Putting the Pieces Together

The mission of MIT’s MEHD Group is to envision the future of the healthcare system and create new knowledge, new technologies and new business practices to improve healthcare delivery throughout the country. Research Director Mahender Singh explains how they plan to achieve these lofty goals.

In the MEHD Group – the MIT Efficient Healthcare Delivery Group ­– we assume that transformative innovation in the healthcare supply chain is essential, and that in order to survive and succeed, industry participants must be attuned to new developments and in command of new ways of doing business.

The group had its genesis in research into the healthcare industry that I carried out with some of my students over the past three or four years. During this time, working on specific research topics, we got a better sense of the industry on the whole. Specifically, we had covered pharmaceutical companies, hospitals and distributors, and we started thinking that they all belonged to a big puzzle, and while they were all contributing in a very unique manner to the whole effort, they were not interacting and coordinating with each other very effectively. In fact, they were tripping over each other and making it harder for everyone to work efficiently.

So we decided to take a step back and we could see that, effectively, the healthcare system is a set of individual companies and organizations that in the end serve one patient. They may not recognize it, and they may not consider it important, but it’s a fact. With that recognition, we said, “We need to pool all this knowledge we have gained and start thinking about the problem in a holistic manner.”

At the end of the day, we are all trying to deliver a service to the patient. Sometimes we are not even aware of the other points of view that are out there, often causing problems and unexpected challenges along the way. The takeaway for us was that this is an important way of looking at the whole thing. It’s like the five blind men and the elephant: they look at different parts of the body and describe it differently, but in reality they’re talking about the same thing.

Buzzwords
Suggestions and solution abound that talk about the patient-centric model and being market driven. Those are good buzzwords: everyone wants to be patient-centric, everyone wants to use the word ‘market’ even if it doesn’t suit them. However, sometimes when we introduce the so-called ‘best practices’ from other industries, we copy-paste processes without thinking deeply about the problem at hand. There’s nothing new here; people don’t pay attention to the details. They jump in and start making changes saying, “let’s become market-driven” since companies in other industries have made significant improvement to their bottom line by using these processes. It’s not that easy, and we should not think of introducing ill informed strategies without considering the overall structure first. In short, healthcare is certainly a unique environment.

Instead of being colored by the famous successful stories of other industries, we decided to start by looking at the overall structure of the healthcare industry. For instance, who are the stakeholders? How are they incentivizing each other? What is really happening? We quickly realized that a significant amount of change taking place in every facet of this industry. Furthermore, these changes are not isolated and likely to cause ripple effect that will go far beyond their local scope and intended impact.

An example of such a change is the obvious fact of aging population. With baby boomers becoming more demanding and torrent of technological innovations, there’s going to be an increase in the number of new therapies and the degree of personalization. Trying to meet these new requirements by stretching and manipulating the capabilities we have today is not going to be sustainable. We need to think about the overall system.

More importantly, the effect of such changes is clear. If we look at the total cost of healthcare in this country, it is a whopping 16 percent of GDP now – and it is projected to be 20 percent by 2017 – you cannot expect to run the system in this manner, so something has to give. We see these problems today and we say, “How do we fix it?” I think it’s too late. We should have done something five or ten years ago to have some hope of avoiding these problems today. Indeed, we can and should try to minimize the damage, but the key lesson is, if we don’t want to see these types of problems five or ten years from now, we’d better start doing something today.

In summary, we started looking structurally at a variety of drivers – baby boomers aging, population growth and new technology – and we put on top of this the information about the decreasing trend in the number of hospital beds per 1000 people. The cost per bed is going up, and even though we spend more than any other country – almost $5,400 per patient, which is nearly 50 percent more than Switzerland, the second-ranked country – we are not even in the top ten in terms of quality as per World Health Report.

Home-based care
Hospitals and clinics are at the heart of the healthcare system. More importantly, these contact points are used to deliver care for specific, acute conditions, on an event driven basis. But if you look at the data, the top eight conditions that lead people to go to the hospitals in the US today are chronic care conditions. Hypertension, diabetes, cancer, obesity, heart problems: these are all conditions whose treatment requires a sustained, continuous interaction with the patient and the medical system.

Hospitals are struggling to provide care for chronic condition to a large number of patients on a consistent basis. An obvious reason is that the current healthcare system is structured to support acute-care, event-driven demands from patients and works well for that purpose. Reimbursement to doctors, nurses, the location of the hospitals; everything revolves around this core idea of acute care. Indeed, acute care needs will not go away in the future as we are still going to break our arms and legs. But what is important to note is the growing need for chronic care that is being superimposed on top of the acute care need. In summary, we are dealing with a healthcare system that is faced with a very different demand pattern both in terms of volume and nature – event driven for acute care versus constant interaction for chronic care. I like to call this the Acute-to-Chronic shift (A2C shift).

Despite this discernible shift in demand, the A2C shift, we are serving the healthcare needs by using the old structure, often extending and manipulating it, and it’s not going to work. The challenge is to recognize the A2C shift, not to say that acute care is less important in the future, and give due importance to chronic needs. Furthermore, there is data to suggest that in the future 70 to 80 percent of healthcare expenses are going to be incurred for chronic care.

To address this new realization, we should focus less on where we are today. Perhaps, the best way to proceed under these circumstances is to start with a clean slate and design what would be a good, effective, efficient delivery mechanism for our future needs. In short, think about that ideal situation from healthcare delivery pint of view. Explore the role of the government and brainstorm what policies would suit the future needs best? How would we reimburse doctors? What kind of technologies would be used? Would it be home-based versus going to a nearby centre?

Value proposition
Another issue with the current healthcare system is the inflexible mindset of healthcare experts. Due to deep-rooted beliefs, the healthcare industry is notorious for ignoring innovative solutions, many times in the name of patient safety and pursuing evidence-based practices. Without a doubt, patient safety is the most important objective of any healthcare institution and care should be taken to protect the patients when implementing change. But this thinking shouldn’t stifle innovative ideas.

Our current healthcare system is focused on disease care: when I have a problem, I get taken care of. It is not healthcare, since healthcare should mean maintaining good health, and that’s where preventative care, home-based healthcare, new technologies, and new models come in. Taking a ‘maintaining good health’ perspective in a rapidly changing A2C environment could be very revealing for different stakeholders in the healthcare industry. For instance, pharmaceutical companies should start thinking beyond the pill – they have to start thinking about the services that need to be attached to the pill. They have to define what it is they are offering to the patients or the customers. Am I offering them a pill, or am I offering them a recovery or a service in the sense of good quality of life? If they are just thinking about pills, then what they are doing today could be justified. Manufacture the pill, make sure it’s available, and then you’re done. But here’s the problem: if the pill doesn’t work for some reason for that patient – maybe there’s a compliance issue, or it could be that there are avoidable side effects – who gets a bad reputation? The pharmaceutical company.

In the end, it’s all about your value proposition. Companies need to start thinking, “You know what? We know more about this drug than anyone else because we identified this. We made this drug.” In fact, they have many reasons to interact with patients while patients are taking their drugs. First of all, to make sure patients are doing the right things: helping them to make sure they’re healthy, happy and have a good quality of life. In doing this, they might discover that the drug has a side effect – perhaps it causes weight gain or moodiness. If companies are aware of this and help patients when they are facing those issues, this would make patients more successful with the drug, and increase the brand value. Then compliance goes up and everyone wins.

Making connections
If we project this thinking into the future, and pharmaceutical companies start interacting with people at various stages of their lives, they will have more information about their health, a better understanding of drug performance, as well as a greater ability to influence them. They can help people live healthier, and even create a virtual community to help each other. Social networks are everywhere and becoming big; why not transfer this to healthcare? We all relate to each more if we are facing adversity.

In my opinion, in the future, pharmaceutical companies will have no choice but to interact more with people they want to serve: the emotional side, the feeling side. They will have to think about, how do I connect with them? How do I work with them to improve the quality of life for everyone and in the bargain make money? All this talk of telemedicine, all these buzzwords that confuse people, I want to walk away from all that and say, “Call it what you will… the tag is less important.” We have to think of the future in an unconstrained manner, disconnected from the past and shape it in the way we think it serves us best.

That’s something that is missing from this big picture when we think about pharmaceuticals and healthcare today. We are so operational that we are not looking at the future and asking how we can prepare ourselves today to get there as well as shape the future? Unfortunately, if we don’t look over the horizon, the traditional pharmaceutical thinking will get in the way and slow down progress. If you look back and analyze history assuming that history is the best source of looking into the future, we will never find anything new.

When you look back in the past, there’s only one sequence of connections that is made available to us by the information embedded in the data. We can analyze it to draw conclusions on the cause and effect - this led to this, led to this, led to this. If I analyze the past, I should be able to tell you a story about why we are sitting here and why this happened, theoretically speaking. But the future has unknown numbers of paths that can unfold over time. Pharmaceutical companies have to look at multiple future possibilities, and then start challenging themselves and shape their future.

In my opinion, the conviction to change is lacking among key healthcare players, including pharmaceutical companies, today. They seem to be playing a different game, driven by molecules and R&D. I am not trying to minimize this; these are very important things. However, there is a business side of the equation, and the business side has a responsibility to ask what is possible, instead of saying the scientists have to come up with something, and then we’re going to find the best way to sell it.

It can be argued that the healthcare industry moves slowly but that could change very soon. Look at companies that are coming into this domain – Google, Microsoft and other big and small companies that had no business in being in this area. Now technology is moving the healthcare field into the future at such a rapid pace that it’s frightening. A few years ago, I would have agreed with the notion of healthcare “not being a fast moving or innovative field. It’s all drug-based: you find one cure, one more drug comes in.” That’s how it used to be, but not any more. Now technology has come into play, changing the nature of the whole interaction.

The future of delivery
How will medicines be made available to the patient in the future? It’s a huge challenge because right now, we’re having trouble making them available efficiently at the pharmacies and hospitals. If it has to be delivered to my home, who’s going do it? Is it going to be the hospital, is it going to be direct from the pharmacy, or is it going to be from the manufacturer? If we have a chronic care driven environment, what is the equivalent of that hospital that will be at the core of this delivery? We may still call it a hospital, but that hospital will not be confined to four walls as it is today. It could be a physical structure or it could be a virtual entity. It could support 500 homes remotely and any number of patients who live far apart.

Although we will be able to diagnose patients remotely because people can send in their tests, but pills or drugs cannot be sent over the Internet, they still have to be delivered physically. One possible solution could be to source directly from the pharmaceutical company to the consumer, to the patient. But this is not possible without a structural change and new infrastructure may be required to support this model. Additionally, when we start sending hazardous material to the patient directly, how will we bring it back in case of a recall – what are the recycling and reverse logistics of the whole equation? For sure, today’s structure will prove to be inadequate.

In order to better understand the future needs, we need to start pushing the idea of A2C shift more aggressively. We must focus on designing a new system with new hospital in the middle, where pharmaceutical companies think simply beyond pills, and not forgetting the role of the FDA, Medicare and Medicaid.

To recap, we must look at the enterprise architecture of the healthcare system today and start thinking about how the future may unravel and then consider different delivery mechanisms. To be sure, in some aspects of the healthcare industry changes are already taking place. For example, CVS have the Minuteclinic that you can go to in a convenience store, where a nurse can see you for certain types of health issues. Indeed, if the structure is changing, the delivery mechanisms also need to change. The question is, how will pharmaceutical companies have to evolve, in order to support this new structure?

About Dr. Mahender Singh
Dr. Singh is Research Director at the Massachusetts Institute of Technology, Center of Transportation & Logistics, a world leader in supply chain management research and education. He is currently leading multi-year research projects focused on the future of supply chains, supply chain risk and healthcare supply chains. His research and teaching focus is on operations and supply chain management.