Ep10: Future Healthcare Business Models with Dr. Gordon Morewood, MD, MBA, FASE

Hills and Valleys is a podcast that uncovers stories from leaders in healthcare, tech, and everything in between. Straight from the heart of Silicon Valley, we give you a look at the good, the bad, and the future, one episode at a time. Brought to you by Potrero Medical.

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About Dr. Gordon Morewood

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Dr. Gordon Morewood currently serves as Chair and Professor of Clinical Anesthesiology at Lewis Katz School of Medicine at Temple University. His research interests include pulmonary hypertension in surgical patients, knowledge transfer in graduate medical education, and incentive systems for medical professionals.

Interviewer: Omar M. Khateeb, Director of Growth at Potrero Medical

Interviewee: Dr. Gordon Morewood

Khateeb: Hi, everyone. This is Omar Khateeb, director of growth over at Potrero Medical and we are in Chicago. It’s a little rainy today at the Hyatt Regency for the Society of Cardiac Anesthesiology. We’re joined by dr. Gordon Morewood. Doctor, thanks for joining us.

Gordon: Thanks for having me.

Khateeb: Absolutely! There are a lot of interesting things that I definitely want to cover but first, for audience, won’t you tell us a little about yourself? Where’d you go to school? Where did you grow up? Why’d you choose Medicine?

Gordon: Sure. Originally, I’m from Canada. I grew up in Canada. My parents were both Canadian and I went to school there. I actually ended up in medical school. I’m not sure how many of your listeners this will resonate with but, one of my favorite shows when I was in high school was Frazier.

Khateeb: I remember that show. [Laughs]

Gordon: I decided that I wanted to be a psychiatrist and it was only after I decided that I wanted to be a psychiatrist that I learned that you had to go to medical school to become a psychiatrist.

So, I thought, All right. I’ll go to medical school. That’s how I ended up on that trajectory. And once I was in medical school, I realized psychiatry really wasn’t for me and started to pick through different paths. I looked at surgery and a variety of different disciplines. But ultimately decided that I liked the ICU?critical care?type of settings the most and that’s how I ended up in anesthesiology.

Khateeb: Interesting. You know, they say that when you go to medical school you end up choosing the thing that your personality most fits in. Would you agree with that?

Gordon: I think I could probably see that. I mean, anesthesiology is very detail-oriented. It’s very task-oriented. It’s very immediate. You have to have yourself organized and be ready to deal with things in the moment, but you have a relatively short time horizon.

For example, in medical school where I did rotations in Rheumatology, which is arthritic type of diseases, they’d put patients on medications and say: “Come back in six months and we’ll see whether you’re better” And I said: “Six months? God! I’m not going to remember any of these patients six months from now. I need satisfaction now?today!” So, that’s a large part of anesthesiology.

Khateeb: Interesting. As you know, cardiac anesthesiology is a subspecialty. So, what was it about cardiac anesthesiology that got you so interested? Because it’s a very high emotions, high tense environment as you’re mostly dealing with big surgeries. What got you interested in that?

Gordon: I think your description is accurate. It is a fairly stressful environment. There are high stakes and procedures tend to be fairly complex. You need to be able to handle them perfectly every single time. Even small deviations can result in disaster.

I think the thing that drew me to the subspecialty most was the teamwork between the perfusionist, the nurses, the surgeons and anesthesiologists in those particular types of surgical cases. That kind of teamwork exists to some degree in every single operating room, but in the cardiac operating room, it’s the most pronounced and has historically been the most obvious when you when you compare it to other settings. I can literally spend six to seven hours, with nothing more than a thin paper drape, standing shoulder to shoulder with a surgeon as he completes the surgical procedure and I am providing the anesthetic care that keeps the patient’s heart beating and their blood oxygenated while the surgeon is manipulating their heart.

Everything he does affects everything I do and everything I do affects everything he does. It’s working together with somebody else to perform a very complicated procedure that I really enjoyed.

Khateeb: Where did you go to medical school? And where did you do residency?

Gordon: I graduated from medical school at Queen’s University in Ontario, Canada. I worked as a GP for a couple of years before deciding to go back to do anesthesiology. At that point, I went back to do a residency at the Beth Israel Hospital in Boston and followed that with a fellowship in cardiac anesthesia at the University of Pennsylvania.

Khateeb: Very nice. And currently you’re a faculty over at temple, correct? 

Gordon: I’m at Temple University, yes.

Khateeb: Okay. Very nice. When you were in residency, did you have any mentors that you trained with in particular? You grew up as a kid and really admired Frasier. So, who became the Frasier in residency?

Gordon: I think there was quite a spectrum of people in my life. I was fortunate that I belonged to a relatively small residency program certainly by Boston’s standards. I can’t remember how many people were in each class, maybe 15 to 20, which means we had a total of maybe 60 residents in the program. The faculty got to know all of us in each incoming class very quickly.

I was only there a couple of months before everybody knew me by name and I knew most of the faculty by name immediately. So, I can’t say that I can pick out one particular person amongst them?that would probably be a little unfair.

 But I think the way the faculty functioned as a team. the way they worked very well together and handled complexity on a daily basis in some very high-stress situations was inspiring.

I saw that and said: “Yes, I’ve definitely picked the right specialty.”

Khateeb: What was the most memorable thing that made you who you are today as a physician?

Gordon: The most memorable thing coming out of training, after my fellowship, we’re out of residency out of training,

Khateeb: You know what, let’s just go with training.

Gordon: Before I finished my fellowship and took my first position, I had already practiced some independent Medical Practice prior. I’ve been a GP for a couple of years before I went back to doing anesthesiology.

So, I think I faced a lower hurdle than a lot of physicians who are first finishing their training and were first taking on that individual responsibility for patients. That’s still prominent in my mind. The operating room is a very high acuity environment. When you’re in training, there’s always another level there. Whether you’re a resident, then there’s a fellow. When you’re a fellow, there’s an attending. There’s always somebody else that you can turn around when you’re in trouble and look at and say, Okay, now what do I do next? The day that you walk through those doors and you realize there’s nobody standing behind you, it’s nerve-racking.

To be fair, I think in today’s healthcare environment that’s not really true. Certainly, in our department at Temple University the ethos that we try and cultivate is that it’s a team sport; anesthesiology is a team sport. So, we have a very low threshold for calling other attendings into the room and asking for second opinions or second set of hands or a different perspective on a problem.

I think it’s less so now than back in those days. Back in those days there was a significant amount of anxiety in your first year or two of practice just realizing the weight of the responsibility that was on your shoulders.

Khateeb: Interesting. I understand that this morning you had a talk about something that’s very interesting but it’s not directly related to cardiac anesthesiology.

Tell us a little bit about the talk that you had and what it entailed.

Gordon: Sure. My talk was on healthcare finances and, in particular, how healthcare reform is reshaping the system in which physicians work and why they need to understand how that system works. I think when physicians think about finances at all, they tend to focus just on what is their reimbursement for the services that they provide.

My message to the physicians that were assembled there was that the system is changing in a way which makes it critically important that you understand how funds are flowing through the system because your actions will affect those funds flows.

If you are not understanding how your actions are affecting the rest of the system, you’re not going to be able to really prove your value to the system. One of my messages this morning was the fee-for-service system for physicians is probably going to go away. Certainly, it’s going to be minimized, but it’s probably going to go away.

I’m referring to situations where you get paid for every little consult you do; where every time you touch a patient, you get a fee. The new model that is emerging in healthcare today is paying for product rather than process, so you have to provide patients with an end result: a knee replacement, a recovery from their pneumonia or competent long-term care of their diabetes. Whatever that end result is that they’ve come to you seeking, you have to deliver that and then the healthcare system overall will get a bundled payment. Ultimately, the physicians, nurses and everybody that’s involved in that care will benefit from those payments.

Although, those payments will get divided up not quite on a straight line. The income will come to the systems and the systems will pay the healthcare workers that are providing those outcomes. Physicians under that kind of system then need to understand. If your value is normally couched in “Did you touch this patient today?” “Did you put an intravenous catheter in or an arterial line in?” “Did you intubate them?” “Did you extubate them?” “Did you take out their gallbladder?” When you think of that as the way your value is defined and now you have to re-imagine your value in: “How did I help the system look after this group of patients?”, it’s a bit of a paradigm shift.

In terms of shifting of paradigm, obviously, we have to start with the status quo. I think you and I and everybody who’s listening to this podcast knows that healthcare is in a big mess these days. To put it into perspective, I was reading a paper earlier stating back in 2012 or 2011, our GDP was about 16%. It was a little bit lower than that, I think it was about 13 or 14% of our GDP that went to healthcare. Today, in the year 2019, we’re just under 18 percent. A group of economists in the employment of the federal government back in 2009 projected that as early as 2040, a third?that’s 33%?of our GDP could go to health care if we continue on the current trajectory. And I’ll say that from 2008 until 2019, we have followed those projections pretty much exactly so there’s very little to suggest that they were wrong.

Khateeb: Interesting. Clearly we can’t go along that way because putting a third towards healthcare is unimaginable. There are many other things that not just this country but also any other country needs; so doing that would be detrimental.

You mentioned Stein’s law. Can you tell us a little bit about that? Because I found that very interesting.

Gordon: Yeah. I love this story about Herbert Stein. And this is a bit of a sidebar.

Khateeb: We love sidebars on the show so go ahead.

Gordon: Herbert Stein was a world-famous economist. He was the president of the Council of Economic Advisors for Presidents Nixon and Ford, but the sidebar that I enjoy about him is that his son was actually Ben Stein who some of you know.

Khateeb: Oh! Really? From Comedy Central? 

Gordon: The thing I love about Ben Stein is he’s a trained lawyer, he’s a trained economist and his breakout into acting was actually in the original Ferris Bueller’s Day Off. I don’t know if you remember, but he was the economist teacher in Ferris Bueller’s Day Off and it was a friend of his that was making the movie. And they said: “Hey, we got this bit part for a teacher, he’s an economist teacher in high school. You want to come out and play the role?” And he said: “Yes, sure.

So, he showed said: “What do you want me to do?” And they said: “Well, we just want you to give a really boring lecture.” He said: “Okay.” [Kateeb laughs] Then he launched into a lecture about the Smoot-Hawley Tariff Act, which is actually a real thing. It was one of his economists lectures from his classes that he was teaching at the time. If you want a Harvard or an Ivy League lecture on the Smoot-Hawley Tariff Act, go back and watch Ferris Bueller’s Day Off because that is an honest lecture.

Khateeb: It’s such a classic piece of the ‘90’s pop culture. Was it ‘90s or ‘80s?

Gordon: It was in the ‘90s. 

Khateeb: By being born in the ‘80s he was part of that.

Gordon: That was him. Yes, that’s Ben Stein. Herbert Stein was actually his father and he, in his own right, was a Nobel winning economist. He worked for presidents Nixon and Ford and Stein’s law is simply that: If something cannot go on forever, it will stop, which sounds overly simplistic but it is a profound economic truth.

At the time that he said it, he was he was actually a non-interventionist and he was arguing to the presidents he served that there was no need for overregulation or interference in the markets. When markets function appropriately, if something is unsustainable it will be curtailed; it will stop.

Khateeb: Interesting.

Gordon: The problem with that theory?although it’s probably correct?is that sometimes it’s uncomfortable. The example I gave the audience this morning was pretty much everybody that I was reasonably certain that pretty much everybody that I could see sitting in the audience owned a home in 2008 when we came to the end of an unsustainable trend in housing finance through the worldwide banking system. When that self-corrected, it was uncomfortable for a lot of people.

Khateeb: Yeah.

Gordon: So sometimes when these processes are unsustainable, even though it’s true that perfectly functioning markets will correct them, it’s in our best interest to get out ahead of the curve and see if we can start to tweak them. Or we could at least see where the crash is going to come and position ourselves so that we’re well able to cope with them when they occur.

Khateeb: Interesting. It sounds like he’s a bit of a natural because even though that law applies to economics and marketing, it like allowing mother nature to take its course which could be very harsh, chaotic and unforgiving.

Gordon: Well, economics at their core are quite winning. They say, if you have a perfectly functioning system, it will produce the most efficient results. Now, the most efficient aren’t always the kindest or the ones that are fair to everyone. Fairness and efficiency don’t  necessarily go together, but markets will produce efficiency when they’re allowed to run on their own unimpaired.

Khateeb: So do you feel that when it comes to healthcare Stein’s law is something that we should embrace? How do you feel that Stein’s law should be factored in?

Gordon: I’m not emotional about it at all. I think it’s just simply a truism. It’s like acceleration due to gravity is 9.8 meters per second. It’s the law of the universe. On the surface of the earth, that’s the acceleration due to gravity. Stein’s law says that unsustainable systems will stop. When you look at the trajectory that our healthcare system is on, that won’t happen. It won’t happen because people can’t dedicate that number of resources to healthcare.

So by definition its going to change. I don’t think that there’s any reasonable question that in the future we will not spend less money per patient to provide healthcare. In fact, my belief is that when done appropriately, we can actually spend less money per patient to provide healthcare and actually provide better healthcare to our population overall than we do now. However, there’s some hard work that needs to be done between here and there.

Khateeb: How do you do you do that? You mentioned that the fee-for-service is going to be diminished and that this is, at least, your belief. How do we get there? What’s the first step?

Gordon: It’s already happening. So the first step is to shift away from paying for process and towards paying for product. There are a number of companies, and this is where the economy comes back into it, you know…

Khateeb: Really quick one here. Can you tell us a little bit more specifically, what do you mean by paying for process versus paying for product?

Gordon: Let me explain that. The quintessential example of this is the experiment conducted Walmart which started in 2012 where they established centers of excellence for healthcare for their employees. Walmart at that point had 1.5 million U.S. directly-employed employees whose healthcare they cover. Walmart is large enough that they’re one of the companies that self-insures their population of employees.

In other words rather than paying a traditional insurance provider to provide healthcare coverage for their employees, they simply hire an insurance company to manage the healthcare insurance products that their employees that use, but they fund the whole thing. So, if they go over the premiums on a given year, it comes out of Walmart’s bottom line. If they save money on premiums every year; if their health care spending is actually less than what they take in premiums then that flows directly to Walmart’s bottom line.

They have a very significant stake in how their employees get their healthcare and how effective it is. Back in 2012, they started their Center of Excellence program and what that involved was giving all their employees a choice. They had basically two choices for three specific types of surgical intervention.

If you were having cardiac surgery spine surgery or transplant, you had the option of either going to your local hospital wherever it is in the country that you worked for Walmart, get your traditional care, pay your normal co-pays and nothing changes.

Alternatively, you had the option of going to one of six world-class healthcare centers around the United States. These are famous names that everybody would know such as the Cleveland Clinic, Virginia Mason Clinic in Seattle guys in your healthcare system. You could go to one of them to have your health care. They would pay all of your deductibles so you had no out-of-pocket costs if you went to one of these world-famous centers. They would pay to fly you there. Not only would they pay to fly you there, but they’d pay to fly your significant other there. They would put your significant other up in a hotel while you were there getting all of your health care and fly you both back home. By doing this what they found was it was actually less expensive than allowing their patients to get care in their normal local community hospitals.

The reason for this is when Walmart paid for their care in their local community hospitals, they were still paying for every imaging study, every physician visit, for every time somebody touches the patient around the time of their cardiac surgery or spinal surgery or transplant surgery. Everything had its own individual bill. The problem with paying for process is that those organizations have no motivation to innovate or try and figure out which parts of their care are effective and which have no value and eliminate the ones that have no value. But Walmart said to these centers of excellence, “We’re giving you one lump sum payment, here’s what it’s going to be.” And the centers looked at that and said, “Yeah, we can we can provide this care for that amount.” By moving away from paying for the process but instead paying for the product, now they can examine their own internal processes and say, “You know what? We don’t really need an MRI in this group of patients to decide whether or not to do surgery, but they would all benefit from you know, visiting with a psychologist before they go to surgery or whatever the case may be.

The point is they were no longer billing for those individual services. So if they eliminated them, they didn’t lose revenue because they were still getting a lump sum payment. They could focus the services they provided to the patients on those that were the most effective. The amazing thing is we now have seven years of experience with these centers of excellence programs through Walmart. What they found out is that consistently, the patients who fly to these centers of excellence and have their care there usually have shorter lengths of stay in the hospital, fewer post-operative complications and their total cost of care is less than getting it in their local hospital. So, that is what moving away from paying for process to paying for the end product looks like in healthcare.

Khateeb: You mentioned that when they implemented the system, patient stay is actually shorter and their recoveries are better. What do you think changed? Do you think the medical care was that much better at these places? Or was it because the process was put under strain where they optimized how treated the patient and so weren’t going through a lot of hoops per se?

Gordon: I think the medical care wasn’t better, instead the system of care was better.

Khateeb: Ah! Tell us a little bit more about that.

Gordon: Under the old system of care, you’re happy to keep things that happened to provide revenue even though they may or may not have provided a lot of value to the patient. You’re happy to keep those going because they bring revenue into the hospital. Things that don’t provide any revenue but might have a beneficial impact for the patient are very difficult to get implemented because the people who manage the systems look at it and say, Well that doesn’t provide us with any revenue we can’t do that.

Once you’re receiving a lump sum payment for a patient’s care, you can then go back and say, You know what? We know that once this group of patients get in the hospital for their surgery, they’re more likely to be here for a longer period of time and suffer some complications if we don’t optimize their serum hemoglobin levels or make sure that their diabetes is very well controlled for six weeks before they come for surgery, or make sure that their asthma is completely controlled before they come into the hospital.

And it’s not that the other systems are intentionally negligent. It’s not that they look at those things and say, “Ah, we don’t care.” It’s just that they only have so many resources that they can apply. So, they may not have the reach out into the community with all their patients to say it’s really important to get these things all sorted out before you come in for surgery. In the center of excellence model, they bring these patients in, look at them and they say: “We’re going to operate on you when we get all of these three things sorted out .

Then they help those patients by coaching them. If they’re not ready for surgery, they send them back to their communities and they tell their primary care doctor to do some things in order to help them. And that they can send the patient back when they meet a specific criteria. Then they come in and now they’re primed for surgery. It’s like training for a race. If you don’t run a half marathon, you don’t just get up on Saturday morning and say “I’m gonna go run a half marathon.”That’s  a recipe for disaster. When you present for surgery it’s like running a marathon and if you hit the hospital not having trained yourself and not having your body in peak condition, you’re going to be in trouble halfway through that race when you’re in the post-operative period. On the other hand, a little bit of coaching and training for a couple of weeks beforehand and we can get you an optimal condition. And in that way, when you hit the hit the operating room you are ready to go. Your body’s ready to undergo that physiological stress and you’re going to sail through the post-operative period.

Because they’re getting a lump sum payment, when they want to divert resources to managing the diabetes or managing the asthma or managing the anemia preoperatively that didn’t pay them well before, now they can look at it and say Well, it doesn’t matter. We’re not getting paid on each individual component. We’re getting this lump sum of money and we know that if we devote a little bit of money to sorting out all these issues on the front end, we’re going to have you go out of the hospital faster and you’re going to have fewer post-operative complications. That’s going to save us a lot of money on the back end and that savings is what we’re going to reinvest in the preoperative period and we’re going to keep that going.

Khateeb: Interesting. So, by essentially attaching a single price tag?a lump sum?to all of this, the hospitals incentivize to focus on making the system more efficient, which means they can either divert resources to the areas of the patient’s care that they need and then whatever is left over is obviously profit, correct?

Gordon: Correct. This isn’t unique to healthcare. It’s like any other sector of the economy. If you go back and pick a variety of products, for instance, electronics. The example I gave this morning was Twinkies. Twinkies were first introduced in 1933 in a suburb of Chicago. Then when they were  first mass-produced, they cost a nickel for two Twinkies. In 2013 when the Hostess company first went bankrupt, if you inflate that nickel from 1933 to 2013 prices, it about $25.

Khateeb: Oh my gosh.

Gordon: So that means two twinkies would cost you $12.50 each. At the time, we knew that twinkies were selling for $5.00 for a box of 10, which implied 50 cents each. Well, how come a 12 dollar and fifty cent twinkie can be sold for 50 cents? The reason is that in the intervening 80 years, there’s just an enormous amount of innovation that went into how they made the twinkies including the process all around it. How they obtained the products, the ingredients etc. The natural course of innovation is to drive efficiency?that’s what most Innovation does. But when you pay for process, you freeze Innovation. You freeze it out and you stop it.

This is because if you’re paying for each individual component of the process, the person managing the process has no reason to innovate now. If you pluck out one step in the process, well you’re getting paid for that. This means you’re going to get rid of it and say: “Well, that’s decreasing our revenue. Forget it, I’m not going to innovate. I’m just going to keep doing what I’m doing.” That’s where medicine is stuck.

Khateeb: You’ve pointed out something very interesting and it’s kind of an ugly truth in medicine. Do you feel that this is one of the big reasons why physicians are rather conservative and hesitant when new and better technology and tools are introduced?

Gordon: I think physicians as a group tend to be relatively conservative as part of their culture. You can trace that right back to Sir William Osler and his tenet: “First, do no harm.” In medicine, one of the basic tenets is: “It’s hard to take something back.” So, we tend to adopt new processes and interventions relatively slowly and cautiously because you don’t want to experiment on people. To some degree as we advance medicine we have to run experiments on people as that’s the only way to figure out how to do things better but we do that very cautiously. We want bench research to first approve the concept that it might be beneficial. We try it on animals extensively in order to see whether there’s any possible benefit there that outweighs the potential risks of changing our processes. Then we slowly introduce it into a small group of human beings just to make sure that there’s no unintended consequences that we haven’t already taken into account because the last thing you want to do is turn this into a disaster.

Despite our best efforts, there are innumerable examples over the years of things that we introduced into modern medicine that we thought would be good and actually turned out to be a disaster. A good example of that is thalidomide.

Khateeb: Can you tell us a little bit more about that?

Gordon: About mistakes we’ve made?

Khateeb: No, you said thalidomide. I’m not familiar with it.

Gordon: I’m dating myself. Okay. So, thalidomide was an anti-nausea. I believe the class of drugs that it belongs to is neuroleptics. At certain doses it can have antipsychotic properties. If there are any pharmacists listening to this podcast and I’ve got this totally wrong, please forgive me.

It’s been a while since I looked up thalidomide. It was this drug that has very specific central nervous system actions, but one of its beneficial effects at lower doses is that it also worked as an anti-nausea. If I have the time frame correctly, I believe back in the 1950s and 1960s, it was marketed as an effective and safe anti-nausea for pregnant women. It seemed to be very effective because morning sickness can be very painful. You think of morning sickness you think, Oh, that’s a cute name. But it’s not cute. [Khateeb laughs]

Some pregnant women suffer greatly during their pregnancy from severe nausea and vomiting to the extent that it can actually affect the pregnancy and make their babies unsafe. This means that the treatment of nausea during pregnancy is very important. They introduced this drug thinking that it was safe. In most pregnancies, it probably was; but what we now understand is that in a small percentage of pregnancies where the women were exposed to thalidomide during their pregnancy, their children were subsequently born with severe limb abnormalities.

This ranged from absent arm, absent legs to absent hands and it took a number of years for people to notice this. The thing is, it wasn’t a hundred percent evident. You know, if you get started giving people thalidomide and everybody that got it had a baby with a birth defect, hopefully the society will pick that up pretty quickly. However, it was just intermittent. It was scattered, so it took us a long time to figure out what was going on. Obviously, in that case the risks of the drug were vastly worse than the potential benefits. And it meant that we had to abandon the drug. That’s just the first example that popped into my head and I wish that were the only mistake that medicine had made over the last fifty to a hundred years, but it’s not even close. We do that not infrequently.

Khateeb: I think, unfortunately, that’s the toll you have to pay when it comes to innovation, right?

Gordon: There is always some risk in.

Khateeb: One thing that I read in your paper and I found very interesting, and also a lot of people are going to be wondering, is why anesthesiologist? Because a lot of the costs that are going to be incurred in the healthcare system come from procedure-based medicines such as in surgery in the OR. Why are anesthesiologist a good group to start understanding this?

Gordon: I think I would answer that question by saying we have a front-row seat.

Khateeb: [Laughs]Tell us a little bit more about that.

Gordon: Anesthesiology as a specialty is involved in pretty much every aspect of hospital-based care. We are in the critical care units, we’re in the operating rooms, we’re in pain clinics, we’re in the obstetrical suite, we’re in the endoscopy suite where they do your colonoscopies and upper endoscopies, we go to the bronchoscopy suite, we’re in radiology; anywhere in the hospital where physicians are performing potentially painful procedures, we’re involved. The scope of that practice is increasing every single year.

We now service almost double the number of sites in Temple University Hospital compared to seven years ago. That’s how quickly our services are spreading throughout the hospital. So, we see all the interventional care. As you very aptly point out, interventional care tends to be on a per-episode basis; it’s one of the most resource-intense and the most expensive care that we provide. The potential cost savings from either targeting those interventions more specifically to the people that we know will benefit beyond any question of doubt or by performing those procedures in a more efficient fashion, avoiding complications at all cost, making sure the patients are properly prepared for them beforehand et cetera. Those can achieve enormous cost savings.

Khateeb: Aside from anesthesiologists, how do you see physicians playing an active role in terms of engineering and developing these official efficiencies?  Unfortunately for me, my father was a surgeon and I got to grow up with medicine in the household and I spent some time in medical school. And one thing that we can all agree on is that because physicians have not been actively involved in things, even if they don’t have a plan, someone else is going to have a plan. In that case, it’s either lawyers or lobbyists no fence them. But again, they’re not physicians and that’s usually who end up controlling or deciding the fate of medicine.

So, how can physicians play an active role in developing this sort of efficiencies? Where should it all start?

Gordon: The first step is to develop the skillset and knowledge base amongst physicians. Medical School is still focused almost exclusively on the acquisition of an enormous body of biomedical knowledge. They’re starting to focus a little bit on human behaviors and interpersonal behaviors. They haven’t really adopted a robust curriculum across the United States yet around what I would describe as systems management.

This was fine about 20, 30 or 40 years ago when most physicians were still working as solo practitioners and dealing with individual disease states on their own because the number of interventions or medications that they had available to them were relatively finite. What has happened over the last 20 years is the complexity of the pathways of care that we are trying to deliver has exploded. It has become almost unmanageable.

The number of physicians that are involved with anyone patient admission to hospital has increased exponentially. In order to control those kinds of systems, you need to have a management structure in place for the healthcare system that can deal with that kind of complexity. The people best position with the greatest understanding of the goals and objectives of the care, as well as the nuances and potential complications from the care are physicians; yet, they don’t yet have that mind frame of being a middle manager.

Not only do you need to deal with this individual patient and their issues and understand their disease state, but you need to also understand process management. You need to understand data gathering. You need to understand process improvement.

How do you get the information on a regular basis? How do you assemble a team that has all the skill sets? You need to make iterative changes to improve the process. How do you prove that you’ve improved the process? All those things that are second nature to people in many industries across the United States are still very foreign to physicians. The truth is they’re not complicated.

They’re not hard things to learn, but they’re not part of our medical training yet. That’s really what our department is focused on with our residents. We’re trying to impart to them an understanding of how they fit into the system and not only how they have a responsibility to their individual patients, but they also have a professional responsibility to the healthcare systems overall in which they work to help them manage the systems.

Khateeb: How does that start? Is that started with physicians having weekly meetings with hospital administration, the nurses and hospital staff to figure out what the process is to deliver on a medical product or result of a procedure and how we can reduce the number of steps and things involved? What’s a good actionable first step for physicians to take?

Gordon: It is complicated, but if I were to boil it right down to the essential elements, it would be that you’ll have to assemble a team of people who can affect the thing that you’re trying to change. And that’s going to involve almost invariably a group of different physicians from different disciplines. That, right there, is a struggle because the healthcare system is largely organized around individual disciplines.

If you look at our healthcare center, we meet every week as a Department of Anesthesiology; and the surgeons meet as a Department of Surgery; and the nurses meet as a Department of Nursing. Then, as soon as our meeting is done at 8 o’clock, we all go off and none of us work with the other people we just met with. We all go off and work as anesthesiologists and surgeons and nurses in a room as a team and yet, that’s not who just had the meeting. [Laughs]

Khateeb: That’s interesting because for us coming at us out of Silicon Valley startup world you can’t have a functional company like that.

Gordon: At all. Imagine Boeing. If all the engineers, marketing people and finance people met and they never talk to each other.

Khateeb: [Laughs] It wouldn’t work.

Gordon: It would not work. That’s issue number one.

Khateeb: How did medicine last this long doing this though?

Gordon: Well I think because the complexity of what we’re trying to achieve, even as at 20 years ago, was orders of magnitude less than what we’re trying to do. We’ve literally gone from a go-kart in the 1970s to a pretty nice 10-speed bike in the 1990s to maybe a nice Vespa in the year 2001 to a moonshot in 2019.

Khateeb: Do you feel like that’s because of the benefit of technologies, sensors and predictive health which is great? However, it illuminates new things maybe… Centuries ago when you first looked under a microscope and you said, Oh wow. There’s actually millions of different organisms that can affect the [….] Do you feel like that’s happening but in a digital way?

Gordon: Absolutely. Our technology, imaging capabilities, the laboratory assays that we have, the targeted pharmaceuticals that we have and our ability to determine genetic differences between patients; all of these technological advancements in the care that we can provide have vastly outstripped our abilities to manage the system that is required to deliver that care. 

Khateeb: That makes sense.

Gordon: We are desperately trying to catch up and, to be honest, only small pockets of professionals and administrators are even recognizing that that’s what the problem is. But we’re getting there now, I think people are becoming more aware of it.

Khateeb: Let’s take an optimistic look at this. Let’s just say in the next five years, all the healthcare professionals get on the same page here in the US about moving more towards a system-based approach to focus more on delivering the product rather than the process, right?

Let’s just say that’s established across 50% of hospitals in the next few years. How much can we decrease the amount of money or the amount of GDP spent towards healthcare? You said that by 2040 if we keep going on the track that we’re going spending close to a third.

If we implement this across 50% of all hospitals in next few years?is that even possible? If so, what would it look like after that? 

Gordon: If you asked people who are very deeply integrated into the healthcare system, who think about this question a lot and are knowledgeable about healthcare economics, “How much of healthcare spending is currently wasted?”

I think the generally agreed upon number is somewhere in the 30% range. 30% of the current spending on healthcare provides no value. It produces nothing that improves the quality of life or achieves the objectives of the patients who are, after all, the ones who are paying for it. If done surgically and precisely, I think you could easily carve out 30% of healthcare spending at the moment and be left with a healthcare system that is no worse. And, in fact, if you correctly organized that, you could be left with a healthcare system that is substantially better than what we have now.

How much of that would be achieved if within 10 years we had 50% of the hospitals paying for product rather than process? I’m not sure. I think it’s difficult to estimate but I actually don’t even think it’s going to take that long.

One of the data sets that I presented in the talk this morning was around this shift from fee-for-service to bundle payments or alternative payments and the shift is frankly remarkable. I believe the statistics are 85% of very large employers in the United States who are self-insured now have some form of centers of excellence type programs. The McKesson Corporation commissioned a study in 2016 where they paid a research agency to go around and interview executives from a hundred and fifteen of the largest healthcare insurance companies around the country to get their perspective on what their book of business looked like then and what they projected it was going to look like in the near future. At that point, they estimated that only 50% of their payments were pure fee-for-service and the healthcare executives believed that by the year 2021, only 35% of the payments would be pure fee-for-service across the industry overall.

So, it’s shrinking fast. We are making that transition relatively quickly and a lot faster than most people who are on the front line in the healthcare system understand.

Khateeb: Let me ask you this. We want to be mindful of your time and we appreciate you spending time with us. For those who are medical students and residents, is there a resource, a book or something that they can at least, sample for now to get their mindset towards thinking about medicine in this way versus having to wait for the system to change for them to learn it.

Gordon: Yeah, I get that question a lot from medical students because I talk about this stuff with medical students and residents a lot and I get that question: “Is there a book I can read where I could just catch up on all the stuff?” The unfortunate answer is “No”.

I’ve sort of accumulated and backed into a lot of this understanding over a couple of decades. However, there are two books that I would recommend people read if they want to understand, especially for people listening to this podcast who have a background in healthcare and really don’t understand anything about business or economics. The two books that I would recommend you read are: Freakonomics, which I think is a wonderful and very accessible introduction to the concept of Behavioral Economics and how to incentivize people appropriately to get the results you want and the other book is by Atul Gawande and I’m embarrassed.

I hope he doesn’t listen to this podcast. It was the last book he wrote I believe it’s entitled “Being Mortal”. It was the last book that he wrote. If you look up Atul Gawande on Amazon and look for his last publication, you’ll find that. In the book, he talks about how the healthcare system has failed to adequately address the needs of patients towards the end of their life.

That is where a huge amount of wasted spending goes. We as a healthcare industry, focus our efforts entirely on fixing things. It’s simply a fact of life that you reach a point where your biological systems can’t be fixed anymore. They’re going to decay and they’re going to continue to decay. There are things that we could do as an industry to make patients more comfortable and to maximize the duration at which they can function at any given level. In other words, to get the highest quality out of the life that they have left.

One of the points that he makes in his book is that in our rush to fix things and our neglect of optimizing current function, we, in many instances, shorten life and take away functionality. There are some wonderful studies in end-stage cancer patients where they showed that those who pursue the most aggressive forms of surgery and chemotherapy actually have shorter survival times and lower quality of life during that residual time that they have left because they spend all their time in these very aggressive medical therapies. Those patients who are transferred to a system of palliative care where the objective is not to cure the cancer but to minimize their symptoms and maximize their functionality, actually live longer and have higher quality of life.

The whole book it leads you to ponder, “Okay, where else in healthcare have we brushed aside what should be the ultimate objective of the patient in pursuit of our own objectives to cure disease?” Sometimes, I think we’ve forgotten the consumer of the healthcare services and are pursuing our objectives perhaps a little selfishly.

So, those are two books I think may be helpful if people wanted to start to nibble around the edges and get a sense of where we’ve gone wrong.

Khateeb: I do have to ask you a slightly controversial question.

Gordon: Sure.

Khateeb: I know that has to be taken with a grain of salt, but as a physician who studies these types of systems and models, what are some of the best healthcare systems out there in the world? [Gordon takes a deep breath]

I know that there’s always this comparison between different country’s healthcare systems. Of course, every country is different; there are different sizes and different populations, but pound for pound, who’s the reigning healthcare champion right now we should be modeled after?

Gordon: Around the globe?

Khateeb: Around the globe.

Gordon: I do get a chance to study and read up on some foreign healthcare systems from time to time and I will not claim any really deep expertise in those areas. The examples that I have come across that I think stand out as being particularly efficient are some of the Nordic countries. Their healthcare systems are standard just because of the general outlook of the culture and the population. They do value quality of life over quantity of life. They do value quality of life over income or status and they have a relatively communal view of how society should function. They have publicly funded healthcare systems that are reasonably priced and?I think?effectively focus on delivering care that makes a difference to patients as opposed to just pushing the envelope and trying to fix everything all the time

Khateeb: Doctor, thank you so much for spending some time with us. Now a question for those who want to perhaps connect with you. Where can they find you online? Are you active on LinkedIn or Twitter? Maybe Snapchat? [Laughs]

Gordon: Yeah, this is embarrassing because I was just sitting in a committee meeting earlier today where they’re saying, we all have to tweet more and I said: “Geez, I don’t have a Twitter account.” [Both laugh]

By the end of today I promise I will have a Twitter account which will be Gordon Morewood on Twitter. However, that works.

Khateeb: Okay, we’ll put that in the show now.

Gordon: If you Google me at Temple University healthcare system, you’ll find me on the web page there. I believe my email address is listed, but if it’s not you can always call the department.

I do have a LinkedIn account and that may be the extent of my social media at the moment, but you can find me on LinkedIn at Gordon Moorewood as well.

Khateeb: Fantastic. Doctor, thank you so much for spending time with us today.

Gordon: You’re very welcome. All right.