Health Business Blog

Health care business consultant and policy expert David E. Williams share his views

Encouraging signs of hospital transparency

The Wall Street Journal reports that a few hospitals are publishing more quality data than required by Medicare’s Hospital Compare website. No hospital is the best in every treatment area, so the overwhelming majority have been unwilling to publish comprehensive data that would show their weak spots. But Dartmouth-Hitchcock Medical Center and The Cleveland Clinic are publishing comprehensive information, while four hospitals in Colorado, and hospitals in New York State are publishing more information than is typically available. (Note: the Dartmouth site was down when I tried it this morning.)

If the trend gathers momentum, it’s just a matter of time before hospitals that don’t publish comprehensive quality information will be at a competitive disadvantage. At some point we can expect to see most or all hospitals publish data on quality and even cost effectiveness.

This trend should be encouraged. It will help hospitals improve their quality and keep costs under control.

Pregnant women lead the way in shopping for health care

Yesterday I contrasted consumer businesses –where sophisticated customers are in the driver’s seat– with health care, where they aren’t. In consumer businesses, like computers, detailed quality and technical information is widely available. And of course prices are posted. None of this is so in health care.

Despite the challenges, unininsured and under-insured pregnant couples are using their sophisticated shopping talents to finding good, affordable maternity care, according to the Wall Street Journal (Childbirth for Bargain-Hunters). They are buying maternity discount cards, such as MaternityCard, and also attempting to negotiate rates with doctors and hospitals, using insurance company reimbursements as their price benchmarks. It’s somewhat reminiscent of how automotive pricing transparency evolved. Everyone used to deal with sticker prices, then slowly adopted Edmunds for dealer cost data and used buying clubs with pre-negotiated discounts. Now, even the dealers quote their prices relative to the invoice.

Childbirth is a clear place to expect consumers to try to take charge. Pregnant couples have an extended encounter with the health care system, giving them time to shop and deal. It’s also often a repeat experience, so the couple knows more-or-less what’s involved. Pregnant women are usually healthy, so they have the energy to confront the system. And pregnancy is for younger people who are more apt to view health care as a consumer service industry and want to engage with their caregivers on a more equal basis.

The customer is king –but not yet the patient

The Economist has a special report this week on how the internet has empowered customers. Dell’s chief marketing officer is quoted as saying, “I am constantly amazed at the confidence level and sophistication of the average consumer.” There is tremendous technical detail and commentary available about computers and other consumer products, and customers have become savvy about their choices. According to the article, when Dell makes a price change on its website it sees an impact within one minute. Consumer oriented companies are now at the mercy of their customers.

Alas, things aren’t like that in health care. Quality data is rudimentary and spotty. For example, a $7.95 profile of my physician on HealthGrades tells where he went to school, what languages he speaks, and whether he has any malpractice judgments against him. So what? The new Hospital Compare website goes a little further with quality data on hospitals, but is limited in scope. (To be fair to the health care system, this is more information than you can easily find on accountants, lawyers, or consultants.)

Now AOL founder Steve Case has announced plans to invest $500 million of his $825 million net worth in launching a new consumer oriented health care, wellness, and resorts company, according to Business Week. Case is motivated by the death from brain cancer of his older brother, Daniel Case III.

[Case] saw for himself just how difficult it is for even the privileged to make well-informed decisions about their care. Case… is interested in [companies] that provide online data about the price and quality of doctors and those that make available electronic medical records; he’s considering everything from high-end personalized health coaching services to clinics housed in Target stores. As he says: “Health care is monumentally complex, confusing, inefficient, and inconvenient. Meanwhile it’s the biggest industry in the country, and everybody hates it.”

Case is not the first tech entrepreneur to look at health care and think he can make things better. I’m reminded of Jim Clark (of Silicon Graphics and Netscape fame) who started Healtheon amidst grandiose talk about revolutionizing health care. He ended up with a successful business formed by mergers and acquisitions, but we’re still awaiting the revolution.

Gene Therapy II

Today’s Boston Globe reports that venture capitalists are starting to invest in gene therapy companies again. The first companies were founded in the mid to late 1980s and failed about 5 years ago. The death of teenager Jesse Gelsinger in a U Penn clinical trial in 1999 started to bring the first era of gene therapy to an end.

The new companies, Applied Genetic Technologies (AGTC), Ceregene, Celladon, Genetix, and Introgen Therapeutics hope to learn from the mistakes of their predecessors. They are improving delivery technologies and being less ambitious on the diseases they target, focusing, for example on diseases that are caused by a single gene. (The Globe article cites my former LEK Consulting colleague Chris Ehrlich of InterWest Partners, which funded AGTC.)

Gene therapy is not the only example of a biotechnology to begin with great hype, disappoint investors and patients, and eventually return to prominence in a new and improved way. A close analogy is monoclonal antibodies.

The first monoclonal antibody was produced in 1975. In the late 1970s and early 80s many articles in the popular press referred to monoclonals as “magic bullets.” The first monoclonal antibody was approved by the FDA in 1986, but then nothing else was approved for eight years. Many clinical trials for cancer failed from 1983 to 1993, and it was only in the late 1990s, after the technology advanced from mouse based to humanized antibodies that antibody based drugs began to fulfill some of their promise. Only now are monoclonal antibodies becoming a significant commercial success.

I hope that gene therapy will work in this investment cycle. If monoclonals are a guide, however, it may take a third round. In 1989, the Wall Street Journal ran an article about how the problems of the original monoclonals had been solved, and proclaimed that, “The long awaited era of magic bullets may now be imminent.” But they were about 10 years too early.

New autism findings pose challenges for regulators

A study presented yesterday at the Experimental Biology 2005 conference in San Diego revealed that many autistic children have low levels of glutathione, an antioxidant that protects against cell damage from oxygen free radicals.

According to the Boston Globe,

The finding is suggestive… because glutathione… is crucial for neutralizing toxic heavy metals such as mercury. [Lead author S. Jill James said,] “One interpretation of this finding is that children with autism would be less able to detoxify and eliminate these heavy metals.”

There is a long-running controversy about whether mercury contributes to autism, and I’ve posted recently about another study that demonstrated a correlation between autism and mercury emission levels in Texas school districts.

Assume for a moment that the findings from the new study hold up, and that a small percentage of people are vulnerable to low levels of mercury in the environment. It provokes some serious questions for environmental regulation:

  • Do we try to set mercury emissions levels so low that no one is harmed? Do we attempt to balance economic benefits with harm done to peoples’ health?
  • Do we expect everyone to get tested to learn their predisposition to mercury poisoning and take steps on their own to avoid mercury (e.g., from fish)? Who pays for the testing?

There are close parallels in pharmaceutical safety:

  • How many moderate, severe, and fatal side effects should we tolerate before a drug that works for some people is pulled from the market?
  • With the advent of pharmacogenomics, can we identify the people who would be harmed by a drug and help them avoid it? Who will pay for the tests?