The inventor’s dilemma: What's unique about health care technology?

Dr. Eric B. Larson finds a link between the recent Kaiser acquisition news and a friend’s JAMA essay on health care innovations

Have you heard our big news? Kaiser Permanente plans to acquire Group Health, the parent organization of Group Health Research Institute. Like other Group Health leaders and our physicians' group, I'm thrilled. Kaiser and Group Health are both nonprofit, integrated health and coverage systems with independent research institutes. They share the goal of accessible, affordable, evidence-based care. GHRI and Kaiser researchers have a strong relationship, including collaborating since 1996 on the Health Care Systems Research Network and its data infrastructure.

Over the next year, if Group Health members and regulatory agencies approve the acquisition, we'll get details about the transition. For now, the news made me think about an essay for the Journal of the American Medical Association (JAMA) by my good friend and keen thinker Dr. Arthur Kellerman. In his commentary, he puzzles over a difference between technology in health care and other industries. In most sectors, technology innovations reduce costs. In health care, technological advances such as new devices and drugs drive up costs; they have a stronger influence on rising costs than even our aging population.

Why doesn't health care have cost-saving technologies? Because of our inventor’s dilemma, writes Art: The overwhelmingly fee-for-service national health care market doesn't reward products that lower costs, because they don't yield revenue. If we want health care advances that improve patient outcomes, he says, we have to change incentives.

I talked with Art about the response to his essay, which summarized a report from RAND Health (where he was a director) funded by the Gates Foundation. He was surprised that only a few people expressed interest in his ideas, especially the intriguing example he uses: the polypill, a single pill to reduce risk of stroke and heart disease by combining commonly used, safe medicines. Because of its low cost, investors and even federal agencies are slow to fund testing of this invention.

Why Group Health is uniquely poised to solve the dilemma

I believe that Group Health joining Kaiser brings two like-minded systems together in a way that could address the health care inventor's dilemma. Group Health and GHRI bring expertise as a leading-edge learning health care system in which researchers and providers work together to make care better. Kaiser, with its national footprint of 10 million people in eight states and its ability to provide resources for building infrastructure, could help Group Health and GHRI grow.

Relevant to the inventor's dilemma, both systems were founded on and are organized around a prepayment rather than the traditional fee-for-service model. This setting naturally exerts downward pressure on patient and health system costs while focusing on long-term health to preserve and enhance care quality and patient satisfaction. It's the perfect environment for pursuing quality-enhancing inventions like the polypill that do more than just add costs. Unlike much of American health care, the Group Health and Kaiser systems simply have stronger incentives to lower costs while improving health outcomes, which aligns with Art's points. Since both Group Health and Kaiser are not-for-profit, reducing health care costs is not about returns for shareholders. Rather, our organizations aim to “serve the greatest number” by making care affordable for more people. If our talented cadres of health services and clinical researchers join forces, we'll have the opportunity to take on the major challenge of U.S. healthcare: finding ways to provide great care, reduce costs, and delight the patients and communities we serve. 

Coming in 2016

Please keep reading this newsletter in the coming months for updates on the Kaiser-Group Health transition, which is expected to take at least a year. Right now, it's business as usual at GHRI, although next month, I'll tell you about exciting leadership changes at the Institute that will put us in an even better position to improve care while lowering costs. Until then, enjoy the holiday season and best wishes for the new year.

Eric B. Larson, MD, MPH
Executive Director, Group Health Research Institute
Vice President for Research, Group Health