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Medicine's New Weapon: Data


Science & Technology: HEALTH CARE

MEDICINE'S NEW WEAPON: DATA

For many Americans, medical innovation is synonymous with gleaming high-tech products: million-dollar scanners that look as if they belong in NASA's Mission Control, vials of gene-spliced miracle drugs, titanium-alloyed instruments that can perform surgery through a wormhole incision.

Today, though, health care's new power brokers--HMOs, buying groups, and other managed-care organizations--have a different vision of innovation. Kaiser Permanente, the nation's largest and oldest HMO, recently took what it considers an innovative step toward improving and prolonging the lives of diabetics. The technology: a simple computer database.

Kaiser combed through disconnected data from its billing, admitting, and lab departments, and a survey. It then created, for the first time, a registry of the 84,000 diabetics among its 2.4 million Northern California members. Now, Dr. Joseph Selby, Kaiser's associate director for health-services research, is using that resource to evaluate Kaiser's performance in serving those patients. The preliminary word--not so hot.

Although diabetes is the leading cause of blindness, Selby discovered that 15% to 20% of Kaiser's diabetic patients aren't getting their eyes checked routinely. Meanwhile, standard office visits aren't doing enough for patients battling complex problems such as obesity and stress, which make the disease worse. Kaiser plans more aggressive eye-screening programs and may set up patient support groups and more access to specialist nurses. "We're leveraging our data to improve patient care," he says.

HUGE PAYOFF. And cut costs. The U.S. spends more than $100 billion annually on the disease, so more effective strategies promise a huge payoff. And by 1996, Selby hopes to have registries for cancer, AIDS, and other major diseases.

Leveraging data to more cost-effectively treat patients is today's new innovation imperative. Everywhere you look in medicine, providers are aiming for the seemingly contradictory goals of cutting costs and improving care. The key? Better information systems, which is why the industry is expected to spend more than $6 billion on them in 1996. In the meantime, the demand for all but the most vital, more traditional medical technologies has fallen off sharply. Predicts Dr. David M. Lawrence, chief executive of Kaiser Foundation Health Plan: "We've gone from celebrating care that benefits people at the margins," such as hugely expensive surgeries for a few, to seeking technology that "will allow us to provide superior care at the lowest total cost for populations of people."

It is the shift to a systemwide focus, notes Bruce Eichhorn of Hewlett-Packard Co.'s medical product group, that has brought "gut-wrenching change" to the medical technology industry. It's putting the squeeze on many entrepreneurs, giving new clout to older, bigger players, and creating myriad opportunities for savvy infonauts and marketers who understand that even the most exotic technologies must be packaged as cost-effective--or they won't fly. "Manufacturers must come up with innovative applications," says Steven G. Sudovar, senior vice-president of drugmaker Hoffmann-La Roche Inc. "And the key is information management."

Hoffmann-La Roche is acting on that principle. The Swiss drug giant has a 10-year-old, powerful antibiotic called Rocephin, for example. It's not cheap. But for problems such as ear infections, sometimes just one shot can be a cure. Trouble is, doctors often try mild drugs first, only turning to potent stuff if the patient doesn't respond. Or some docs figure if Rocephin once a day is good, twice is better. Both scenarios unnecessarily add costs.

GIZMO GLUT. To keep the 1,100-facility VHA Inc. buying group's business, Roche's Sudovar offered what he calls "risk sharing." He made a pitch to VHA that Rocephin, used properly, could save money by eliminating other medications and excess office visits. Roche has agreed to use its sales force to discourage physicians from injecting more than is needed for a patient. In turn, VHA, using its data systems, helps Roche identify doctors who need that guidance. "Twice a day is not good medicine, and it's not good business," says Sudovar. Adds William J. Elliott, senior vice-president for supply-chain management for VHA, "Everything has to be focused around reducing cost of care." Across the board, he says VHA members are scouring their systems for inefficiencies, from wasted surgical sutures to duplicative forms.

The incentive for such action is managed care's growing reliance on capitation--or paying primary-care doctors and hospitals a set rate per patient covered, no matter how much care is required. Hospitals used to compete for patients based on things like how many heart transplants they performed or how many magnetic resonance imaging scanners they owned. But with employer demands for capitation, providers overnight went from making more money by doing more procedures, to losing money for every unneeded procedure performed.

Providers are first modernizing back-office functions, such as accounting and inventory--and finding surprising mpportunities. "We didn't even know we didn't need all these new gizmos," says Kim Byrd, assistant director of materials management for St. Joseph's Medical Center of Stockton, Calif. In just one case, Byrd and supplier Abbott Laboratories analyzed St. Joseph's catheter supply orders. Byrd found that the hospital was buying multiple products in each of 18 different lines. And the staff wasn't using catheters uniformly, so patients had catheters replaced unnecessarily, which raised their risk of infection. St. Joseph's standardized on one or two products per line, then educated the staff about optimal procedures. The hospital should save $165,000 over the next five years--and improve patient care.

Networking systems to link the cost and effectiveness of care, hospitalwide, is a more complex challenge. A patient in an intensive care unit, for example, may be hooked up to a dozen different devices--heart monitors, infusion pumps, ventilators, blood pressure and gas monitors. Not long ago, such a set-up would generate several hundred pieces of paper manually filled out and shipped around the hospital by "sneakernet" (literally by foot). Now, "the devices have to change, the architecture has to change, and the development process has to change," says Eichhorn.

In that vein, HP is rolling out its "Careview" system, which provides a workstation at the patient's bedside that records readings from all instruments attached to the patient, making all relevant patient records available in one spot, updated constantly. That saves money by cutting staff time spent in recording data. There's no more waiting for lab results because a key sneakernet connection is on a coffee break. And such things as warnings about patient drug allergies can be built in to prevent unneeded complications.

Over time, that growing reservoir of data becomes even more valuable. A provider can find out precisely how the patient was treated, how different patients with the same diagnosis were treated, complication rates, even how individual doctors are performing. Since practice patterns can vary tremendously by geographic region, systems like this help providers bring practices in line with the most proven methods. "Up until this point, no one was ever able to measure what worked," notes HP marketing manager Jill Glashow Padwa.

Eventually, these information systems will form a continuous feedback loop that propels other kinds of innovation. Kaiser is collaborating with San Diego-based Sequana Therapeutics, a biotech outfit looking for cures for diabetes by understanding its genetics. Sequana hunts for genes by starting with inheritance patterns in real patients. Now, instead of putting ads in the paper, says Sequana CEO Kevin J. Kinsella, "at the flick of a computer keyboard you can identify everyone with diabetes" that Kaiser covers and have access to records on those patients that are far more reliable than a given patient's memory.

This new innovation paradigm, however, is leaving many small players in the $42 billion device business in the lurch. "[Buyers] won't give you any margin, flexibility, or room to operate. Vendors end up without money to innovate," laments Joseph Mandato, chief executive of Origin Medsystems, a maker of minimally invasive surgical devices.

To make matters worse, managed-care organizations want to cut fewer, bigger deals, which would favor larger vendors. Robert W. Croce, franchise chairman for Johnson & Johnson's Ethicon Endo-Surgery division, for one, has won huge market share in the minimally invasive surgery market for the past several years--not so much with new technology, but with add-ons such as Ethicon's state-of-the-art training facilities. Ethicon has even spent several million on a "virtual reality" surgical simulator. "People are looking for who can deliver the goods in a new way," says Croce. And having surgeons trained properly up front is more economical for providers in the long run.

"GOOSE BUMPS." Meantime, venture capitalists are far more selective in their medical investments. Today, they are moving toward funding software-oriented medical information system developers. Says Russell Hirsch, a partner with the Menlo Park (Calif.) Mayfield Fund: "It gives me goose bumps to think of the value resident" in the information such systems can capture. He's working with entrepreneurs to come up with programs to standardize patient care, and other data-leveraging approaches.

Still, novel, breakthrough products can find takers. Greenleaf Medical Systems, a small Palo Alto (Calif.) maker of sophisticated devices that measure hand function, for example, has seen a surge in revenues in the past two years because its $20,000 to $40,000 smart machines fill an important niche: Worker's compensation claims are soaring for repetitive motion injuries to the hand, and Greenleaf's devices can help providers win contracts to evaluate workers and get them back on the job.

Both payer and patient win when a condition is appropriately treated or prevented, rather than allowed to escalate because of disorganized, or pocket-

lining patient management. In the long run, preventing a disease or nipping it in the bud is always the cheapest path. Nevertheless, some critics argue that managed care is still not effectively embracing some potential cost-saving technologies. That may be an unfortunate but necessary aspect of playing catch-up on the computer side. When health-care information management matches the sophistication of those Mission Control scanners, medicine will be ready for more quantum leaps.By Joan O' C. Hamilton in San Francisco, with bureau reports


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