Reading any of the rules and regulations that come out of Washington always makes me feel like a foreigner, even though I have lived here in the States for over 25 years.  Only the DHHS could have thought up the title of the new rules – “Modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules Under the Health Information Technology for Economic and Clinical Health Act and the Genetic Information Nondiscrimination Act; Other Modifications to the HIPAA Rules.”  With a catchy title like this, perhaps it is not surprising that most people failed to understand its implications.  Luckily, Rob pointed out the key consequences in his blog.

The essence is that it is no longer illegal to send unencrypted emails or text messages about someone’s health condition to them.  Prior to this notice, hospitals, physicians, pharmacies, PBMs and health plans could not send emails or text message reminders directly to patients and plan members as they are not secure.  However, now as long as a health provider asks an individual if it is “OK” to use some form of unencrypted electronic messaging and as long as this individual says “Yes,” it can be used.  Officially, this is termed “duty to warn.”

This is a major shift in policy.

This means that a hospital, disease management firm, pharmacy or clinic can use email or text messaging as a reminder directly to individuals that they are late renewing their meds.  It can also be sent to patients’ care givers, like their sons or daughters.  Of these two forms of messaging, the most likely to be used will be text messaging as it is far more likely to be read.  Frost and Sullivan report that 98% of text messages get opened.  This is significantly more than e-mails, which are increasingly getting trashed as soon as they arrive in someone’s inbox.

Although pharma and biotechs cannot directly send patients text messages, they will be the major beneficiaries if providers and health plans start to use text messaging to improve compliance.  We all know that it is typical for compliance to drop to something like 30% after just one year in the case of maintenance medications.  Increasing compliance to just 40% by the use of text messaging reminders would mean a major increase in refills and a major increase in drug sales.  The benefit to America is that individuals on these medications should stay healthier and less likely to end up with costly complications.  The extra cost of more drugs should be more than offset by savings down the healthcare road.

Pharma companies and biotechs would love another direct-to-consumer tool to push compliance.  They are all piloting out how to use mobile apps to do this.  However, have they realized that they can now try to leverage text messaging?

If anyone out there is interested in learning more, please ping me.

When you think about this technology, it is ideal for healthcare.  Each of us is subtly different.  What could be better than being able quickly and efficiently to make custom products to replace – or help repair – aging or damaged body parts.  This is real Trekkie stuff!

“Nurse would you call down to the 3D print room and see if Mr. Darby’s ear has printed out yet?”

Fictional … yes.  But possible?  Not today, but highly probably in the near future … amazing!

3D printing is not new.  It has been slowly evolving for the past 30 years.  In its early years it was severely limited by the print material and its ability to make structurally strong products.  Today you can make multi-colored objects as hard as steel or as flexible as plastic.  3D printing is ideal for short production runs or one-off custom jobs.  It has captured the imagination of designers, architects, academics and hobbyists who want to cradle their creations in their hands, rather than stare at them on a flat piece of paper or computer screen. Today, 3D printing is used in aerospace to make stronger and lighter cabin designs, in the automotive market to make new engine castings, in fashion houses to make jewelry, and at home to build toys, lamp shades, or just art.

The key to the future of 3D printing is the development of new and better materials that can be fed into the printer, together with new and better processes to cure them.  Arcam AB of Sweden specializes in 3D printing of orthopedic implants, like cranio-maxillofacial implants for major reconstructive head and neck surgery, or implants that are 3D-printed together with fine structures that will maximize the ability of existing bone to grow into the implant and minimize rejection.  The German company, EnvisionTEC, sells the 3Dent printer specially designed to make high quality dental models of jaws and implants.  They also sell printers to make personalized hearing aids in a wide range of colors.  Medical researchers have developed methods to reproduce human ears that look and behave like the real thing for patients with congenital deformity and cannot hear properly.  The world’s leading 3D print company, 3D Systems of South Carolina, sells printers that make custom prosthetics, hip and other personalized implants.  Perhaps one of the most amazing breakthroughs is biofabrication.  Researchers at Heriot-Watt University in Scotland have shown that it is possible to 3D print using embryonic human stem cells.

It may not be too long before we will be able to 3D print new artificial organs and new tissue.  With nearly 100,000 people in the U.S. waiting for a kidney transplant, just think of the benefits of being able to print a new kidney tailor-made for your immune system, to minimize the waiting period and the possibility of rejection.  Researchers are even looking at 3D printing customized drugs through molecular assembly.

The new phase for 3D printer is likely to become a “personal matter fabricator.”

Oh and before you ask … Yes … Hewlett Packard is also involved in the market. So in the future will we need a sticker that says “HP Inside?”

It is nothing new for the CBO to revise its forecasts.  The CBO noted in the same report that its forecast annual growth rates today are some 5% less than estimated in 2010 … that is also a major change.  However, what is noteworthy in this New York Times article is not that the CBO has revised its forecasts, but that it states “Health experts say they do not yet fully understand what is driving the lower spending trajectory. But there is a growing consensus that changes in how doctors and hospitals deliver health care — as opposed to merely a weak economy — are playing a role.”

I think we can interpret this as meaning that the DHHS and CMS hope that the new Obamacare programs to move physicians and hospitals away from the old transactional fee-for-service and to new pay-for-performance (P4P) models are working, programs like Accountable Care Organizations (ACOs),  Patient-Centered Medical Home (PCMH) and Health Home.   However, these programs have only just started, some are still in pilots and so there may be some other reason.

This uncertainty could become a political football.  If the P4P programs are a root cause, the cost of Obamacare will be vindicated.  If not, Republicans will say it is a waste of money as the free market is reducing healthcare costs on their own.

If we look at CMS’s historical and forecast figures on the growth of healthcare costs, we see the current slowdown is expected to be reversed only too soon.  The Obamacare expansion of coverage for the low income in 2014 is forecast to give a major upwards jolt to costs and, then as baby boomers continue to age, the increasing cost of providing care for them will fuel healthcare cost inflation pushing it up to an estimated 7% a year by 2020.

There is, therefore, a real political benefit to link this “sharp and persistent slowdown” to Obamacare before 2014.  Once again, it is a “watch this space” and worthwhile for everyone in the U.S. healthcare market to monitor what the “health experts” say as being the reason for this “the lower spending trajectory.”

Don’t you love mysteries?

Recruiting departments of most firms are unaware how valuable job descriptions can be to their competitors.  To entice the best candidates, all too often postings give away invaluable tidbits on the inside structure and workings of a company … who this job reports to, what is its geographic coverage, why it has been created.  When pieced together with other intelligence on the company, it is sometimes amazing what you can understand about a company’s strategy and tactics.

Take AstraZeneca for example.  We know that this big pharma has been involved in researching the benefits of Big Data for some years.  In 2011, it announced a partnership with Healthcore to research Healthcore’s novel program to integrate data collected at retail pharmacies about individual patients and their prescription drug usage with Wellpoint’s transactional healthcare claims database.  Wellpoint, who owns Healthcore, covers the lives of 35 million individuals and has massive volumes of data on drug usage, diagnostics and hospital visits, again at the individual patient level.

Wendy Diller of the Pink Sheet recently reported on this partnership and that it has already completed 22 research projects and 40 feasibility studies. It has looked at a number of markets that are strategically important to AZ, such as compliance in the asthma market, re-admission rates for acute coronary care patients and issues around biopolar disorders.  However, little has been published and the success of this project is still unknown.

Is this program important competitively?

The answer has to be “Yes” if you are another pharma or biotech in any of the therapeutics market studied by AZ through this Big Data analysis partnership!

Why?  Well, if AZ is seeing opportunities to better treat patients through Big Data, this could be a serious threat to you.  AZ might be seeing better ways to position and message its existing drugs to physicians and patients, or unmet needs that it can fill by developing or acquiring very specific new drugs.  And without having access to the same analysis, you are blind to these opportunities, which can all too quickly become threats.

But, is AZ seeing anything interesting?

Enter the recruiting department of AZ from stage right.  They have recently posted a job ad for a Big Data Informatics Scientist that screams out success!  What degree of success is not known, but some degree of success, otherwise why would AZ go to the effort of creating a budget for such a job if they had not seen that Big Data analysis can deliver real value?

AZ in Waltham, MA, is looking for a “Sr. Principal Informatics Scientist – Big Data Analytics.”  This “talented” individual will “drive the vision and strategy of Big Data Analytics in R&D and provide advanced hands on support to R&D activities across all therapeutics areas and phases of the drug discovery and development pipeline.”  He will “drive and develop Big Data Analytics to a world-class level that creates competitive advantage for AstraZeneca.”  He will use “multiple domains such as Pharmaceutical R&D data, clinical trials and health data, payer and claims data, patients’ data and business intelligence data” and will be the voice of AZ to “present to internal and external scientific communities on Big Data informatics solutions, best practices and scientific approaches, including external scientific publication.”

There would seem to be a very clear take home message for all pharma and biotechs, not just direct competitors of AZ.

“You too should experiment with Big Data.  And, you should do this now, before competitors like AZ gain too much of a competitive advantage in understanding how to exploit Big Data.  As new datasets and analytical tools become available, Big Data analysis is an evolving skill and those companies that are at the cutting edge are most likely to be the one to reap the greatest rewards.  You should also note that this AZ job is focused on assisting R&D and not in-market products.  There is a message there, and where you should focus your efforts.

And, of course, there is other take home message … “make sure that your competitive intelligence group is looking out for unusual job ads by your direct competitors.”  You never know what you will discover!

Both Microsoft and Google jumped into the PHR market some five years ago.  This was far too early for anyone to understand what incentives would make healthy individuals spend their time entering personal health data into a remote database.  In today’s market, PHRs are not for most people.  To minimize the effort of entering data, we need remote sensors to automatically capture detailed personal biometrics and day-to-day activities.  We also need the causal links between this data and prevention to be clearly demonstrated.  This will happen, but in tomorrow’s, not today’s world.

For individuals with chronic disease, the use of PHRs is a different story.  PHRs are starting to get traction, chronic disease by chronic disease.

Google’s retreat from the PHR may be very wise.  With gaggles of players testing out new ideas, it makes sense to let the current market settle down.  Better to let others experiment.  However, it is highly unlikely that Google will stay out of the eHealth market.  At nearly 20% of GDP, the healthcare market is too large to ignore.

Last week saw a very interesting announcement.  Ray Kurzweil was appointed a Director of Engineering by Google to focus on “machine learning and language processing.”  Kurzweil inventor, futurist and author is deeply interested in health.  He cured himself of Type 2 diabetes and has minimized his predisposition for heart problems.  His website is full of new, potentially breakthrough medical technologies and discoveries.  He believes that the technologies of genetics, nanotechnology and robotics will radically increase life expectance to 150 years and beyond.  They will allow us to repair and maintain our aging bodies well beyond what current medication and surgical techniques can do today.  He sees that biology has recently turned the corner to become an information technology and is keenly interested how to reverse engineer the human brain.

Kurzweil is perhaps best known for his predictions on the merging of Artificial Intelligence (AI) and the human brain in around 30 years.  He calls this theory the “Singularity.”  Many of his predictions on the impact of information technology have turned out to be correct, from the rate of development of AI to when a computer can beat a Grand Master at chess.  He emphasizes that it is critical to get the timing of new technological products right.  One cannot develop them for today, but for the right point in the future when they will have the greatest impact.  Launching them too early will be a flop … just like what happened to Google Health.

On his appointment as Director of Engineering, Kurzweil stated “I’m thrilled to be teaming up with Google to work on some of the hardest problems in computer science so we can turn the next decade’s ‘unrealistic’ visions into reality.”

The question is where will Kurzweil focus his efforts?

Solving complex language processing problems is highly applicable to healthcare and Big Data.  IBM is trying to do just this in cancer with their Jeopardy winning software program, Watson, by working with a number of leading cancer institutions around the country and data from electronic medical records (EMRs).  Similarly, Pfizer has just announced it will work with Humedica and its 20 million EMR patient database.  On the other hand, will Google relaunch Google Health and try to link into disease specific PHR systems?  Or, will Google and Kurzweil try develop completely new ways of capturing and analyzing health and wellness data using Google’s existing vast mountain of consumer data?

This is definitely a stay tuned moment.

by Mike Ratcliffe

Over the past decade, it has often been large employers who have been the most creative in trying out new “value” ideas for health plans. Back in 2000, Fortune 500 companies lead the way into value-based health plans. They began to invest in their employee health rather than simply cutting benefits. They created plans that would incentivize employees to understand their health risks and to change their behaviors to prevent ill health. They paid for on-site clinics to help reinforce the concept of prevention. And they were so successful that, by 2010, many commercial plans were taking their ideas and incorporating them into their commercial offerings.

Today, we see large employers taking the lead again. This time with a concept called “domestic health tourism.” The first report of this was Walmart doing a deal directly with the Mayo Clinic in 2006 to take on all transplants for Walmart employees. Very recently this massive employer announced a second deal with six leading hospitals to handle all heart and spine surgeries. Walmart will pay for these procedures plus travel costs for employees and family members, if they are caregivers. So zero out-of-pocket cost for the employee and a free trip to one of the most prestigious hospitals in the country.

Walmart is not the only large employer testing out such direct deals with these “Centers of Excellence.” Alliance Oil, Boeing, Kohl’s, Lowe’s and Rich Products have made deals with Cleveland Clinic. Pepsi has one with Johns Hopkins. These deals are radical paradigm shifts for healthcare. The message they give is that if you are best-practice in a specific therapeutic area and can help cut long-term costs through better care management, you will get a lot more business. They bypass the health plan managers who have traditionally set up a network of providers for companies like Walmart and put the provider, the hospital, squarely back in the center of the competitive landscape.

But what will happen if this concept takes off across a wide range of hospital procedures and therapeutic areas with large and mid-size firm wanting the same types of deals, or if CMS (Centers for Medicare and Medicaid Services) picks it up and wants the same for Medicare? Will there be sufficient top flight hospitals to handle the demand?

U.S. News & Report 2012 Survey of U.S. Hospitals allows us to gauge the size of the issue. It rated all 5,000 hospitals across the country by the quality of outcomes on a scale of 0 to 100 for different specialties. Only 1-5 hospitals scored over 90 in any one of nine specialties researched … a minute number of “Centers of Excellence.” The numbers increase marginally to 2-12 for hospitals with scores over 80 and to 9-42 hospitals with scores over 70. In other words, there are very, very few “Centers of Excellence” and very few hospitals that are second tier “Centers of Excellence.”

The small number of hospitals getting these high scores probably helps to explain why large employers are looking for these deals with these top flight hospitals as most hospitals get really poor scores because their outcomes are equally poor.

Obamacare is trying to improve the situation by driving hospital consolidation with the creation of Accountable Care Organizations (ACOs). This could reduce the overall number of hospitals from 5,000 to 3,000 and in so doing create a far more dynamic and competitive hospital market. However, it will not be possible to replicate the culture and quality of institutions like the Mayo, Cleveland Clinic and Johns Hopkins overnight. So any near term increase in demand for these deals is most likely to be channeled to the limited number of current super-star hospitals, most of which have high scores in nearly all specialties.

The fact that a number of large employers are doing these deals seems to imply that domestic medical tourism is of real value and that demand could rapidly grow. As a result we could potentially see a small number of leading hospitals become true mega surgery centers, with their own hotel complexes for family members and leading edge surgery, teaching and R&D multiplexes that dominate the U.S. hospital market. An interesting concept and one which suppliers of products like drugs, devices and equipment need to watch closely.

And all due to the second largest company on the planet that is all too often maligned for its employee healthcare coverage … Walmart.

by Mike Ratcliffe

As CI professionals we all have to look for “blind spots,” assumptions about the competitive environment that are wrong because we have preconceived and incorrect ideas about how a market is evolving.

The classic example in my mind is that of Ken Olsen and Digital Equipment Corporation.  Olsen, CEO of DEC, created the mini-computer market in the 1970s.  However, when the PC began to take off in the 1980s, he refused to see this new computing platform as a competitive threat, stating that there was “no reason for any individual to have a computer in his home.”  In 1998, DEC collapsed and was bought by the PC manufacturer, Compaq.  Olsen clearly got the evolution of the computer market wrong.

I recently found a great TED video talking about the same issue.  Take a look at Eddie Obeng and his talk “Smart failure for a fast-changing world.”  He is a great presenter and you’ll enjoy the 12 minutes.

It is worth looking at how these two lessons from Olsen and Obeng relate to today’s U.S. healthcare market.  My question to you is:

“Do you have the Olsen blind spots that the market is not changing, or the Obeng vision to understand that the rules of the market have already changed?”

Obeng draws a diagram that I have used on many occasions to illustrate the dynamics of blind spots.  One line represented technology, growing exponentially, the other, knowledge, growing linearly.  For most of us normal people, our knowledge about the market we work in grows only linearly.  So, it is very easy for technology to accelerate beyond our current understanding creating knowledge gaps and, hence, blind spots.  If you really want a host of examples and have more than 12 minutes, you should read Ray Kurzweil’s book “The Singularity in Near.”

How does this relate to today’s U.S. healthcare market?

There are two types of technology driving change across the market.  One is therapy technology, the other is information technology.  Both are growing exponentially … faster and faster as well as more and more complex.

It is difficult for us to keep up and easy for blind spots to develop.  For example, stem cells have become politically controversial thanks to the religious implication, but that is here in the U.S.  Elsewhere in the world, developments in this technology are racing ahead.  This technology has the promise of a quantum leap in disease control with the potential for a one shot therapy that can repair damaged organs.  Stem cells can eliminate the need for drugs and it is a blind spot you do not want to develop if you are a drug manufacturer.  The website 23andMe.com recently acquired the crowd sourcing site CureTogther.com and can combine genetic coding data with actual patient disease data allowing it to undertake complete new types of patient trials.  This is another revolutionary development you don’t want to turn into a blind spot, especially with companies like Genentech already testing out this service.

Technologies like robotics, nanotechnology, genomics, material science and sensory augmentation are creating exponential advances in drugs, devices, diagnostics and therapeutic procedures.  Information technology is also driving mobile health, remote monitoring, face and voice recognition, telemedicine and big data.

All these technologies are here TODAY.  But do you live in this TODAY, or is your TODAY one which has failed to keep up with all these developments and so is NOT today?

And perhaps even more important, if your today is NOT today, do you have processes to protect you, your company or your clients from the blind spots that are very likely evolving all around you?

by Mike Ratcliffe

I did a job a few years back for a US client looking at West Nile Virus.  I had to look at the competitive landscape.  Then as today, outbreaks of the associated fever and deaths were regularly in the news.  I did my normal wide sweep of the secondary information to make sure I understood the issues and quickly found two anomalies which radically changed how I approached the rest of the project.

West Nile virus is carried by mosquitos.  But in the winter, they die off, and the virus is carried forward to the next season by birds as they also get bitten by the same mosquitos.

As the name implied, West Nile is not indigenous to the U.S.  So I did not restrict my secondary research to just the U.S.  It was easy to find that the virus was first identified in the upper reaches of the Nile in Uganda in 1937 and had been plaguing countries around the eastern Mediterranean for decades and probably millennium.  What was interesting was that maps of infected areas and European bird migration routes clearly showed infections breaking out at choke points where birds were forced together as they migrate from north to the south in the late summer.

U.S. data gave a very different picture.   The virus had first appeared in 1999 near the major international airports and seaports of New York and New Jersey.  It is assumed that a stray infected bird or mosquito took a free ride on a ship or plane and immediately started to infect other birds and mosquitos in the area.  If you go to the CDC, you can page through electronic maps of the spread of infections year-by-year.  You can clearly see that in two years it had spread all down the East Coast to Florida, after three years it had moved across the Mississippi to the mid-west and after five years to California.

So what does this tell us?

First, the pattern of infection is very different between Europe and the U.S. … in Europe it is centered on the north/south migratory bird patterns, while in the U.S. it followed an east to west pattern as it spread across the country.  Second, the number of infections is hugely different.  Take this year, 2012.  In the EU and neighboring countries, the total number of infections up to early October was 750, compared to the 4,350 in the U.S while the associated population around the infected areas of the Mediterranean is roughly the same as that of the U.S.

Two sets of facts that do not fit together, two anomalies.  What is the reason for them?

The answer is hidden on the CDC website on the virus.  To quote the very last item on the Q&A section on Transmission of West Nile Virus:

Q. If a person contracts West Nile virus, does that person develop a natural immunity to future infection by the virus?
A. It is assumed that immunity will be lifelong; however, it may wane in later years.

The answer is simple.  Europeans have no insect screens and accept that they live with mosquitos. They have built up a natural resistance to the virus having been bitten on numerous occasions multiple times.  Prior to 1999, only those Americans who had traveled or lived abroad and then bitten by an infected mosquito would have any immunity.  So, when the virus arrived on the East Coast, it spread like wild fire and is still infecting people who have never had it before.  As a result, infection rates in the U.S. are five times higher than in Europe!

This also means that as time goes on, more Americans will get bitten by infected mosquitos and build up immunity.  At some time, infection rates will peak and fall back towards European rates.  This conclusion created a very different direction to my subsequent primary research as now the question was more about when might the infection rate peak and then start to fall, rather than how soon a competitive vaccine might hit the market.  My client, who had only focused on the U.S. side of the story, had not appreciated this wider global perspective.

So my fellow CI professionals look for those anomalies.  They are the clues that there is some hidden facts you do not fully understand and resolving them may allow you to uncover very valuable competitive and strategic insights for both you and your client.

by Mike Ratcliffe

I have just recovered my wife’s lost iPhone using the free iCloud tracking App, my wife’s iPad and two police officers!

It is also a great CI case story as Apple’s tracking service gave me the intelligence to proactively make decisions before my competitor, the person who stole the phone, could wipe it clean and either start to use it themselves, or sell it.

The details of the story are that my wife lost her iPhone in a local nail salon, but only discovered the loss after the salon was closed.  Soon as she told me, I immediately booted up Apple’s tracking App on her iPad to find the phone was right near the salon.  I drove over to check if she had dropped it outside … no.  So, it must be inside.  First thing next morning, I called the salon owner who said she could not find it.

I rechecked the Apple App and to my horror I see the phone had moved about a mile away to a residential street.  I immediately called the local police department and agreed to meet in the parking lot of gym which is just round the corner from the street.  However, my wife’s iPad does not have wireless so I had to go into the gym to use its WiFi to show the police sergeant exactly where the phone was.  We then both get into his cruiser and off we go.  When we get to the street, we find the house where the App says the phone is near. However, the App had said it was on the side of the road and only thing there is a trash barrel. So I start to go through the trash while the sergeant knocks on the front door of the house. Nothing in the trash!  A very friendly lady comes to the door, but she denies knowing about the iPhone.  I need to boot up the App again and so ask if she has WiFi.  She says yes and she gets the access code.  I logo on to her WiFi, boot up the App on the iPad and can now see the phone is right by me, somewhere in or near the house.  It so happens that the new Apple software upgrade IOS 6.0 has improved the App allowing anyone to remotely make their phone ring.  So, I use the iPad to instruct the iPhone to ring.  The Sergeant, who has really good hearing, hears something inside the house.  He goes in and, two minutes later, emerges with my wife’s iPhone in his hand, still pinging.

Unbelievable …

How is this a great CI case study? Look at the five simple decision steps Apple must have gone through to create this service and relate them to how you manage CI for your key brands:

• Identify where you are most vulnerable
  • The loss of a phone
• Identify the key forces that could impact this vulnerability
  • Someone stealing and accessing the phone
• Set up an effective monitoring system of these key competitive forces
  • The Apple App that tracks the phone through its location software
• Set up actions to mitigate any threats or capitalize from any opportunities
  • Add the functionality into the Apps to remotely ring the phone or wipe it clean
• Learn and improve
  • Listen to your customers, improve the App and launch version IOS 6.0

Follow these five steps and you will be heading for best CI practices.

by Mike Ratcliffe

The managed care market looks like another round of innovation.  This time thanks to health plans and Accountable Care Organizations (ACOs).

Since 2000, employers have been innovators in driving change in the health care coverage model.  While health plans reacted to the failure of managed care to control costs by pushing costs on consumers through high deductible health plans (HDHP), large employers developed ideas around value-based plans.  By 2010, concepts around investing in health by driving wellness and prevention had moved from a few innovative large employers across the Fortune 1000 and into the mid-sized employer market.  On-site clinics located on employer campuses were also proving themselves a valuable addition to managing employee health and the market was clearly moving away from simply shifting costs onto consumers and towards driving value.

Following the publication of the final rules for setting up ACOs in 2011, two rounds of applications have netted 154 applications for ACOs.  Each one is a new regional agglomeration of providers, some hospitals, some clinics.  At the same time, health plans have started to see the opportunities to take a leaf out of the innovations made in the employer self-funded health plan market over the past decade and plug them into ACOs to offer new highly competitive plans designed for employers co-located with a specific ACO’s provider network.

Take Aetna for example.  Aetna has been at the forefront of using Big Data to help manage costs.  In 2005, it acquired ActiveHealth and its compliance engine allowing Aetna to monitor potential drug-on-drug and compliance issues using data feeds from medical claims and drug prescriptions.  In 2011, Aetna completed the purchase of Medicity gaining access to its health information exchange technology.  This gave Aetna the ability to link into the electronic health record (EHR) system of any ACO and feed its EHR data into ActiveHealth.

Pretty powerful stuff and puts Aetna in a sweet spot to exploit ACOs to gain regional market share.

To see how it might do this, look at the July announcement that Aetna and Wisconsin-based Aurora Accountable Care Network will partner allowing Aetna to offer a new type of health plan to local employers.  Aetna is guaranteeing lower premiums, potentially as much as 10%.  As part of this plan, employees will have to use the Aurora provider network as much as possible plus the employer will allow a half-time nurse to be on-site.  Employees will be enticed to switch to an Aurora primary care doctor and to only use Aurora’s specialists and hospitals through penalties of going outside this new Aurora ACO provider network.

Presumably Aetna will be able to layer on disease management (DM) as and when necessary for high risk employees.  Although DM has been around for well over 15 years, it has been notoriously difficult to make profitable.  One of the reasons has been the problem of getting all high risk employees to sign up and be part of the program fearing that their employer might find out that they have certain medical conditions.  Now with employees being pushed into an ACO health management program, this problem should go away, or at least be minimized.

For drug companies these developments raise some interesting questions around what the formularies might look like in these new value-based ACO plans.  There will be incentives for the ACO’s doctors to maximize the use of specific branded drugs to help drive wellness and prevention, plus back-office monitoring systems like Aetna’s ActiveHealth should aim to drive compliance of maintenance drugs.  So health plans may have to rethink how they structure their formularies and drug companies how they contract to get priority access.

It is early days and many managed care innovations have failed in the past.  However, this one is certainly worth tracking carefully and seeing if it will deliver on its promise of cutting premiums.

by Mike Ratcliffe