The demand for medical care services in the U.S. has long been the envy of other industries. Americans are generally not accustomed to going without, typically despise most non-market forms of rationing, and don’t like government telling them what they can and can’t have. Beneath this culture of consumption lie several layers of public and private insurance, the main effect of which is a decoupling of prices and consumption, at least from the consumer perspective. The net result has been, as we all know, growth in medical care spending consistently outpacing growth in just about everything else.
After several attempts at reform, stretching from the 1970s until the recent passage of the Affordable Care Act to whatever will be in store for us should the Republicans control the federal government after the next presidential election, it has become clear that the attributes of the U.S. health care industry that have challenged managers, divided politicians and puzzled consumers are, in the end, the defining characteristics of the industry. We can talk about changing everything, but that’s not really a feasible option. As the Nobel Laureate (and my former dissertation committee member) Oliver Williamson constantly opined, there’s no point in comparing anything to a hypothetical ideal; we are better off focusing on options that are in the set of feasible alternatives. We need to get more comfortable and smart about working with what we have.
This is why the new book by James Robinson, a professor of health economics at the University of California Berkeley, Purchasing Medical Innovation: The Right Technology, for the Right Patient, at the Right Price, is so welcome as we enter a more realistic and practical phase of U.S. health care evolution. In the spirit of full disclosure, Robinson was my dissertation chairman while I pursued my PhD at U.C. Berkeley. But this does not bias me in favor of the book; on the contrary, it provides me with a rare opportunity to retaliate for the all the red ink with which Robinson drenched my chapter drafts back in the day. This urge to retaliate is moderated at least somewhat by another disclosure—Dr. Robinson is also a Director here at Avalon Health Economics. I think the net result is a fair and balanced review.
I’ll begin with some basics. The book is concise, at around 150 pages (excluding chapter notes, indices, etc.), and is written for an audience with some “entry level” knowledge of the U.S. health care industry. The style of writing strikes a pleasant balance between the need for technical detail and the desire for a more engaging, narrative approach. There are some data presented when necessary, and some citations for the ambitious reader to track down on their own, but these are not critical to the main points.
As the title implies, the focus of the book is on the purchasing of medical innovation in the U.S. The term “purchasing” is complicated in our health system, because there are many different types and forms of purchasers. Perhaps more importantly, the purchase of medical innovation is inextricably tied to issues regarding: (1) regulatory approval, (2) coverage and payment, (3) prescription and adoption by providers, and (4) engagement and adherence by consumers. Indeed, the main theme of the book, which is divided into an introduction followed by six content chapters, is the passage of medical innovation (drugs, devices, and diagnostics) across these four hurdles. Along the way, rather than waiting until the end, Robinson provides insights into how these hurdles can be improved with the overall objective, again as the title implies, of seeking the health industry nirvana of “the right technology, for the right patient, at the right price.”
What makes this the right approach to such a compelling and important topic is its emphasis on the interconnectedness of the four hurdles, rather than a linear process that yields a static result. The process is dynamic, and each hurdle is connected with the others in ways that differ across technologies, evolve differently over time, and interrelate differently under various circumstances. While the reader cannot help but feel a sense of helplessness as we go deeper into each chapter, Robinson’s depiction of these hurdles as important industry attributes rather than issues for policy makers to fix gives the reader a vague sense of hope that cooler heads might very well prevail. If we develop a more complete understanding and a fuller appreciation for the structural details, organizational features, and behavioral incentives associated with each of the four hurdles, there is a substantially improved chance that progress can be made toward the primary objective of the right technology, for the right patient, at the right price.
While the themes and main points of the book are applicable to each of the three D’s—drugs, devices, and diagnostics—Robinson has conducted some shoe-leather research in one particularly interesting area—the organizational capabilities of hospitals in the purchase of medical devices. He devotes a whole chapter to reporting on research he and his research team conducted in five different acute care hospitals in Orange County, California. Robinson compares the hospitals in several dimensions, including efforts at assessing new devices, physician contract compliance, device supply chain management, physician incentive alignment (and conflicts of interest), relations with device manufacturers, of contract duration. The chapter offers a deeper dive into issues that are generally underreported in the academic and health management literature.
What are the implications of this research to the medical technology industry? That question is the focus of the final chapter, which brings together most of the main points from the preceding chapters. And it is here where Robinson again draws emphasis on the interconnectedness of the hurdles. The medical industry, he advises, should be more willing to work with the Food and Drug Administration (FDA), while acknowledging the difficulties. The industry needs to get better at providing meaningful data, and the FDA needs to develop its adaptive capabilities. Data can play a similarly helpful role in the industry’s relationship with insurers; establishing an evidence base for coverage policy is in the interest of both parties. As for hospitals, as is the case for many hospital management challenges, the key seems to continue to be physician alignment. “The health care system has suffered from a deficit of effective purchasing,” Robinson concludes, “but this deficit is being overcome. Purchasing is becoming more sophisticated, cost-conscious, and value-based. The bar for innovation is rising.”
-John E. Schneider, PhD