Radical change often happens suddenly, the result of a single decision or event.
The fall of the Berlin Wall and the dissolution of the USSR stand out as two dramatic political examples. In a social context, Supreme Court decisions in Brown v. Board of Education or Roe v. Wade both radically changed our society.
Then there’s the U.S. health care system. We know it can take 17 years for a new, proven treatment to make its way into routine patient care. But on occasion, the pace accelerates and the industry is taken by storm. The passage of Medicare in 1965 and, more recently, the Affordable Care Act (ACA) in 2010 are two powerful examples. In both cases, the underlying coverage issues were debated for decades. But with their legislative passage, each brought sudden and unprecedented change to U.S. health care.
As we begin the New Year, I invite you to indulge in a thought exercise: Imagine what would happen to our health care system if the following hypothetical scenarios suddenly became reality.
Hypothetical #1: Legal access to medications beyond U.S. borders
What if U.S. patients could purchase prescription drugs from pharmacies in other effectively regulated countries?
When it comes to automobiles, new technologies or retail products, we do not hesitate to take advantage of price differences beyond our borders. Why not allow such an approach for pharmaceutical agents?
Does anyone really believe that brand-name prescription drugs sold at significantly discounted prices across our northern border — or in countries like England or Switzerland — are inferior to the exact same brands provided by pharmacies in the U.S.? Big pharma, also known as the U.S. drug lobby, wields massive political power. They are the reason this practice is prohibited.
Were this hypothetical to become a reality, we could expect U.S. drug companies to reduce their supply to those nations that would sell to Americans at lower prices. The U.S. government could counter this move with reference pricing regulations. In other words, public payers would only reimburse the price offered overseas for any given medication. Patients would be required to pick up the rest.
We have seen this in other areas of health care. The Pacific Business Group on Health (PBGH) limited what it would pay for hip replacements. Hospitals subsequently dropped the price of the procedure. With medications, market forces would likely drive down prices and put the U.S. at par with the rest of the world. This hypothetical raises an important question: How much longer do we want U.S. patients to pay more than the rest of the world for the exact same medications?
Hypothetical #2: Raising the regulatory bar for new devices and drugs
What if all new medical devices and drugs that target a specific condition had to be tested against those currently on the market? And what if they couldn’t be sold at a premium if their outcomes didn’t prove significantly better?
Once a new drug is proven relatively safe, the bar for regulatory approval by the Food and Drug Administration (FDA) is low. Manufacturers only are required to test new medications against placebo, not against similar medications currently on the market. If every new medication or device had to be tested against the best available alternative, then patients — not manufacturers — could decide whether the difference in outcome was worth the dramatically higher price.
Patients deserve this information. Without it, aggressive advertising, persistent drug reps and guaranteed long-term patent protection enable new pills to be sold at extremely high prices without letting anyone to be sure they’re worth it.
Device manufacturers enjoy similar opportunities and advantages. In addition, they can forgo the standard approval pathway by seeking it through the Premarket Notification or 510(k) clearance. Per the 510(k) clearance, new devices are expeditiously approved if deemed “equivalent” to an existing device on the market. Of course, once the device hits the market, the company’s sales force will claim the new product is unique and therefore warrants its much higher price.
By raising the regulatory approval bar, regulators could better protect the health (and life savings) of U.S. patients. But the strength of drug and device manufacturer lobbies has blocked these requirements, so far.
Hypothetical #3: New accreditation standards to improve surgical outcomes
What if the Joint Commission for Accreditation of Health Care Organizations (JCAHO) refused to accredit facilities with low surgical volumes and thereby improved the quality of outcomes while lowering costs?
More surgical experience produces higher quality outcomes for patients undergoing complex procedures. The reason is simple: higher volumes allow surgical teams to become more specialized in the procedures they do and more comfortable working together.
Higher-volume facilities don’t just produce higher quality outcomes, they produce economies of scale. When volume is low, there’s high variation in daily demand. Some days are busy, others very slow. Nevertheless, the medical staff at low-volume facilities is paid even when service is idle.
Centralizing patient volume would reduce the daily variation, making daily demand more predictable. It would also lower the total cost of surgery for patients. Manufacturers across the world embrace this basic and fundamental economic principle. Why not doctors and hospitals?
Hypothetical #4: Routine use of mobile and video technology
What if insurance companies refused to pay health care providers more for an in-person office visit than a video visit when the medical problem could be addressed equally well in either fashion?
Telemedicine, the use of video technology, has the potential to make medical care more convenient by eliminating the need for patients to drive to the doctor’s office. Anyone who has used Skype or FaceTime to speak with a faraway loved one understands how simple this technology can be to use.
Doing so for medical purposes would lower operational costs, and require less capital investment and fewer office staff.
Of course, there are no technological alternatives for those times when patients require a physical exam. And certainly some patients prefer to be seen in person. But that’s not what’s stopping “virtual visits” from becoming standard practice. The reimbursement system is.
Most insurers pay physicians to see patients only in their offices. And doctors prefer this approach. It doesn’t matter that virtual care could be provided twice as conveniently at half the price.
If we look to other industries, we can predict that most patients would embrace the convenience of telemedicine if it were available.
Health care delivery is structured around the preferences (and economic incentives) of doctors, not patients. We can expect that once reimbursement guidelines shift, so too will this practice.
Going from hypothetical to reality
Of course, these four hypotheticals are merely “what ifs” for now. None are likely to become realities in 2014.
Legislation around reference-based pricing would require overcoming a lot of inertia. Drug and device lobbies are powerful opponents of new regulations. New medical accreditation standards would require setting minimal volumes that are not yet defined. And getting value from telemedicine would necessitate tough standards to avoid doctors creating virtual visits without value.
We shouldn’t underestimate the inherent challenges and resistance in trying to implement major change. But all of these hypotheticals are possible with the right amount of financial incentive and political will.
Besides, ask yourself: If these four hypotheticals became our reality, would we miss the way things are today?