Solving the Wanamaker Problem for Healthcare

Solving the Wanamaker Problem
for Healthcare

Tim O’Reilly
O’Reilly Media

StrataRx
October 16, 2012

Tuesday, October 16, 12

How Data Science is Transforming Healthcare

• Changing healthcare business
models
• Enabling new scientific
breakthroughs
• Empowering patients
• Changing tradeoffs between
privacy and efficacy

http://oreillynet.com/oreilly/data/radarreports/how-data-science-is-transforming-health-care.csp

I recently published a short booklet/ebook on how data science is transforming healthcare.

Big ideas from Silicon Valley
that will shape the future

It discusses some big ideas from Silicon Valley that I believe will shape the future of health care, both on the payment and
business side and on the clinical side.

Many of you know way more about health care than I will ever learn, so I’ll focus on the lessons from the technology
community.

Solving The Wanamaker Problem for Healthcare

“Half the money I spend on
advertising is wasted; the
trouble is I don't know
which half.”

- John Wanamaker
(1838-1922)

I want to start with this quote from 19th century department store magnate John Wanamaker, who was said to have remarked,
“Half the money ...” Faced with a healthcare system that is breaking under the strain, we ask “How can we just pay for the things
that work?”

Google’s Pay Per Click model solved the Wanamaker Problem for advertising--we pay for clicks, not just impressions.

Accountable Care is an attempt to do for healthcare payments in the US what Google did for advertising.

“What I learned from Google is
to only invest in things that
close the loop.”
- Chris Sacca

Investor Chris Sacca, who used to run special projects for Google, remarked “What I learned...”

We see this pattern everywhere in healthcare innovation today.

Public awareness of the power of data to transform healthcare has been building.

Most of you must have seen Atul Gawande’s writeup of the enormous savings that Dr. Jeffrey Brenner was able to achieve in
Camden, NJ by using data to ﬁgure out why some patients were costing the system a disproportionate amount of money.

Or Gawande’s most famous piece, the Cost Conundrum, in which he highlighted the fact that quality of care is, if anything,
inversely correlated with cost.

“Price increases, not
increases in utilization,
caused most of the
increases in health care
costs during the past few
years in Massachusetts.
Higher priced hospitals are
gaining market share at the
expense of lower priced
hospitals, which are losing
volume. The commercial
health care marketplace has
been distorted by
contracting practices that
reinforce and perpetuate
disparities in pricing.”

The irony, of course, is that Gawande himself works as a surgeon for one of the largest health care providers in Massachusetts,
which has used its market power to demand higher than normal reimbursements. Here’s a quote from the Attorney General’s
report.

“A friend of mine jokingly said, "What's all this talk
about the US health care system being inefficient? If
we consider that the system was designed to transfer
money from consumers to the various parts of the
health care industry, we are twice as effective as the
world average! Why would we expect that a free
enterprise health care system designed by hospitals,
doctors, pharmaceutical and device companies, IT
firms, and industry consultants and suppliers would do
anything other than maximize transfers of this sort?"
Paul Levy, http://runningahospital.blogspot.com/
2012/10/when-you-think-about-it-that-way.html

This is an illustration of the perverse incentives that still remain in our healthcare payment system. Paul Levy, the former CEO of
the Beth Israel Deaconess Medical Center, described this situation well.

Feedback Loops and “Algorithmic Regulation”

I want to move on, and to talk a bit about where all this is taking us - towards systems that are algorithmically driven and
therefore must be “algorithmically regulated.” I’m told that “regulation” has become a dirty word in Washington, and that we
should just talk about making markets work better. Well, I’m not going to back down. One of the things that make markets
work better is the right kind of regulation. Your car’s carburetor or fuel injection system is a regulatory system. The autopilot of
an airplane is a regulatory system, and the Google self-driving car is a regulatory system, using algorithms (i.e. rules) and
feedback loops to keep on course.

There should be a number of preconditions before one seeks to use financial
incentives or penalties to influence behavior. If these conditions are not met,
the financial tools will either not work or will have unintended consequences.

What might those conditions be? Let's start with a few:

1) Have a clear sense that the metric to be measured is determinative of the
result sought.

2) Ensure that the recipient of the financial payment or debit controls the work
flow associated with the metric.

3) Be confident that the recipient is likely to be influenced in the correct
direction by the financial incentive.

4) Ensure that the amount of the financial incentive is sufficiently meaningful to
the recipient that it is likely to influence his or her behavior.

5) Consider how to avoid the unintended consequences of the financial
incentive, e.g., impacts on other metrics that are of concern.

Paul Levy, http://runningahospital.blogspot.com/2012/10/my-arms-getting-
tired.html

Paul Levy has some warning words about regulation.

The secret of algorithmic data systems
is to focus on real time measurement of outcomes

And you need to keep changing the rules to keep up with reality, and drive towards outcomes.

The Lean Startup
The goal of a Lean Startup is to move through the
build-measure-learn feedback loop as quickly as
possible.

This whole model of using data to decide what works is at the heart of one of the most powerful methodologies to hit Silicon
Valley. The Lean Startup model isn’t about running cheap startups, it’s about ﬁguring out “the minimal viable product” that you
can build that will give you validated learning about the market. You measure and test, and use that data to reﬁne your ideas,
and improve your offering incrementally to perfect it as quickly and cheaply as possible, with as little wasted cost and effort.

This shift requires new competencies of companies. The ﬁeld has increasingly come to be called “Data Science” - extracting
meaning and services from data - and as you can see, the set of skills that make up this job description are in high demand
according to LinkedIn. They are literally going asymptotic.

Personalized Medicine

I want to move on to the topic of personalized medicine. I won’t go into the details of what’s scientiﬁcally and clinically possible
here - there’s going to be a lot of that in this conference. I want to talk about the social changes that are required for us to get
maximum value from the science.

• patientslikeme and collaborative clinical trials

What we see from initiatives like PatientsLikeMe

and 23andMe is how much cutting edge consumers want to get involved in their own health care or the health care of their loved
ones.

As Shakespeare said, “the hot blood leaps over the cold decree.” Consumers are charging ahead to learn more about their own
health, and they know from their experience on the internet how much more value can be created when they do it together.

This is the real “social revolution”

This is the real social revolution - sharing work on stuff that matters.

One of the big movements here is the movement to own our own data. This needn’t be a complex piece of technology. The
VA’s Blue Button initiative cut the Gordian knot by adopting the simplest possible format for a medical record - an ascii ﬁle.

It turns out that there’s one big loophole in the move to get patient records into the hands of patients. And that’s in the area of
lab results. Because of conﬂicts between HIPAA and CLIA and various state laws, patients have rights to their lab results in only
a few states.

• copy of letter about lab results

There’s a simple solution, a proposed federal rule that would harmonize state and federal laws. However this rule has not yet been ﬁnalized.

So with the help of Ann Waldo, we’ve been organizing a petition to HHS secretary Kathleen Sebelius to get this rule ﬁnalized.

· O'Reilly has long supported open source and open data, because access to information is the key to innovation and progress.

· Information enables people, and information that provides feedback about ourselves is especially valuable.

· Too often health information is opaque, not transparent - patients can't even get access to their own medical records! We all know stories of people not being able
to get records in an easy, quick way at the time they’re medically needed.

· Also, the lack of ready access to one’s medical records inhibits health technology progress, for many of the great useful tools and apps in development rely on
patients being able to access and direct their records.

· That's why O'Reilly has been putting together a letter that urges the government to finalize a regulation that will allow individuals to get a copy of their own test
results directly from labs. [Today, people don’t have the same rights to get their lab results as other their other medical records – it depends on state law, and most
states do not allow it.]

· For me as a person, for us as a company, this idea is a no-brainer - I hope it will be for you, too.

· It's beyond time for people to have real - ideally, real-time - access to their medical records. Including their test results.

· I invite you to sign on to this letter and take the opportunity to help shape policy in Washington. I urge you to talk to my colleague Ann Waldo about the details.

· [TBD – You can sign on electronically through ______, and you’ll also find copies of the letter and sign-on sheets in the hallway.]

http://oreil.ly/patient-tests

You can sign this letter outside in the exhibit hall on paper, or you can go online here. We already have several hundred high
proﬁle signatories. You can add your own signatures to add weight to the request.

I want to talk as well about the Quantiﬁed Self movement as an important part of this personal data picture.

The spread of sensors
• sensor platform slide

Companies like FitnessKeeper (an OATV portfolio company) are becoming fitness hubs, integrating data from multiple quantified
self devices into a kind of consumer-controlled personal health profile.

“The PC is just a toy.”

-Ken Olsen, Digital Equipment
Corporation

Now it’s easy to dismiss this subclinical health monitoring as just a toy. But remember what the giants of the industry of the
time said about the personal computer.

OMG, I could have my own computer!

Personal computers, open source software, the Maker movement were all created by people doing it because it was deeply fun.
The entrepreneurs and VCs arrive several years later.

Innovation often starts not with entrepreneurs,
but with people having fun,
who believe in an impossible future

So take the quantiﬁed self movement seriously as a sign of the future.

What happens when you throw open the doors to partners

More than 50,000 iPhone
applications in less than a year!
Now at 688,000

The consumerization of health care has the potential to unlock an entrepreneurial revolution.

Apple showed us the power of this kind of transformation when they turned the smartphone into a platform with the
introduction of the iPhone app store.

“What if we felt about
government the way we feel
about our iPhones?”

- Jennifer Pahlka,

Jennifer Pahlka, the founder and executive director of Code for America, recently asked a question about government that also
resonates for healthcare. “What if...?”

“I believe that interfaces to government
can be simple, beautiful, and easy to
use.”
- Scott Silverman
2011 Code for America Fellow

Code for America runs a service year program that brings talented web developers and designers to work with cities
for a year. Last year, fellow Scott Silverman, who had previously worked at Apple, explained why he had applied to the program.
He said...

What if interfaces for both doctors and patients
were simple, beautiful, and easy to use?

So let’s ask this question:

You might think that I’m talking about iphone and ipad apps - and yes, they can be important.

But sometimes a better interface is just a simple matter of changing the workﬂow of how people interact with the system. It’s
not the app, it’s the service. Zocdoc lets you make ad hoc doctor’s appointments quickly and easily. I recently had a problem
that I had to check out before getting on a plane, and no time to visit my regular physician. I was able to ﬁnd a doctor halfway
between my meeting at Google and the airport, and get the job done.

OATV portfolio company Sherpaa is a NYC startup that is working to put in place low cost medical concierge services as part of a
company health plan.

Healthloop is looking at creating new ways for doctors to check up on their patients to see how they are doing between visits.

Looking further ahead, new information retrieval UIs like Google’s Project Glass can be game changers - in specialized settings
where access to a computer can be seen as a powerful kind of human augmentation. I expect it to be used in professional
settings before it becomes popular as a consumer device. (In social settings, it will require even more profound resets of
behavior than the “always-on” mobile phone.)

You can see a preview of where this is taking us in the Apple Store. Where most stores (at least in America) have used
technology to eliminate salespeople, Apple has used it to augment them. Each store is ﬂooded with smartphone-wielding
salespeople who are able to help customers with everything from technical questions to purchase and checkout. Walgreens is
experimenting with a similar approach in the pharmacy, and US CTO Todd Park foresees a future in which health workers will be
part of a feedback loop including sensors to track patient data coupled with systems that alert them when a patient needs to be
checked up on. The augmented home health worker will allow relatively unskilled workers to be empowered with the much
deeper knowledge held in the cloud.

Steve Jobs on Design

“In most people’s vocabularies,
design means veneer. It’s interior
decorating. It’s the fabric of the
curtains and the sofa. But to
me...design is the fundamental
soul of a man-made creation that
ends up expressing itself in
successive outer layers of the
product or service."

http://www.nytimes.com/2011/10/08/business/how-steve-jobs-infused-passion-into-a-
commodity.html?hp=&pagewanted=all

I want to ﬁnish with a quote from Steve Jobs. The heart of what we want to do is think about the essence, the deep context of
what people are trying to do, and build products from that. We are redesigning the healthcare system. What an amazing
opportunity. I’m so glad to be here, cheering you on.

Solving the Wanamaker Problem for Healthcare

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