A Conversation With David J. Brailer, MD, PhD: A New Age for IT

The former national health technology ‘czar’ says that as insurers’ business models change, information systems will be critical to success

MargaretAnn Cross

Almost a decade after George W. Bush launched a national effort to encourage the broad implementation of health information technology the man he first tapped to lead the project heads a private equity firm that helps innovative IT companies get a foothold in the marketplace. “President Bush said in his 2004 State of the Union address that he wanted a majority of Americans to have access to electronic medical records in hospitals and in their doctors’ offices,” says David J. Brailer, MD, PhD, who is CEO and managing partner of Health Evolution Partners. “We’re here, and it’s amazing.”

The technology landscape is changing rapidly for insurers in particular, because their business models are changing, he says. Areas such as care management and consumer engagement have great potential, he adds, and Medicare Advantage plans are setting a strong example. But we have a long way to go before we’ll see the most significant changes health care information technology can enable, Brailer says.

“We’ve accomplished nothing if in the end we’ve simply converted paper to electronics and it doesn’t change the way treatment decisions are made, the way costs are managed, the way quality is improved, the way consumers engage, and the way people can begin having a broader health care experience. And that has yet to be seen.”

The new post that President Bush appointed him to was National Coordinator for Health Information Technology. He held it from 2004 to 2006.

Brailer is an Internet pioneer. Back in 1992 he founded CareScience, a company designed to bring Internet-based tools to health care, and began the health information technology program at the University of Pennsylvania’s Wharton School. He also practiced general medicine and taught health management and economics at the University of Pennsylvania.

He earned a bachelor’s degree in science and political science as well as his medical degree at West Virginia University. He completed an internal medicine residency and a fellowship in general medicine at the University of Pennsylvania School of Medicine, where he was a Charles A. Dana fellow and a Robert Wood Johnson clinical fellow. He earned his PhD in health economics at the University of Pennsylvania. Brailer spoke recently with Managed Care Senior Contributing Editor MargaretAnn Cross.

Managed Care: We are close to 2014, 10 years after President Bush hired you to be the first health technology czar. How does the progress today compare with the expectations then?

David J. Brailer, MD, PhD: No one then would have guessed how far we’ve come. We have seen very little partisan bickering, and I think that in part is why it has moved forward so well. It also could not have been more well timed. The industry was clearly ready for this change.

MC: You talked a lot about connecting health systems together back then. Did the priorities evolve?

Brailer: In July of 2004, we outlined the nation’s strategic plan for the decade of health IT. It outlined four things: point-of-care automation; widespread connectivity; a clinical research, discovery and public health enterprise; and transparency for pricing and purchasing. I think it’s fair to say that we’ve accomplished goal number one, but the other ones are lagging, and they are going to take some time to get done. We have all the basic infrastructure in place, and if it’s not quite there, it will be in the next year or two. Nearly every hospital has an electronic medical record in place or being installed. Almost all doctor groups of any size have one as well.

MC: So we have what we need to accomplish the other goals?

Brailer: What we need is a reset of another decade of health IT to refresh these other goals. The promise is there, and it is tremendous. But they are still “to be done.”

MC: We understand that the investments being made by the government through the Affordable Care Act and the HITECH Act are perhaps the biggest commitment ever to health IT. How does that bode for the “to do” list?

Brailer: This has been an area of debate. At the time the government stimulus occurred, the market was moving along very strongly. There has been steep growth in the rate of adoption by hospitals and doctors since 2004. When the government incentives were announced, that rate of adoption slowed tremendously; people were waiting on the government, saying that if the government is going to pay you to do something, why do it yourself?

MC: It changed the market?

Brailer: Many health systems bought computer systems that are different from what they might have because of the government incentives. Certainly many organizations that wouldn’t have gone digital have, but we have to get back to a functioning marketplace where people do things because it is in their interest and has an ROI, as opposed to because they are required or paid to do it. We’re going to see a tremendous hangover from the binge we’ve been on with government financing and that will be very disruptive.

MC: What will that mean for the other goals, such as interoperability or getting consumers information about pricing?

Brailer: We will see the market stumble along for a while until people wake up and say, “No one is going to pay me to do this. I have to do this if I want to get it done.” That is like someone going off of welfare and back to work. It’s a hard transition. But the market forces here are powerful, and there’s so much value created from the innovation and the technology that I am sure it will happen. It is just not going to be as linear as it would have been if the government had stayed out of the marketplace and not interfered. It’s just a question now of how to wean people off of this tremendous dependency mentality so they can get back to building their businesses.

MC: You have an economics background. How does the argument for better care at reduced costs hold up?

Brailer: The research that demonstrates the value in productivity, efficiency, and transparency that comes from using information technology is very powerful. It has consistently shown that up to a third of health care spending is wasteful and driven by quality errors, and much of it could be eliminated. Having said that, technology alone will not be enough. Technology enables organizations to work smarter, be more proactive and preventive, and to work as a team, but if organizations don’t change the way doctors and nurses do things and the way they manage the care process, they are simply going to have an “electronic paper” chart. They are not going to see the financial, competitive, and better care benefits.

MC: Are you seeing organizations use information technology that way?

Brailer: I have been very impressed, particularly in the last two years, by how the health care system has taken on this charge. It will take a long time for these benefits to be fully realized because we are not talking about easy changes. We are talking about re-engineering a multi-trillion dollar health care sector. Remember that most of the cost in health care is tied up in hospitals and specialists, so information technology has a lot of work ahead of it before it can change these complicated and critical parts of the industry. Connectivity and health information exchange will begin by making the health care industry more seamless — we won’t get those benefits until we stitch this system of independent electronic medical records together into a cohesive, intelligent, portable information system that is as integrated as we want it to be.

Accountable care organizations are a publicity stunt created by Congress and the administration to make people feel like they were reforming care delivery when everyone knew they weren’t.

MC: Will accountable care organizations play a role in moving that forward?

Brailer: Accountable care organizations are a publicity stunt created by Congress and the administration to make people feel like they were reforming care delivery when everyone knew they weren’t. You can’t create integrated care by having a trivial economic incentive for it in the face of a tsunami of disincentives. Nearly all Medicare payments reinforce disintegrated, volume-based care, so the little experiments that are called ACOs face a stark reality. We need economic incentives that are like ACOs but on a vastly larger scale, and to do that, we have to have the information infrastructure in place. It’s not that accountable care drives IT adoption, it’s the other way around. We will never be able to get there unless we have the information systems in place. We always saw IT as the ramp upon which we pull onto the integrated care highway, and from that perspective, we’ve got a lot of work to do. It’s up to the next iteration of IT to prove that it can work.

MC: How are health plans contributing?

Brailer: My answer is different now from what it would have been two years ago. When I was in public policy, I spent a lot of time courting health plans, showing them the roles that they could take as aggregators of large groups of consumers and as regional care organizers. But with Obamacare, the role that insurers play in IT has changed dramatically. It is no longer a catalytic role to stimulate a better pool of care delivery. Now their role in IT is an absolute matter of necessity. What I mean is: Being a traditional insurer who makes money from underwriting is clearly a very bad strategy in this market. All health plans, other than Medicare Advantage plans, are running quickly to the exits. Where are they running to? They are either trying to become information technology and information exchange companies, trying to be really good at claims processing and the back office infrastructure, or beginning to manage care delivery or actually provide clinical services. Some of the biggest acquisitions of health information exchange companies have been by health plans.

MC: So they are becoming more than insurance companies?

Brailer: Yes, some are becoming IT companies. Some are becoming providers. They are buying up hospitals and doctors and using their population approach to create a scaled, integrated care delivery system that will drive IT forward out of necessity. Or, insurers are trying to become consumer aggregation entities. Again, the information technology they need for that is vital to their survival. At this point I view the future of IT and the future of our insurance platform as being completely interwoven. It is no longer health plans pushing others to do the right thing and to help; it is now a vital necessity for them, too. That is one of the reasons I am optimistic that market forces are going to come raging back into the health IT economy once the government steps out of it.

MC: You mentioned Medicare Advantage plans not running for the exits.

Brailer: It’s the one sector of insurance that has really thought hard about the role of IT, partially because of the way MA plans are paid, partially because of their population, partially because of their strategy, and partially because they are newer and more modern organizations. They represent a new life form and what insurance is going to look like in the future, particularly for the regional plans, which are being threatened by provider consolidation. Medicare Advantage plans, which fought for their existence against a very hostile Congress when ACA was passed, will make care delivery reform unnecessary: MA plans will grow to become such a dominant share of Medicare that they will do the reform from the bottom up by making FFS irrelevant rather than from the top down the way we always expect health reform to happen.

MC: Are some health plans being left behind?

Brailer: It is too chaotic to know who’s really ahead and who’s behind. But, one thing is clear: This is a game of scale and the bigger you are the more staying power you have. Smaller plans, while they can carve out a small niche market, are vulnerable to regional challenges and aren’t able to invest what they need to build their offerings to keep up. Smaller, more regional plans are still trying to figure out which direction to go. We are beginning to see the signs of a tremendous amount of experimentation going on.

MC: Are health plans exploring how to merge data from electronic medical records and claims systems?

Brailer: I see a lot of interest from health plans in traditional electronic medical records, but I have not seen a lot of success yet. Plans are still trying to take claims data and then add lab results or prescription data that come from outside the EMR. Electronic medical record data are in the hands of many, many providers, so mapping and getting those data in the absence of a health information exchange is quite hard. Plus, this is really about how to amalgamate relevant data that you can use to manage care. A lot of the data in the EMR are simply there for medical management and for liability reduction, so they’re not very relevant to being able to manage future health status.

MC: If not EMR and claims data, what areas do have the most potential for better automation for health plans?

Brailer: I mentioned the area of taking claims data and supplementing them in some way to get very precise, very actionable information to help a health plan manage the patient. That is significantly more productive than creating a huge mass of data from electronic records. We actually have a company that does that. CenseoHealth gets claims data and then figures out what additional data need to be collected about that patient to assess and manage certain risks. The information is then compiled into algorithms, and a number of predictive tools are applied to suggest what interventions would benefit the patient. That to me is the future: the ability to use data to manage a patient and to target medical interventions toward that. Medicare Advantage plans are uniquely positioned to do this and should be given room to let this mature. Another area that should be on plans’ radar screens is the ability to manage specific care episodes in real time, to know what’s going on with a patient so that they can intervene. Some of the best Medicare Advantage plans are doing this because they know that it doesn’t help them to figure out a month later when their patient started spiraling down. This is one area where regional plans can have a real toehold because it’s hard for national plans to develop the relationships necessary to collect this actionable data across the whole U.S., but if you are active in one market, you can do that.

MC: Any others?

Brailer: A third area that is quite exciting is the ability to create consumer engagement around the care experience. There are companies that are trying to put a seamless front end on the insurance experience, the care provider experience, the financial experience — putting all of the pieces together. It is no different from having a single integrated interface for your bank. Consumers who are starting to age into certain conditions are very tech savvy. They are going to expect it. Health plans need to pay a lot of attention to this, because it’s an area where they really can flourish in terms of their aggregation of the consumer engagement brand experience.

MC: One of the goals of your investment firm is to help new products gain market share. How do things become standard in the industry?

Brailer: New ideas in the health care industry don’t behave the way new ideas do in the tech industry or in consumer sectors, where a new idea can simply obliterate an old idea. In health care, old ideas fight back very hard — they don’t give up even if some other approach is demonstrably better. At the broadest level, where American health care has gone wrong is that we focus all our effort on salvaging patients once they are sick, not on preventing the illness.

Obesity and diabetes and other conditions are caused outside of the health care industry — a result of our ubiquitously available and cheap bad nutrition and other bad practices. The illness they create flows into the health care industry at an increasing pace, and this onslaught of uncontrollable demand has pushed the health care industry further and further into salvage. Many good ideas for slowing disease progression or educating patients away from bad choices don’t have a business model in this health care market because the economy is based on treatment. The significant question is going to be when do Congress and Medicare recognize this and realize they are the root of the problem? Until that happens, the rest of the industry has no chance of reorienting itself toward prevention and away from salvage.

MC: Do you, then, say no to a lot of good ideas?

Brailer: Investors like us say all too often, “That is a great idea. We need that. But you are going bankrupt because there is no money for it.” Unfortunately, that happens all of the time.

MC: What do you look for in a health IT company’s business model?

Brailer: The first and most important thing is how the company creates value, not how it makes money. What does it do to fundamentally alter the way care is delivered or the results obtained? The second question is how does it monetize the value it creates? You can go wrong in both of those. There are companies that create very little value but can monetize it. For example, if I help a hospital collect its bills from consumers or from health plans, I have a very easy model. I can say, “You are collecting 70%, and I am going to collect 90%, and I am going to keep a third of that difference.” But that creates zero value. So we look for value creation. How does it create better care, better quality, better consumer engagement? How does it create a more efficient, more productive industry? How does it create alternatives to expensive treatments that are less expensive or more valuable? That’s primary value creation. But many of these companies can’t monetize their value because their success could be costly to their customers in this toxic marketplace.

MC: Have you seen innovative pricing models?

Brailer: Yes, and they can look promising at first glance. The question is whether they monetize value in a legitimate, sustainable way. Often, a lot of companies are trying to monetize through advertising. That works for the tech industry, but I don’t think it is sustainable in health care. We look at a business model and ask how it translates the company’s value proposition into money? Who pays for what? And are they being paid for the value being created in a way that they can do it profitably? Often, a company is doing something that everybody knows is of value, but it doesn’t help a hospital’s bottom line that much, so they don’t get paid very much and can’t deliver that service profitably. There are many pitfalls in monetizing health care value creation, to say the least.

MC: Who is buying the most technology right now?

Brailer: Hospitals are in a funk. They have figured out that a lot of the expenses for health care reform are going to be balanced on their books, so it’s a hard proposition to sell things to hospitals right now. The future of health care is going to come through doctors, yet doctor groups are still relatively small and difficult to organize. They are still in the primary stages of becoming sophisticated organizations, but they will grow up and become major clinical companies, but still have a ways to go. Health plans have a lot of hope. Some are just floundering around figuring out where the future is, but a lot of them have figured out where they are going and are working hard to put together that new platform. They are buying products and services that help them build. Health plans are really working against a timetable to get to a new place before their iceberg melts, so they are motivated. So are drug companies. They have been through their funk and are on the other side. Their pipelines are getting stronger again. They are dealing with the financial distress from the generic conversion wave, and they, too, show a lot of promise. Hospitals will come back at some point, probably as big corporate entities, but the hospital industry has to rebuild the core economic proposition of a hospital before anyone succeeds.

MC: Thank you.


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