By Psilos Group: Al Waxman, Darlene Collins, and Lisa Suennen, Contributing Editors

September 24, 2009 – ECONOMIC & INNOVATION DRIVERS FOR HEALTHCARE POLICY

EDITOR’S NOTE: This paper is the first formal “policy perspective” published by healthcare venture capital firm Psilos Group. Psilos has been investing in private-sector healthcare reform since 1998, with a defined focus on reducing costs, improving quality and aligning incentives payers, providers and patients. The firm’s partners have more than 135 years experience transforming healthcare from the inside out as company managers, investors and consultants. This paper is intended to inject fresh thinking and ideas into the U.S. healthcare debate from an investment, innovation and healthcare economics perspective.

It’s been a long hot summer of debate and, dare we say it, discontent.

Over the past six months, Americans have watched with anticipation and increased trepidation as healthcare reform details slowly emerge.  President Obama has appropriately led the charge to alert Americans about the crisis and the need for change.  At this point we all know our current healthcare “system” does not work and we have all seen plenty of evidence detailing the symptoms and root causes of healthcare’s failure.  

It’s now time to develop a *realistic* plan for change.  We need to understand that we are attempting to fix an extraordinarily complex problem and it will require the best of all parties to accomplish that.  Creativity and quality ideas are the essence to build a lasting solution.  Reckless expedience, in this case, may serve a political purpose but is unlikely to serve the public interest.  Thoughtful deliberations do not mean we do not move forward, but rather, that we move forward with good ideas on a reasonable and achievable time schedule.

If you consider the means by which large corporations make quantum shifts in strategy, it is rarely an overnight endeavor.  Rather, leadership adopts a multi-year strategic plan and takes a series of phased actions over time towards achieving the ultimate objective. Leaders garner consensus and demonstrate results along the way so fine tuning of the plan can take place and mid-course corrections can occur based on early learnings.  The goal of creating value for the shareholder is the ultimate objective, with leaders focused on their fiduciary responsibility to ensure that each step along the way delivers the value expected from a major strategic undertaking.

By contrast, government too often drives policy shifts in the context of election cycles rather than strategic planning.  Policy-makers and pundits talk about healthcare reform in terms of who’s winning in Washington, framing the debate as a “once in lifetime” opportunity that leads politicians to push with increased intensity for an all-encompassing “swing for the fences” act – rather than set out objectives and advance towards them step by realistic step.  This is a mistake. In the instance of healthcare reform, American citizens are the “ultimate shareholders.” Our leaders’ fiduciary responsibility is not just to deliver good policy, but also to build the right alignment, strategic plan and tactical actions that ensure the desired outcomes for patients as well as providers and payers.

Based on our experience in public- and private-sector healthcare reform, we urge policy-makers to take three immediate steps as they work through the details: 1) SLOW DOWN and develop a focused step-by-step plan with clear goals; 2) BUILD ALIGNMENT to make sure a large majority of stakeholders in the system are on board, not just that there are enough votes to pass legislation; and 3) SHIFT THE FOCUS from “who pays” for reform to “how much” we should pay for healthcare – and how do we strengthen its value proposition to ensure good value for quality care.

This last issue is ultimately the one that vexes American families, small businesses, large corporations, healthcare providers and all levels of government. Debating “who pays” is simply a political comfort zone that stokes traditional liberal versus conservative passions and fuels talk show rhetoric. However, it does nothing to actually cover the costs when bills are due. Addressing “how much” is a more complex economic issue that needs to move front and center, especially when healthcare costs are growing at double or triple the general inflation rate – and are expected to consume 19.5 percent of GDP by 2017. This issue is even more contentious today due to our weakened economy and increasing debt.

Clearly, it’s time for fresh thinking and transformational solutions that deliver President Obama’s targeted cost savings in order to cover healthcare for 47 million uninsured Americans. Fortunately, private sector “reformers” have tackled these issues for years, and many have proven it’s possible to cut costs *and* improve quality at the same time. Indeed, with a few smart bets on healthcare technology and service innovations already available, we believe healthcare reform can literally pay for itself.

A Realistic Vision and Real Savings—the Prerequisite for Good Policy

Businesses start their strategic planning with a clearly defined set of objectives. Those may be as simple as “earning profit for our shareholders” or “providing good jobs for our employees,” but the objectives need to be defined with clarity and measurable targets in order to align people to ensure success.

So what are the clearly defined objectives for healthcare reform?  We have heard much about providing coverage for the uninsured and some about coverage for those who have had insurance denied based on pre-existing conditions. These are very important objectives but are not all-inclusive of what it takes to ensure a healthy system.  We have heard far less about transforming the underlying economics and using innovation and investment to drive a sustainable healthcare economy for the long term … see full article

About the Authors

Albert S. Waxman, Ph.D., CEO and Founding Partner, Psilos Group

Dr. Waxman has more than 40 years leadership experience as an entrepreneur and investor in the healthcare industry, fueled by a particular focus on driving down costs, improving quality and aligning incentives across payers, providers and patients. As the CEO and founding partner of Psilos Group, he and his firm have funded and developed more than 38 innovative companies dedicated to this vision, including ActiveHealth, Click4Care, Definity Health, ExtendHealth, … see full bio

Darlene Collins, MEd MPH, Managing Director, Psilos Group

Ms. Collins leverages more than 20 years healthcare experience and a national network of government and industry relationships in support of Psilos’ investor and government relations, as well as company business development. Her areas of expertise include government-sponsored and employer-sponsored health benefit programs, information technology, medical devices, pharmaceutical/health benefit management strategies, and disease management initiatives.   … see full bio

Lisa Suennen, Managing Member, Psilos Group Ms. Suennen is a co-founder of Psilos Group and leads the firm’s West Coast office, focusing on the medical device, healthcare IT and healthcare services sectors. She serves as a director on the board of several Psilos portfolio companies, including AngioScore (chairman), InSound Medical, PatientSafe Solutions, Inc., OmniGuide and VeraLight (chairman) … see full bio