We’re Living in the Era of the Second Derivative
By Dr. Lawrence Kosinski, Founder and Chief Medical Officer, SonarMD
LinkedIn: Lawrence Kosinski
LinkedIn: SonarMD
In Calculus, the second derivative of a function is the “derivative of the derivative” of that function. In other words, the second derivative can be phrased as “the rate of change in the rate of change”.
We are living in an era of an increasing second derivative with respect to health care. The rate of change in the rate of change is increasing making for a progressively more complex world around us in which we have to work and strive to survive.
To complicate matters more, there are multiple strategic forces impacting us today, each of which is in its own second derivative of change. This sets the stage for logarithmic change. The combined effect of these changing forces on us is resulting in stress on the system and burnout for providers.
What are these forces? I see six major categories.
Structural Changes
Most of the significant structural change imposed on the system has resulted from federal government legislation. The Recovery Act in 2009 gave us Meaningful Use which promoted the conversion of paper records to digital health records. Although this was meant to help coordinate care, the crafters of the legislation allowed for each vendor to create their own proprietary database, which has resulted in silos of data that don’t communicate.
The Affordable Care Act (ACA) was passed shortly after creating the Center for Medicare and Medicaid Innovation (CMMI) to test new payment and delivery models that would lower spending while maintaining or improving patient care . As enacted, the ACA appropriated $10 billion for the CMMI for 2011 through 2019 and authorized another $10 billion for the following ten years through 2029.
Over the last decade, CMS has used CMMI to administer multiple demonstration projects, including the Medicare Shared Savings Program (MSSP) for Accountable Care Organizations (ACOs) and the follow-on Pioneer ACO program. Over 50 model tests have been launched, reaching nearly 28 million patients and over 528,000 health care providers and plans. These models have generated important lessons about how to transition the U.S. health system to a value-based care model.
A major effect of the small four-page section of the ACA that created ACOs has been the rapidly accelerated consolidation in the hospital space transferring significant power to these consolidated health systems.
The Medicare Access and Children’s Health Insurance Program (CHIP) Reauthorization Act of 2015 (MACRA) was written to create more accountability in the provision of care. Unfortunately, it has not improved quality and has resulted in significant stress on the provider space.
At the end of 2024 we sit on the horizon of a new administration, one that will likely impose its own new initiatives. Likely results of the new administration will be:
- Decreasing regulations on the insurance industry
- Further growth of Medicare Advantage
- A possible significant revision to the current RBRVS physician payment system.
Consolidation
Health plans were the first to consolidate back in the 1990s, which has markedly increased their market power and influence. Today basically five health plan platforms control the bulk of the commercial space. Because of the opportunity for ACOs, the ACA accelerated the consolidation of the hospital space. They are now vying for power with the health plans. Both are increasing their employment of physicians. Low interest rates over the last decade led to a massive consolidation in the GI provider space through private equity purchases. These entities all remain on the private side and there have been no IPOs for any of them to date.
This process will continue going forward with further horizontal and vertical integration.
Payment Model Changes
Ever since the passage of the Resource Based Relative Value Scale, the reimbursement for physician services has been under annual revisions. The structural changes created by the ACA and MACRA have laid the groundwork for value-based care to replace fee for service. Unfortunately, this has not really materialized with the main effect being a 23% decline in Professional reimbursement since 2000. Risk is being transferred from Medicare to Medicare Advantage and Medicare Shared Savings Programs (ACOs) while in the Commercial space, Health Plans have transferred risk to ACOs and self-funded employers. A new category of provider has been created through this transfer of risk, one that assumes risk.
These new “Payviders” are the model for future accountable care. GIs like other specialists will need to develop nested risk bearing solutions inside large population based total cost of care models.
Disruptive Technologies
Although the initial vision of the tremendous benefits of digital health records was that they would transform the provision of health care, improve outcomes and control cost; the unfortunate effect to date has been the conversion of physicians into data entry technicians. The silos of data that do not communicate with each other have created a nightmare in redundant data entry for providers.
The COVID 19 pandemic catalyzed the use of telehealth, which has enabled remote care to be provided. Since practice-based systems are not designed for remote visits, one of the main effects of telehealth has been to disintermediate providers. Direct to consumer products are now taking the place of the doctor patient relationship. A vacuum cannot exist. Something will always fill it. If providers are not willing and able to provide telehealth services to patients, industry will.
Artificial intelligence is the new frontier and is already revolutionizing how care is provided. Office functions will be first to be affected by AI which should provide relief to the providers on the data entry issues. Ultimately, it will become the dominant force in the future.
Management of Chronic Disease
The management of chronic disease is the “elephant in the room” representing the most significant challenge in controlling the cost of care. 86% of the total cost of care is consumed in the management of patients with chronic disease. Current fee for service systems are not appropriate for the holistic medical needs of the chronically ill. Hybrid payment structures that combine a per member per month payment with fee for service is the model for the future.
Consumerism
The days where the physician was in control of the doctor patient relationship are over. Digital tools have allowed patients to take control of their care. They can now obtain accurate information without going to the doctor. This has allowed care to be disintermediated away from the provider to third party entities. Social media is now the source of care for most patients.
What is the physician to do to survive in this era of the second derivative. What will care look like in the future? How is one to maintain a practice? Time will tell.
