Innovating Through the Fortress of Healthcare Regulation

“How much of what doctors currently do will eventually be reduced to algorithms?” Dr. Robert Graboyes, senior research fellow at the Mercatus Center at George Mason University, poses the question as part of a larger discussion about the notoriously high cost of U.S. healthcare. In this episode of Mastering Innovation on SiriusXM Channel 132, Business Radio Powered by The Wharton School, Dr. Graboyes explains how future innovations in medicine will lower costs by empowering machines, nurses, and even patients to perform functions that only highly specialized doctors can do today.

As Dr. Graboyes observes, recent decades have seen remarkable innovations within IT, but we haven’t seen comparable progress within heathcare. Regulatory and legal frameworks, he says, have limited risk-taking and stifled innovation. In contrast, there are major hospital systems in countries like India which are able to deliver a very high quality of service at a fraction of the cost. Dr. Graboyes examines why this disparity exists, and also highlights effective cost-saving measures such as AI initiatives that can supplement the care provided by human doctors.

An excerpt of the interview is transcribed below. Listen to more episodes here.


Robert Graboyes
Robert Graboyes (Senior Research Fellow, George Mason University)

Robert Graboyes: Three years ago, I experienced my first (and so far only) episode of atrial fibrillation. Oddly, I had delivered a lecture on that subject the day before, and I was specifically talking about a device which I immediately bought for myself called AliveCor, which just fits onto my iPhone. It can do a two-lead clinical quality electrocardiogram in 30 seconds, and it has an artificial intelligence component that will tell me at the end of 30 seconds whether my rhythm seems to be normal sinus rhythm, or whether I’m, in fact, going into AFib.

On at least two occasions, this $99 device has kept me from needlessly going to the emergency room where one could spend $5,000, $6,000 to get wired up, overseen by doctors, and told there’s nothing wrong. Interestingly, the day before my episode, I was talking about this device to a room full of 250 high-level insurance executives.

None of them had ever heard of the device, and I asked, “You need to ask two questions. One, why haven’t you heard of this, and two, why haven’t you handed one out to everybody on your rolls who has this [condition]? It’s just one small device.

Harbir Singh: It’s fascinating, because a friend of mine who was a cardiologist actually told me about this product and how good it was. He recommends it to his patients. But I think you’re right. I suppose you can’t write it in a prescription. It’s something that is outside the system in some way.

“Now, I have technology that can allow me to do things that only a doctor used to do.” – Robert Graboyes

Robert Graboyes: Right. That’s part of it. I assume the part of Narayana [Health System]’s success in India is they don’t have the sort of guarantees that we have. We have a Medicare assistance that says, “We’re going to pay you, but here’s a list of things we do pay for, and here’s a list of things we don’t pay for, and here’s how much we’re going to pay for each of the first group.” We have a rather rigid set of price controls, quantity controls, and even quality controls that make it very difficult for a provider to innovate.

What we need to do with my little AFib device is one example. We need to take expensive inputs such as physicians and, to the greatest extent possible, shift that work to lower-cost substitutes such as non-physician providers — nurse practitioners, pharmacists, or nurse anesthetists. Or you shift that work to intelligent machines, of which [AliveCor is] an example. There are more high-level examples such as the incredible uses to which IBM’s Watson computer is being put in clinical settings. Or you shift some of the burden to the patients themselves. Ten years ago, I couldn’t have bought this device, and I would have had to go to the ER. Now, I have technology that can allow me to do things that only a doctor used to do.

Harbir Singh: Right. This is really in the general domain of frugal innovation, but I think you’re talking about other forms of innovation as well. What I think is really fascinating is the frontier versus fortress idea: you may have an innovation on the periphery, but it doesn’t diffuse because of the various fortresses or barriers that exist.

Robert Graboyes: Exactly. I had a dinner in New York a while back with some medical school professors and philosophers of science, and it was just a wonderfully high-level group of people. I or someone else at the table asked the group, “How much of what doctors currently do do you think will eventually be reduced to algorithms?”

The lowest estimate in the room was about 80%, and the highest was 97.5%. An awful lot of what doctors do today that is very expensive, specialized, and labor-intensive will eventually be mechanized so that a machine can do it, or a nurse can do it, or the patient can do it. There are so many incredible examples.

I mentioned IBM’s Watson. It was a fantastic example about two years ago. A Japanese woman who had some severe leukemia wasn’t responding to treatment in multiple hospitals. Nothing was working, so they called in Watson. They fed in her charts, her DNA, and Watson went out on the internet to read 20 million articles on leukemia and came back and said, “You’ve misdiagnosed her. She doesn’t have that kind of leukemia. She has this kind of leukemia.” That entire process took 10 minutes.

“You want a doctor administering your prescription, but you don’t necessarily have to shake hands and say, ‘Hello.'” – Robert Graboyes

Now, I imagine getting 10 minutes of work out of IBM’s Watson is rather expensive these days. But Moore’s Law doesn’t seem to be slowing down yet. Imagine another two, three, four, five years – that operation probably would be relatively affordable and much more widely available.

Harbir Singh: That’s a fascinating point. What you’re talking about is the technical side and how the technical side can also be automated. In your document, I have observed recently in the healthcare services area that people are spending a lot of time on paperwork. The actual time they’re spending on the true medical activity is lower than should be the case.

Your recommendations here, regarding malpractice law, regulations that exist, the codes that exist which cost time, how does one deal with that? That’s a long-term institutional change.

Robert Graboyes: Well, it is. And having taught many, many doctors over the years, it scares them to death. So, I’ll mention another company, a little company called Lemonaid Health co-founded by Jason Hwang, who was Clayton Christensen’s co-author on the landmark Innovator’s Prescription. Lemonaid provides prescriptions for several classes of drugs, maybe eight to 12 types of drugs that don’t really require you to see a doctor face to face. You want a doctor administering your prescription, but you don’t necessarily have to shake hands and say, “Hello.” This can be done asynchronously. You can log on during the night.

Harbir Singh: And send in your request.

Robert Graboyes: Yes, send in your request, and the next morning there is a mass processing of all the requests that have come in. Each one is overseen by a physician who is administering it. If you go to your doctor to get a prescription, it’s labor-intensive for the both for you.You park, go in to see the doctor, the doctor has to enter it into the computer, and then in the afternoon the doctor re-checks it and double checks it to make sure everything is correct. Well, Lemonaid did a clinical study and found that one doctor could safely process roughly 1,000 prescriptions per hour, just as safely as if  each of those patients had gone to a doctor for that labor-intensive process. And as Jason noted to me, “One advantage of our algorithm is it doesn’t forget to ask important questions.”

About Our Guest

Dr. Robert Graboyes is a Senior Research Fellow at the Mercatus Center at George Mason University. He is the author of “Fortress and Frontier in American Health Care”, and has taught health economics at various universities. His work asks “How can we make health care as innovative in the next 25 years as information technology was in the past 25?”

Previously, he was health care advisor for the National Federation of Independent Business, and Sub-Saharan Africa economist for Chase Manhattan Bank. Graboyes studied at the University of Virginia, received a master’s from Columbia University, Virginia Commonwealth University, and the College of William and Mary, and has a PhD in Economics from Columbia University.

Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.