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By Robert B. Teague, MD

October 5, 2005
Just in Case

In the business column of the Wall Street Journal today Alan Murray reported that Steve Case, the former America Online chief executive, will announce a series of investments in health care that are designed, he says, "to change the world."

Whew!! What a guy! Of course, he didn’t say change it which direction.

• Case did get one piece of it right, however. "He calls his new venture Revolution Health Group. Its goal is to…revolutionize the way health care is delivered in this country. Mr. Case says he wants to 'put patients at the center of the health system, with more choices, more convenience, more control.'" OK. That seems right as far as it goes. I’m for that.
  
  So why would Case be successful when everyone else hasn’t been so far? “The question: Is Steve Case the man who can finally fix the mess?”
  
  “He believes he can, and compares his current effort with building AOL. While others had created online services before him, he was the one who succeeded at bringing the Internet to the masses.” It’s not healthcare. But it is big. Maybe transferable.
  
  I believe the one thing that Case hasn’t considered yet is the Cartel. They are the exclusive managers of the $1.7 trillion of healthcare expenditure. None will go quietly into the night to make way for Mr. Case to sup at the table of healthcare trillions.
  
  Who is this Cartel? And where did it come from?
  The Cartel is my name for the healthcare system. It was spawned in its current form in post-World War II politics. It is the United States’ answer to the European social contract. But it is pluralistic and federalist in nature rather than monolithic. It is an all-American solution. But it is also “socialized medicine” in the sense that both finance and delivery of healthcare are sponsored and controlled by the government.
  
  We created a system to finance and deliver healthcare that includes six major players:
  • Government
  • Insurance companies
  • Employers
  • Physicians
  • Hospitals
  • Pharma

  Just like monolithic European healthcare systems with their single-payer and single-delivery system, the American system also excludes the consumer, the end user of the service, the patient. There is no entity among the six that represents the interest of the consumer/patient.
  
  It has often been argued that we should have “socialized medicine” in the US. We already do; it is distinctly American in form, however. As things stand now the government taxes and redistributes money to finance and deliver healthcare, though doesn’t “guarantee” insurance universally. It imposes wage and price controls on the delivery system. It defines what medical services may be delivered and reimbursed and at what level. It defines the product. It defines the market. It determines who may deliver what services. I don’t know how much more the government could be involved. The only difference in our system and others is the plurality of payment methodologies and who employs whom.
  
  The Abramson Family Center for the Future of Health has four guiding principles: Transparency, Visibility, Decisioning, and Distributed Healthcare. All four support the move to a provider-consumer rebalance of power in all healthcare matters.
  
  The consumer movement in healthcare is driven by several factors. Among them are costs, access, quality, choice, control, experience, information, collaboration, and convenience. Access to information may have started to change the likelihood that consumers could ever have an impact on their own healthcare. Through AOL Case may have contributed to this movement.
  
  “Mr. Case argues that the way to fix the health-care system is to put consumers in charge. He favors innovations like health savings accounts, or HSAs, and health reimbursement accounts, which are high-deductible, tax-favored arrangements that allow employers to make fixed-dollar contributions to an employee's care but leave the employee in charge of spending those dollars. The investments he's announcing today are designed to support such "defined contribution" health care plans.”
  
  His Board of Directors is a curious collection of non-healthcare people. “He's recruited Carly Fiorina, who was fired earlier this year as CEO of Hewlett-Packard; Franklin Raines, who was forced out of the top job at Fannie Mae; and Steve Wiggins, who built, and then was ousted from, Oxford Health Plans. Also recruited are former Secretary of State Colin Powell and former Netscape CEO Jim Barksdale. Ron Klain, former aide to Vice President Al Gore, serves as executive vice president and general counsel of Mr. Case's investment firm, Revolution LLC.”
  
  Healthcare people haven’t figured it out. Maybe these folks will. Regardless, it is a curious lot of fallen angels.
  And Case is starting off on his quest in predictable fashion for non-healthcare types. “For starters, Revolution is buying four companies that will become the building blocks of a new Web portal to help consumers manage their care. The companies are MyDNA Media, which provides up-to-date health information; 1-800-Schedule, which helps consumers find doctors and schedule appointments; Simo Software Inc., which enables users to keep track of their health care spending; and Wondir Inc., a search engine linking users with others who may have answers to their health-care problems.”
  
  I wish Mr. Case well. He has been successful before. As they say, however, past performance is no guarantee of future returns. But stay tuned, just in Case.
  
  

Robert B. Teague is a pulmonologist and business consultant who is based in Houston, Texas. E-mail him.

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