When 21-year-old Mike Kelly (not his real name) set out on his bicycle one evening in Durango, Colorado, he had no intention of ending up in a hospital. A collision with an automobile changed those plans. Fortunately, Durango is a ski mecca where broken bones are almost a way of life. With all that practice, doctors there have evolved their practice into a sort of natural center of excellence for treating bone injuries.

In Mike’s case, however, another set of doctors came into play. Mike and his family are clients of PinnacleCare, a “health advisory” firm in Baltimore, Maryland. Within 30 minutes of Mike’s arrival at the emergency room, the staff of PinnacleCare was on the phone with the ER doctors in Durango—discussing treatment options and transferring Mike’s medical records.

Communication is a big problem for everyone in medical emergencies. The doctors want to know what drugs the patient has been taking; if there have been any recent surgeries; etc. The patient may be in no condition to tell them. The ER might have important information and the family naturally wants the ER doctor to tell them what is happening. But a federal law (HIPAA) prevents such communication unless the patient signs a waiver and even then ER doctors aren’t fond of talking to families when a patient needs attention. PinnacleCare solves this problem. They already have the waiver. They have the electronic medical records (EMRs). They can provide the kind of doctor-to-doctor communication that is most needed. And then they can talk to the family while the ER doctors do their work.

As Mike’s parents (who were at home in Virginia at the time of the accident) explained, “It’s like having a family doctor helping you instead of a strange doctor in a strange land.”

In Mike’s case, there was important information the ER team needed to know. One month earlier Mike had come down with mononucleosis and as a result his spleen almost burst. So the PinnacleCare doctors requested a FAST test (sonogram) on the spleen right out of the shoot. Then there was an option on treating Mike’s broken leg—he could have a rod or a cast. Either choice involves a tradeoff. PinnacleCare is in the business of providing second opinions, and these opinions come from doctors who have no financial interest in over-treating or under-treating or in any of the options under consideration.

After Mike was discharged, PinnacleCare found a physical therapist to attend him while his leg healed. When Mike was able to return to his home in Virginia, the agency found a therapist to continue the care and an orthopedic doctor to oversee his recovery. They emailed his Colorado medical records to the Virginia doctor and discussed Mike’s treatment plan with him.

Through it all, the Kelly family never had the difficulty so many other patients have—getting answers to questions. In fact, the Kellys have the cell phone numbers of the PinnacleCare staff!

Now let’s recap how many problems were solved in this one case.

Help, I need somebody,
Help, not just anybody.

There is (1) the problem of agency, (2) the problem of incomplete information, (3) the problem of asymmetric information, (4) the problem of uncoordinated care, (5) the problem of no electronic medical records, (6) the problem of lack of transparency, (7) the problem of poor doctor communication to the patient, (8) the problem of poor patient communication to the doctor, (9) the problem of the availability and reliability of second opinions, and (10) the problem of shopping for care in the medical marketplace when undergoing the trauma of accident and injury.

Do you know how many forests have been felled to produce enough paper for all of the articles and books that have been written about these 10 problems? Yet what I’ve just described is an entrepreneurial solution to all of them—without any pilot program, without any demonstration project, without any ACO and without spending any taxpayer money. Imagine that!

Care is being coordinated, but not by the doctors actually treating the patient. It is being coordinated by an entity that is free to act as the agent of the patient and his family. The coordinating entity is also in a position to offer an objective second opinion for every important decision. Records are kept electronically—but not necessarily by the treating doctors or institutions. Communication is easy for all parties—doctors, patient and family—and it takes advantage of an instrument other professionals have used for years—the telephone! Whenever there was need to bring in a new provider, the agency did the screening—selecting providers who could furnish high-quality, low-cost care. The patient did not have to do his own quality investigation and he didn’t have to worry about whether a referral decision was made with his best interest in mind or for some other reason.

Notice that all of this is happening outside the third-party payer system. In fact, that is why it is happening. With third-party payment, the providers’ incentives will always be to maximize against the payment formulas. Without a third-party payer, entities like Pinnacle have no choice but to try to please the patient. Every year, Pinnacle’s goal is to convince the Kelly family that they are worth the annual fee the family pays them. So far they have succeeded.

Many years earlier Mike’s brother, Carl, was diagnosed with a malignant brain tumor. The tumor was removed, but the radiation and chemotherapy that followed weakened his arteries, heart and lungs. Then, in 2008, Carl suffered a stroke at his home in Key West, Florida. PinnacleCare arranged an air ambulance to take him to the Johns Hopkins Stroke Center, a center of excellence for stroke therapy. Then, PinnacleCare helped find a rehabilitation hospital—transferring his medical records to all three places along the way.

Because of his cancer treatment, Carl’s lungs were giving out and he was a candidate for a lung transplant. The agency helped find a transplant center, placed him on the waiting list and prepared the family to think through the options that choice presents. Carl was on a respirator for the last month of his life and as things went wrong, PinnacleCare was there each time a problem arose.

The agency also did something that is controversial and which probably will be completely dysfunctional under ObamaCare. It engaged the family in end-of-life counseling. But remember, unlike a typical provider or a typical third-party insurer, PinnacleCare has no financial interest in the family’s decision. Its profit does not go up or down based on whether the patient gets a transplant or not. It has no financial interest in whether the patient goes to a hospice or remains in the hospital. The agency is free to give unbiased, professional advice.

After the counseling, Carl decided against the transplant. His last few days were spent in palliative care.

Tragedy struck again when Mary Kelly, grandmother of Mike and Carl, was diagnosed with lymphoma. Here again, PinnacleCare engaged in coordinating, offering second opinions and exercising quality control. PinnacleCare advocates actually went to the meetings with Mary when her cancer doctors discussed her prognosis and her treatment options with her. Partly as a result of PinnacleCare’s end-of-life counseling, Mary opted for hospice care much earlier than her grandson had.

After Mary’s death, her husband, Jeff Kelly, also needed assistance. On a weekend trip to Wilmington, Delaware, he twisted his ankle and it was bad enough to require medical attention. Jeff had a number of health issues and had difficulty managing daily living activities even before the accident. Though the incident occurred around 4:00 pm on a Saturday afternoon, PinnacleCare found an agency to supply a nurse by 8:00 pm. After Jeff’s return to his home in Virginia, PinnacleCare helped find an orthopedic doctor and have his ankle X-rayed, transferring appropriate medical records along the way.

The Kelly family has had a need for the services of PinnacleCare for four family members. They’re convinced they have gotten their money’s worth several times over.

How much money? Here’s the good news. The family pays $10,000 a year. The fee is like an insurance premium. The family pays it, whether or not they need any of PinnacleCare’s services in any particular year.

Did I say good news? Yes. Here’s why.

Every new consumer product—from the first automobile to the first cell phone to the first hand calculator to the first laptop computer—tends to follow a pattern: the prototype tends to be expensive, too expensive for the general public to afford. But if there are people willing to pay a lot of money for the prototype that means it created a lot of value. It also suggests that there is a significant unmet need in the marketplace. It justifies further efforts to economize and figure out ways to bring the price down to a level that most other people can afford.

The $10,000 price is evidence that the current system is so bad that people are willing to pay a significant amount of money just on the chance that they might need a better way of dealing with it. And it is a signal to the rest of the marketplace that there is a great deal of money to be made if someone can figure out how to bring these services to more people at a lower price.

Oops, I meant to say there is a great deal of money to be made provided the entrepreneurs stay outside the third-party payer system.