How incentives affect innovation

Kaiser Health News published a longer-than-usual piece on how companies are not always able to parlay success in improving patient health into financial rewards. How medical systems are compensated can greatly affect whether products are adopted.

Wellsmith, one of the companies highlighted in the article, demonstrated increasing physical exercise and decreasing A1c levels among diabetic patients. Exercise and A1c levels are metrics that providers are often glad to see diabetic patients improve in. The problem that the company encountered, however, is that Wellsmith's major investor, Cone, a healthcare network, was primarily paid on procedure volume (fee-for-service), and not on the general health of its patients (value-based care). Hence, simply improving the patients' health might have actually resulted in reducing necessary procedures, leading to decreased revenue for Cone, making it difficult to financially justify continuing the investment. If a much greater percentage of Cone's patients were on a value-based care model, then their requiring fewer procedures could have financially benefited Cone, and Wellsmith's offering would have been more compelling. Over the last several years, there has been a push for value-based care so that healthcare providers actually benefit when patients are healthier (and require less treatment). Perhaps we will see more viable technology products and services as the industry moves more towards value-based care. Another option would be for payers (insurance companies) to pay for these products directly, if they are shown to reduce treatment costs.