Do we really need innovation in health care?

Talk of innovation is everywhere. The formula is simple—innovations, like driverless cars, Smartphones and block chain databases disrupt existing markets, increase productivity, and drive economic growth. Investors make returns and life improves for everyone. To an outsider it may seem like the same rules apply in healthcare. Improve R&D and access to venture and human capital; produce more patents and access to new drugs and gadgets; increase exports and you improve the economy with a bonus effect of reducing healthcare spend. But nothing could be further from the truth. Most technologic innovations in healthcare increase costs, albeit while potentially improving patient lives, typically reducing healthcare productivity. Robot-assisted surgery is a textbook example. Despite improving recovery time for patients, the increase in organizational manpower, training, and price tag have been shown to consistently increase costs. One study, examining 20 types of robot-assisted procedures showed consistent improvements in outcomes important to patients while increasing costs by an average $1,600 per case, or six per cent of the average procedure. This doubles when the amortized cost of the robot itself is included. And when patients learn that the procedure is available, they demand it, increasing the number of procedures, accelerating costs further. Technophiles may still argue that these are incremental innovations—not everything can be ‘disruptive’ and if we stay the course, it will lead us to the next big thing. However, this is not borne out by evidence. Out-of-hospital drug spending, due to its reliance on monopoly producers and limited price regulation, is consistently a top healthcare cost driver. Non-drug technologic change has been estimated to account for 40 per cent to 60 per cent of growth in Canadian spend, however, the real numbers are not known, as these data are not directly tracked. Instead, the impact of this type of innovation can be seen in across several cost categories, including physician and hospital spending. For example, a Health Infoway report estimated federal investments in information and communication technology for radiology diagnostic services improved radiologists’ productivity with an associated value from wide scale adoption of “$850-million and $1-billion a year.” This is not a return on investment to the healthcare system – patients realized the health benefits while specialists pocketed the monetary gains. Similar productivity gains have been seen in cataract surgery. Patients’ outcomes and convenience improves, while ophthalmologists have become Canada’s highest paid physicians. These examples of productivity-enhancing technology, however, are gross exceptions to the rule. Unlike economic sectors outside of healthcare like manufacturing and high technology, where more output can be quickly realized with fewer inputs, healthcare and other “stagnant” sectors like the performance arts require labour-intensive interactions with consumers. The result is that it is difficult to increase the rate of pap smears, fracture repairs and operas performances with technology. Car manufacturers, on the other hand are more than able to compensate for price inflation from labour, while similar gains in productivity are not realized by surgeons and opera singers; their need for better wages is passed on to consumers. The good news is that not all innovation is commercialized technology. This recent Report of the Advisory Panel on Healthcare Innovation (the “Naylor” Panel) appears to recognize this fact. It starts with a suggestion that the first real innovation needed is a mechanism to spread and scale innovation. They propose an arms-length-from-government ten-year Healthcare Innovation Fund and Agency to catalyze needed innovation. Like Amazon, and Uber, this is a marketing innovation—it connects the dots on needed innovations rather than creating them itself. Ideally, these are innovative products, processes and organizational innovations. If this solution sounds a bit too much like a planned economy, the Naylor Panel had little choice. Transfer payment systems have typically failed in the past, as provinces did what was necessary to receive money and used it to fund other things. Private sector solutions, usually the best for innovation, don’t work well in highly regulated healthcare systems. Small companies, for example, would be hard-pressed to conduct large-scale evaluations of alternative payment systems for hospitals or physicians without government partners. The agency model recognizes that competition and market forces must be used, but within a highly regulated industry. The Naylor Panel goes further and suggests the types of innovation that should be funded. This is too much like a planned economy. While some suggestions have strong evidence of reducing growth in spend (and providing value for money), others do not. Precision (aka personalized) medicine, which involves advanced diagnostics, features prominently despite good evidence that much precision medicine is poor value and will result in increased spending. Other examples of little-evidence or low-value innovations in the report are electronic patient portals, scope of practice changes, integrated care, and its wholesale endorsement of Choosing Wisely®. Not mentioned is the need for better data capture regarding value for money– without the right kinds of measures, we may never capture the impact of good innovation. Although some attention is paid to structural problems in health care, and in particular the federal-territorial divide, there could most certainly be more. Politics is a substantive barrier to valuable innovation. To their credit, the panel was asked to name innovations, and has done so. The panel also wisely concluded the need for strategies and evaluation mechanisms to facilitate the adoption of many of its candidates. However, one would hope that an innovation fund, a great idea, would simply name the kinds of goals it wishes to achieve in health care, and nudge would-be health-care innovators toward solutions that will benefit society the most. Don Husereau is an adjunct professor of medicine at the University of Ottawa and a senior associate with the Institute of Health Economics. His research includes work on the value of innovation and best approaches to the use of evidence and economics to inform health policy. The Hill Times

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Do we really need innovation in health care?

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