New business models will emerge as a result of regulatory changes in healthcare reform law, concluded a panel at the last week's Health Technology Investment Forum.
At the same time, elements that should have been in the bill but were not will create opportunities for new business models, said E. David Hetz, co-founder and managing director of Cutlass Capital.
"We should all hold out hope that this is not a one-time event, that this is the first step in genuine healthcare reform," he said at th forum, held in San Francisco. "It's just that the first step is really insurance reform and provided a very, very important societal benefit in the form of access, but did virtually nothing to deal with – ultimately what we all have to wrestle with – the cost side of the equation."
Some money was allotted to support state tort reform and fraud and abuse investigation, audit and prosecution, as well as demonstration projects from the Centers for Medicare and Medicaid. "But they're not going to make much of a dent in the bill," he said.
"The cost side of healthcare continues to be the most significant opportunity for market-based solutions," said Hetz. "Priority has to be about taking real hard dollar cost out of the system."
Daniel Farrell, director of PricewaterhouseCoopers' Transaction Services Practice, agreed.
"Any business model that takes cost and waste, such as over-utilization, out of the system is going to be a success," he said. Anything that shifts the paradigm away from the current system, which incentivizes utilization, will be successful, he said.
Massachusetts shows what to expect
Look to Massachusetts as a leading indicator of what to expect theoretically on the national level, said Christopher McCord, principal at Healthcare Growth Partners. Since its adoption of statewide healthcare reform, the commonwealth has experienced strained emergency departments and the highest wait times for appointments in the country. New business models that address scheduling throughput and efficiency in patient flow, as well as over-use, are potentially in a good position.
"Access is expanding; costs aren't contracting," McCord said. "The best companies are those that don't take advantage of that situation but try to fix it."
With approximately 32 million uninsured people required to purchase health insurance under the new law, the shrinking numbers of primary care physicians in the country will be further strained, panelists said. Hertz noted that models that provide more direct care than a physician does will emerge. More progressive hospitals are looking at traditionally competitive surgical centers as intermediaries, part of the solution for continuum of care, he said.
Healthcare reform legislation will also change how the total population will have to be managed, said Hertz. The market will seek intermediary models that deploy analytics to look at populations and manage services for populations in a better, smarter way, he said.
McCord agreed. The care and use management space will be big, with niche benefit companies – for example, in radiology – providing the most effective best practices, he said.
While the legislation didn't focus on wellness, expect this area to grow, according to Farrell and Hertz. Such devices as the PDA and the iPhone and their applications have the potential to transform the industry by enabling consumers to access healthcare information and become personal wellness managers, said Hertz.
The bottom line, according to Hertz: "If you have a solution that really works, gets hard dollars costs out and customers are your partners, it's a huge win-win."