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I was fortunate enough to be able to attend the Rock HealthHealth Innovation Summit onJan.20th. It was the third day of a conference that highlighteddevelopment, design, and business issues around the potential for health care transformation through technology. The room was full, and the audience stayed until the end, even on a Friday afternoon.

Why? Because they knew something big was up. What’s up is the awareness of the Rock Health accelerator and the move to change a system only a young person from outside the industry could even hope to change. For three days, enthusiastic developers listened to cynics like me talk about business models, chasms, and challenges. I hope our doubts didn’t make a dent in their drive.

A year ago, there was no Rock Health, but more important, there was no community pulled together around the cause of health care innovation brought about by young people largely focused on digital and mobile technologies. A scant one year later, there is a vibrant health tech community in San Francisco, supported by large hospital systems, insurance providers, VCs, angels, entrepreneurs and mentors. The need is recognized, but until Rock Health, there hasn’t been a community. Health 2.0, another wonderful step in the direction of change, focused more on showcasing change than on financing or mentoring change.

The second class in the Rock Health program kicks off this week. Some of the grads from the first have already received additional funding or gotten to revenue.

They won’t all succeed. They have no concept of how complicated this industry is. But here’s the most important point: Rock Health has drawn together all the people inside and outside the system who want it to change, who are willing to take chances, and willing to support the effort to move the needle.

And thus I feel like 2011 was a tipping point for health care as an industry. After last year, for many reasons, it can’t remain the same. The larger providers and payers have already begun to circle the wagons around Obama’s health care reform law, because they are realists and know it’s not going to be repealed completely no matter who gets elected. So they’ve begun the journey toward bundled payments, Accountable Care Organizations, medical practice acquisitions, and better electronic health records. The battleships are slowly changing direction.

And the best part, Rock Health was founded and is run by women — the very people who make most of the health care decisions anyway.

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The difficulties that health technology innovators will have breaking into the health care industry were no more clearly illustrated than by the talk given by Dr. Sam Ho, Chief Medical Officer of United Health Benefits Group, on the third day of San Francisco-based health incubator Rock Health’s  Health Innovation Summit. After two days of exciting stuff about design and development, CEO day presented the cruel reality of the market .

Dr. Ho began by admitting the system was broken. Payments, he admitted,  didn’t align with objectives, and outcomes were an afterthought.  But now things are in the process of change, partly because of the passage of Obamacare (although he didn’t mention it by name), partly because of the too-temporary tenure of  Dr. Donald Berwick at CMS, and partly because in a worldwide recession, we can’t afford our health care costs any longer.

So the big players, fearing innovation from without, have decided to try to innovate from within, and came up with a slogan called “The “Triple Aim:”  a slogan that embraces how to improve the individual experience, improve population health, and control inflation of per capita costs. Dr. Ho believes these three aims are separate now, but they must be aligned  to succeed.

For United Health, this means Care Management Programs, Transparency and Premium Designation Programs, Hi Performing Preferred Networks, Value-Based Benefits, and Value-Based Contracting. These can be read as forms of rationing and cost shifting by the more cynical among us. However, for him,  it mans developing more and more incentives for changing consumer behavior. For example, patent premiums will get lower and benefits richer if consumers enroll in a diabetes plan and stick to it. If they manage their blood pressure or lipid levels, they will also have richer benefits. But what if they try and fail? I’m all for outcomes-based medicine, but we have to be careful we are measuring things that are within the control of either patient or provider. And how do we judge?

Here at Health 2.0 there is definitely an air of transformation. Several initiatives that I had been following have come to fruition, or at least to critical mass, among them implementation of EMRs and patient communities. MedHelp now has over 12 million visitors a month, while millions of women annually visit the women’s social health site EmpowHER.com

On the electronic medical records side,  physicians have finally begun to implement EMRs in large numbers, because they are now subsidized by ARRA, the stimulus bill (you remember, the one that didn’t work?) to do so. In order to receive $50,000 to deploy an EMR, a physician need only buy one and demonstrate its “meaningful use” in his practice. For this year, to qualify for the Medicaid meaningful use incentive, all you had to do was purchase the software and go live in your practice. In the future, there will be other, more important qualifiers, such as the health outcomes of your patients. But for this year, just buy the product and begin to use it.

As a result, companies like Practice Fusion, which always made its software free, and is a (private) cloud-based platform have begun to grow by leaps and bounds. Founded in 2005, Practice Fusion grew by 400% in 2009 with the passage of ARRA now has 100,000 users and 21,000,000 patient records online. Next year, it is projected to have  100,000,000 records. Its iPhone app will launch soon, and its iPad app is being designed by one of the country’s top designers, who will speak at Practice Fusion’s user conference in November.

As part of an “exclusive” interview  with Practice Fusion’s founder and CEO, Ryan Howard, in which we took a pedicab ride around downtown San Francisco, I found out that within the next few years, users of EMRs like Practice Fusion will be able to choose physicians based on whether they have EMRs and allow the patient to have access to his or her data. After five years of waiting for the market to catch up with his innovation, Ryan has found himself sitting pretty, with open data ready for the new wave.

[ Aside: I also found out that in the early days of the company, Ryan actually took an insurance settlement check for an automobile accident and used it to make payroll instead of having his torn rotator cuff fixed. Yes, he's a hard core entrepreneur]

However, if you are a patient of the VA, of Medicare, or of any other insurer that is part of the Blue Button initiative, you can get your data today, by logging into VA.gov or Medicare.gov and registering online. Once you prove your identity, you will be given an opportunity to use the Blue Button  to download your data as a text file, or view it as a .pdf . You can save the data to your hard drive or send it to a PHR, such as Health Vault.

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Health care, long ignored by VCs who didn’t understand it, is now so obviously broken that it can’t be ignored, Rock Health, the crusading seed incubator inSan Francisco where I’m a mentor , has done a  study ofVC-funded healthcare startups. According to Rock Health’s survey, which is admittedly incomplete, 35 companies have received $2 million or more in funding in 2011 alone. But that’s only 2% of the startups. The rest, we can assume, are bootstrapping in one way or another. And although 2011 shapes up to be a record year in venture funding for the segment,  surpassing the previous record year 2010, much remains to be done.

Of the interviewees, 51% are in the business-to-business area (business to consumer health sites such as Wellsphere and WebMD having sprung up ten years  ago and already consolidated that space). This year, I see a great emphasis on personal health monitoring, on remote patient monitoring, and on connections between doctors for clinical decision making. There’s also a push to be mobile.

And yet the bulk of the work in transforming the industry has yet to be done. In the early days of electronic health records, a few major players — Cerner, GE, and McKesson — became entrenched in hospitals, providing ERP systems that did things like bar codes and inventory management, critical care bedside monitoring systems and claims processing. Those players, already in the hospitals,  also developed the early EHRs.

Those few players, with their expensive, proprietary systems, are still in place in most hospitals. As a result, patient data is siloed inside the hospital. When I had my hip replaced in 2006, I had to check into the hospital in advance. I filled out a series of paper forms at one end of the hospital. I was then required to take some preliminary blood tests, and I had to walk to the other end of the hospital, where the labs were located, and fill out the same forms. I filled them out again in the surgeon’s office, and again at the physical therapist.

My surgeon had to use the same costly EHR software the hospital uses in her office to make it possible for her to communicate with the hospital, and then another piece of software to read my outpatient X-rays, and still another software product to get the lab results.

When I returned to the care of my family doctor, who didn’t have any of the same software,  so the information transfer reverted to fax machines and hand carried X-rays.

Why? Because the Amazon and the Google of health IT don’t exist yet. Google tried and failed to get into the health care market, and Amazon is smart enough not to try.

As a general rule, hospitals buy separate pieces of software that don’t talk to each other. The problem is intensified by privacy regulations that few people fully understand. These regulations were designed to protect the patient, but the net effect is to make the transfer of information between health care providers almost impossible without paper files. In his day and age, that’s shameful. Even Kaiser Permanente, one of the pioneers in integration within its own hospitals, doctos, and patient population, has a system that can’t talk to the outside world.

Here’s what that means for you:

You go to your family doctor, and he will now have an electronic health record, because the government is incentivizing him to put one in.

His electronic health records software may or may not “talk to” the hospitals he practices at, or the labs he sends you to

If you are referred to a specialist, he may not even have an electronic health record, but if he does, odds are it’s not the same one your family doctor has, and—you guessed it — the data doesn’t transfer from one system to another.For you, it means your doctor will receive a copy of the specialist’s records by fax, or hand carried by you.

If you go to a hospital, when you leave, you will have paper discharge instructions, and your doctor may or may not get a report. Chances are, he will have to ask the hospital for one, and you will have to fill out forms to give him access to the reports. In fact, you will have to sign multiple forms just to get your OWN report, and when you do, it will probably be paper.

Lack of information sharing leads to redundant data entry, which takes up critical time.

Can you see the opportunity here? Health IT experts call it “Continuity of Care,” and are trying to set up regional “Health Information Exchanges,” so that if you happen to move from one city to another, change insurers, or change providers, your data can go with you.

But these are in the dark ages, because the acceptable standard, HL7 (or maybe by this time is is HL8) doesn’t do the job. The big entrenched players appear to have done everything they can to protect their market share my making it as difficult as possible to export or import information from their systems. Even at Rock Health, where awesome innovators are committed to changing the system, everyone is touching only a piece of the elephant.

So where’s the big opportunity in health care these days? I think it’s in data transfer and data sharing. If you think about how the internet has made it possible to share all kinds of other data, such as consumer sentiment, political opinions,  even energy use through the common TCP/IP standard, you realize how far health care has fallen behind.I am anxiously awaiting the day when your own health data moves with the same fluidity as data about your car, or data about your spending habits.

We appear to have “bent the curve” in health care spending last year; national health spending grew at a historically unprecedented low of  3.9%. That’s including all national health expenditures — private insurance, Medicare and Medicaid, and out-of-pocket expenses.

You would think this was a good thing, right?

But according to Deloitte’s new survey, not necessarily:

• In the United States, three in four (75 percent) consumers say the recent economic slowdown has impacted their health care spending.
• Forty-one percent are more cautious about spending, 20 percent have cut back on spending, and 13 percent say they have reduced their spending considerably.
• Sixty-three percent say their monthly health care spending limits their household’s ability to purchase other essentials, such as housing, groceries, fuel, and education.
• In an effort to save money, 36 percent of prescription medication users say they asked their doctor to prescribe a generic drug instead of a brand name drug.
• One in four (25 percent) U.S. consumers skipped seeing a doctor when sick or injured.

• Consumers believe that hospital costs (68%), lifestyle

choices (62%), and fraud (62%) are major drivers of

overall health care costs. Administrative costs (57%),

prescription drugs (54%), and defensive medicine

(51%) are also commonly cited.

• Over half (51%) of all consumers believe that 50% or

more of health care spending is wasted

• Of those believing that the system is wasteful,

49% feel that money is wasted because

individuals are not taking enough responsibility

for maintaining their own health.

• Consumers also blame redundant paperwork

(55%), defensive medicine (46%), lack of

adherence to evidence-based approaches (40%),

and extreme measures taken at the end of life to

extend life for a short period of time (35%)

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As the last of the large American industries to undergo forcible automation, health care is currently in a state of prolonged agony. The HealthTech NextGen 2011 Conference, held in San Francisco recently, highlighted this by calling attention to at least six disruptive changes that are still ahead in health care. These range from physician workflow to patient responsibility, to perhaps the overall (again) of the entire system.

1)Conversion of physicians to electronic health records. So far, 83,000 physicians have proven to Federal government that they have implemented electronic health records and are using them to manage patient outcomes. Many of these were already using EHRs, and had only to report in to the government and receive their $44,000 per physician incentive for whatever they bought. If you are a physician and haven’t yet done this, you must be finished implementing your EMR by 2012, or the Medicare incentive will start to decline. This incentive goes away altogether in 2014. For the late adopters, subsidized technical assistance is available. So the gathering of patient information into automated systems is underway, and patients will soon have health care portals.

2)If stage one of meaningful use is to capture information about patients, stages 2 and 3 are about sharing it. Health Information Exchanges are springing up all over the US, designed to ensure continuity of care by allowing your medical records to travel between physicians, hospitals, pharmacies, and labs. The current way of exchanging health information is to export it to the patient, one way or another, and give her the responsibility of carrying it with her. In the future, the patient should be out of this process, except for controlling to whom the record can be sent.

3) The rise of the genomic signature as part of the medical record. Within the next decade, state of the art medical care will include tailoring your therapy to your unique genetic signature. You will have your genes sequenced as a matter of course, because the cost to do this is falling rapidly, and the number of therapies that depend for success on knowing exactly who you are is rising just as rapidly. Over 500 actional geneticSNPs influence treatment in oncology therapy alone today.Over 70,000 SNPS are known to affect disease development, course, or response to therapy Soon it won’t be possible to publish medical research without the genomic signatures of the cohort, and state of the art medical care will rely on a complete chart and comprehensive digital genomic sequence.

4)Perhaps the biggest transformational change to the health care delivery system will be moving the responsibility for health care and outcomes from the provider location to the consumer location through telemedicine, mobile apps, and remote patient monitoring. The patient will no longer go to the doctor’s office; the office will be with the patient at all times via a mobile device. Device integration is happening right now in all the major EMRs.

5) The rise of health avatars, trusted online resources to sort through the conflicting information a consumer needs to manage his own health. Your health avatar will help you do everything from stick to your exercise program to take your blood pressure and report it to a central database. In limited forms, these exist today as products like Fitbit and the Withings Connected weight scales and blood pressure monitors, which send information to central repositories on the internet from devices you can now buy for home use. The Fitbit measures your sleep and exercise, while the Withings weighs you, calculates body fat, and takes your blood pressure.

6) The change in physician compensation from fee-for-service to fee-for-outcomes. Your physician will be paid to keep you well, not for treating you when you are sick. In this ideal future, he will spend more time with you planning out how you plan to stay healthy than fixing you when you don’t stick to the plan, because he will be compensated for your health, not your illness. One of the nation’s largest health systems, Kaiser Permanente, has pretty much ridden the front wave of these disruptions, and after four years of turmoil emerged with a fully integrated and automated system in which all of its 150,000 patients, 15,000 physicians, 36 hospitals, and 454 medical offices all participate. It boasts 100% of patient charts and 100% of its hospitals and clinics online. The online system processes 20,000 emails a day and has a full hot failover between data centers. To accomplish this, Kaiser Permanente also had to deliver 3,000,000 hours of training. But it has saved over 12,000 lives so far, by channeling the vision of Kaiser’s Founder, Dr. Sidney Garfield, who first published his vision of a completely integrated system in a 1941 edition of Scientific American. An overnight success.

What are the odds that I would find myself in a room with two other women who  also worked at Intel and were passionate about health care?  I thought maybe a million-to-one until I met Halle Tecco and Leslie Zeigler at Rock Health. They are truly star power.

It gets better from there. Rock Health is a new nonprofit incubator in the touristy Chinatown part of San Francisco.  But take the elevator past the imported knickknacks and large animal sculptures in the doorway and you will find an open, industrial workspace dedicated to software development to change health care. These women have the dream of disrupting the worst-run consumer industry in America with new mobile technologies that put power back in the hands of patients and providers.

In case you are wondering where the power lies now, it’s in the hands of the payers.

In most industries, the growth of information technology has shifted power to the customer. Or at least put it in the hands of the vendor who can target based on known customer preferences.

But healthcare has very little CRM, and no VRM. These software driven terms translated to health care would mean that the provider had adequate information about you to offer you intelligent treatment choices, and that you as the patient had the power to choose who and what gets treated and what you will pay. In healthcare, the patient has almost no choice of either treatment or cost.

Rock Health has eleven resident grantees (who have received nominal sums of $20,000) in its the first program, and twenty “member companies” who have not received money but can come to workshops and receive advice. They are focused everywhere from preventing hospital readmissions, to drawing conclusions from large data sets, to helping people find doctors who will give discounts.

But Rock Health isn’t trying to boil the ocean of our broken health care system. Instead, it is trying to work around the intransigence of the existing old guard to empower patients. It doesn’t touch the areas of data integration or flirt with privacy laws no one understands. Realizing that mobile devices can be used for prevention, monitoring, and better communication, it is trying to encourage startups that can succeed in selling into this difficult market because they are not selling to hospitals, but rather selling WITH hospitals.

What I loved most about Rock Health, and why I plan to stay involved with it, is the energy of the founders, one of whom was recently diagnosed with ulcerative colitis and got a crash course in health care systems mismanagement herself while still in her mid-20s. She has blogged a bit about her colonoscopy prep here.

There’s nothing like being a patient in our health care system to fire you up for change.

This morning I attended a Small Business Roundtable held by the Phoenix Business Journal, one of forty such publications in the country. The focus of the meeting was for the Business Journal to learn what it could do to provide more help to small business in the community. Around the table were representatives from chambers of commerce, small business associations, the local chapter of NFIB, and many small business owners.

The number one issue on every small business owner’s mind? The cost of health insurance. One gentleman, an attorney, said that his pre-existing condition made health insurance unaffordable for his entire law firm. Another said that the Blue Cross insurance offered to the self-employed was cost prohibitive. And then the attorney said he had finally discovered the PCIP plan and it had lowered his cost of insurance about 40%. The conversation shifted. Everyone wanted to know more.

Somehow the entire country  has forgotten that Obama promised in the Affordable Care Act that no one would be denied health insurance because of a pre-existing condition. 18 months later, the PCIP is up and running, and hardly anyone notices it. So here are the highlights of the plan:

1. PCIP plans are administered differently in every state, sometimes by the state and sometimes by the Government Employees Health Association (GEHA). In my state, Arizona, GEHA runs the plan. The enrollment criteria and forms are here.

2. PCIP is a PPO (Preferred Provider Plan), which means that it contracts with a provider network and pays the network to provide services. If you go to a physician in the network, you will pay less of a cost-share for  services from a than from a provider outside the network. (We had this system in the 1980s, when last we tried managed care. It died with HMOs). You can go to any physician, but you will pay more outside the network.

3. The network is one of the largest in the state, at least it is in Arizona, so access to care should not be a problem.

4. There is an annual deductible, but there are no lifetime limits on what the plan will pay.

5. You are indemnified against paying for hospital-caused illnesses, and the hospitals are incentivized not to commit the kinds of medical errors that have come to frighten patients.

We have a benefit payment policy that will encourage hospitals to reduce the likelihood of hospital-acquired conditions such as certain

infections, severe bedsores and fractures; and reduce medical errors that should never happen called “Never Events.” When a Never

Event occurs, neither you nor your PCIP plan will incur costs to correct the medical error.

We have a benefit payment policy that will encourage hospitals to reduce the likelihood of hospital-acquired conditions such as certain infections, severe bedsores and fractures; and reduce medical errors that should never happen called “Never Events.” When a Never Event occurs, neither you nor your PCIP plan will incur costs to correct the medical error.

6. Preventive care is available at no charge.

7. A wide range of providers are paid for, including chiropractors and nurse practitioners, podiatrists and mental health providers.

A licensed doctor of medicine (M.D.) or a licensed doctor of osteopathy (D.O.).  Other covered providers include a chiropractor, nurse midwife, nurse anesthetist, audiologist, dentist, optometrist, licensed clinical social worker, licensed clinical psychologist, licensed professional counselor, licensed marriage and family therapist, podiatrist, speech, physical and occupational therapist, nurse practitioner/clinical specialist, nursing school administered clinic, physician assistant, registered nurse first assistants,  certified surgical assistants and Christian Science practitioner.

The term “doctor” includes all of these providers when the services are performed within the scope of their license or certification.

8. A wide variety of maternity benefits are included — even NICU stays in certain cases.

Just reading the fine print of the PCIP tells me it incorporates much of the best thinking on how to reconcile access to care with cost controls and the financial motivations of insurance companies. If you have a pre-existing condition and you are not afraid to “go bare” or self-insure for six months, this may be a huge help for you.

My family doctor emigrated to the US from Canada years ago. He has just installed an EMR and qualified easily for meaningful use stimulus funds because he takes Medicaid patients. To qualify for meaningful use under Medicaid, all you have to do is order the EMR; it doesn’t even have to be up and running.

Medicare is more rigid; outcomes must be reported. To report on outcomes, he had to buy another module of the EMR, probably because the EMR he bought was developed before the meaningful use standard or the stimulus money.  In his opinion, it will be difficult to report significant outcomes for Medicare and Medicaid patients, because they often don’t stay in his practice long enough. They move, they change insurance, they drop off Medicaid into the ranks of the uninsured. People in the US no longer stay with a medical practice long enough for longitudinal study — which is why all our EMRs have to talk to each other and we have to track patients as they move from provider to provider.

Today, as part of a wide-ranging discussion on the state of health care in America, he told me a little about his experience and that of his family in Canada. He says America does not look at Canadian health care from the right perspective.  We think it’s great that Canadians have universal health care, but we don’t understand what that means.

When he practiced in Montreal (and today),  primary care docs were capped at a certain number of billable dollars and patients a month. After he hit the cap, which he did very early in every month, he was only paid 25% of what he billed. His colleagues would limit the number of patients they saw a day to about 20, so they hit the cap at the end of the month. He liked to see 30-40 patients a day, so he would hit the cap way before the end of the month, and he wanted to continue to see patients because he enjoyed them. But he finally figured out that it cost him 35% of what he billed to run his practice, so it didn’t pay for him to see more patients. He left Canada.

In Canada, the untold story is that although they are insured, 300,000 people are without a primary care doctor — because no matter how many doctors there are, it won’t be enough if they limit the number of appointments the can grant a month.He told me that’s why people in Canada, including his own mother, have to wait two months for an appointment with a family doctor unless it’s a real emergency. I knew that was true of specialists, but I had never heard about primary care scarcity before. Canadians also pay out of pocket for things like camp physicals; there’s a chart of services and costs on the wall of the doctor’s office that tells patients what the government doesn’t pay for, and what the cost will be to them.

Dr. Kramer loves America because in his own practice he can now happily afford to see 30-40 patients a day.  And unlike many family doctors, he continues to see Medicaid patients, even though they pay less, because they are interesting cases. That energizes him; he has problems he can solve.

But he watches the younger docs go on salary and limit themselves to 20 patients a day at places like Mayo Clinic, and it worries him for the future of American health care. He admits that it’s a great improvement in the physician’s quality of life, but he predicts a huge upcoming shortage of doctors as American docs go on a system more similar to that of Canada, and begin limiting the number of patients they see daily because they are no longer incentivized to see more.

Everyone in health IT is looking at the proliferation of mobile devices and wireless communications capacity and they are salivating. Now, they say, we are finally going to be able to monitor the vital signs, activity levels, food intake, lifestyle habits of patients and use all this information for prevention. Remote monitoring will bring about the Holy Grail in prevention. And prevention will lower costs.

Not so fast, Kimo Sabe.

For my birthday this year, I got an iPod Nano Watch. The new Nano has a pedometer built in and it uploads your data to Nike. I have been wearing it every day, even though that means I have to charge it every night (this is decidedly sub-optimal for a watch). Faithfully I count my steps and upload them. Rarely do I have get to 10,000 steps a day, except at BlogWorldExpoNY, where I went over the top twice. Most days a dog walk and a trip to the gym put me at 6,000 or so steps.

The Nano Watch replaced my Fitbit, which I wore faithfully all last year. The Fitbit was more complicated and gave me even more information. It tracked my activity, and if I wore it at night, it tracked my sleep patterns and told me how effectively I was sleeping. I also could log my food.

For months I found out that I have a banana and a frappacino for breakfast, some other kind of fruit in mid-morning, along with a diet Coke right before lunch. I then have a salad of some kind or a sandwich on one piece of bread for lunch, fish and a vegetable for most dinners, 2 glasses of wine, and about half a chocolate bar (dark) after dinner. Every once in a while it varies, but most days, that’s it. Oh, and I sleep at 97%.

I gave up the Fitbit because I had the knowledge. And what did I do with it?

Nothing.

The same thing I am doing with the data I am uploading to Nike. Nothing.

Why? Because now I have to make real changes, and the biggest thing I’ve learned from all these monitoring devices is that I AM NOT WILLING TO DO THAT!

There are certain things all the remote monitoring in the world won’t fix. I’ve read about the applications that will tell doctors whether I have taken my pills, too. But if I don’t want to take them, can’t I still refuse the reminder phone call? Or even thank the (probably robo-) caller, hang up and do nothing?

The technology, as usual, is far ahead of the user. And until it gets into our heads and convinces us that we MUST change, we probably won’t. This is the saddest part of all the talk about invoking “prevention” to lower healthcare costs. All of that requires participation by the patient. It’s not dictated by the provider, the payer, or least of all by the health IT product manager.

Anybody want a Wakemate? I have one of those, too.