Thursday, May 10, 2012

Innovating Innovation: Why Government-Sponsored Innovation Grants Are a Poor Remedy for What Ails Us


Earlier this week, Health and Human Services (HHS) Secretary Kathleen Sebelius announced the first recipients of the Health Care Innovation awards. Made possible by the Affordable Care Act, the awards will support 26 projects that propose to save money, deliver high-quality medical care and enhance the health-care workforce. HHS announced that it expects to reduce health spending by $254 million over the next 3 years through these awards totaling $122.6 million.

The successful proposals seek to deliver a wide range of improvements to our health-care system by way of lower costs, improved outcomes, or greater access to care.

HHS Secretary Sebeliius rightfully stated, “We can’t wait to support innovative projects that will save money and make our health care system stronger.”

All of which leaves me wondering --Why have we been waiting at all? After all, we Americans spend enormous sums to maintain our mediocre health status. Health care is a “house on fire” when it comes to the need for innovation. If we are to believe the ROIs on each of the initiatives, someone, somewhere, should have had a financial interest in seeing these changes implemented long before HHS came forward. The question, then, is: Why didn’t this happen earlier?

My quick read of the proposed “innovations” doesn’t reveal anything really innovative. Rather, it’s a list of projects that fall outside the mainstream of what the current system will pay for. Moreover, the payers, led by Medicare and Medicaid, are interested in paying only for the absolute minimum for care, preferably somewhere south of the marginal cost of providing the service. To innovate, you must have the resources and flexibility to do so. Sadly, our health-care programs provide little of either.

Innovation requires nurturing to take root and produce fruit. It also requires an outsized reward attached to the risk of abject failure that often accompanies true innovation.

In a government-led, health- care system risk taking is not rewarded. Therefore, we should come to expect that what comes to pass for innovation is merely a half-step outside the established mainstream of how health care is practiced and paid for under the current system.

Innovators gravitate to problems in need of solutions. We certainly have these in health care. What we don’t have is a financial model that rewards spontaneous innovation. The most important innovation the government can sponsor is to change how it pays for care. We need innovation that is not dependent on government funding.