How technology is lowering the costs of diabetes
How Technology Is Lowering the Costs of Diabetes
David Snow, Privcap:
Today, we’re joined by Jacques Mulder of EY, Adam Blumenthal of Blue Wolf Capital Partners and Brad Coppens of One Equity Partners. Gentlemen, welcome to Privcap today. Thanks for being here.
Unison: Thank you.
Snow: Jacques, you’ve done quite a lot of work in trying to understand how the provision of care around diabetes can be improved with all the IT breakthroughs we’ve had. Why did you choose diabetes as something to focus on and what did you learn about how that care is going to be revolutionized?
Jacques Mulder, EY:
Diabetes is just a proxy. It affects a lot of people, it’s expensive and it’s kind of topical. But the same could be said for congestive heart failure or COPD or a number of other things.
You’re moving, as we are now, into payment models, which have an element of accountability in terms of the quality of the outcome. Where I see this going is [that] either organizations, groups, hospitals or others are going to start laying down better ways of treating a disease like diabetes.
Diabetes is one thing, but patients tend to develop a series of co-morbid conditions and, ultimately, you don’t pass away from the diabetes itself, you pass away from some other complication. Once you get into high weight, hypertension, increased weight and sugar control, now it becomes stroke, cardiac death—there are all kinds of other risk factors.
So, the point I’m trying to make is [that] finding a way to intervene in something like diabetes has a spinoff effect on a number of other things, but the core elements that we’re missing in the treatment from our view was, one, care coordination. You show up at your doctor’s office once in six months or once a year, and then you’re out in the community doing your own thing and no one checks you.
The ability to have a good idea of what a diabetic population looks like, both into the handheld devices were the remedial algorithms saying, “If this thing is going off track, we should have someone that has the right skillset look at this patient.”
You can also escalate or go way downstream and have lower levels of care available for the patients. So, a nurse or a pharmacist or other types of practitioners who don’t have to be a clinician—you put this all together and you wind up in a place where you can certainly treat the diabetic for $400 a year or less and you can minimize some of the risky outcomes dramatically, just because you have the connectivity and you can be preemptive.
We are going to move to a point where payment is fixed and your ability to deliver quality care underneath that payment ceiling and the better you do it is going to be your profit. Understanding that risk equation is what’s going to make companies successful. I think that’s the biggest opportunity for private equity, because most of those organizations just don’t have the inherent skills.
Brad Coppens, One Equity Partners:
Diabetes is honestly but an anecdote to a whole host of chronic conditions that end up driving just an enormous amount of cost for the system. You could put folks with congestive heart failure, COPD, diabetics, in a bucket of consumers that, while around 5% or so of the population of a health plan, drive over 40% of the cost.
There’s a complicated way to get to better outcomes, which is the ultimate objective at a lower cost, and there’s a very simple way to try to change the cost paradigm within a very limited population who drive an enormous amount of cost.
If you could only identify change in condition—don’t diagnose, don’t do anything above the license of the practitioner who is in the home, but simply identify change of condition when it occurs and bring in an appropriate intermediary to assess what’s going on and avoid a hospital admission—you’ve all of a sudden changed an enormous amount of the cost surrounding those services. The ability to do that is IT-enabled, to Jacques’ point, but the objective is really quite modest when you think about what we actually have to capture to have an enormous cost shift.
Adam Blumenthal, Blue Wolf Capital Partners:
We deal a lot with hospitals, which traditionally had been kind of one–size–fits–all community providers of every type of healthcare services. That model really is breaking down and it’s been breaking down for a number of reasons.
As in many other industries, these big, high fixed-cost large institutions are not really good ways of delivering services effectively. And, with advances in information technology, advances in the ability to distribute services and advances in medical technology that [make it] much easier to do a surgery or a lab test than it was 20 years ago, you just don’t need that huge fixed cost.
You start to build a much more distributed system and, as you build a more distributed system and you put the services and the venues out there in the communities and make them more accessible, people start to make decisions about them.
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