3 Obstacles Blocking Healthcare Innovation

Efforts to create a sustainable value-based healthcare delivery system face financial, social, and political barriers.

Talking about healthcare innovation is a hopeful exercise. Tackling obstacles to innovation is hard work.

I recently attended a conference in Boston that focused on innovation in the healthcare industry. The news story I wrote about the conference delved into the exciting innovative work the forum participants discussed. You are now reading the untold story I have been itching to write for nearly a month.

I reached out to three of the forum's participants to pick their brains about obstacles to change in healthcare: Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, a research and advocacy group in Pittsburgh; Anita Goel, MD, PhD, chair and CEO of Nanobiosym, based in Cambridge, MA; and David Hare, chief executive of National Health Service Partners Network in the United Kingdom.

Miller commented on financial barriers to innovation. Hospitals and physicians are floundering under the weight of ill-advised and uncompensated fixed costs—a trend that will worsen with the advent of population health management, unless addressed by new payment systems.

"We want hospitals to have emergency rooms, operating suites, and cardiac catheterization labs ready to go 24/7 when we have an accident or heart attack, but we don't pay hospitals for standby services, we only pay them when they have admissions and do procedures. It's not just hospitals that have this problem; physician practices also have significant fixed costs to cover, but they are only paid for office visits and procedures," Miller says. "That means that when a hospital has fewer admissions and readmissions and when a physician practice helps its patients stay healthier, their revenues will decrease faster than their costs."

Payment reforms are crucial to clearing the financial obstacles blocking value-based healthcare innovation, he told me.

"You can't solve that problem by adding small bonuses or penalties on top of the existing fee-for-service system. That's the weakness with most shared savings programs, and it's why many high-quality healthcare organizations have been exiting Medicare's Pioneer ACO program," Miller says. "Providers need completely different payment systems—such as bundled payments, warrantied payments, condition-based payments, and global payments—that give them the flexibility to redesign care in a way that reduces overall spending for payers in a way that is financially feasible for the providers."

The hard work of innovation comes with a payoff, he says. "The good news is that better payment systems can enable win-win-win solutions: Patients can get better care, payers can spend less than they do today, and providers can actually improve their operating margins."

Patience goes with the toil. "This can't happen overnight, though. There will need to be a transition, and healthcare providers and purchasers-payers will need to work together to achieve win-win-win results through that transition."

Goel talked about how consciousness is acting as a barrier to healthcare innovation on several fronts.

Nanobiosym has developed a mobile device platform that enables low-cost but highly sensitive and accurate diagnostics in real time. Goel's vision for developing nanobiophysics technology at a low cost is a potentially revolutionary approach to patient care, one which is the polar opposite of the prevailing notion that equates medical technology with multimillion-dollar equipment such as advanced imaging and radiography machinery.

"I believe we should promote the consciousness that high-technology innovation can help to reduce prices and increase access to a particular commodity. Google, for example, decentralized access to information and made it more affordable for the masses. Likewise, cellular technology enabled vastly larger numbers of people to have access to telecommunications. In our case, I believe that our nanobiophysics solutions will help to democratize access to healthcare on a global scale," Goel told me.

She says the U.S. healthcare system is ripe for disruption.

"Our consciousness in the healthcare industry is very much rooted in a centralized paradigm dating back to the Industrial Revolution of the 1700s," Goel says. "Just like Google disrupted the information industry and a country like India went from a few hundred thousand land lines a little over a decade ago to over 900 million cell phones today, I believe we are at the tipping point of a similar impending disruption in the healthcare industry."

She believes a change of consciousness will be required to achieve the kind of financial reforms Miller is advocating in healthcare.

"The consciousness in the financing industry is not always aligned with what the broader stakeholders of the healthcare ecosystem want," Goel told me, noting the widespread focus on maximizing return on investment in the shortest amount of time.

The financial obsession over ROI is "a consciousness that undermines the commercialization of disruptive innovations that threaten traditional revenue streams and requires extra time to establish niche markets in the midst of legacy infrastructure and entrenched business models. … Often the best way to maximize ROI is to sell out to the competitors, who will pay the highest price just to avoid disruption of their revenue stream," she says.

Lastly, I asked Hare to shine light on the tangled political webs in democratic societies that snare healthcare innovation.

"The party political divide in the U.K. over the future of the National Health Service is very real but it is not as acute as in the U.S.," he told me. "This is because reform in the NHS has actually been incredibly slow and has allowed politicians to cluster around a general outlook whilst disagreeing at the margins. In the U.S., how healthcare is paid for and delivered has opened up a much deeper fault line, and the consequences of that will play out for some time."

Hare made a bold statement at the Boston forum that will resonate with U.S. healthcare provider leaders: "The hospital is the symbol of healthcare, and we need to change that." Apparently, the United Kingdom and its former crown jewel colony across the Atlantic are charting similarly perilous political courses.

"One of the biggest challenges facing policymakers in healthcare is to shift thinking from the institution to the citizen. Institutions treat patients, but for people to live healthier lives healthcare systems need to adapt to support and inform greater self-care and management of long-term conditions. This will entail using resources differently and de-commissioning services that are no longer fit for purpose," he told me. "Here, local politics can be a bigger barrier than national politics, and finding a way through the politics of these changes is going to be one of the biggest issues healthcare leaders face in the coming years."