Etienne Deffarges: “Communities can take a leading role in educating individuals”

Bring universal healthcare to all Americans! Being the only country in the developed world that does not have universal healthcare represents one of the worst injustices of the modern world and is a national embarrassment. I would be delighted to inspire and support any movement that would aim to end this injustice and bring affordable […]

Thrive Global invites voices from many spheres to share their perspectives on our Community platform. Community stories are not commissioned by our editorial team, and opinions expressed by Community contributors do not reflect the opinions of Thrive Global or its employees. More information on our Community guidelines is available here.

Bring universal healthcare to all Americans! Being the only country in the developed world that does not have universal healthcare represents one of the worst injustices of the modern world and is a national embarrassment. I would be delighted to inspire and support any movement that would aim to end this injustice and bring affordable healthcare to the 30 million Americans who do not enjoy it today.

As a part of my interview series with leaders in healthcare, I had the pleasure to interview Etienne Deffarges, founding operating partner at Chicago Pacific Founders and serial healthcare entrepreneur.

Etienne Deffarges is a Co-Founder and Operating Partner at Chicago Pacific Founders, a private equity firm focusing on healthcare delivery providers. Etienne is a serial entrepreneur who participated in several IPOs and exits — most recently Acumen, a healthcare laboratory excellence company, in January 2019. He is the author of “Untangling the USA: The Cost of Complexity and What Can Be Done About It,” published in July 2018 by Routledge, Taylor & Francis. He serves on the boards of Alain Ducasse Entreprises, Atrio Health and Sight MD, and is a board advisor at AEye and NG1 Technologies. He is also a member of the Executive Council at the Harvard School of Public Health.

Between 2004 and 2014, Etienne was part of the founding management team, EVP then Vice-Chairman of R1 RCM. He took the company public in May 2010, at a 1.2B dollars valuation. He also established the company as a healthcare partner with the World Economic Forum in Davos, Switzerland. Before, Etienne was Global Managing Partner of the Utilities Practice, and member of the Executive Committee and Global Management Council at Accenture. He participated in the company’s IPO on the NYSE in 2001, at a 14B dollars valuation. He was the first Market Maker at Accenture, negotiating several billion dollars deals successfully. He also founded Accenture’s Energy Advisory Board, chaired by Secretary George Shultz, and was a member of the Aspen Institute. Prior, Etienne was Senior Partner and Global Practice Leader, Energy, Chemicals and Pharmaceuticals at Booz Allen Hamilton, and member of the firm’s Executive Committee.

Etienne holds a MBA from the Harvard Business School, where he graduated as a Baker Scholar; a MS in civil engineering from UC Berkeley, where he was a French Government Fellow; and BS/MS degrees from ISAE / Sup ‘Aero in aeronautical engineering. He is Chairman of the Harvard Business School Alumni Angels NC, a private pilot, and fluent in five languages.

Thank you so much for doing this with us Etienne! Can you tell us a story about what brought you to this specific career path?

After twenty years as a management consultant and business executive, I had the opportunity to become an entrepreneur and launch a new company in that most traditional of industries, health care. It was very exciting to bring the latest technology know-how to not-for-profit hospitals that often lacked the relevant administrative resources to navigate the complex world of claim reimbursement dominated by powerful for-profit insurance groups. “To do well while doing good” was a powerful motivator.

The company I co-started in 2004, R1 RCM, helps hospitals get full reimbursement for the amounts they are contractually owed by health insurance companies, avoiding costly denials of payments for legitimate insurance claims. The company also helps hospitals find funding for those uninsured and low-insured patients who are treated through emergency departments. As a result of this work, hospital clients see a strong reduction in financial “leakage” and significant improvement to their operating margins, which are very low (0–1% on average) in the U.S. We launched the company with 17M dollars of committed capital and became cash-flow positive after only 4M dollars deployed. I was the lead executive officer (#2 of the company) present at the NYSE when we had our successful IPO in May of 2010, valuing the company at 1.2B dollars (A “Unicorn” before the term became popular).

When we started the company, my partner / CEO and I did not know the way to the nearest hospital. My background had been in aeronautical engineering and energy, not healthcare. Fortunately, our chairman of the board was a healthcare specialist, with a wealth of industry contacts. I am a quick study, and not being fully versed in the traditional ways of doing business in healthcare allowed me to ask the critical “why?” questions. We changed the status quo and created an innovative and disruptive business that ended-up helping not-for-profit hospitals (90% of U.S. hospitals) a great deal. Helping these hospitals, many of them struggling to stay afloat while performing indispensable health services to their communities, was a very motivating factor for me, and a great source of entrepreneurial “fire.”

Can you share the most interesting story that happened to you since you began leading your company?

Prior to launching my company, I had been a senior partner with Booz Allen Hamilton and a global managing partner at Accenture. I advised CEOs and governments globally, and in the U.S. essentially flew coast to coast, from San Francisco, Los Angeles and Seattle to Boston, New York and Washington DC. Yes, I also stopped occasionally in Atlanta, Chicago, Dallas, Denver and Houston, but these are huge cities as well. Even though I had been to all fifty states, mostly because my curiosity in discovering our vast country as a student and young immigrant, I really did not know how most people live in the “flyover country.” Then I became an entrepreneur, and my first clients (the best!) happened to be in Michigan, Eastern Pennsylvania, Tennessee and Wisconsin. For a year and a half, I went every week to Kalamazoo, Flint and Saginaw in Michigan — where our first hospital clients were. Typically, we worked with about a hundred administrative people in each hospital we served. Quite a few such hospital employees were wives of laid off auto industry workers. Cream of the people, saying what they thought and doing what they said, many of them invited me to their homes and I got to appreciate them a lot. But they all suffered from forty years of regional industrial decline, infrastructure dereliction and even creeping poverty. And when I was back in California and dared suggest that we need a Marshall Plan for the Great Lakes region, people laughed at me…The current Coronavirus pandemic hit some of these areas hard. However, it has also taught us that if we want to overcome such crises in a more coordinated way, we need to work together to ensure that basic infrastructure is in place, foremost in public health. I even hear today the words “Marshall Plan” pronounced here and there, so there is hope that eventually we will learn to stick together in adversity.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

When we were negotiating our first client contract with a very large not-for-profit hospital network, my lead investor asked to join me at a key meeting with the potential client CFO. I said yes, and as soon as the meeting started it was clear there was no chemistry whatsoever between my investor and my would-be client. At some point, the investor tried to earn brownie points by telling the CFO, “I can help you with your taxes, I have great tax people in my employ.” To which the not-for-profit CFO replied, deadpan, “I don’t pay any taxes.” Lessons learned: Investors in the company are not part of the sales force.

What do you think makes your company stand out? Can you share a story?

Help turning around the financial viability of struggling community hospitals. This is even more important today than when we launched the company, sixteen years ago.

One of the initial insights our company was built upon was to understand early on the challenges faced by hospital administrative staff when dealing with disputed and delayed claims sent to health insurance companies. Prior to our company being launched, hospital management teams would try to address these either through detailed management consulting reports — which were never thoroughly implemented — or purchases of dedicated software that were either user unfriendly or not what the staff felt was needed. We decided to pioneer an entirely different approach, which rested on three pillars: First, new technology dedicated to these specific claim reimbursement problems, which leveraged early-stage AI and machine learning to make it as user friendly as possible, with lots of simple touch screen functions taking the hospital staff through all the relevant decision-making steps. This proprietary technology was only available to our clients, and also designed to be compatible with every existing hospital patient accounting system, so as not to be a burden on already overworked hospital IT teams; Second, a philosophy of “no stone left unturned” applied to the complex process of preparing insurance claims and following-through until they are paid in full; And third, supplementing the hospital staff with half a dozen resident managers from my company, who guided the relevant operations and helped the local teams make the absolute best of our new technology. This allowed us to help successfully many hospitals with low or negative operating margins: In more than one instance, our new approach saved community and safety net hospitals in danger of being closed.

What advice would you give to other healthcare leaders to help their team to thrive?

Think first about the patients, the people who need medical care, or even better, preventive medicine. That is what great hospitals, physicians and healthcare delivery organizations do. We all have our problems, but when one’s health becomes a challenge, not much else counts. The Covid-19 crisis has also showed us that healthcare is home to legions of essential workers. They have saved many lives and are the heroes of the day. Yet they are for the most part underpaid, and often under-appreciated. Obviously, this needs to change.

Ok, thank you for that. Let’s jump to the main focus of our interview. According to this study cited by Newsweek, the US healthcare system is ranked as the worst among high income nations. This seems shocking. Can you share with us 3–5 reasons why you think the US is ranked so poorly?

The US healthcare system suffers from prohibitive costs; lack of universal coverage; and availability of care for those who need it the most. As such, it fails tens of millions of our citizens, unlike what happens in other developed countries, where reliable and high-quality healthcare is viewed as a fundamental right. The Covid-19 pandemic has exacerbated these shocking healthcare shortcomings in the US. Compared to other developed countries, even some grievously affected like Italy and Spain, we have failed to develop a nationwide testing and tracing strategy; our healthcare providers suffer repeatedly from acute supply chain issues for basic personal protective equipment (PPE) for their medical staff; public health systems and vulnerable community hospitals are running out of cash, principally in rural areas; and with patients no longer undertaking regular check-ups, primary care physicians are also getting hurt financially. It looks as if we have renounced to fight the virus with the simple but proven approaches used in other advanced countries, such as rigorous confinement, disciplined mask wearing and systematic testing, in favor of pinning our hopes in a quick vaccine. In NFL terms, we are eschewing short passes and the ground game in favor of one “Hail Mary” play. Let’s now review four major reasons why the US is ranked so poorly in healthcare:

1) The U.S. has by far the most expensive healthcare system of any high-income nation. We spent 3.6 trillion dollars per year in healthcare in 2018, or 18% of GDP, according to figures released in December 2019 by the US Department of Health and Human Services (DHHS). This represented about 11,000 dollars per capita on healthcare, more than twice as much as of our direct economic competitors. Per capita annual healthcare spending was 5,700 dollars in Germany; 5,000 dollars in Australia; 4,900 dollars in France; 4,800 dollars in Canada; 4,700 dollars in Japan; 4,200 dollars in the U.K.; and an average of 5,300 dollars for a dozen such wealthy countries, according to the Kaiser Family Foundation and OECD data. Spending almost a fifth of our GDP on healthcare, compared to 9–11% for other large developed economies (and much less in China), is like having a chain tied to our ankles when it comes to our economic competitiveness. Sadly, this pandemic has again revealed stories of excess unique to us, like patients receiving Covid-19 treatment bills in the five figures, or patients refusing needed treatments for fear of going bankrupt. Also, the realization that our healthcare costs are out of control means that providers try to cut costs wherever they can. As a result, there is no spare capacity of beds, principally critical intensive care unit (ICU) ones, and the pandemic overwhelmed this capacity in New York in April. In contrast, Germany was ready for Covid-19 with a 50% excess capacity of ICU beds, a “just in case” approach instead of our “just in time,” overextended supply chains.

2) Every developed country enjoys universal healthcare — except the US. Pre-pandemic, we had 30 million uninsured people in our country. Now, with 20 million Americans having lost their job, and with it their healthcare coverage (uniquely associated with work in the US), this figure is likely to reach at least 40 million, over 12% of our population. A very undesirable type of “exceptionalism…”

3) Health outcomes in our country are below par relative to other developed economies. In many annual health studies, ranging from the World Health Organization (WHO) indicators to the Bloomberg health efficiency index, the US lags most other developed countries in life expectancy; infant mortality; women’s deaths in childbirth; heart disease, and several other health outcomes. For example, according to WHO rankings for OECD countries, US life expectancy at birth was 79 years in 2018, versus 84 years in Japan; 83 in Australia and France; 82 in Canada; 81 in Germany and the UK; and an average of 82 years in Europe and Japan. This is hardly surprising, since the high cost of care and lack of universal access essentially mean that healthcare is “rationed” in the US.

4) In the land of free markets, competition and open markets are systematically thwarted in healthcare. For example, in most states there is a duopoly of health insurers, with little or no competition. But the best illustration of this is pharmaceuticals. Why is the price of drugs galloping in the US? For two simple, anti-competitive reasons:

First, the absurd clause in Medicare Part D that prohibits Medicare to negotiate drug prices directly with pharmaceutical companies. Have you ever heard of any other large industry where the principal purchaser of products is not allowed to exercise its negotiating power? I think not.

Second, the fact that we prohibit drug imports from reputable developed countries (think European Union countries like Germany; Japan; and Canada) to enter our country to increase competition in this very large market. As a result, a dose of insulin from our very own Eli Lilly costs 55 dollars in Germany, whereas in the US we have to pay at least 275 dollars for the same branded product (Humalog), and 140 dollars for a generic brand. Proven treatments for Covid-19 can save many lives, and Gilead Sciences has just announced it will sell its Remdesivir drug for 520 dollars per vial, or an expensive 3,120 dollars per treatment in hospitals. And wait, it has been reported that there was pressure on the company from Wall Street to charge much more for this treatment, even though Gilead received tens of millions of dollars from the government to develop Remdesivir. This corporate welfare for drug companies needs to end, yesterday.

There is no easy fix to this, because our health care system is a massively complex construction, involving a lot of entities: Government ones, e.g. Medicare; 50 Medicaid programs; the VA, etc. 62 cents out of every healthcare dollar in our country is spent by government entities — in that respect Uncle Sam is much more involved in our health care system than, say, the governments of Germany, the Netherlands or Switzerland; private sector ones, some not-for-profit (e.g. most U.S. hospitals; the Blue Cross Blue Shield insurers; the Kaiser Health Plans) and others for-profit (e.g. giant insurers like United Health and Aetna). This creates myriad interfaces that make the system both unproductive and ineffective, with enormous administrative costs.

You are a “healthcare insider”. If you had the power to make a change, can you share 5 changes that need to be made to improve the overall US healthcare system? Please share a story or example for each.

The Coronavirus Pandemic has exacerbated the negatives of the US healthcare system: Its prohibitive cost; lack of universal coverage; and availability of care for those who need it the most. It is imperative that we focus our political, medical and business efforts to transform US healthcare through five major priorities:

1) Reduce significantly the price of drugs, by allowing Medicare to negotiate directly with pharmaceutical companies and authorizing the imports of drugs that are too expensive in the US, such as insulin, from reputable countries and commercial partners like Canada; Germany; and Japan;

2) Expand the Medicaid Extension within Obamacare to all fifty states, Medicaid being by far the lowest cost health coverage alternative in the US;

3) Develop a public insurance option available to all remaining uninsured Americans, based upon the well-functioning combination of Medicare (public) and Medicare Advantage plans (private);

4) Decrease costly overtreatment, encouraging insurance companies and hospital systems to use “capitated” treatment models that keep patients healthy with a pre-determined amount of health spending;

5) Simplify US healthcare, reducing the overlapping role of the public and private sector, and engaging the hospital and IT communities at the national level to decrease galloping administrative costs, for example by creating standardized national electronic health records for all US patients. Let’s go through these five major changes in more detail:

1) Cut the cost of drugs. We need to stop protecting our pharmaceutical companies by freeing their largest purchaser, Medicare, to negotiate with them, and allowing lower-cost imports from reputable countries. U.S. Drug costs have grown in double digits annually in the 90s and 2000s, reaching 335 billion dollars in 2018, or almost 10% of our total healthcare spending. As a result, Americans spend about twice as much in this area than residents of other rich developed countries. Americans sometimes pay five times more than Europeans, Canadians or Japanese for the same prescription drug, such as a dose of branded insulin as shown above, which is absurd — and immoral. As is often the case in industries with “cozy” government relationships, we also have seen far too many scandals in the U.S. pharmaceuticals industry: Remember Martin Shkreli? The Valeant Saga, which made many people comment that drug companies should not be run like hedge funds, or Enron? And so many prices abuse, even by reputable companies like Gilead? We should open the pharmaceuticals industry to genuine competition, which economists tell us is also the best way to foster innovation. The often-heard argument from pharmaceuticals lobbyists that we need to continue to “protect” the industry from competition so that it can have successful R&D efforts is completely specious — I know of no business school teaching that protectionism is the mother of innovation. And if drug prices cannot be tamed by the free market and laws of supply and demand, a growing number of voices in America are calling for price regulation, which would be very easy to implement — many European countries already do this, not only for pharmaceuticals but also in healthcare for X-ray and MRI machines (also far too expensive in the US).

2) Expand the Medicaid Extension within Obamacare to all fifty states. Today Medicaid is the cheapest form of health insurance available in the US. Medicaid spending totaled 593 billion dollars in 2018 and covered 72 million people (more than one in five Americans), at a cost of about 8,000 dollars per patient per year, or 27% less than the US average of 11,000 dollars per capita. Following the November 2018 Midterm elections, three newly elected Democratic governors in Kansas, Maine and Wisconsin promised to bring Medicaid to their constituents through the Affordable Care Act (ACA) or Obamacare. Plus, the citizens of Idaho, Nebraska and Utah (all with Republican governors) approved their own Medicaid expansion through successful ballot initiatives. With the staunchly Republican state of Oklahoma also approving Medicaid expansion through a ballot initiative on June 30, 2020, 36 states have done so, leaving 14 holdouts, all with Republican governors. Yet, given the cost effectiveness of Medicaid, the whole country would benefit if all 50 states adopted Medicaid expansion under the ACA, Medicaid acting as a “damper” on our healthcare costs. For any state governor, beyond the ideological politics in play, this also makes a lot of sense financially, since the Federal Government picks-up the tab for this expansion for a number of years, allowing the state to insure more of its citizens at little additional cost to local budgets. The Coronavirus pandemic, which has stretched state budgets to breaking point and also made the point that lack of health coverage can have deadly consequences, further reinforces the need to cover as many people under Medicaid as possible.

3) Develop a public insurance option available to all remaining uninsured Americans, based upon the well-functioning combination of Medicare (public) and Medicare Advantage plans (private). 30 million Americans did not have healthcare insurance before the Covid-19 pandemic hit us, and now it is likely that their numbers have increased to about 40 million, one in eight Americans. This lack of access to basic care leads to expensive emergency rooms visits, and much increased costs. Today, Medicare and Medicare Advantage plans are extremely popular, with the government providing the safety net and the private sector being very involved in more comprehensive plans. Why not extend this to all our population, with more economical plans for the young? This is the simplest way to achieve universal coverage, with both a public option that would offer Medicare type coverage to anyone wanting it and private plans — people who are happy with their work-related private insurance could keep it. Itis important to keep the ability of the private sector to innovate in the area of leading-edge medical treatments, and provide enough capacity so that no queuing exist, even for medical operations that merely improve our physical comfort.We need to do this with particular attention on the overall costs of the system, to prevent our healthcare costs to crash the barrier of 20% of our GDP, something that could well happen within a decade if current trends continue. How would such a solution work?

First, this new public option would be extended as government guaranteed health insurance to everyone above 26 years of age without health insurance, e.g. having lost work-related insurance; not covered by Medicaid expansion; or unable to by coverage on the ACA marketplaces. Younger individuals would keep the option to stay on their parents’ insurance plans, as they have today.

Second, as a cost containment measure, today’s Medicare, which is very generous and comprehensive, principally with available supplemental plans, would remain available only to those sixty-five years of age and older. It could be called “Comprehensive Medicare.” The public option coverage would have lower fees but higher co-pays and deductibles. Eventually, the health exchanges set up as part of the ACA, a source of much complexity and challenges for those seeking to enroll in a health plan through them, could be closed.

Third, anyone wishing to get better quality coverage than provided in this public option could go to the private sector for supplementary coverage providing lower co-pays and deductibles, just like Medicare patients do today with private sector Medicare Advantage plans. All such private sector supplementary insurance plans, as well as remaining employer-based coverage, would be allowed to operate across state lines. Private health insurers would be encouraged to compete nationally, just like any other form of insurance such as for homes or cars.

4) Decrease overtreatment and “capitate” costs: US Healthcare costs will fall in 2020! Unfortunately, it took a global virus pandemic to achieve this. Before the Coronavirus crisis, the Center for Medicare & Medicaid Services (CMS) estimated that US healthcare spending would increase from 3.6 trillion dollars in 2018 to 3.8 trillion dollars in 2019 and then to over 4 trillion dollars in 2020. But 2020 is a new ball game. We did have a spike of Covid-19 related hospitalizations, foremost in March and April in New York and the Northeast, and now in July in the South, in Florida, Texas and Arizona among other states. However, sinceCovid-19 upendedour lives, millions of doctor visits, check-ups and hospital stays have been cancelled, or at least postponed to an undetermined date. Virtually all elective surgeries have been cancelled, and Americans have been extremely reluctant to leave home to receive medical care — hospitals and enclosed physician offices being viewed as places of potential contagion. Several medical and hospital surveys report a decrease in revenue for healthcare providers of about 50% between March and June. Given that hospitals, clinics and physicians accounted for 1.8 trillion dollars in healthcare spending in 2018, according to DHHS, we are looking at about 300 billion dollars in reduced spending (50% for four months of provider spending or 600 billion dollars) for the first half of the year. We also do not know what will happen after this first wave (we are still going through it, having experienced a record number of 68,000 Covid-19 cases on July 12), but most epidemiologists expect a second wave in the fall and winter, which will continue current trends. Offsetting this is the 175 billion dollars in federal aid allocated to hospitals and healthcare providers as part of the CARES Act and the Payroll Protection Act voted by Congress to alleviate the impact of the pandemic. Overall, though, given how slowly we appear to be able to control this virus, Americans are likely to continue to stay away from hospitals and their physicians unless they have no choice, and this will likely lead to our first decline in healthcare expenditures in decades.

Will this have an impact on Americans’ health? Interestingly, 86% of Americans say they are about as healthy as before the pandemic, according to a recent Kaiser Family Foundation poll. This begs the question, do people in the US need as much healthcare as they (and their doctor) believe they do? Has Covid-19 exposed to us that a substantial amount of healthcare delivered in America is wasteful? Many studies have estimated that between 20% and 30% of surgeries in the US may be unnecessary. Doctors would tend to “overtreat” us for fear of lawsuits, a strong belief in the latest technologies and medical equipment, or simply to make their patients feel better. But these were studies. What we are experiencing today is a real-life experiment, and it is likely that from now on patients will not be shy to talk to their physician about whether that surgery, or this treatment, is really needed? In many cases, the answer will be no. There will also be fewer face to face encounters with doctors, with telemedicine already experiencing explosive growth. In the era of social distancing, telemedicine will become a shining example of technology actually decreasing healthcare costs, a kind of a first in this country.

What institutional changes can support these new trends? “Capitated” treatment models, which keep patients healthy with a pre-determined amount of health spending, should be encouraged for insurance companies and hospitals, including through new legislation. Today, most services provided by U.S. physicians and hospitals are under a fee-for-service regime that encourages overtreatment. In contrast, these emerging “capitated” reimbursement models have a not-to-exceed ceiling, and revolve around the primary care physician, who acts as the “gate keeper” to other care givers such as specialist physicians. In these models, for example applied to senior populations, Medicare pays a fixed amount per “life insured” to Medicare Advantage plans who then work with independent physician organizations managing patient populations. These coordinated care models, where doctors are empowered with data, technology and nursing teams, produce excellent patient satisfaction and cost efficiency, managing successfully the overall health risk for eligible populations. But they are still covering relatively few Americans and should be expanded significantly to have a real impact nationally.

5) Simplify US healthcare, engaging the hospital and IT communities to decrease galloping administrative costs. Medical-record coder; claim-submission specialist; health insurance broker; Medicare consultant. These are all healthcare jobs that only exist in the US. They reflect the extraordinary complexity of our health system, where any significant reform has historically added complicated features. Case in point, the ACA: It has been very successful in reducing our number of uninsured from its 50 million level pre-Obamacare, but at the cost of very complex processes, such as the ones required to navigate its private sector health exchanges. A logical consequence of this complexity: our galloping administrative costs. Theyhave risen a whopping 65% over the last decade and totaled 270 billion dollars in 2018. What good can come out of excess administrative costs? Employment! Yes, but this is not the type of employment that adds to our economic competitiveness… We spend more on administrative costs than the United Kingdom spends on total healthcare. Let’s do some quick math here: Australia; France; Germany; Italy; Japan; and the UK spend an average of 2% of total healthcare costs on administration, versus 7.4% in the U.S. All other things being equal, if we too spent 2% on administrative costs, we would save 200 billion dollars per year, enough to insure pretty much all our uninsured at today’s costs. A potential sign of improvement in this area will be when technology innovations lead for the first time to a demonstrated ability to cut healthcare costs. Thus far, and unlike in any other industry, the opposite has proven true, and administrative costs have grown hand in hand with ever more complex electronic health records (EHRs), patient accounting systems, the use of big data and other IT innovations. We spent hundreds of billions of dollars on EHRs and hospital IT systems that cannot interface, or “talk to each other.” The New York Times reported on July 13 that a major bottleneck to get results from the Covid-19 tests is…the Fax machine. Faxes and “reams of paper” have to be used systematically by laboratories and public health officials because of our “fragmented health system, a jumble of old and new technology…” and the lack of “a system that can smoothly handle that avalanche of (test) results.” Complexity reigns supreme in U.S. healthcare, and even Silicon Valley is unable to do anything about it.

Here our federal government should emulate what France and Germany have done over twenty years ago with their national health records, through their “Carte Vitale” and “GesundheitKard,” a type of credit card with a photo every French and German person have. Go to the doctor, swipe the card, and pronto! All medical data and costs updated. Only the US government has the buying power to force all insurers and healthcare providers to accept standardized national electronic health records and billing rules for every US patient.

Beyond such critical national initiatives, the overlapping role of the public and private sector in the US should be much simplified. A government more focused on our health, and a private sector free of playing a role in our welfare, will both become more effective as a result. The roles of the federal government and the private sector in healthcare should no longer overlap significantly like today, with the mosaic of interfaces between public and private healthcare participants that generate so much complexity and costs. The federal and state governments should focus on universal healthcare with basic coverage (through Medicare, the federal public option and Medicaid), the operations of VA hospitals (which could be reversed to the private sector without changing the proposed system fundamentally), some advanced medical research, public health preparedness and outbreak response, including more emergency funding for pandemics, and the regulatory role played by the FDA. The private sector would do all the rest, including operating most of our hospitals. With this simplification of state-private interactions in healthcare, information systems could also become much simpler over time, effectiveness would increase and costs go down.

Ok, it is very nice to suggest changes, but what concrete steps would have to be done to actually manifest these changes? What can a) individuals, b) corporations, c) communities and d) leaders do to help?

The above changes do indeed require the emergence of a political consensus that we do not enjoy today. However, even in the short term, there are quite a lot of things individuals, corporations, communities and leaders can do to improve health in our country and reduce the enormous costs of U.S. healthcare.

a) Individuals can play a key role in improving their own health, focusing on preventive care, improved nutrition and wellness efforts. This has been very effective in other countries. For example, who has not heard of the fabled “Mediterranean diet?” Rich in seafood, organic fruits and vegetables, olive oil and nuts, with little or no room for packaged and processed foods, it leads to lower rates of cardiovascular diseases and diabetes. Healthy dietary habits have helped propel Spain and Italy to the top of the 2019 Bloomberg Health Index rankings. Japan, with the longest life expectancy among developed countries, can boast of legendary and centuries-old food traditions emphasizing balance, variety and freshness of ingredients. One very tangible result of all these culinary traditions is a much lower rate of obesity than in America. Obesity leads to a number of potential causes of premature death such as heart diseases (the leading cause of death in the U.S.), diabetes and kidney ailments. It is unfortunately a well-known fact that adult obesity in the US exceeds that of most countries in the world. About 40% of adults in the US are obese, with a body mass index (BMI, a measure of a person’s weight relative to her or his height) above 30. In Spain, only 25% of adults have a BMI above 30; that percentage is 20% in Italy; and a remarkable 5% in Japan. The causes for obesity in America are well known: A poor diet, with too much consumption of packaged and processed food, which is not as well-regulated as it ought to be; too many fast food meals; and low levels of exercise due to excess driving caused by an urban sprawl absent in Europe and Japan. Many Americans have started to make critical changes to their lifestyle, with more exercise, a better-balanced diet, and increased levels of wellness. Consumption of snacks and packaged food is declining, and this positive trend needs to accelerate. I also see many young companies sprucing-up that deliver fresh and organic farmers’ products directly to homes — a booming activity during this pandemic. Individuals can also take local healthcare policy initiatives, in particular by voting to put Medicaid expansion on statewide ballots, like the habitants of Idaho, Nebraska and Utah successfully did in the November 2018 elections, and those of Oklahoma in 2019.

b) There is a lot that corporations can do as well. After all, 180 million Americans get health insurance through employer sponsored plans. Corporations can join networks that use the purchasing power of their aggregate insured employee populations to demand lower drug prices from pharmaceutical companies. This is already happening, with a growing number of large corporations launching initiatives to help cut the price of prescription drugs for their workers. For example, over 40 Fortune 500 companies have started programs in 2018 to offer drug discounts to their employees. Some of these programs cut middlemen and get drug-manufacturer rebates from direct purchasing efforts, with the savings passed on to employees. A noted initiative has seen three preeminent hospital groups, HCA Healthcare, Intermountain Healthcare and the Mayo Clinic launching a new venture called Civica Rx: This joint company will manufacture and market 14 common generic drugs that have been in short supply and seen their prices increase significantly in recent years. Other healthcare delivery networks have joined this initiative, which now includes over 300 hospitals. Telehealth is booming, with a myriad initiatives from all sorts of companies, from start-ups to giant corporations. New and improved technologies will play a key role in enabling more Americans get treated from their homes, with physicians on-line and a newfound abundance of self-diagnostic tools for a number of medical applications. This telehealth trend will mirror what is happening in the workplace, with millions now working successfully from home thanks to effective online communication tools. And of course, there is Amazon, which sent shockwaves to the healthcare world when it announced early in 2018 an ambitious partnership with Berkshire Hathaway and JP Morgan to reduce healthcare costs for their employees. Since then, Amazon has announced initiatives in numerous areas such as the supply of medical devices and prescription drugs; on-line pharmacy; healthcare technologies for the elderly; disease management; wellness; data science applied to health analytics; artificial intelligence (AI) applied to drug development; blockchain technology applied to claim reimbursements; and AI applied to medical diagnostics.

c) Communities can take a leading role in educating individuals: As seen above, much progress needs to take place in the U.S. in the areas of preventive care, improved nutrition and wellness efforts. Communities can launch efforts to communicate the benefits of preventive care, and facilitate meetings with health counsellors for their population, in coordination with local health delivery outlets. Education is key here, since even today many Americans do not understand the negative impact of a poor diet, for example. It is at the community level that this education process is the most effective. Much of our health system has also become so complex that individuals can no longer cope. Communities can help uninsured individuals enroll in Affordable Health Care (ACA) exchange plans, a process that is challenging for many. Communities can help promote the advent of new urgent care centers that offer an easier point of access compared to hospital emergency departments for routine, non-life-threatening health incidents such as superficial cuts and burns; simple infections requiring antibiotics; and many other minor ailments. Needless to say, communities also play a key role during pandemics, promoting and implementing rapid responses to outbreaks as well as containment policies, from testing availability to mask wearing.

d) Healthcare leaders can accelerate their current efforts in a number of areas: Hospital executives should continue their emerging efforts to ween their operations away from fee for service, embracing Accounting Care Organizations or ACOs; embracing capitated insurance plans; and bundling health services to focus on patient health outcomes as opposed to individual treatments. Insurance executives are often heard complaining about the ever-increasing cost of drugs, which they have to cover in their plans. They too can use their aggregate purchasing power to lower the cost of drugs, like the corporations who employ the individuals they insure. Both hospital and insurance leaders should promote the use of telehealth and urgent care centersto increase access to healthcare and reduce costs.And state wide leaders such as governors and members of state legislatures may eventually take matters in their own hands if nothing changes at thefederal level.In particular, we can expect voters to become very vocal in demanding new investments in public health, focusing on pandemic preparedness and population immunity. Government authorities will have to spearhead the funding of initiatives in alert systems that would help detect emerging outbreaks and control them at an early stage, using the latest data mining and sharing technologies. In the pursuit of universal coverage, we could see a number of statewide healthcare initiatives, such as the ones that were launched and voted upon in local legislatures during the last few years in California, Nevada and New York. Nevada came the closest to enact such a momentous change, with the local legislature approving on June 7, 2017 a “Medicaid for all” plan for the state, which was vetoed at the 11th hour, after much reflection, by then Republican Governor Brian Sandoval. There are also single-payer initiatives in fourteen other states: Colorado; Illinois; Maine; Maryland; Massachusetts; Minnesota; New Mexico; Ohio; Oregon; Pennsylvania; Rhode Island; South Carolina; Vermont; and Washington. In the short-term, some states are also tackling the issue of high prescription drug prices. During his January 2019 inauguration, California Governor Gavin Newsom stated he intended to use the aggregate purchasing power of California’s Medical enrollees and state government employees to demand lower prices directly from drug companies.

When one compares the above list of concrete steps with my earlier list of five changes that need to be made to improve the overall U.S. healthcare system, one can find a fair amount of overlap, which is a good thing. Even in the current political gridlock, there is much individuals, corporations, communities and leaders can do in reducing the cost of drugs; moving health care services to value-based pricing or capitated prices, away from fee for service; and help as many Americans as possible gain access to health insurance. The only critical healthcare issues that remain difficult to solve through grass-roots initiatives are system complexity and the resulting excess administrative costs.

I’m interested in the interplay between the general healthcare system and the mental health system. Right now, we have two parallel tracks, mental/behavioral health and general health. What are your thoughts about this status quo? What would you suggest to improve this?

I believe in integrated medicine. My preferred model is one where a generalist / primary care physician coordinates all aspects of care for her or his patients, including all general health specialties but also mental / behavioral health and every aspect of wellness, includingnutrition.Beyond my personal opinion, the best case for integrating mental and general health is made by the role mental illnesses play in the tragic increase in suicides in our country, and in so many gun related homicides. We have experienced recently an alarming rise in suicides in the U.S. The number of suicides in our country rose 30% since 2000, reaching 48,000 deaths in 2018, or 14 per 100,000 people. This tragedy is afflicting disproportionately those in mid-life, between 45 to 54 years of age. It did not use to be this way; remember the stories about high rates of suicide in Nordic countries relative to ours? Yet, during the last 15–20 years, suicide rates fell in other developed countries, particularly in Europe. According to the WHO, suicide rates are now at 5 per 100,000 in Spain, or less than half the U.S. rate. In Denmark and Norway this rate is 9, and 11 in Sweden, all below ours. Are there explanations for this tragedy? This is obviously a very sad and sensitive topic, much beyond the scope of this article, but a number of studies have looked at economic and social causes for this affliction, as well as untreated mental health issues. Mental health is also at the heart of many gun related homicides and massacres — facilitated by the widespread availability of firearms in the U.S. We suffered close to 40,000 gun deaths in 2018. About 60% of these were suicides; and 40% homicides, or 4.4 deaths per 100,000 habitants. This is a real health emergency, in which our statistics are an order of magnitude worse — 10 times or more — than in other developed nations. According to the WHO, gun related homicides per 100,000 habitants total 0.47 in Canada; 0.06 in the United Kingdom; 0.04 in Japan; and 0.02 in Singapore. Many people clamor for tough gun control laws, while others claim that untreated mental health diseases are the main culprit. Both, together, are true. We need to integrate mental health into the general care of our population, and also make sure we have much tougher gun control laws and that in no case sick people get access to fire arms.

How would you define an “excellent healthcare provider”?

A provider of integrated medicine, with a strong focus on preventing care: Easy access to generalists who bring to their patients the best in general health, mental health, nutrition and wellness; and specialist physicians who can also provide the best acute care when necessary, including in complex cancer cases. In my San Francisco hometown, UCSF would qualify, as would the Cleveland Clinic; Intermountain Healthcare; John Hopkins; Mass General; the Mayo Clinic; MD Anderson; NY Presbyterian; UCLA; and UPMC in other parts of the U.S.

Can you please give us your favorite ”Life Lesson Quote”? Can you share how that was relevant to you in your life?

Being an entrepreneur is never easy, and above all requires infinite patience to follow a sound game plan that might unfold over many years. One can never claim victory too soon! Even when one has done an IPO, and the share price is growing nicely, one should remember what my entrepreneurship professor at Harvard told us: “Real money is green.” Many paper billionaires during the turn of the century boom will remember this one…But my favorite life lesson quote, one that epitomized that there is always much to fight for even after a great achievement, comes from the great Winston Churchill. Just after the young Royal Air Force pilots had won the decisive “Battle of England” that prevented Nazi Germany from invading the U.K., Churchill was asked about the significance of this decisive victory and said: “This is not the end. This is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

Are you working on any exciting new projects now? How do you think that will help people?

I am an active member of the Executive Council of the Harvard School of Public Health, which is a great forum to debate and advance healthcare solutions for the American people. I also continue to be an active “angel” investor and coach to young companies, focusing on healthcare start-ups. Many new medical devices and innovative health technologies can be brought to patients more quickly if entrepreneurs get the support they need. I am active with a team of fellow volunteers in helping local not-for-profit entities in the Bay Area, such as local education centers. I am also working on the French, Japanese and Spanish translations of my book, “Untangling the USA: The Cost of Complexity and What Can Be Done About It.” This book has a significant healthcare content, since healthcare is unfortunately our most complex socio-economic sector.

What are your favorite books, podcasts, or resources that inspire you to be a better healthcare leader? Can you explain why you like them?

I am a voracious reader, and like books that deal with significant events, as well as biographies of people who have made a difference for good in our world. Recent books I have read include, in chronological order:

Which Country Has the World’s Best Healthcare System? By Ezekiel Emanuel, 2020.

Deaths of Despair and the Future of Capitalism, by Anne Case and Angus Deaton, 2019.

The Age of Surveillance Capitalism, by Shoshana Zuboff, 2019.

The Sleepwalkers: How Europe Went to War in 1914, by Christopher Clark, 2012.

Steve Jobs, by Walter Isaacson, 2011.

Affluence & Influence: Economic Inequality and the Political Power in America, by Martin Gilens, 2011.

The Big Short: Inside the Doomsday Machine, by Michael Lewis, 2010.

Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer, by Shannon Brownlee, 2007.

The Greatest Generation, by Tom Brokaw, 1998.

Commander in Chief: Franklin Delano Roosevelt, His Lieutenants, and Their War, by Eric Larrabee, 1987.

In particular, Overtreated and Deaths of Despair are must read for anyone interested in healthcare in America, because these books explain how pernicious incentives in our health system lead to abuses by a few, high costs everywhere and poor health for many.

I prefer spending my free time reading rather than to listening to podcasts. However, one Podcast I listen to is Nate Silver’s FiveThirtyEight: It helps me understand the intricacies of polling and actual voting results state by state, district by district. It also provides a good understanding of what most Americans think are the most pressing issues facing our country — and guess what: Healthcare is mentioned as the #1 issue by 78% of Americans, a clear bi-partisan consensus among voters.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂

Bring universal healthcare to all Americans! Being the only country in the developed world that does not have universal healthcare represents one of the worst injustices of the modern world and is a national embarrassment. I would be delighted to inspire and support any movement that would aim to end this injustice and bring affordable healthcare to the 30 million Americans who do not enjoy it today.

How can our readers follow you online?

LinkedIn: etienne-deffarges-012a33ba, and my website:

Thank you so much for these insights! This was so inspiring!

Share your comments below. Please read our commenting guidelines before posting. If you have a concern about a comment, report it here.

You might also like...


The Future of Healthcare: “We must free medicare to negotiate with the pharmaceutical companies” with Etienne Deffarges, of Chicago Pacific Founders

by Christina D. Warner, MBA

The Future of Healthcare: “We must free medicare to negotiate with the pharmaceutical companies” with Etienne Deffarges, of Chicago Pacific Founders

by Christina D. Warner, MBA

Etienne Deffarges of Chicago Pacific Founders: “Perseverance”

by Chef Vicky Colas
We use cookies on our site to give you the best experience possible. By continuing to browse the site, you agree to this use. For more information on how we use cookies, see our Privacy Policy.