There is a good argument to be made that we have reached a tipping point for telehealth: ubiquitous web cams, widespreadd (>50%) broadband penetration, cost-concious payers, and a more tech savvy population of patients and providers.  However, the barriers remain imposing, including reimbursement, state licencure, and HIPPA requirements among others.

Tacara found this video series on YouTube, enthusiastically entitled “Personal Telehealth Is Here”, particularly interesting in this light.

What do you think? We grant that there are many applications for telehealth, ranging from the use of cell phone camera images and phone calls to surgeries performed over great distances.  So, to make this discussion more concrete, we pose the following question: are we at a point where providers should start shifting a good portion of appropriate patient visits to live video chats?

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We are not at all bullish about Health 2.0, believing it to be just as much hype as Web 2.0 with even less chance of evolving substance from the business perspective.  Here’s why: Web 2.0 spawned several platforms, including the admittedly troubled Facebook and Twitter, whereas Health 2.0 has yet to do so in any significant way.  Being the platform is a far more valuable position to hold than simply creating disparate, fragmented communities with few if any underlying connections.  Don’t get us wrong,  there will be exceptions to our bearishness, and we are huge believers is niche communities for their value to users and ability to generate endemic advertising rates.  But, where are the big companies in Health 2.0? Without focusing on meaningful platform or market place models, Health 2.0 is likely to remain a niche for enthusiasts and futurists.  One company that might be on the right track, however, is AmericaWell.

One trend that we are bullish on is the potential for care coordination, as manifest in the chronic care model, guided care model, and patient-centered medical home. For a long time, private businesses have successfully created and harvested value by focusing on the specialization of care.  Western Dental is but one example of this trend. However, the move to coordination of care and truly integrated medical teams creates not only interesting opportunities around IT but also around corporate practice of medicine.

For today’s discussion however, we want to step back and feature a very well done slide show outlining what is likely to be one of the most significant pieces of near-term regulatory change: the patient centered medical home.

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We’ve spent most of our online time today on Twitter, so please check out what we had to say. Please sign up for our feed if you’re interested.  We have been having some very good discussions, both over DM and in public, about innovation in health care.

One highlight of our offline day was a very good conversation with a seinor health care plan executive on populations of patients that are underserved due to a lack of viable integrated, comprehensive care options.

We are also busy researching HSAs as well as severity adjustments for reimbursement and will be bringing you posts on those topics over the coming weeks.  We invite your comments on what posts you would like to see or on what you think are the most pressing issues/biggest changes ahead for each area.

Lastly, thanks to our readers who have helped our blog grow far more quickly than we imagined.

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Retail clinics are extremely exciting because of their rapid growth and promise to bring basic care to previously undeserved populations through convenience and low cost.  In the 21 months preceeding July of 2008, clinics grew by 5x.  A Wall Street analyst predicted, prior to the current economic downturn that there could be over 4,000 clinics in the US in 2009.  We developed the presentation below, which is mostly based on various reports from Deloitte,  to document this phenomenon, the trends surrounding it, and the possible near-term changes in the clinic market.  More after the jump.

Retail clinics are  what Clayton Christensen calls disruptive innovations, which he loosely defines as “cheaper, simpler, more convenient products or services that ultimately let less expensive professionals provide sophisticated service in affordable settings.” The basic theory here is that incumbent providers, in this case Doctors and Hospitals, have focused much of their energy and time on the most complex (and, in some cases, profitable) patients.  Those with basic needs like immunizations, strep throat exams, and diabetes screening, often do not have their needs fully met.

Think about the lead-time needed for an appointment, or the wait to see a doctor, for a simple hearing test or STD panel for instance.  As a result, the market was ripe for early clinic upstarts to arrive with a model that is far more convenient and less expensive for the general population’s basic and most common medical needs.  According to Christensen’s model, and as we can see from this history of many markets such as the PC, which rapidly supplanted the mainframe in most use cases in the decades after it was released, the low-end innovation of the retail clinic is likely to serve medical needs of ever-more increasing complexity.  However, as any casual observer of the health care industry would note, clinics will not come close to their full potential given restrictions on how care is administered and who can provide it.

In more general terms, entrepreneurs would be wise to look for anything that can enable less-skilled workers to perform the work now performed by more-skilled workers.  A systematic way to search for such opportunities is to focus on medical areas where care is recently becoming more rules-based due to greater medical understanding or technology advances.

The amazing growth of retail clinics cannot continue forever.  In the near term, clinics are being hit by the decline in consumer spending that has accompanied the downturn.  Over the long-term, we just don’t think that 4,000 or more clinics nationally makes sense.  According to our calculations, an average clinic needs 12,000 visits annually to break even.  In the context of a Citigroup analyst’s prediction of 4,000 clinics nationwide in 2009, that means a national visit break even of 46,700,000.  Looking at comparable visits to the ER for the services currently offered by clinics, that would mean that clinics would have to take over 41% of such visits to the ER just to break even.  In industry-wide revenue terms, that would be about $2.7 billion.  These numbers don’t pass the gut test, but a tantalizing prospect for clinic growth is not in numbers but in additional services.  To the extent that clinics can expand their offerings, they will see more patient visits and higher average revenue (and quite likely margins) per visit.

To better understand the retail clinic first-hand, we visited a Quick Health clinic in San Francisco on Mission St.  This clinic did have a doctor and was focused on Spanish-speaking patients although staff members also spoke English.  Our overall impression was that this clinic offered real convenience due to its location.  It’s facilities were clean and spacious.  The location of the clinic at the back of the store afforded patients, who faced no wait at lunch time on a Thursday, privacy from most shoppers as well as passers-by on the Street.  The staff, all wearing white lab coats, looked professional and competent.  They were both friendly and knowledgeable when we spoke to them.

We are personally grateful for level of care we receive in our private health insurance plans, but would be more than happy to visit a clinic if needed based on our impressions.  The following images are pictures of the clinic we visited and its menu of services.

Main clinic desk and waiting area. Private patient rooms are to the right.

The siting of the clinic affords patients some privacy.

Quick Health Clinic Service Menu

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Chronic pain sufferers – 75-80 million of them in America – are primary care physicians’ most dreaded patients.  Why?  Because there is no “cure” for many types of chronic pain.  Back surgery, for example, is often no more effective than less invasive treatment modalities in restoring function.  So patients keep coming back to their PCPs with ever-increasing demands for opiates and injections and little prospect of a cure.

In response to this demand, 10,000 new pain specialists have opened for business over the last decade.  These doctors provide the much sought – and highly profitable – facet injections that provide temporary relief from chronic pain.  Anecdotal reports suggests that there is a wide range of quality among these specialists: from folks who learned the latest techniques in weekend courses to highly thoughtful and skilled practitioners.  And the evidence-based guidelines espoused by the relevant boards are less and less inclined to recommend facet injections as a way to improve patient function.

There is a steadily developing consensus that this approach to treating chronic pain is unsustainable, as exemplified by many pain treatment guidelines.  An increasing body of literature suggests that comprehensive pain programs (CPPs) are the most effective way to treat chronic pain. CPPs combine traditional medical treatment for pain (injections, drugs, surgery) with non-medical treatments, including physical therapy, psychological counseling, behavior modification (e.g. diet, exercise, yoga) and alternative medicine. CPPs acknowledge the reality that chronic pain is both physical and “biopsychosocial.” CPPs acknowledge that that pain is both physical and “biopsychosocial” and seek to help patients accept and cope with their pain.

CPPs would seem to be a win-win-win for all involved:

1) An increasing body of evidence suggests that CPPs are less costly, more effective and can yield insurers the much-sought ROI

2) Doctors can finally have the tools to help patients understand that ever-increasing doses of drugs will not make the pain go away

3) Patients receive more sustainable and equally effective care without risk of dependence

The problem is, of course, that there is no CPT code for “Comprehensive Pain Program.”  And in today’s procedurally focused reimbursement system, who wants to sit across the table from the big insurers and ask them to reimburse a yoga class?

If health care actors are serious about all reform buzzwords, then there is no better place to experiment than chronic pain care.  Specifically:

- “Evidence-based medicine”: Evidence suggests that CPPs are as effective as surgery, injections and opiates

- “Patient-centered, multi-disciplinary treatment”: co-locating psychologists, physicians and physical therapists in a continuum of care

- “Episode-based reimbursement”: procedural reimbursement has made dubiously effective pain management therapies incredibly profitable.

- “Pay for performance:” functional restoration in pain is by no means a perfect metric, but it can work

- “Reducing cost”: Weaning patients off expensive injections and drugs

- “Consumerism” and “Transparency”: let patients understand the relative effectiveness of CPPs and purely medical modalities and decide for themselves

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I have always thought that many insights into business and ecology are equivalent at an abstract level.  A good example would be carrying capacity, which is, roughly speaking, the population size of a specific species that can be supported by a given habitat.  So, for instance, a fish bowl might be only able to sustain 4 gold fish on two standard size feedings per day.  Business is actually quite similar, as the characteristics of specific markets, such demographics and psychographics, among a  myriad of factors, determine how many businesses can profitably exist in that space. Wal*Mart famously turned the principles behind carrying capacity to its advantage by establishing many of its original locations in more rural markets that could only support one discount retailer, erecting a strong barrier to the entry of any competitors to one of its local markets.
Similarly, it is very helpful to think of medical delivery businesses not in terms of individual opportunities but in terms of how they fit into the complex ecology of our health care system.  Any health care delivery business that survives and thrives, just like any organism, has to reflect the reality of its surroundings by fitting into the existing system in a way that works with some combination of existing players, potential players in adjacent markets, market forces, demand whether latent or existing, and an array of other considerations.
This multidimensional thinking is one of the reasons that innovation, including entrepreneurial innovation, is so difficult in health care delivery and services.  In health care services, unlike many many markets, it is rarely sufficient to find a need and fill it.  Take the hypothetical example of a high-price consumer device that predicts whether or not an individual is suffering from early but undiagnosed signs of certain types of dementia with 85% confidence.  Assuming customer demand, which may be a stretch in this case, it is unlikely that the company behind the device will be successful.  Providers are likely to resist losing control over such diagnoses, particularly those with high error rates.  Payers might worry about the cost of a wave of false positives.
Harvard Business School professor Regina E. Herzlinger has written especially clearly and persuasively on the implications of the structure of the health care system for entrepreneurial innovations:  “The health care sector has many stakeholders, each with his or her own agenda and power. Innovators who are either unaware of this complexity or neglect the connections among the various components may well suffer unwarranted difficulties.”
One company that caught my eye recently as nesting particularly well in its ecosystem is outsourced clinical trial recruitment firm EmergingMed.  The company provides its clinical trial matching and referral service to patients and physicians for free and generates its revenues by charging companies running trials a monthly listing fees.  Government and non-profit trials are listed free of charge.  With this system, all three parties involved directly in the transaction, the biotech and pharma companies running trials, EmergingMed, and the patient, win in an economically sustainable model that aligns all parties’ incentives without creating problems for other players such as insurance companies or government regulators.
The CEO of EmergingMed, Courtney Hudson, launched the company, structured in a way that fit into the ecosystem, after months of interviews with patients, advocates, caregivers, and researchers.  It is through a similar listening process that we will find our own sustainable niche.

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Specialized health care clinics have the potential to offer, and have delivered in many cases better outcomes, more cost-effective treatment, and higher patient satisfaction, among other impressive results.  The well-known Shouldice Hernia Center is just one successful example of the benefits of specialization.  Venture firms have long been in the business of specialized health care services, and remain so with investments like Chronicity, an interesting business focusing on Fibromyalgia, Chronic Fatigue, ADD/ADHD, and learning disabilities.

Specialized clinics and centers come in all different forms with varying medical approaches, organizational structures, staffing models, philosophies, and levels of focus on alternative medicine.

We here at Tacara are ever-weary of buzz-word laden trends.  However, we firmly believe in the benefits of specialization, the model of specialized clinics, and the ability of such clinics to fit comfortably within the complex health care ecosystem.  At the highest level, clinics are solving two critical problems: cost containment and primary physician labor shortages.  Costs are addressed through the benefits of specializing and PCP shortages by allowing accessible care.  So, we are inclined to rush towards, not away from, specialized clinics promising patient-centered approaches and collaborative medicine.

In this discussion, we’d like to highlight a few interesting points around specialized clinics.

1) Many chronic conditions are poorly suited to treatment in the existing medical system because of their multi-faceted nature and need for ongoing management as well as varying degrees of awareness and understanding among providers.  Chronic pain and fibromyalgia are two particularly good examples of conditions where sufferers often fall through the cracks of our medical system and where care orchestrated by one spcialized clinic that maintains an ongoing relationship with the patient provides clear benefits.  However, as mutli-faceted conditions with elements requiring psychological care and ongoing therapy rather than surgical procedures or injections, reimbursement can be a large issue.  As such, many patients will have to pay out of pocket for such specialized care, with indemnity plans and other options possibly helping financially.

2) Specialized clinics also reduce search costs for customers and provide marketing benefits to their proprietors.   The empowered medical consumer is a common theme, yet countless forums for such customers dwell on a common topic: where to receive treatment. Customers can more quickly answer this question when specialized services exist.  Service providers, furthermore, can and must leverage SEO and other internet marketing tools to ethically inform consumers of their relevant treatment options.

3) On the business side, one common concern is around the utilization of facilities and full-time staff.  As it was first growing, True North Center for Functional Medicine and the Healing Arts learned that it had over-built and as such faced unnecesary costs and low facility utilization, proving that a scalable model and well managed growth plan are extremely important in mitigating demand-side risk.  Two Brattle, a private psychiatic clinic initially focused largely on borderline personality disorder, was effective in solving plant utilization issues by renting space to part-time clinicians for use in their private practice.  But, Two Brattle struggled with the trade off between the high fixed cost of full-time staffers invested in the clinic’s growth and the economic attrativeness of part-time clinicians who represented a variable cost and did not receive benefits.  These part-time clinicians, however, were not invested in the growth of the clinic and increased the complexity of managing and growing the Ceter.

4) Specialty clinics, moreover, cannot operate in a void.  They must integrate themselves with insurers, proving cost-effectiveness through rigorous studies, to recieve main-stream adoption.

5) One large point in specialized medicine, which has been beneith the surface of this discussion so far is the difference between integrative and integrated medicine.  The former refers to the focused collaboration of providers from different medical specialties working together while the latter refers to a modality-agnostic treatment approach focused solely on patient outcome, typically with a component of alternative medicine involved.

What are your thoughts? We would be particularly interested to hear from those who have started or worked at specialty clinics or who are thinking of starting one.

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Customer satisfaction is a tricky thing and has only recently begun to receive increasing interest in the medical community and businesses surrounding it.  This attention is long overdue.
For those businesses focused on providing information and community online for health and wellness consumers, the problems of customer satisfaction are legion, as these companies are faced with incredibly heterogeneous populations with heterogeneous needs and expectations.  Some companies have addressed this problem by specializing, typically according to a specific medical condition or set of conditions.  WebMD has been a successful horizontal play.  The market place has become increasingly crowded and start-ups are having trouble breaking out.
As such, so called Health 2.0 companies should consider that  a superlative customer service effort can yield strong, perhaps invaluable, word of mouth. Word of mouth, as many studies have shown, is an incredibly potent marketing force.
This is a common trope, but Health 2.0 companies need to be rigorous and tactical in thinking about and approaching customer service.
The first consideration is the measurement of user satisfaction.  Surveys and other methods of data-gathering are helpful, but only a handful of metrics will move the needle.  Most importantly, sites have to get down and measure whether or not their customers would recommend the site to their friends. Referral is perhaps the most important metric for long-term success, as it is directly related to both customer acquisition and user engagement. Retention is another important metric, but companies should not be looking at many more metrics in measuring customer satisfaction because optimizing towards more than three or four data points will not move their bottom line.
The key to a satisfied customer can be expressed in the following equation: customer satisfaction = actual experience – expected experience.
So, if the actual experience provided for a given customer is better than his or her expectations, he or she will have a good (positive utility) experience, but anything below expectations will be a bad (negative utility) experience. This is a slightly more rigorous way to express the fact that it is all about succeeding customer expectations, not necessarily providing the best customer service in the world.
So, what are the implications of this?  Based on many years of research by Stanford Graduate School of Business Professor Uzma Khan and others, there are several keys to customer experience.  Here we look at the implications of this research for Health 2.0.

1. Health 2.0 companies should try and set their customers’ expectations low so that they are easy to surpass.  The trick is to do this without losing any customers near the top of the site’s funnel. So, what’s an example of this? An e-commerce company selling diabetic devices might have an “official policy” on shipping, fees, etc and routinely provide customers with special breaks so that they, in turn feel special. And, when a customer receives special treatment, it must be made crystal clear to them that they are being treated “specially” or else the exercise will be fruitless.  In another example, a nursing home referral service might provide an initially low estimate of the benefit to a user of filling out a form (“Recieve 3 Free Quotes”) only to promise them an even bigger benefit at the end (“Free One on One Phone Counseling Session.”)
2. The customer’s experience should always end strongly. Users’ estimation of site performance is not a monolithic, single unit. It is something that is built up over the time of their interaction with the site, and biased towards positive or negative variations over that period. So, an experience that ends on a high note is usually judged by customers as better than a uniformly strong experience equal to, or in some cases better than, that final high note of an improving service experience. This is something that is hard for a lot of sites to do that monetize indirectly through ads, but such sites might consider investing more heavily in content discovery for users to draw them deeper into the site towards more popular content.
3. Recovery is key. Customers tend to rate experiences where a service has rapidly corrected to fix a mistake better than a service that does not have any mistakes. Be sure to handle mistakes well, as this is a key “conversion point” for turning dissatisfied customers into satisfied customers. This point is most applicable to e-commerce companies.
4. Combine negative events, split positive events. Perceptions of experiences are funny things – it turns out that people do not rate an experience as poorly if everything bad was concentrated into one interval rather than into several discrete intervals. What does this mean? For e-commerce companies, it could mean combining all extra fees into one comprehensive fee. Or, for a website focused on monitoring disease management compliance, outbound patient reminders should be  as consolidated as possible.
5. By this point, readers will probably point out that exceeding expectations may likely have the unintended consequence of setting higher standards.  The solution is to make sure that the customer’s perceived experience fits as closely as possible with his or her expectations for service. It is impossible to please all of the customers all of the time, but this is the most that any site can aim for. More specifically, there are always many gaps in service that sites can examine and try to address:

• User desires vs. what site management thinks that the user desires. Solution: Listen closely to what users tell their friends about the site.
• What users want vs. what the site is positioned to deliver. Solution: This is very similar to the above, but the site’s management needs to thoroughly understand the site from the user’s perspective, mapping out their experiences in great detail and trying to understand what it is going on in their heads while they are on site. This is a long way of saying: put the user at the center of the site’s design.
• Promised/Delivered experience. Solution: The best way to combat a gap between what users are experiencing and what the site is promising them is to make sure the entire web team is crystal clear about what exactly users are promised by the site.

The meta-question here is whether or not Health 2.0 companies should spend resources on delighting relatively satisfied customers or moving unhappy customers to a relatively satisfied state. Perhaps both are possible given a company’s resources and experience, but the answer depends on what each company is trying to accomplish. If a company is trying to acquire customers, they are going to want to please, in a very impressive way, users who were somewhat satisfied before. For, it is surprisingly positive experiences that lead customers to refer friends and generate elusive word of mouth. The level of service that we are discussing here is the type that would receive rating of 9-10 rather than 7-8 from users. If the goal is to retain customers, the most important thing is to convert unsatisfied customers into customers who, while they may not be elated with the experience they’ve had, are relatively satisfied. As a rough benchmark, this would be equivalent to moving a user’s rating from a 5 to a 7.

Above all, incredible customer service is not free marketing, nor is it cheap. Would that time and money just be better spent buying traffic? The question is debatable, but these six points should help Health 2.0 companies think through their customer service more analytically and effectively.

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“The surest way to add value to a network is to connect it to another network”
-Michael Schrage, MIT Securities Study Program