Saving Oregon’s Health System: A prescription for Oregon Governor Elect John Kitzhaber, MD

In earlier guest posts here on Silicon Florist, Dave Chase has written some thought provoking pieces that have generated quite a bit of dialog here and offline. He has shared why he chose Portland over Seattle and Silicon Valley and how Oregon’s Athletic & Outdoor, Software & Clean Tech clusters should meet. Then in the first part of a two-part series on healthcare, he put out a call to action for entrepreneurs to employ what he calls Do-it-yourself Health Reform.

In Dave’s post below—part two of his health reform post—one of his ideas highlights an opportunity for Oregon to be home of a cluster that is likely to explode over the next decade – Personal Health Monitoring. And calls for Governor Elect Kitzhaber to take action. The Nike Plus is the tip of the iceberg of what is coming in this area. There couldn’t be a more natural home for that cluster than Portland. And the potential for that changing our entrepreneurial environment is very real.

$aving Oregon’s Health System – A Rx for Governor Elect Kitzhaber, MD

Dear Governor Elect Kitzhaber, MD:

The crushing financial burden of healthcare on businesses and families couldn’t come at a worse time. Regardless of one’s political stripes, there’s recognition that it’s unsustainable to have healthcare costs go up 274x over the last 50 years compared to 8x for consumer goods. Fortunately, there is something you can do almost immediately to reduce healthcare costs without negatively affecting healthcare quality. Businesses and individuals have felt the burden of health premiums increasing 4x the rate of earnings over the last 10 years and can’t wait any longer. I believe there’s no governor in the entire country that is better positioned to rethink the fundamentally flawed health payment model given your own medical knowledge. Even better, no state is more strategically positioned to create a job stimulating industry cluster than Oregon that I’ll explain below. Fortunately, the “prescription” is something that Progressives and Conservatives can agree upon. It’s only the “Preservatives” who want to protect the status quo that are the barrier but fortunately most of this Rx requires only a governor’s bully-pulpit, not legislation.

As a physician, you are well aware of the distortions created by the current fee-for-service compensation model. This model encourages primary care provider appointments not to exceed 7 minutes and also encourages healthcare providers to buy expensive equipment as a way of increasing their bottom-line. For example, MDs who own imaging equipment utilize it at 3x the rate of those who don’t own their own equipment. The supply side driven economics of healthcare contributes to the extraordinary healthcare inflation. You are also aware that our health compensation model has created a situation where we have an increasing shortage of primary care physicians because the split of specialists to primary care MDs is 70/30 while it is 50/50 in the rest of the world. What’s worse, graduating physicians are choosing specialty practice over general practice by a rate of 10:1 because primary care MDs are dramatically out-earned by specialists.

The former American Medical Association President referred to the family doctor as “the quarterback of the modern medical team” yet we pay them like a little-used “special teams player” compared to their brethren. It’s no wonder that more than half of primary care MDs say they’d leave practice if they could. We can and should stop this growing primary care shortage crisis.

As an Oregonian, you recognize the independent spirit of our fellow citizens. The only way we can make a big impact on healthcare costs is encouraging individuals to take more control over their health from both a behavioral and financial perspective. From a behavioral perspective, the state that spawned Nike and jogging is positioned like no other to encourage healthy behavior. From a financial perspective, we must return health insurance to its roots which will make it consistent with all other forms of insurance. That is, one obtains insurance for the rare events that you hope never happen. No doubt, you recognize that less than 20% of your health premium cost goes to those rare events. The remaining 80% of your premium goes for the medical equivalent of getting your car tuned up or getting it fixed when it breaks down. If we similarly burdened car insurance with the bureaucracy, overhead and profits necessary if insurance is involved in the day to day items, it too would cost 40% more than it needs to. See Sidebar for an illustration of a fictitious scenario.

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Let’s not forget that not only did an Oregonian popularize jogging in the U.S., it’s Oregon that has been a leader nationally on transportation, sustainable energy and farming as well as recycling. Oregonians have proven themselves to be open to fundamental change more than any other state. This bully-pulpit-driven three point plan is something you can begin right away with a major communications and education campaign.

1. Have Oregon become the home of an “X Prize” for dramatic improvement in personal health & wellness. X Prizes have shown to generate 10x the amount of private sector investment than the prize is worth. Whether it’s a personal or corporate wellness program, a computer-based game or something completely different. Imagine if there was a game as successful as Sims or Farmville for your body. Rather than building virtual communities or farms, people were similarly entertained tending to their physical self. Tackling the state/countries obesity issue is similarly challenging as the first X Prize that led to the first privately funded spacecraft. With a pre-existing hub of active gear and technology companies, there’s nowhere more suited to catalyze an X Prize of this type. With encouragement from the Governor’s Office, private sector sponsorship of the X Prize cannot only help the sponsoring organization but catalyze much more private investment.

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2. Massively expand the emerging Direct Primary Care (DPC) model that has demonstrated Google/Apple level customer satisfaction while lowering primary care costs. Further, these DPC models are reducing specialist and hospital visits by more than 55% (i.e., two of the most expensive aspects of our health system). In the traditional reactive sickness-care model, many of those result from medical conditions that could have been addressed earlier and cheaper had their been easier, more affordable access to primary care. Simple math would tell you that if there’s a growing shortage of primary care doctors and appointments go from 7 (today’s average primary care encounter) to 45 minutes (the typical appointment duration in DPC models), that will exacerbate the shortage. Over the long haul, if primary care doctors are paid commensurate with their “quarterback status” the shortage will ease, but that will take a long period of time. [HTML3][HTML3]Consequently, it is critical to encourage the integration of Physician Assistants and Nurse Practitioners into the primary care mix to help mitigate and ultimately reverse the growing primary care provider shortage. Families such as mine have received outstanding care from non physician primary care providers as they can readily handle many of the common conditions we experience and will gladly refer or work with a physician when there is greater medical complexity. At a regulatory level, one thing the state government can do is explicitly state that these plans are acceptable as a non-insurance offering as has been done in Washington. This is implicit in the new health law but it should be made explicit as has been done in states such as our neighbors to the north. You can read more on this little-reported facet of the new health law in my Huffington Post piece entitled Health Insurance’s Bunker Buster.

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3. Push for pricing transparency so that people can to take more financial control of their health-related spending. Healthcare pricing is even more confusing and opaque than buying a car once was. For most of the day to day health needs, moving to a cash-based practice is a win for patient and provider alike (of course, the insurance model is perfectly appropriate for catastrophic items). Physicians who have moved to cash-based practices have found they can lower their charges by 30-50% and make more money as they aren’t burdened with thousands of billing codes and hundreds of plans. The state can go further and encourage practices that receive state funding to also have a similar price be available for cash-based patients. The providers offering their services via cash-based models can join networks that will market their services making it worth their while. In the process, people will become educated about the true costs of the model we are burdened with today.

Dr. Kitzhaber, every 30 seconds someone in America files for bankruptcy in aftermath of a health problem. In a recent study, it was found that insurance costs forced 86% of people cut back on savings and 44% to cut back on spending on food & heating. We can’t wait. I intentionally focused on those items that require little or no legislation to be passed. Rather, your executive leadership and bully-pulpit can have a dramatic positive effect.

I’m optimistic that you will seize this leadership mantle and once again put Oregon at the vanguard of change that is necessary for sustained economic vitality and the health of our fellow citizens.

(Image courtesy Cameron Yee. Used under Creative Commons.)

Published by Rick Turoczy

More than mildly obsessed with the Portland startup community. Founder and editor at Silicon Florist. Cofounder and general manager at PIE. Follow me on Twitter: @turoczy View all posts by Rick Turoczy