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True to form, the JP Morgan Healthcare Conference lived up to its reputation as one of the premiere investment conferences. This year there were 350 plus presenting companies (including a separate room for not-for-profit and Chinese companies) and 8,680 attendees, surpassing last year’s 338 and 7,247, respectively.

Also, not lost among investors bustling from room to room, JP Morgan Chase & Co. (NYSE:JPM) continued the tradition of featuring its Chairman and CEO, Jamie Dimon, as well as some of our country’s leaders. This time, instead of delivering a prepared speech, Mr. Dimon was interviewed on a broad array of topics by Tom Marsico, CEO and CIO of Marsico Capital Management, LLC. Nancy-Ann DeParle, Administrator of CMS (1997-2000) and current Counselor to President regarding health reform, and Judd Gregg, Republican Senator-New Hampshire (1993-2011), discussed the aftermath of the Patient Protection and Affordable Care Act.

However, as appealing as the aforementioned leaders were, the “Innovation Opportunities for the Health IT market driven by HITECH and the Affordable Care Act” panel presentation moderated by John Doerr (Partner of Kleiner Perkins Caufield & Byers and venture investor to Amazon.com (NASDAQ:AMZN), Compaq, Google (NASDAQ:GOOG), Intuit (NASDAQ:INTU), Symantec (NASDAQ:SYMC), and Sun Microsystems) was arguably the most enlightening event of the conference. The panelists were Todd Park, Human and Health Services CTO and co-founder of athenahealth (NASDAQ:ATHN), Aneesh Chopra, U.S. CTO and Eric Schmidt, then Chairman and CEO of Google. That’s right, Eric Schmidt’s presence surprised many, for why would he be considered a leader at a healthcare conference?

Regarding healthcare reform, Mr. Schmidt was actually one of the more progressive and vocal non-healthcare CEOs. Not only is he a frequent speaker at healthcare industry conferences and events, he serves on the Presidential task force to reform American healthcare and the President’s Council of Advisors on Science and Technology. Thus, given his technological expertise and involvement in healthcare reform, and the fact that healthcare technology is front and center among investors – healthcare IT and software companies presentations, including Accretive Health (NYSE:AH), Allscripts Healthcare Solutions (NASDAQ:MDRX), athenahealth, Cerner (NASDAQ:CERN), MedAssets (NASDAQ:MDAS) and Quality Systems (NASDAQ:QSII), were standing room only – Eric Schmidt was a natural participant.

He did not disappoint. The audience hung on his every word. Below is a summary of some of Eric’s key messages.

  • People live their lives online, so, digital devices should be a natural extension. Imagine that a patient could have his/her whole medical history on his/her mobile phone. Doctors could then plug it in a computer and see all the information instantaneously.
  • The healthcare industry operates in a closed system and lacks automation, impeding interoperability. Interoperability is the key to offering consumers choice, as patients often have multiple providers with which information should be shared seamlessly.
  • Google Health (an online account that enables individuals to organize, track and monitor their health information in one central location) was demonstrated at a recent health IT conference, attracting thousands of audience members.
  • 4-5 percent of searches are health related, and sometimes consumers are making life and death decisions. Google has hired physicians and medical experts to ensure accurate information.
  • Technology in healthcare will be more powerful when the patient drives innovation. We have already seen the strong influence of the consumer in technology.

Although alone these points may seem intuitive, these ideas and comments are extraordinary and in fact, represent a breakthrough for healthcare technology. Today, most healthcare IT companies are focused on selling solutions to the providers. Consider the rough estimate that publicly traded healthcare IT companies catering to providers, representing greater than $17 billion in enterprise value, generate more than $4bn in revenues. Compare that to healthcare IT companies catering to consumers, representing approximately $3bn in enterprise value, which generate much less, roughly $0.5bn in revenues. These provider-focused companies grew rapidly by creating products such as revenue cycle management (improving billing, collections, and reimbursement) and Electronic Health Records (EHR) software because there was a direct ROI for their customers. These companies have opened the door for more technology in healthcare, however, their products fail to directly address the troubling issues of usage and cost. Eric Schmidt’s message is clear; for real change to happen in healthcare the consumer must be more actively involved.

This participation has to go beyond utilizing services from companies like WebMD (NASDAQ:WBMD) which provide general information regarding diseases, sicknesses, medication and procedures, or Google searches where patients can sometimes catch misdiagnoses – a Q&A audience member even remarked, “Google saves lives!” before she asked her question. The U.S. needs solutions that empower the patient to help solve our country’s healthcare problems. If we want consumers to be responsible in their utilization, then shouldn’t we provide them with the proper tools to make decisions?

Eric Schmidt will be delighted to know that his vision has been heard. A healthcare industry where the patient is instrumental in encouraging technology adoption may shortly be upon us.

Outside the conference, I had the opportunity to meet Christopher Parks, CEO of change:healthcare. change:healthcare is a private healthcare software company located outside of Nashville. Their key product is “Cost Transparency Solution,” and their 100 plus customers are primarily self-insured employers (companies that are responsible for employee expenses over the deductible). In the U.S., according to change:healthcare, approximately 90 percent of companies with more than 5,000 employees are self-insured, and approximately 55 percent of all companies are self-insured. These companies are looking for ways to control their expenses while offering their employees no degradation in healthcare. Mr. Park’s company seeks to do this by addressing the critical, often ignored issue in the healthcare industry, “Why can’t patients shop for healthcare like we shop for anything else?”

Through “Cost Transparency Solution”, employees of self-insured plans can now “shop” before selecting a provider (physician, therapist, hospital facility, etc.). Patients-to-be need just log in to their employer’s health portal and enter the service of interest. Provider prices for that specific service (derived from analyzing historical claims and governed by HIPAA) are then displayed. By doing so, an employee can choose how much he/she is willing to spend before accepting service. For example, a patient could save up to $2,500/year on ABILIFY medication just by switching pharmacies. Before, the employee would likely have chosen the most familiar drugstore without considering cost. change:healthcare’s product creates new decision points.

The success of this solution clearly lies in the belief that if employees are given an opportunity to save money, they may think twice. Given the increasing adoption of high deductible plans and HSAs (health savings accounts) it is likely that healthcare consumers will embrace such a tool. Many are now not only accountable for a larger share of their medical expenses, but also responsible for managing their HSA funds.

Early results are favorable, as employers are getting at least 6 to 1 payback and saving $200-800/per member annually. Moreover, a large majority of these cost savings come from common medications and routine procedures/visits, not “special, cutting edge” treatments. What this may suggest is that price does not always equate to quality, and that consumers, when given an opportunity to shop, can be judicious in their spending.

change:healthcare is not the only company to recognize the value of “cost transparency”. In June 2010, Castlight Health, Inc. raised $60 million in a Series C round. It signed Safeway, Inc. (NYSE:SWY), with over 180,000 employees, as its first customer. Castlight’s investors include Cleveland Clinic, Maverick Capital, Morgan Stanley Investment Management, U.S. Venture Partners, Venrock and Wellcome Trust. Also, not to be lost among these startups, public companies such as Aetna (NYSE:AET) and Thomson Reuters (NYSE:TRI) are making forays into this area.

So while Google may not directly “save lives”, the company continues to be a key force in driving technological innovation. True to its unconventional nature, Google has taken the stance of promoting healthcare technology advances that actively engage the consumer when many high profile leaders have overlooked them. The day is coming where Eric Schmidt’s vision of empowering the consumer/employee/patient will be real. As Google paves the way for more transparency, the change:healthcares of the world (currently flying under the radar while political debates on health reform persist) could take the industry by storm. Cost transparency is obviously better than the current system where potential patients have no simple way of knowing how much they might spend before a doctor’s visit. How can society blame our citizens for overspending when they lack the pertinent information? For an industry that has been obscure since infancy, the transition to a market-based system will not be taken lightly.

Disclosure: I am long GOOG.

Source: JP Morgan Healthcare Conference 2011: 'Google Saves Lives'