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Solving the Wanamaker Problem for Healthcare (pdf with notes)


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Finding a solution to Wanamaker's complaint, "Half of my advertising doesn't work, I just don't know which half" fueled the consumer internet revolution. We are now in the process of finding and solving a similar dilemma in healthcare. I offer some lessons from Silicon Valley for Healthcare

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Solving the Wanamaker Problem for Healthcare (pdf with notes)

  1. 1. Solving the Wanamaker Problem for Healthcare Tim O’Reilly O’Reilly Media StrataRx October 16, 2012Tuesday, October 16, 12
  2. 2. How Data Science is Transforming Healthcare • Changing healthcare business models • Enabling new scientific breakthroughs • Empowering patients • Changing tradeoffs between privacy and efficacy, October 16, 12I recently published a short booklet/ebook on how data science is transforming healthcare.
  3. 3. Big ideas from Silicon Valley that will shape the futureTuesday, October 16, 12 It discusses some big ideas from Silicon Valley that I believe will shape the future of health care, both on the payment and business side and on the clinical side. Many of you know way more about health care than I will ever learn, so I’ll focus on the lessons from the technology community.
  4. 4. Solving The Wanamaker Problem for Healthcare “Half the money I spend on advertising is wasted; the trouble is I dont know which half.” - John Wanamaker (1838-1922)Tuesday, October 16, 12I want to start with this quote from 19th century department store magnate John Wanamaker, who was said to have remarked,“Half the money ...” Faced with a healthcare system that is breaking under the strain, we ask “How can we just pay for the thingsthat work?”
  5. 5. Tuesday, October 16, 12Google’s Pay Per Click model solved the Wanamaker Problem for advertising--we pay for clicks, not just impressions.
  6. 6. Tuesday, October 16, 12Accountable Care is an attempt to do for healthcare payments in the US what Google did for advertising.
  7. 7. “What I learned from Google is to only invest in things that close the loop.” - Chris SaccaTuesday, October 16, 12Investor Chris Sacca, who used to run special projects for Google, remarked “What I learned...”We see this pattern everywhere in healthcare innovation today.
  8. 8. Tuesday, October 16, 12Public awareness of the power of data to transform healthcare has been building.Most of you must have seen Atul Gawande’s writeup of the enormous savings that Dr. Jeffrey Brenner was able to achieve inCamden, NJ by using data to figure out why some patients were costing the system a disproportionate amount of money.
  9. 9. Tuesday, October 16, 12Or Gawande’s most famous piece, the Cost Conundrum, in which he highlighted the fact that quality of care is, if anything,inversely correlated with cost.
  10. 10. “Price increases, not increases in utilization, caused most of the increases in health care costs during the past few years in Massachusetts. Higher priced hospitals are gaining market share at the expense of lower priced hospitals, which are losing volume. The commercial health care marketplace has been distorted by contracting practices that reinforce and perpetuate disparities in pricing.”Tuesday, October 16, 12The irony, of course, is that Gawande himself works as a surgeon for one of the largest health care providers in Massachusetts,which has used its market power to demand higher than normal reimbursements. Here’s a quote from the Attorney General’sreport.
  11. 11. “A friend of mine jokingly said, "Whats all this talk about the US health care system being inefficient? If we consider that the system was designed to transfer money from consumers to the various parts of the health care industry, we are twice as effective as the world average! Why would we expect that a free enterprise health care system designed by hospitals, doctors, pharmaceutical and device companies, IT firms, and industry consultants and suppliers would do anything other than maximize transfers of this sort?" Paul Levy, 2012/10/when-you-think-about-it-that-way.htmlTuesday, October 16, 12This is an illustration of the perverse incentives that still remain in our healthcare payment system. Paul Levy, the former CEO ofthe Beth Israel Deaconess Medical Center, described this situation well.
  12. 12. Feedback Loops and “Algorithmic Regulation”Tuesday, October 16, 12I want to move on, and to talk a bit about where all this is taking us - towards systems that are algorithmically driven andtherefore must be “algorithmically regulated.” I’m told that “regulation” has become a dirty word in Washington, and that weshould just talk about making markets work better. Well, I’m not going to back down. One of the things that make marketswork better is the right kind of regulation. Your car’s carburetor or fuel injection system is a regulatory system. The autopilot ofan airplane is a regulatory system, and the Google self-driving car is a regulatory system, using algorithms (i.e. rules) andfeedback loops to keep on course.
  13. 13. There should be a number of preconditions before one seeks to use financial incentives or penalties to influence behavior. If these conditions are not met, the financial tools will either not work or will have unintended consequences. What might those conditions be? Lets start with a few: 1) Have a clear sense that the metric to be measured is determinative of the result sought. 2) Ensure that the recipient of the financial payment or debit controls the work flow associated with the metric. 3) Be confident that the recipient is likely to be influenced in the correct direction by the financial incentive. 4) Ensure that the amount of the financial incentive is sufficiently meaningful to the recipient that it is likely to influence his or her behavior. 5) Consider how to avoid the unintended consequences of the financial incentive, e.g., impacts on other metrics that are of concern. Paul Levy, tired.htmlTuesday, October 16, 12Paul Levy has some warning words about regulation.
  14. 14. The secret of algorithmic data systems is to focus on real time measurement of outcomesTuesday, October 16, 12And you need to keep changing the rules to keep up with reality, and drive towards outcomes.
  15. 15. The Lean Startup The goal of a Lean Startup is to move through the build-measure-learn feedback loop as quickly as possible.Tuesday, October 16, 12This whole model of using data to decide what works is at the heart of one of the most powerful methodologies to hit SiliconValley. The Lean Startup model isn’t about running cheap startups, it’s about figuring out “the minimal viable product” that youcan build that will give you validated learning about the market. You measure and test, and use that data to refine your ideas,and improve your offering incrementally to perfect it as quickly and cheaply as possible, with as little wasted cost and effort.
  16. 16. Tuesday, October 16, 12This shift requires new competencies of companies. The field has increasingly come to be called “Data Science” - extractingmeaning and services from data - and as you can see, the set of skills that make up this job description are in high demandaccording to LinkedIn. They are literally going asymptotic.
  17. 17. Personalized MedicineTuesday, October 16, 12I want to move on to the topic of personalized medicine. I won’t go into the details of what’s scientifically and clinically possiblehere - there’s going to be a lot of that in this conference. I want to talk about the social changes that are required for us to getmaximum value from the science.
  18. 18. • patientslikeme and collaborative clinical trialsTuesday, October 16, 12What we see from initiatives like PatientsLikeMe
  19. 19. Tuesday, October 16, 12and 23andMe is how much cutting edge consumers want to get involved in their own health care or the health care of their lovedones.As Shakespeare said, “the hot blood leaps over the cold decree.” Consumers are charging ahead to learn more about their ownhealth, and they know from their experience on the internet how much more value can be created when they do it together.
  20. 20. This is the real “social revolution”Tuesday, October 16, 12This is the real social revolution - sharing work on stuff that matters.
  21. 21. Tuesday, October 16, 12One of the big movements here is the movement to own our own data. This needn’t be a complex piece of technology. TheVA’s Blue Button initiative cut the Gordian knot by adopting the simplest possible format for a medical record - an ascii file.
  22. 22. Tuesday, October 16, 12It turns out that there’s one big loophole in the move to get patient records into the hands of patients. And that’s in the area oflab results. Because of conflicts between HIPAA and CLIA and various state laws, patients have rights to their lab results in onlya few states.
  23. 23. • copy of letter about lab resultsTuesday, October 16, 12 There’s a simple solution, a proposed federal rule that would harmonize state and federal laws. However this rule has not yet been finalized. So with the help of Ann Waldo, we’ve been organizing a petition to HHS secretary Kathleen Sebelius to get this rule finalized. · OReilly has long supported open source and open data, because access to information is the key to innovation and progress. · Information enables people, and information that provides feedback about ourselves is especially valuable. · Too often health information is opaque, not transparent - patients cant even get access to their own medical records! We all know stories of people not being able to get records in an easy, quick way at the time they’re medically needed. · Also, the lack of ready access to one’s medical records inhibits health technology progress, for many of the great useful tools and apps in development rely on patients being able to access and direct their records. · Thats why OReilly has been putting together a letter that urges the government to finalize a regulation that will allow individuals to get a copy of their own test results directly from labs. [Today, people don’t have the same rights to get their lab results as other their other medical records – it depends on state law, and most states do not allow it.] · For me as a person, for us as a company, this idea is a no-brainer - I hope it will be for you, too. · Its beyond time for people to have real - ideally, real-time - access to their medical records. Including their test results. · I invite you to sign on to this letter and take the opportunity to help shape policy in Washington. I urge you to talk to my colleague Ann Waldo about the details. · [TBD – You can sign on electronically through ______, and you’ll also find copies of the letter and sign-on sheets in the hallway.]
  24. 24., October 16, 12You can sign this letter outside in the exhibit hall on paper, or you can go online here. We already have several hundred highprofile signatories. You can add your own signatures to add weight to the request.
  25. 25. Tuesday, October 16, 12I want to talk as well about the Quantified Self movement as an important part of this personal data picture.
  26. 26. The spread of sensors • sensor platform slideTuesday, October 16, 12Companies like FitnessKeeper (an OATV portfolio company) are becoming fitness hubs, integrating data from multiple quantifiedself devices into a kind of consumer-controlled personal health profile.
  27. 27. “The PC is just a toy.” -Ken Olsen, Digital Equipment CorporationTuesday, October 16, 12Now it’s easy to dismiss this subclinical health monitoring as just a toy. But remember what the giants of the industry of thetime said about the personal computer.
  28. 28. OMG, I could have my own computer!Tuesday, October 16, 12Personal computers, open source software, the Maker movement were all created by people doing it because it was deeply fun.The entrepreneurs and VCs arrive several years later.
  29. 29. Innovation often starts not with entrepreneurs, but with people having fun, who believe in an impossible futureTuesday, October 16, 12So take the quantified self movement seriously as a sign of the future.
  30. 30. What happens when you throw open the doors to partners More than 50,000 iPhone applications in less than a year! Now at 688,000Tuesday, October 16, 12The consumerization of health care has the potential to unlock an entrepreneurial revolution.Apple showed us the power of this kind of transformation when they turned the smartphone into a platform with theintroduction of the iPhone app store.
  31. 31. “What if we felt about government the way we feel about our iPhones?” - Jennifer Pahlka,Tuesday, October 16, 12Jennifer Pahlka, the founder and executive director of Code for America, recently asked a question about government that alsoresonates for healthcare. “What if...?”
  32. 32. “I believe that interfaces to government can be simple, beautiful, and easy to use.” - Scott Silverman 2011 Code for America FellowTuesday, October 16, 12Code for America runs a service year program that brings talented web developers and designers to work with citiesfor a year. Last year, fellow Scott Silverman, who had previously worked at Apple, explained why he had applied to the program.He said...
  33. 33. What if interfaces for both doctors and patients were simple, beautiful, and easy to use?Tuesday, October 16, 12So let’s ask this question:
  34. 34. Tuesday, October 16, 12You might think that I’m talking about iphone and ipad apps - and yes, they can be important.
  35. 35. Tuesday, October 16, 12But sometimes a better interface is just a simple matter of changing the workflow of how people interact with the system. It’snot the app, it’s the service. Zocdoc lets you make ad hoc doctor’s appointments quickly and easily. I recently had a problemthat I had to check out before getting on a plane, and no time to visit my regular physician. I was able to find a doctor halfwaybetween my meeting at Google and the airport, and get the job done.
  36. 36. Tuesday, October 16, 12OATV portfolio company Sherpaa is a NYC startup that is working to put in place low cost medical concierge services as part of acompany health plan.
  37. 37. Tuesday, October 16, 12Healthloop is looking at creating new ways for doctors to check up on their patients to see how they are doing between visits.
  38. 38. Tuesday, October 16, 12Looking further ahead, new information retrieval UIs like Google’s Project Glass can be game changers - in specialized settingswhere access to a computer can be seen as a powerful kind of human augmentation. I expect it to be used in professionalsettings before it becomes popular as a consumer device. (In social settings, it will require even more profound resets ofbehavior than the “always-on” mobile phone.)
  39. 39. Tuesday, October 16, 12You can see a preview of where this is taking us in the Apple Store. Where most stores (at least in America) have usedtechnology to eliminate salespeople, Apple has used it to augment them. Each store is flooded with smartphone-wieldingsalespeople who are able to help customers with everything from technical questions to purchase and checkout. Walgreens isexperimenting with a similar approach in the pharmacy, and US CTO Todd Park foresees a future in which health workers will bepart of a feedback loop including sensors to track patient data coupled with systems that alert them when a patient needs to bechecked up on. The augmented home health worker will allow relatively unskilled workers to be empowered with the muchdeeper knowledge held in the cloud.
  40. 40. Steve Jobs on Design “In most people’s vocabularies, design means veneer. It’s interior decorating. It’s the fabric of the curtains and the sofa. But to is the fundamental soul of a man-made creation that ends up expressing itself in successive outer layers of the product or service." commodity.html?hp=&pagewanted=allTuesday, October 16, 12I want to finish with a quote from Steve Jobs. The heart of what we want to do is think about the essence, the deep context ofwhat people are trying to do, and build products from that. We are redesigning the healthcare system. What an amazingopportunity. I’m so glad to be here, cheering you on.