1. There is a significant rise in, advertised profit making, genetic and device based medical screening (e.g. BRAC1, whole body CAT scans, etc). What effects will this evolving industry have on healthcare? How do organizations like the Amerian Cancer Society plan for the growth of this trend?
The early market for innovative fee for service diagnostic testing will largely be the worried well, a group that accepts their eventual mortality but has a higher than usual interest in putting it off. While a large number of people fit this profile, the cost and the risk of the new diagnostic technology will mandate that the early adopters have considerable financial resources or access to high-end health benefit programs.
We are entering an era where early adopters of new high tech diagnostics will face considerable risk. These risks include the potential discovery and concomitant treatment of anomalies that may never have become serious disease. Any serious or potentially expensive conditions found will complicate the preexisting condition profile of their health insurance coverage and thus carry the potential to either require considerable future resources or great optimism about the future of universal health care.
From a business planning perspective there are two possible business models to tap the market for these new diagnostics;
I. The economics of this type of testing will make it valuable for a limited number of independent or corporate practitioners who understand and can efficiently target and service individuals in a highly a targeted medical market. As with any technology if this one provides perceived customer benefit, the market size will grow over time. This is the business model we are seeing now.
II. Hospitals are reimbursed for needed and covered procedures, such as surgery and radiation what is required is the number of patient necessary to provide cost effective treatment. Some of the new diagnostic tests will, while expensive to establish, produce a need for profitable after test treatments. In these cases the tests could become effective loss leaders that generate profitable business. In the 1980’s hospitals began free cholesterol screening knowing that it would increase the number of heart surgeries and thus revenue that would more than compensate for the marketing and program costs associated with the free tests. Whole body scans could prove viable in this patient acquisition model.
As marketable tests for more and more diseases become available the government, employers, and health insurance providers will confront the economic reality that the additional tests result in increased care and rising costs, and the debate over health care rationing will grow more strident. However the health system’s ability to create costs and the private and public sectors inability to pay determines the ultimate outcome. The more that rationing of some procedures becomes acceptable the more acceptable the rationing of others will become.
2. What economic and treatment ramifications will occur as a result of the movement of stem cell scientists and laboratories offshore (Britain, Singapore) to avoid US laws and funding prohibitions. What will be the ramifications for ACS?
This is an interesting emerging world issue, particularly for embryonic stem cells. The US allows research but restricts it to a limited number of cell lines. California has recently passed a state law to allow the creation of additional embryonic stem cell lines. England encourages and funds the research. Singapore is actually pursuing biotech as a major pillar of their economy and is actively recruiting leading researchers including Dr. Adam Coleman who helped clone Dolly the Sheep. The EU permits research and passed funding which is now in doubt because of concerns raised by Germany, Italy, Ireland, and Austria.
Rarely does a type of scientific health oriented research face this type of social division. Clearly there are enough welcoming countries to ensure that the research continues and the expectation is that scientists and investment will flow to the welcoming environments. Global capitalism has demonstrated its effectiveness in the allocation of research funding.
It is reasonable to assume that, if current trends continue, embryonic stem cell research centers of excellence will be outside of the USA. How much of an effect this has on the future of American biotech and science depends on how rapidly effective treatments are developed. If effective treatments come on line there is little question that they will be put into production and used.
A big question is will laws banning the use of embryonic stem cell derived products be the next step in countries now restricting development. If so, it would certainly reduce market size but it would also initiate a significant travel to treatment facilities that would have far reaching unpredictable effects on global medicine.
3. The fight for government funded treatment for specific disease interventions, created by the last 30 years of research, will cause the development of antagonism between traditional health organizations, as flat funding causes redistribution of a flat Medicare budget. For example the mechanical heart assist pump could require 15% of the current Medicare budget; if the budget is not increased some other interventions will need to have reimbursements cut. What will be the effect?
In 1965 Medicare became law, and set off a golden age of medicine with the promise to pay “customary and usual fees’’. For the first time there was a third party payer for all above age 65. Hospital construction boomed, new innovative medical procedures arrived, and the income of health care professionals rose dramatically. In the Early 1970’s the Nixon Administration embarked on ‘wars’ against cancer and heart disease bringing the age of big science to heath care. In due course medical research spending dramatically increased leading to further technological improvements, new drug therapies, and advanced procedures. In the 1980’s worry developed that health care costs were going out of control; managed care arrived in force and Medicare began to cap the rate of spending. Hospitals saw shrinkage in patient days and a concomitant fall in income. In the 1990’s hospital closings and reductions in patient beds became the norm. The ratio of hospital staff giving care to patients dropped as a new bureaucracy and processes to manage the costs and reimbursement of care went into place. Costs were held close to the rate of inflation until the late 1990’s when rapid increases again materialized.
In the early 21st century we will see the potential for the rapid introduction of new pharmaceuticals, diagnostics and therapies that have resulted from the research investment of the previous 30 years. Unfortunately this potential for unprecedented health care progress coincides with a world wide economic downturn. With total Medicare spending capped, the number of uninsured under age 65 growing and the number of underinsured expanding rapidly, health care rationing exists and is a growing reality.
Economics dictate that not everyone, unless they can privately pay, can get every available treatment. It is an inevitable reality that decisions on care will increasingly be made in the political arena. New and existing treatments will compete for the same limited dollars. In order to secure care for their constituency’s health care organizations like ACS will depend increasingly on their ability to form and effectively manage coalitions, that out competes other coalitions, in the battle to influence government and other third party health care purchasers. Bone marrow transplants as therapy will compete with mechanical heart assist devices, stem cell therapy for spinal injury or MS will compete with both. The argument will be emotional and attempts will be made to base them on the value and of life criteria. Decisions however will be made on the real and perceived power of the constituencies affected. It is likely that the treatment debate will result in a serious secondary debate on the funding of future research when we cannot afford to provide the treatments already in existence.
4. Medical websites will evolve into systems that provide primary care, diagnostics and drug therapy for growing numbers in the US and Europe. How does ACS plan for and position itself to make use of this trend?
The traditional approach to health care is perceived to be becoming too expensive, employers are passing on increasing costs and employees are dropping out of the current system. In the year 2003 health care insurance costs are expected to rise an additional 20%. Today 41.2 million people are without health coverage, 31.3% of workers who work for firms that employ less than 25 are without coverage. It is not just the low income group that are affected 6.6 million people with household incomes of $75,000 and above don’t maintain health coverage. Managed care, while profitable for investors, has stripped away many of the management functions. Patient and Doctor choice is returning and with it a business model that looks increasingly like the old and expensive fee for service model it replaced. Employers are again demanding cost control and the new product being offered, under various names is a repackaged medical savings account with high deductibles. Its most common form is an employer – established account of $1,000-2,500 per year, which can be rolled over, with traditional coverage starting above that level. The hope is that employees will use the account with the same accountability they would use with their own money. Expect that in the future the amount put into the medical savings account will stay flat while the deductibles will increase.
Any way you slice it the need for medical advice and access to pharmaceuticals at lower costs, exists and is set for rapid growth.
Internet medical advice, diagnosis and prescription services, particularly in combination with high deductible catastrophic health insurance $1,000 to $2,500 for those with MSA, or $10,000 to $20,000 for those currently with no insurance, offers a large and growing market for a profitable business model with a web based front door.
Think of a service where for a moderate up front fee a user can register with a website that takes a medical history and then when illness occurs takes them through a series of diagnostic questions where answers generate additional questions that eventually lead to as suggested solution. If blood tests are required, referrals to existing labs can be made. Video cameras can provide direct observation, and simple programs and hardware can test simple bodily fluids such as blood, saliva, and urine. If prescription drugs are required the session is reviewed by a RN, authorized by an MD, sent overnight mail and billed to a credit card. It sounds unreasonable until one considers the number of sites that offer everything from diet pills to hormone replacement therapy.
No market as big as the one currently uncovered by health insurance, complimented by the more cost conscious consumer that will be created by MSA’s can be ignored for long. The question is how to make it a profitable business. The essential ingredients for a successful business model exist, what is required for market entry is combination, packaging and marketing. While the recent dot com. bubble discourages investment currently, lack of investment is a temporary condition. Expect to see either the incumbent health insurers or new entrants drive wide spread development of a web based primary care model in the next five years.