Jonathan Rauch is a senior writer for National Journal magazine in Washington, a contributing editor for The Atlantic Monthly, and the author of several books and numerous commentaries on public policy, culture, and economics.

He recently published a paper through Brookings that details how entrepreneurial newcomers are making essential contributions in realizing the fee-for-value vision in health care. He discussed his findings with DOTmed News.

DOTmed News: You quote Jonathan Bush's observation that, "The industries we care about least innovate at the highest speeds, while those we hold dearest to our heart innovate hardly at all." What accounts for that?

Jonathan Rauch: Probably because when we care a whole lot about something, and when we believe everyone should have access to it, we tend to regulate it heavily and treat it as an entitlement. That's the case in both education and medicine, both fields where we're justifiably cautious about precipitous changes that might harm people or destabilize settled norms--but where we've paid a price in lagging innovation and productivity.

That's starting to change in both sectors, but gradually.

DOTmed News: Why has value-based medicine proven so difficult to implement?

JR: Patients understandably want the best medicine money can buy; third-party payment reduces incentives to shop for values (after all, someone else is footing the bill); and fee-for-service as the basis for payment encourages overutilization. So incentives were aligned in a way that made value-based models downright unattractive.

DOTmed News: Can you give an example of an entrepreneurial company affecting change in health care?

JR: There are many examples in my paper, but here's a good one: a major source of illness and cost is patients' failure to take their medications. And once people fall off their meds, it's often hard to get them back on. What if a company could make money by predicting which patients are at highest risk of medication noncompliance and then, working with their health-care providers, by preventing noncompliance before the problem begins? That's what RxAnte, a company I profiled, is doing. This can work for two reasons: first, the advent of predictive analytics that can identify risks in advance; second, the advent of population-based payment models that reward health plans for keeping their members healthy. Put those together, add a dash of entrepreneurship and a sprinkling of venture capital, and you have a new business model that wouldn't have been possible just a few years ago.

DOTmed News: How do these new companies influence older companies to change their business models?

JR: Older companies are under pressure to move toward value-based profit models. They're well aware this is a very different world, from a business point of view. And they don't want to become Kodak, as one executive told me. So they're investing in, partnering with, and sometimes acquiring entrepreneurial newcomers in order to get ahead of the curve. Many insurers and providers run strategic venture-investment arms, seeking to gain early access to new technologies, diversify their business portfolios, hedge against risk in traditional markets, tap into fresh talent or expertise, develop strategic partnerships with new businesses, stimulate innovation or fresh thinking within their own corporate culture, or all of the above.

DOTmed News: To what extent can this shift in values be credited to the ACA?

JR: In my interviews, the ACA came up again and again as a major source of pressure to shift toward value. Party that's because the ACA implements a suite of value-based payment programs and incentives (there's an eight-page list of them here), and partly it's because the ACA's overall scope and scale got health-care executives' attention, convincing them that the government is serious about taking away the fee-for-service punch bowl. But other policy changes have mattered, too: payment-incentive changes in Medicare Advantage, for example, and the government's stated objective of moving half of all Medicare payments off of fee-for-service by 2018. Add these things together, and CFOs of health-care organizations get the message.