future of health insurance. Technological and economic forces are accelerating change in the healthcare industry globally. The two primary technological forces are Internet and the global adoption of mobile devices. The two primary economic forces accelerating change in the US are (a) the challenged hospital revenue model and (b) the end of independent physician practices. He noted that 70% of medical practices are now owned by hospitals, up from only 25% 10 years ago.
Hospital profit centers, such as diagnostic imaging, are turning into cost centers as a result of reimbursement changes. The convergence of medical practices and hospital systems combined with reimbursement changes that no longer incentivize volume overvalue our rapidly transforming the industry.
Bertolini pointed out that in China there are 270 million mobile devices and 538 million Internet users. In both India and China the growth of the Internet is starting from mobile platforms, thus skipping prior generations of Web technology. Both countries face major challenges and the current US healthcare system does not provide an attractive model. The opportunities for healthcare innovation in developing countries are very interesting to Aetna.
Aetna has acquired a number of health IT companies in recent years and has assembled a tech stack that is “payor agnostic”. I thought it was especially interesting when Bertolini said “I would rather have Banner Health (one of their integrated delivery system customers) on the health insurance exchange with our technology than to have Aetna on the exchange”. The strategic implication of his statement that “We don’t sell members, we convert patients” is a shift from directly insuring populations to becoming a provider of capital, IT, and underwriting expertise to risk-bearing care delivery organizations. He asserted that “the sick ones are the most profitable because we can manage this risk better using our technology”. He asserted “population management is a consumer centric model”. This equation of population health management (payer perspective) with the consumer at the center (personalized) is the strategic kernel.
Bertolini had just returned from China where he snapped this picture of thousands of unoccupied new housing units being constructed in Shenzhen China in a region that aspires to become China’s Silicon Valley (a point not lost on this Stanford audience).
Aetna has concluded a joint venture deal to assist China in its development of the ‘health care of the future”. Bertolini did not go into details about the venture but said that this is a 300 million RMB program and it is based on principles of population health management. China faces a challenge of having 29% of its population over the age of 65 by the year 2030. He noted that this joint venture is not building an insurance product but one that can be underwritten. That said, one of the hottest insurance products in China is a policy for high net worth individuals that will evacuate them for Tertiary and Quaternary care.
The Affordable Care Act exchanges open in October 2013 will unleash a disruptive wave that will ripple through the US healthcare system. Bertolini expects that the long-term effects of this to be dramatic.
I was especially intrigued by Bertolini’s comments on the shift in health care finances towards consumers. In western and southern Europe we are already beginning to see the fight over the social contract promises made after World War II. These are promises that cannot be sustained. In the US the debate is really about the social contract. That is one reason that “The shift to healthcare consumerism is unstoppable and inexorable”, he asserted.
“If we do population health management right we don’t need benefit plans. In this context Bertolini mentioned SCAN, a social HMO in San Diego County. In his vision of the future healthcare financing will be outcomes based and will include such measures as happiness, rather than a discrete set of specific covered services.
“For this to be effective we must have price transparency. We need to move to bundled payments.”
My take-away from this talk is that the future of health insurance in the US is going to be disrupted by IT-enabled care delivery systems who learn quickly how to manage the health of populations and how to combine the network value of this population (via underwriting) with more effective evidence-based resource management. Bertolini did not say this, but it made me wonder about the economic viability of regional payers who do not have the scale to make the kind of investments Aetna is making or the enlightened leadership necessary to guide these tradition-bound and risk-averse organizations. Clearly, Aetna has a major head start.
In future blog posts I’ll comment on the other Health Innovation Summit sessions about recasting patients as consumers, innovation efforts in care delivery organizations, the changing roles of physicians and allied health professions in a reinvented global healthcare system, and what this means for entrepreneurs.
To watch the videos of the 2013 Stanford Health Innovation Summit, including Mark Bertolini’s talk, click here.