VC, not ACA, is the answer!

Hopefully you all understood the first acronym in this blog title, but the second one, just in case you've been living under a rock for the past week, refers to the Affordable Care Act.

In the midst of all the hubbub relating to the Supreme Court decision, its impact on the political landscape of our country, and its impact on our tax dollars (!), many argue that the route of free market capitalism will bring forth the true solution to the healthcare problems in the USA. One such author is Al Waxman, Senior Managing Partner of the Psilos Group, essentially a VC fund that provides investment opportunities to the healthcare industry.

You can read his article for yourself on PEhub: here's a link.

The crux of Waxman's argument is fairly simple: healthcare in this country is too expensive and too lacking in quality and efficiency. It really makes a good bit of sense. Healthcare is inefficient in that drugs are overprescribed, procedures are called for when they aren't truly necessary, and doctors are not always presented with an incentive for supporting preventive care (as opposed to the more lucrative, reactive care). These inefficiencies lead to lapses in quality (this one should be obvious), and increased expenses (this one should be painfully obvious).

Okay Al, I think we're all with you there. But what's the solution?

Simple, you see. A number of start-up companies are looking to tackle these inefficiencies at their roots. Waxman discusses SeeChange, an independent health insurance company that his fund backs, though he doesn't go into great detail about how SeeChange differs from any large-player insurance company (think Aetna, Blue Cross, etc.). A link to SeeChange's mission statements can be found here.

Basically, SeeChange is all about value-based benefits. The idea is that barriers to high-value health services are removed, and stronger incentives for healthy activities are created. Essentially, SeeChange hopes to further a paradigm shift from reactive to preventive healthcare as a cost-cutting measure.

Another startup that Waxman discusses is HealthEdge, a healthcare IT company. The notoriously bureaucratic nature of the healthcare industry costs a ton of money, and you'll be shocked to hear that before the American Recovery and Reinvestment Act which mandated a shift toward electronic health records, a whopping 80% of healthcare organizations strictly used paper records. This was in 2009 people, isn't that insane?!

There is little doubt in the claim that electronic medical records are safer than paper medical records. Jokes about handwriting aside, electronic systems can warn providers when they are giving a patient a conflicting drug, administering too much of a given drug, and allow for a patient's health records to be pulled up in seconds from essentially anywhere in the country. EMRs play a huge role in the safety and wellness of the population, and despite the fact that there are only two to three major players in that market, I would imagine many start-ups in the near-future will attempt to gain market share in this industry.

Anyway, I tend to agree with Waxman's sentiments, especially with the fact that placing 32 million previously uninsured Americans into the system will only make it all the more expensive due to the inefficiencies that are at this point inherent to our healthcare system. I'm not sold on the fact that an organization like SeeChange is really as innovative as Waxman claims, and I feel like I've read about many insurance companies attempting to implement similar incentive programs with little success. There is a certain degree of self-selection, in my opinion, for value-based plans, so results initially may be magnified and disproportionate. What do you guys think?

And what do you all make of healthcare information technology? I think it's really the way of the future; it's still unbelievable to me that not a few years ago such a large proportion of healthcare organizations were on paper records.

Thanks for reading.