So, what are the solutions to these Hobson “Choice” in Medicine Project dilemmas? Allow us to offer some emerging suggestions to consider.




Consumer-Driven Healthcare & Health Savings Accounts [HSAs]

According to colleague and Associate Professor Gregory O. Ginn; PhD, MBA, CPA, MEd., of the University of Las Vegas, an important emerging trend today is consumer-driven healthcare [CDHC] as patients become more knowledgeable and demanding about the quality of care they receive.

According to, CDHC refers to health insurance plans that allow members to use personal Health Savings Accounts (HSAs), or similar medical payment products to pay routine health care expenses directly, while a high-deductible health insurance policy protects them from catastrophic medical expenses. High-deductible policies cost less, but the user pays routine medical claims using a pre-funded spending account, often with a special debit card provided by a bank or insurance plan. If the balance on this account runs out, the user then pays claims just like under a regular deductible. Users keep any unused balance or “rollover” at the end of the year to increase future balances, or to invest for future expenses.

Benefits managers in particular are proponents of consumer-driven healthcare. They argue that employers should focus on which plans create the most value, go with quality, get employees to pay more, and move to a defined contribution approach. The concept of consumer-driven healthcare is being implemented in employer strategies to change participant and provider strategies. This trend stimulates competition among providers based on both price and quality and forces providers to offer more information about cost and quality. Providers who successfully differentiate their strategies to respond to this trend may benefit financially.

Consumer-driven healthcare will have major ramifications for the operations management function in hospitals;too. In order for hospitals to compete on both price and quality, they will need to develop greater flexibility in order to differentiate their service offerings. Such flexibility is not likely to occur without sophisticated information systems that allow for data integration. Of course, considerable staffing and training changes may be in order to provide this type of service. 



Direct Medical Care Reimbursement

A cash-based medical practice or direct care provider has these basic duties:

  1. to comply with statutory duties such as the drug laws
  2. to obtain proper consent for medical care
  3. to render care that is not substantially inferior to that offered by like providers

A breach of any of these duties that causes harm to a patient can result in a malpractice suit. While the first two duties are important, it is the duty to render good quality medical care that is the basis for most malpractice lawsuits. The breach of this duty is most likely to result in a serious patient injury. The prevention of such negligent injuries is the responsibility of the individual provider, but it also basic to the institution’s quality control program.

From the individual provider’s point of view, quality control involves continuing education, attention to detail, and retrospective review of the course of the provider’s patients. The process is only loosely structured and is usually poorly documented. This lack of formal structure is less important for the individual provider because the provider’s actions are judged only within the context of the injured patient in question (although previous actions may be used to negate claims of accidental injury).

Ad so, the legal questions is whether the care rendered the injured patient was negligent. It is not relevant to the case if the provider carried out an effective personal quality control program.


Concierge Retainer Medicine

Briefly, a new-wave boutique, or concierge medical practice business model requires an annual retainer fee for personalized treatment that includes amenities far beyond those offered in the typical practice. And, as doctors may not accept Medicare patients for two years thereafter, there is no going back to the economic oasis if the model doesn’t pan out.

Rather, patients pay annual out-of-pocket fees for top tier service, but also use traditional health insurance to cover allowable expenses, such as inpatient hospital stays, outpatient diagnostics and care, and basic tests and physician exams.

Typical annual fees can range from $1,000 to $ 5,000 per patient, to family fees that top $20,000 a year, or more.  The concept, initially developed for busy corporate executives, has now made its way to those desiring such service; but the masses have been slow to accept the new business model.


Transparent Medical Pricing Models

Back in 2007, federal and state legislatures first called for hospitals across the country to make their prices “transparent.” The term was defined as the full, accurate, and timely disclosure of hospital charges to consumers of healthcare, as well as the process employed to arrive at those fees. Moreover, transparency does not merely involve publishing a list of prices and fees.  Essentially, hospital CXOs must be able to present their prices in a manner that is understandable to the general public and they must be prepared to explain the rationale behind their charges. More recently, at least 38 states have already proposed or passed legislation regarding publication of hospital charges.

For example, the average cost for a hip, knee or ankle joint replacement is $38,443; while a heart valve operation is $124,561and a back fusion is $60,406.  Torrance California based HealthCare Partners now notes on its Website that it charges $15 for flu vaccines, $61 for a chest X-ray, while a colonoscopy costs $424.

hospital bills


Retail Medicine 

As clinicians continue to debate the merits and limitations of retail clinics, it is increasingly clear that they are here to stay. These nontraditional sites have proliferated around the country, appealing directly to patients’ desires for convenience in ways that many traditional primary care practices do not. A report by the Robert Wood Johnson Foundation found that retail clinics have increased by 900 percent over the last decade, an expansion that represented 10.5 million patient visits in 2012.

Although some concerns about this trend have merit, retail clinics could also create positive disruption for the medical community.

As one new facet of the emerging value-based health care system,  according to  Kyle Morawski MD and Joshua Liao MD, they can nudge clinician organizations to grapple with strategies for interacting with and caring for patients who utilize both traditional and nontraditional care setting. This a welcome tension to the degree that it leads traditional sites to provide better care and innovate in the name of better health.

Urgent Care Centers

The Convenient Care Association [CCA] is comprised of companies, medical providers and healthcare systems that provide patients and consumers with accessible, [urgent], affordable and quality healthcare in retail-based locations. The CCA works primarily to enhance and sustain the growth of the convenient care industry through sharing of best practices and common standards of operation.


The CCA was founded in October 2006 and the first Convenient Care Clinics [CCCs] opened in 2000. The industry grew quickly since then. Today there are approximately 1,060 clinics in operation, and CCA member clinics represent more than 95% of the industry.

To date, CCCs have served more than 3.5 million patients with its nurse practitioners [NPs] and physician assistants [PAs]. With this rapid expansion, and projected continued growth, it quickly became clear that the shared concerns and needs of both providers and patients could best be served through an association that allowed for:

  • Sharing best practices, common standards of operation, experiences and ideas.
  • Developing common standards of operation to ensure the highest quality of care.
  • A united voice to advance the needs of CCCs and their customers
  • A unified effort to promote the concept of CCCs, and to respond to questions about this evolving industry.
  • Reaching out to the existing medical community and creating new partnerships.
  • Building synergies with traditional medical service providers.

The Public Health Management Corporation [PHMC], a nonprofit public health institute, provides executive management and administrative support for the Convenient Care Association.



Crowd Sourced Medicine 

Do-it-yourself healthcare, in the guise of, harnesses the wisdom of crowds to collaboratively solve even the world’s most difficult medical cases quickly and accurately online. The company offers individuals, insurance providers, and self-insured corporate customers the ability to more quickly diagnose medical conditions and reduce healthcare costs without compromising care. Founded by veteran technology entrepreneur Jared Heyman and based in San Francisco, CA, CrowdMed has received more than $2.4 million in funding from some of Silicon Valley’s top venture capital firms including NEA, Andreessen Horowitz, Greylock Partners, SV Angel, Khosla Ventures and Y Combinator. The company’s advisors have founded and run some the world’s most successful online healthcare companies including WebMD. CrowdMed graduated from Y Combinator’s Winter 2013 class, and was officially launched during the TEDMED 2013 conference in Washington DC. So, US physicians and consumers may be ready to embrace a dramatic expansion of the high-tech, personal medical kit. And, wearable technology, smartphone-linked devices and mobile apps will become increasingly valuable in care delivery. Other firms like 23andMe, Navigenics, DeCodeMe, CollabRx and Cure Together, hope that genomics and aggregated patient experiences will advance fast enough so the current epidemic of “more diagnosis with less ability to change outcomes” will morph into one where knowing your  future averts adverse medical consequences.


On-Demand Health

News that telehealth companies Teladoc and Avizia attracted tens of millions of dollars in funding in 2016 is the latest example of the seriousness investors are placing on growth of healthcare on demand. The investment in Teladoc brings to more than $250 million the backing the telehealth company has received from venture capitalists, Accenture. Meanwhile, American Well has raised more than $140 million. The U.S. market for “virtual consultations” in the primary care space alone is projected to grow by more than 23% a year for the next five years, according to market research firm I.H.S. Total virtual primary care consultations are projected to jump from 2.7 million this year to 5.4 million in 2020.Among the companies in that market include American Well, Doctor On Demand, HealthTap, MDLive and Teladoc. I.H.S. doesn’t count consultations via telephone in its calculations because they are less personal.



Crowd-Source Pharma

What’s a neglected disease? It’s one that as much as half the world’s population is at risk of dying from, but which nevertheless doesn’t present an attractive profit target for any of the major pharmaceutical companies. Why? Because once again, those at risk can’t pay as much as patients in the developed world, and those in the developed world rarely get the disease. Diseases like malaria and drug resistant tuberculosis, which together claim millions of lives a year in developing countries. Open Source Pharma holds the promise of addressing these appalling realities, and it’s therefore imperative that it take hold in the marketplace.
While the name doesn’t fully explain what CSP is, it certainly suggests what it’s all about. But before we turn to a detailed definition, let’s look at what the alternative looks like. Today, pharmaceutical development is the very epitome of a proprietary business. Research results are closely guarded, developments are immediately patented, and ingenious strategies are employed to extend that patent protection for sometimes decades after the original drug should have become generic. Yet at the same time, the great majority of actual innovation goes on in universities rather than at the big pharma’s, often funded by government and non-profit grants. When innovative new startups do pop up, they are soon purchased by the big pharmas, thereby reducing the diversity of innovation.


Crowd-Sourced Prescription Delivery

Prescription delivery isn’t really that new. Local drugstores have been delivering prescriptions for ages, while ExpressScripts has similarly shipped your prescriptions through the mail. The difference, however, is the relationship of the deliveryman to the prescription.

On one hand, the corner pharmacy is sending out an employee with your medications, presumably someone who has been vetted to a certain degree by the pharmacist running the drugstore, while the mail carrier is a federal government employee who has undergone a level of scrutiny before he or she was hired. The Walgreens venture is something very different, as it entrusts our medications to someone with an unknown history — a relationship that carries with it a level of risk.


Accountable Care Organizations; Value-based Payment Models and  Bundled Payments

Current payment models reward providers for the number of procedures performed rather than for the quality of care provided. In fact, lower quality of care may result in higher payments when factors such as hospital readmissions are considered. Health Payers are looking for ways to change their focus from claims payment to being more involved in patient care. This includes focusing on wellness, care management and looking for ways to share the risks involved in payment for services. This has led to the emergence of value-based contracting models. Plans are working to drive business outcomes because evolving regulatory mandates and market conditions are creating both challenges and opportunities. This new paradigm is creating a demand for critical thinking and foresight. The successful plan will use both to create a new type of healthcare system.


Pay-for-Performance [P4PPhysician Compensation

According to Mark Fendrick, MD and Michael E. Chernew, PhD, instead of the one size fits all approach of traditional health insurance, a “clinically-sensitive” cost-sharing system that supports co-payments related to evidence-based value for targeted patients is emerging. In 2014, for example, there were a number of changes to Medicare’s pay-for-performance programs. These value-based payment modifiers will show up in physicians’ paychecks in few years, and will be expanded to practices with 10 or more eligible professionals. The program, mandated by the Affordable Care Act, assesses a provider’s quality of care and costs, and increases Medicare payments for good performers and decreases them for bad ones. And, doctor performance will be reflected in adjustments to 2016 payments. As much as 2% of Medicare payments will be at risk in 2016 based on physician performance in 2014. It was only 1% for 2015, which was based on doctors’ 2013 performance.


Capitation – The Next Generation


According to Richard Eskow, CEO of Health Knowledge Systems of Los Angeles, capitated medical reimbursement has been used in one form or another, in every attempt at healthcare reform since the Norman Conquest. Some even say an earlier variant existed in ancient China.

Initially, when Henry I assumed the throne of the newly combined kingdoms of England and Normandy, he initiated a sweeping set of healthcare reforms. Historical documents, though muddled, indicate that soon thereafter at least one “physician,” John of Essex, received a flat payment honorarium of one penny per day for his efforts. Historian Edward J. Kealey opined that sum was roughly equal to that paid to a foot-soldier or a blind person. Clearer historical evidence suggests that American doctors in the mid-19th century were receiving capitation-like payments. No less an authoritative figure than Mark Twain, in fact, is on record as saying that during his boyhood in Hannibal, MO his parents paid the local doctor $25/year for taking care of the entire family regardless of their state of health.

Later, Sidney Garfield MD [1905-1984] is noted as one of the great under-appreciated geniuses of 20th century American medicine stood in the shadow cast by his more celebrated partner, Henry J. Kaiser. Garfield was not the first physician to embrace the notion of prepayment capitation, nor was he the first to understand that physicians working together in multi-specialty groups could, through collaboration and continuity of care, outperform their solo practice colleagues in almost every measure of quality and efficiency. The Mayo brothers, of course, had prior claim to that distinction. What Garfield did, was marry prepayment to group practice, providing aligned financial incentives across every physician and specialty in his medical group, as well as a culture of group accountability for the care of every member of the affiliated health plan. He called it “the new economics of medicine,” and at its heart was a fundamentally new paradigm of care that emphasized – prevention before treatment – and health before sickness.  Under his model: the fewer the sick – the greater the remuneration. And: the less serious the illness, the better off the patient and the doctors.

Such ideas were heresy to the reigning fee-for-service, solo practice, ideologues of the mainstream medical establishment of the 1940s and ‘50s, of course. Throughout the period, Garfield and his group physicians were routinely castigated by leaders of the AMA and county medical associations as socialistic and unethical. The local medical associations in Garfield’s expanding service areas – the San Francisco Bay Area, Los Angeles, and Portland, Oregon – blocked group practice physicians from association membership, effectively shutting them out of local hospitals, denying them patient referrals or specialty society accreditation. Twice in the 1940s, formal medical association charges were brought against Garfield personally, at one time temporarily succeeding in suspending his license to practice medicine.

Of course, capitation payments made a comeback in the first cost-cutting managed care era of the 1980-90s because fee-for-service medicine created perverse incentives for physicians by paying more for treating illnesses and injuries than it does for preventing them — or even for diagnosing them early and reducing the need for intensive treatment later. Nevertheless, the modern managed care industry’s experience with capitation wasn’t initially a good one. The 1980-90s saw a number of HMOs attempt to put independent physicians, especially primary care doctors, into a capitation reimbursement model. The result was often negative for patients, who found that their doctors were far less willing to see them — and saw them for briefer visits — when they were receiving no additional income for their effort. Attempts were also made to aggregate various types of health providers — including hospitals and physicians in multiple specialties — into “capitation groups” that were collectively responsible for delivering care to a defined patient group. These included healthcare facilities and medical providers of all types: physicians, osteopaths, podiatrists, dentists, optometrists, pharmacies, physical therapists, hospitals and skilled nursing homes, etc.

However, the healthcare industry isn’t collective by nature, and these efforts tended to be too complicated to succeed. One lesson that these experiments taught is that provider behavior is difficult to change unless the relationship between that behavior and its consequences is fairly direct and easy to understand. Today, the concept of prepayment and medical capitation is to uncouple compensation from the actual number of patients seen, or treatments and interventions performed. This is akin to a fixed price restaurant menu, as opposed to an àla carte eatery.


Patient Centricity

According to Jeremy Wallman, a consultant based in Connecticut, patient-customer centricity in the form of patient choice has been a mantra of managed care organizations for well over a decade. If you listen closely, you can hear plaintive cries of our care providers, lamenting the labyrinthine, almost Kafka-esque system of prior authorization, reimbursement, meaningful use, and near-real-time obsolescence of medical technology. The crushing weight of reform, the perverted incentives created by volume-based reimbursement, and the soaring costs of doing business have created a situation — much like public education – where our system is fueled primarily by the power of a dedicated and passionate community whose members are motivated by their desire to care for other human beings.

“How can we possibly think about self-service websites when we are holding back an imploding healthcare delivery system”. Maybe we need to ask a more basic question …. is the U.S. healthcare system viable in the long-term? That question might simply be too hard to answer. So instead, we try to convince ourselves that delivering medical care should be treated as a business. Innovation and value are fueled by financial incentives and healthcare is no different.

But, healthcare it is different … It is very different. 

For example, in some particularly competitive/ wealthy markets, the medical industrial complex is offering differentiated services … delivery rooms with hotel-style amenities, upgraded menus, physician concierge services, etc., usually available for an extra charge. But, these services are not adding to anyone’s bottom line … they are just attracting those few patients who have the luxury of choice. Where is the value here? 

So, perhaps it is time to acknowledge what the policy wonks have been saying all along … the challenges of our healthcare system will be addressed by creating value for all public health stakeholders in the value chain triad, not just patients. And, instead of working to delight patients, we should be working to remove the barriers to achieving efficiency and sustainability.

At that point; patients, payers, providers and public health advocates can focus on Dr. Arnold Relman’s original vision and what is most important – making human beings healthier.


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