What drives healthcare costs lower: Cures vs treatments?

Steven Loeb · September 30, 2019 · Short URL: https://vator.tv/n/4ecf

At Invent Health, not all panelists agreed about whether better care equals cheaper care

It's pretty well known that healthcare costs are rising, while the quality of care in the United States continues to lag behind many other countries. It's a problem that affects every aspect of our healthcare system, including outcomes for patients. But would creating better outcomes actually lead to lower costs? The best outcome seems to be a cure for a disease vs a treatment that keeps a person healthy but dependent on a plan. At the same time, the question is whether that a cure for a few would be something society has to shoulder. 

These high-level philosophical and ethical questions were debated during the Reinventing the Doctor salon, hosted by Vator, UCSF Health Hub and HP, in a panel moderated by Dr. Archana Dubey (Global Medical Director, HP), and Bambi Francisco Roizen (Founder and CEO, Vator), with panelists Michael D. Abramoff (CEO & Founder, IDx), Dr. Aswin Chandrakantan (Chief Medical Officer & SVP Corporate Development, Komodo Health), Liz Rockett (Partner, Kaiser Permanente Ventures),  David McAughan (COO, Providence Express Care), Drew Oetting (Founding Partner, 8VC). 

Francisco kicked off this part of the discussion by asking Oetting about 8VC's investment in IDx, to which Oetting admitted he had an inside track, as his father works with Abramoff.  

Oetting spoke about what he looks for when he invests in a healthcare company, one piece being "an ability to deal with regulatory complexity," something that he believes IDx has done from an FDA perspective, but also a Healthcare Effectiveness Data and Information Set (HEDIS) perspective. Another thing he looks for is the ability to reduce costs. 

"A lot of startups have a value proposition that says, ‘Well, we’re going to create an ROI in this sort of universal way by creating efficiency.’ I think that maybe you can sell that, but it’s a lot easier to say, ‘For each patient we’re going to reduce cost. Or we’re going to reduce revenue.’ That’s pretty powerful," he said. 

"It seems like you’re more focused on point solutions, because they are much more laser focused. They are looking at one pain point and then trying to solve it for the patient to provider journey and then have a workflow attached to it, have regulatory attached to it," HP's Dubey said to him, to which Oetting responded that "it really depends."

"We’re invested in IDx, which I view as a point solution that has huge implications across a large population, and it makes sense in a fee-for-service world, but in a value-based world, or a health economic world, makes even more sense. That, to me, is a win," he said. 

Komodo Health's Chandrakantan chimed in, stating that "by improving you actually solve the cost equation."

"So many times we talk about the cost as, ‘We need to improve revenue’ and I agree with that; I believe, though, that if you get to earlier treatments because of earlier diagnosis, because you’re finding diseases faster, you’re getting them on the right therapy, you're seeing the right specialist, you're on the right intervention, all of those things create value to the system," he said. "They create value to the patient, who gets the possible outcomes, and they reduce costs. So, it’s actually incredibly important that we all recognize that improving outcomes fundamentally improves the cost, the entire efficiency equation.

Ultimately, Chandrakantan believes that the healthcare system will "be able to optimize the outcomes for every single sub-cohort that it actually fundamentally drives efficiency in the system and also improves costs." That will be the opposite of the way that healthcare operates now, where specific sub-cohorts are not fully understood, meaning the cost of care is based on what the average patient would pay rather than on what that specific person needs. 

Oetting agreed, noting that that's true for 90 percent of things, "but once we solve that 90 percent, then there’s a real question, which is: what does an outcome mean?" he said.

"You have a terrible disease you just got diagnosed with, and you’re going to die in three months. I have a gene therapy that can cure you, and you’re going to live but it's going to cost you $1 million a year, plus my gene therapy will cost you $5 million. There’s a real question, what does the outcome mean? I cured you, so it’s great for you, I think, but is it great for everyone else? We are going to get soon to a world where these conversations start happening, where there’s incredible technology, or incredible solutions that are presented, and there’s going to be this zero sum discussion."

Cures vs treatments

In Chandrakantan's view, the world is moving toward focusing on the cost of cures, which is much different than a world where a diabetes patient has to be on medication for 40 years. 

"In a world in which we move everything towards a cure, it reduces, or eliminates, these false trade offs, where it’s like, ‘I need to choose between kind of curing you, or not curing you.’ So, we’re already kind of there; we’re seeing these in gene therapies where you’re not going to have blindness because we’re going to fundamentally repair this gene. I believe the overall trend in life sciences is towards curative therapies that are actually value-accretive to the entire system," he said.

Not everyone on the panel was as optimistic about the way things are going to go in terms of cost reduction, however. As Express Care's McAughan put it, keeping people alive longer by curing them doesn't necessarily reduce cost, since they will eventually get sick again as they age. 

"We all know that the cost of health is generally, majority, tied to the end of life. So, the more curative we are, the more people are going to have longer lives and we’re going to have more people living so that’s actually going to drive up the cost of our healthcare system, the way it’s orchestrated today," he said.

"Changing where I spend the money may solve these sort of chronic diseases but I’m still spending into our health system at the end of life because they have some new disease they wouldn’t have had because they would have died."

Rockett was also skeptical, noting that, "In the U.S. health system, in general, cost and quality have absolutely not been correlated, at all, for a very long time. So paying more or paying less has not been tied to better outcomes. There’s not a lot of correlation there."

While she said she appreciates the vision of focusing less on the patient population and more about the specific patient, she noted that Kaiser thinks very differently about outcome and cost, choosing a more practical approach of selling into the system as it currently is, rather than trying to change it. 

"For any work and innovation, there’s going to be those data models and all the different incentives that exist, and accepting them as they are today is important," said Rockett.

"We learned this first with Omada, where diabetes prevention was better from a cost perspective, better for the patient, all things that are good, but you could not get the system to take the technology and put their care managers against that problem," she explained. "You had to offer the full service. If you're playing in that, ‘Your outcomes are going to improve and your costs will go down,’ they can still not work because of some of the incentives in the system. And, if we're thinking about that, what is the business model? It’s really important to take our crazy system as it is, learn from it and find a way to work with it." 

Thanks to our sponsors Avison Young, ScrubbedStratpointUCSF Health Hub and HP.

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IDx’s first solution was envisioned nearly 20 years ago when founder Dr. Michael Abramoff was working as a practicing ophthalmologist in the Netherlands.

Dr. Abramoff noticed how much time he spent screening people for diabetic retinopathy who did not have disease, while people who were going blind had to wait months to be diagnosed.

“This is so inefficient,” he thought. “There has to be a better way.”

Frustrated, Dr. Abramoff, who had previous training in artificial intelligence and software development, began to research ways to automate the process of detecting diabetic retinopathy.

In 2010, Dr. Abramoff realized that in order to have the biggest impact on healthcare productivity, he needed to develop fully autonomous systems capable of making medical decisions by themselves. This led him to found IDx to further develop the scientific research so these autonomous AI systems could reach patients safely and effectively.

Today, the automated diabetic retinopathy diagnostic solution Dr. Abramoff had envisioned years ago is a fully developed product called IDx-DR that is authorized by the FDA for use in clinical care.

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Bambi Francisco Roizen

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Author of "Unequally Yoked"; Co-founder Vator and Invent Health; Former Columnist/correspondent Dow Jones MarketWatch; Business anchor CBS affiliate KPIX

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Archana Dubey, MD

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Liz Rockett

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Venture investor for Kaiser Permanente Ventures focused on healthcare IT, digital health and tech-enabled services in healthcare. Board director at Big Health, Chrono Therapeutics, board observer to Omada, Vapotherm, LP advisor to Rock Health.