Meeting Minutes from InspireSeattle Social on May 31, 2014

Obamacare, Disruptive Innovation and the Future of Health

Dale Jarvis, a longtime healthcare consult and West Seattle resident, came and spoke to InspireSeattle.  Dale has been working on health reform since George Herbert Walker Bush was planning to fix the healthcare system in this country. (Did you know that 41 had a plan?) Since the Affordable Care Act was signed into law in 2010, Dale has been involved in health reform projects in 21 states, participating in a yet-to-be told story of how 18% of the American economy is engaged in an enormous transformation project that will affect every citizen – for the better. Dale joined us to share his stories and interview us about what a new health ecosystem in the Seattle area might look like.  You can learn more about Dale at his website: .

Dale showed very interesting slides that describe in multiple ways how healthcare in the US vs other developed countries is high-cost and low-quality.  Dale described our system as more accurately being called “sick care” in that it only acts after one gets sick and is not run to keep us healthy.  Some interesting statistics included:

·         It costs all Americans $1000 a year each to cover the uninsured and their repeated trips to emergency rooms

·         45% of Americans suffer from one chronic illness or another, and half of these folks see 3 or more different doctors, typically higher cost specialists

·         These chronic problems eat up 80% of the healthcare dollars spent.

·         The treatment system is designed and run in a way that produces a huge number of errors

·         Only 3% to 5% of healthcare dollars are spent on primary care

·         In 2009 in the US, $2.5 trillion dollars were spent on healthcare (that’s $2,500,000,000,000)

·         30% of this expenditure was lost to waste, amounting to $765 billion

·         Over 100,000 people a year will die in hospitals in the US by preventable issues (and can therefore be called “death by healthcare”)

·         Here in Seattle, Virginia Mason Hospital is actually one of the country’s very safest healthcare providers

Dale discussed how Tom Skully, who was the first President Bush’s point person on healthcare, has been out talking to fellow Republicans about “The President Wants You to Get Rich on Obamacare”, describing how the transition within healthcare, including the Affordable Care Act (AFA or Obamacare), are providing tremendous opportunities to make money.

Dale described an epic battle that is already underway in this country around health and healthcare.  Dale described it as “disruptive innovation”, a concept defined in the 2009 book The Innovators Prescription.  To illustrate disruptive innovation Dale used the computer industry as a descriptive example.  Prior to the 1970s, big mainframe computers were the industry standard, but each succeeding generation of computer was smaller, cheaper and easier to use and therefore reached a broader audience of consumers.  Novelty hit again and again, always disrupting the existing computer market and allowing the industry to arrive at better solutions.  Computers evolved from mainframes to minicomputers to PCs to laptops to handheld devices.  Companies that didn’t keep up went out of business.  For a long time healthcare has been the only major industry in the US not to experience disruptive innovation, but it is happening now.  Notice the large number of healthcare CEOs that have been fired in recent times for not innovating quickly enough. 

Dale described two areas of disruption:

1.  Healthcare Professionals

2.  Healthcare Institutions

In both cases demand for more complex (and costly) care is being reduced. 

Dale suggested folks visit the Patients Like Me website to educate us on our own healthcare issues.  This website is also one example of how many health issues can be resolved with less cost or complexity.

Dale described the ultra-high cost of specialists.  How does this remain the case?  Dale explained there is an official medical board that sets pricing for medical procedures, made up of 27 members, 25 of which are specialists and only 2 of which are primary care doctors.

Typically a primary care doctor will make 1/50th what a specialist will for a 15 minute procedure.  As a result primary care doctors now frequently go out of business.  Often they are forced into a system where their role is to feed patients into the more costly (and profitable) services of specialists and hospitals.

Hospitals now call themselves “healthcare systems”, and have been in a major acquisition mode.  These acquisitions are an attempt to ensure their own survival according to one of two strategies: 

1)      Creating a monopoly will remove competition and the need to change.  But in truth, any healthcare system unwilling to address inefficiency will ultimately go out of business. 

2)      Alternatively, healthcare systems may recognize that disruptive innovation is coming but by making themselves the only player they can not only be disrupted but also be the innovative force  that is moving forward successfully.

A new and different approach to providing health (vs sick care) is Accountable Care Organizations, or ACOs.  They are spreading more of a Group Health model through incentives to keep people well.  Part of what ACOs are doing is working to stop the fee-for-service approach.  ACOs push quality down the delivery system, and are designed to dramatically downsize insurance companies.  A good ACO team includes primary care doctors, nurse practitioners, RNs, care managers, dietitians, stress management experts and others to provide the majority of needs to keep members healthy.  If more care is needed, quick referrals to specialists are also available.  These organizations charge members a monthly fee, typically $50 to $75.  For this, they provide care even on weekends and evenings.  Basic characteristics of ACOs include:

·         Primary care only

·         Monthly fee

·         Save employers 20% to 30% in healthcare costs

·         Keep people out of the hospital

·         A doctor will typically have 600 to 800 patients (vs the standard 1500 patients/doctor in a “normal” system)

·         This allows the doctor to know patients and spend more time on each appointment

·         Patients are also likely to buy traditional health insurance but a “wrap-around” policy that allows access to ACOs

Dale described how the future is in Health and Wellness Centers, customized to a neighborhood.  This will be driven by the expectations of the Millennial Generation. 

Dale described other key trends in the industry:

·         Health plans are attempting to reinvent themselves

·         Private Equity firms are making investments into healthcare

·         Rise of non-hospital affiliated providers

·         New innovative players

Pharmaceuticals are structured to make their money off the sick care system.  More sickness, more money.

For a local example, Dale describe the situation currently in West Seattle:

·         81,000 people

·         Spend $552 million on healthcare annually!

·         30% is waste (~ $165 million)

·         Question:  why not use some of these wasted dollars to create Wellness Centers?

Regarding Obamacare (the ACA), Dale said it’s a “great start” but stated true change, needed change, must come from disruptive innovation, just as it has in other industries.  We need to move from “healthcare systems” to “health delivery systems”.  At this point even foreign countries that have much better health outcomes than the US for far lower cost typically focus on “sick care”, not health delivery.

Q – Isn’t it likely that health and healthcare will go the way of climate change in the US, with extensive denial and politicking and no real change or progress?

A – Enough disruption is happening already in health that it won’t go the way of climate change.  Healthcare is 18% of the US economy.  The other 82% of the economy pays for those inefficiencies or otherwise suffers the consequences from our country’s poor health.  We’re getting screwed by sick care and the large majority will keep demanding change. 

Q – What about mental illness?

A – Mental illness patients, on average, die 25 years younger than others.  And a big reason for this is that we don’t treat them holistically, which is another driver for needed change.


Dale’s Bio

Dale Jarvis is the founder of Dale Jarvis and Associates LLC, a Seattle-based consulting firm. Dale has extensive experience helping governments, health plans and healthcare providers redesign their organizations to achieve better health for the populations they serve, better care for individuals, and reduced costs. He has contributed articles to publications and is a co-author of two books on healthcare system redesign. Currently Mr. Jarvis is working with states, counties, and at a national level to help ensure that the health needs of all Americans are addressed as health reform unfolds. You can learn more about Dale at his website:


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Thank you to our speaker Dale Jarvis
Thank you to Dave for organizing this event.
And many thanks to Carrie and Dean for hosting!

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