I was reading an article from last week’s Wall Street Journal titled, “The Myth of Prevention” by Abraham Verghese, MD. The bulk of the article focused on health reform and the specter of phantom savings derived from a greater focus on prevention. Specifically, more screenings find more diseases, get more patients on more drugs and the economics of how, as awful as it might be to say, hundreds of thousands of dollars spent on new care spawned of “prevention” may not really return high numbers of years or lives saved; begging the question, is all that prevention delivering real health system value or will it actually drive costs up with little return?
A fascinating economics-ethics debate for sure. But not today.
For today, however is a discussion that Dr. Verghese sparks near the end of the piece. “[The EMR will] ensure that we doctors, nurses, therapists, particularly in hospitals will be spending more and more time focused on the computer, communicating with each other, ordering and getting tests, buffing and caring for our virtual patient—the iPatient is my term for this phenomenon—while the patient in the bed wonders where everybody is.”
He continues, “I have felt for some time that the patient in the bed has become an icon for the real focus of our attention, the iPatient.”
This intrigues me. Computers are about data, and the “insights” that data can deliver. I am knee deep in a digital project right now, awash in all the conversation/debate about what is measurable and what is trackable – connectable and projectable to some form of real or modeled ROI. The inherent data-collectability of digital activities, be they website clicks, ad views, drugs prescribed, or digital x-rays reviewed very well may be distracting us from the humanity and reality of what we do as providers, planners, marketers, communicators and strategists.
Or to Dr. Verghese’s point, are our tools shifting our focus from the human to the digital representations of the human – their medical data, the data about their behaviors in digital space, their purchase data, their attitudinal data?
An extension of the iPatient is the iConsumer. We’re guilty of this in marketing communications—boiling people down to numerical representations of the larger population’s humanity.
I can’t say that I have a pointed opinion or conclusion to offer here, other than to wonder when the last time was one of us sat down with a real patient and listened to their story. Not for the purpose of collecting data about who they think is “best” or “most preferred” or how they engaged the internet in tackling their health condition or whether a ad made them trust a hospital more or less, but rather just listened to the reality of confronting disease and what’s needed to find peace of mind within a disorganized network of care providers. While your customers should never develop your strategy for you, they certainly inform your planning.
Maybe that’s the difference between “research” and “listening.” In research we have a goal in mind. We ultimately want the target to either confirm our suspicions (brilliance) or report our effectiveness in influencing their rational thinking to our point of view. In listening we should have no agenda for what they are to give us, other than connecting in real, human terms. Sure, compile enough connections and the inquisitive mind can craft correlations, conclusions and relations. Even insights.
As we rush forward, in policy around reform, in strategy responding to changing technologies, economies and care delivery models, in communications marshalling the unrivaled power of digital mediums, tools and all the data they can spew at us, perhaps we should all make a concentrated effort to talk to, and listen to humans.
Friday, June 26, 2009
Tuesday, June 16, 2009
Wow!
I hope someone in DC is paying attention, because a dose of solid logic just succinctly, realistically, actionably, landed on their doorstep.
I was tipped off by a HealthLeaders article titled, “Healthcare CEOs Offer Quality-Driven Payment Model.” An organization called Health CEOs for Health Reform issued the white paper “Realigning U.S. health Care Incentives to Better Serve Patients and Taxpayers,” and, according to the HL article was led to Congress by the Reform Czar herself, Nancy-Ann DeParle. Having read the 12-page paper, I can see why.
They get it.
They begin by agreeing to quality, affordable coverage for all, with limits (among them, no new public plan – YAY!) and only permitting an individual mandate once coverage systems are proven to be accessible and affordable. No rush to create a mess that would distract from real reform. Good.
Then they spend the next 9 pages succinctly running down how to do the thing(s) that most need to be done – reforming the delivery of care to bring down cost and improve quality facilitated by broad payment system reforms. There’s an old planning adage, “you are what you measure,” and its corollary, “what gets measured gets done,” and they, rightly, frame nearly all their suggestions on the canvas of incentives. Markets work wonders!
“We will not control health care costs until we create clear incentives for providers…to focus on quality and efficiency. Likewise, patients must be encouraged to make healthier choices through changes to their incentives…This will require…courageous provider leadership and significant cultural change.”
The authors present a comprehensive range of ideas, but focus primarily on concrete steps that could be undertaken tomorrow to get us moving down this pathway: End fee-for-service payments, hold providers accountable to cost and quality standards by a specified date, and move to bundled payment models. The last point begs questions (which they address) about how to pull this off. It’s powerful stuff.
A corner post of the plan to move to bundled payments rekindles the 90’s-era conversations around full- and partial-risk contracts and accountable care organizations (called integrated delivery systems back in the day, supported by things like PHO’s). It was a great idea then, it’s a good idea now. But, I wondered, why would it work this time?
A few possibilities came to mind. First is scale. When only capitated HMO contracts were the drivers of these ideas, there was no reason to push ahead, really. It was too small a portion of the payment stream to a hospital/practice to meaningfully change behavior. If fee-for-service goes away entirely and all payers of all stripes move to a bundled methodology, it would force change.
Secondly, the 90's effort emphasized the primary care “gatekeeper” as blocker, er coordinator, of care. Even the phrase “gatekeeper” suggested restricting access. Bad. While the exact specifics of how care organizations are formed and identified for bundled payment purposes are not clear (for obvious reasons) it feels more like primary care physician-as-care-quarterback than as preventer of care.
And that changes because under the old “full risk” models, the PCPs sat on the capitation cash and had to pay bills to others, incentivising the hoarding of cash and a stinginess to refer. If the payer holds the cash and reconciles payments later based on performance it removes that power role from the relationship between providers and might inspire greater care team cooperation. That said, if you don’t capitate, how do you make this work practically? Case rates for inpatient services that cover the right quantity of pre- and post-admission elements of care? On the outpatient side, what? Some modified ICD structure? The devil's in the details.
Lastly, the 90’s model emphasized capturing covered lives. More was better. This compelled odd alliances, irrational hospital system relationships and emphasized scale over outcomes. While Health CEOs for Health Reform do suggest regionalizing high-cost, resource-intensive services, network scale is not necessarily an advantage (fairly, nor a disadvantage). If a small community hospital has a system and processes for delivering excellent outcomes in chronic disease management they can do quite fine financially. That seems sensible.
This opens up a host of strategic, marketing and business planning questions. How should care delivery organization leaders begin to re-engineer their businesses in light of an end to fee-for-service? What are the right business/system organization structures to support clinicians and promote success under bundled payments? If there are national benchmarks for clinical performance with financial penalties for falling below the mark, does quality of care muscle its way back into the strategic plan?
I hope these ideas get some traction on the Hill. They’re offering good advice that wouldn’t cost an arm and a leg to implement and would actually attack the heart of the problem.
However, hope is not a strategy. Maybe I need to email my elected leaders….
I was tipped off by a HealthLeaders article titled, “Healthcare CEOs Offer Quality-Driven Payment Model.” An organization called Health CEOs for Health Reform issued the white paper “Realigning U.S. health Care Incentives to Better Serve Patients and Taxpayers,” and, according to the HL article was led to Congress by the Reform Czar herself, Nancy-Ann DeParle. Having read the 12-page paper, I can see why.
They get it.
They begin by agreeing to quality, affordable coverage for all, with limits (among them, no new public plan – YAY!) and only permitting an individual mandate once coverage systems are proven to be accessible and affordable. No rush to create a mess that would distract from real reform. Good.
Then they spend the next 9 pages succinctly running down how to do the thing(s) that most need to be done – reforming the delivery of care to bring down cost and improve quality facilitated by broad payment system reforms. There’s an old planning adage, “you are what you measure,” and its corollary, “what gets measured gets done,” and they, rightly, frame nearly all their suggestions on the canvas of incentives. Markets work wonders!
“We will not control health care costs until we create clear incentives for providers…to focus on quality and efficiency. Likewise, patients must be encouraged to make healthier choices through changes to their incentives…This will require…courageous provider leadership and significant cultural change.”
The authors present a comprehensive range of ideas, but focus primarily on concrete steps that could be undertaken tomorrow to get us moving down this pathway: End fee-for-service payments, hold providers accountable to cost and quality standards by a specified date, and move to bundled payment models. The last point begs questions (which they address) about how to pull this off. It’s powerful stuff.
A corner post of the plan to move to bundled payments rekindles the 90’s-era conversations around full- and partial-risk contracts and accountable care organizations (called integrated delivery systems back in the day, supported by things like PHO’s). It was a great idea then, it’s a good idea now. But, I wondered, why would it work this time?
A few possibilities came to mind. First is scale. When only capitated HMO contracts were the drivers of these ideas, there was no reason to push ahead, really. It was too small a portion of the payment stream to a hospital/practice to meaningfully change behavior. If fee-for-service goes away entirely and all payers of all stripes move to a bundled methodology, it would force change.
Secondly, the 90's effort emphasized the primary care “gatekeeper” as blocker, er coordinator, of care. Even the phrase “gatekeeper” suggested restricting access. Bad. While the exact specifics of how care organizations are formed and identified for bundled payment purposes are not clear (for obvious reasons) it feels more like primary care physician-as-care-quarterback than as preventer of care.
And that changes because under the old “full risk” models, the PCPs sat on the capitation cash and had to pay bills to others, incentivising the hoarding of cash and a stinginess to refer. If the payer holds the cash and reconciles payments later based on performance it removes that power role from the relationship between providers and might inspire greater care team cooperation. That said, if you don’t capitate, how do you make this work practically? Case rates for inpatient services that cover the right quantity of pre- and post-admission elements of care? On the outpatient side, what? Some modified ICD structure? The devil's in the details.
Lastly, the 90’s model emphasized capturing covered lives. More was better. This compelled odd alliances, irrational hospital system relationships and emphasized scale over outcomes. While Health CEOs for Health Reform do suggest regionalizing high-cost, resource-intensive services, network scale is not necessarily an advantage (fairly, nor a disadvantage). If a small community hospital has a system and processes for delivering excellent outcomes in chronic disease management they can do quite fine financially. That seems sensible.
This opens up a host of strategic, marketing and business planning questions. How should care delivery organization leaders begin to re-engineer their businesses in light of an end to fee-for-service? What are the right business/system organization structures to support clinicians and promote success under bundled payments? If there are national benchmarks for clinical performance with financial penalties for falling below the mark, does quality of care muscle its way back into the strategic plan?
I hope these ideas get some traction on the Hill. They’re offering good advice that wouldn’t cost an arm and a leg to implement and would actually attack the heart of the problem.
However, hope is not a strategy. Maybe I need to email my elected leaders….
Wednesday, June 10, 2009
Required Reading
I think I’d be kicked out of the blogger’s union if I didn’t comment on Dr. Atul Gawande’s article in the June 1, 2009, issue of the New Yorker. Commentary on it is all over the blogosphere. Then yesterday, the New York Times, on its front page, reported that President Obama “summoned aides to the Oval Office to discuss [the article.]”
“He came into the meeting with that article having affected his thinking dramatically,” said Senator Ron Wyden, Democrat of Oregon. “He, in effect, took that article and put it in front of a big group of senators and said, ‘This is what we’ve got to fix.’ ”
So I guess that makes it required reading.
As not to insult your ability to read, briefly, the story tells the tale of McAllen, Texas (MSA total population just over 700,00+) and how it is the second most “expensive” Medicare market in the country. Nationwide, Medicare spends twice the national average – roughly $15,000 – per enrollee here per year. Only Miami, with significantly higher labor and living costs, is more expensive. Worse, in 1992 in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. “But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.”
Interesting side note, the average income per capita in McAllen is right around $12,000 per year…so on an “average” senior, Medicare pays out $3,000 more than that person earns in a year.
A fun exchange in the article comes when Dr. Gawande sits down to dinner with six McAllen doctors. “All bread-and-butter physicians: busy, full-time private-practice doctors who work from seven in the morning to seven at night and sometimes later…” of different specialties. Their explanations run the gamut: “Maybe the service is better here,” says one while an FP says, “It’s malpractice [insurance expense].” A cardiologist agreed, saying McAllen was “legal hell,” before ultimately admitting that since Texas passed tough malpractice laws that limited pain and suffering payouts to $250,000 lawsuits have gown down, “practically to zero.”
“’Come on,’ the general surgeon finally said. ‘We all know these arguments are bulls---. There is overutilization here, pure and simple…the way to practice medicine has changed completely. Before it was about how to do a good job. Now it is about, how much will you benefit?”
Dr. Gawande digs further and proves, in fact, patients in McAllen get more of just about everything – more diagnostic testing, more hospital treatment, more surgery, more home care – than patient nationwide.
Read the article for yourself. You’ll be amazed.
But that’s not the point of today. Yesterday’s NYT article is. It contained some scary stuff. I am going to quote at length here, sorry…
“As part of the larger effort to overhaul health care, lawmakers are trying to address the problem that intrigues Mr. Obama so much — the huge geographic variations in Medicare spending per beneficiary. Two decades of research suggests that the higher spending does not produce better results for patients but may be evidence of inefficiency.”
“Members of Congress are seriously considering proposals to rein in the growth of health spending by taking tens of billions of dollars of Medicare money away from doctors and hospitals in high-cost areas and using it to help cover the uninsured or treat patients in lower-cost regions.”
“The Senate Finance Committee recently suggested that one way to pay for health care overhaul would be to reduce geographic variations by cutting or capping Medicare payments in “areas where per-beneficiary spending is above a certain threshold, compared with the national average.”
“Another proposal would spare health care providers in low-spending, efficient areas from across-the-board cuts in Medicare payments.”
“Dr. Langberg [a senior vice president at Cedars-Sinai Medical Center in Los Angeles] endorsed the goal of covering the uninsured, but said, “We do not believe that rushing to make large cuts in Medicare payments to hospitals is the right way to fund that coverage.”
The reason this got my cackles up was fear of what I see as a tremendously flawed premise. The logic chain goes something like this: 1. Universal coverage is a must [not necessarily], 2. This will be expensive for a variety reasons – a public plan, increased utilization etc. [very true but again, based on a shaky foundational assumption], 3. Providers are paid too much, let’s move cash from care to coverage and overhead [there’s certainly merit to attacking overuse and duplication but that will only go so far, and do any providers think they are paid too much?], 4. That’s not going to be enough money, we’re going to need more and since employer sponsored benefits are sacrosanct [not true] we’ll have to tax those too.
Today I will begin to read the legislative analysis of the 615-page bill that came out of the Senate Health, Education, Labor and Pensions Committee yesterday, but early reports lead me to expect the worst.
So where is all this going? On Monday I posted about hospital CEO’s in a real American town and their differing views on the right strategy for the future. Late last week I sat in on some consumer focus groups to hear them talk about and react to statements about hospital quality. A fascinating study. By and large people know two things: Cleanliness and “reputation,” which, when pressed they can’t elaborate, clarify or define.
I’m confounded because I see all three of these points as deeply, importantly connected. If “reputation” is some nebulous trigonometry of chance, our Big Dog hospital from Monday might be on the right track because better outcomes and lower costs might just not matter to people. But, if some form of payment system reform incentivizes and rewards integration and best practices, maybe, Hospital #2 might be well situated in theory, but if no one goes there, does it really matter? So then that leaves an increasingly larger Federal infrastructure (remember we expanded coverage and costs so now we’re all on the hook for even more) with only one tool to impact both behavior and costs – the hammer of pricing. But now it’s not just pricing on 25%-50% of your business, it could be much more. That makes the hammer bigger and the pain of being hit greater.
God-freaking-dammit Charlie, back up the bus! Go back to the New Yorker article. Think this through. What does the Dartmouth (and others) analysis tell us? It tells us we have a long way to go in best practices implementation and integration before we’re ready pile on a bazillion dollars in new costs! It means we should partner with payers of all stripes to test and trial incentive payment programs to advance best practices and integration. Oh and by the way, it’s going to take hospital/health system innovators a few years to re-engineer the delivery system. It’s hard to redecorate your living room when your kitchen’s on fire.
Ugh.
“He came into the meeting with that article having affected his thinking dramatically,” said Senator Ron Wyden, Democrat of Oregon. “He, in effect, took that article and put it in front of a big group of senators and said, ‘This is what we’ve got to fix.’ ”
So I guess that makes it required reading.
As not to insult your ability to read, briefly, the story tells the tale of McAllen, Texas (MSA total population just over 700,00+) and how it is the second most “expensive” Medicare market in the country. Nationwide, Medicare spends twice the national average – roughly $15,000 – per enrollee here per year. Only Miami, with significantly higher labor and living costs, is more expensive. Worse, in 1992 in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. “But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.”
Interesting side note, the average income per capita in McAllen is right around $12,000 per year…so on an “average” senior, Medicare pays out $3,000 more than that person earns in a year.
A fun exchange in the article comes when Dr. Gawande sits down to dinner with six McAllen doctors. “All bread-and-butter physicians: busy, full-time private-practice doctors who work from seven in the morning to seven at night and sometimes later…” of different specialties. Their explanations run the gamut: “Maybe the service is better here,” says one while an FP says, “It’s malpractice [insurance expense].” A cardiologist agreed, saying McAllen was “legal hell,” before ultimately admitting that since Texas passed tough malpractice laws that limited pain and suffering payouts to $250,000 lawsuits have gown down, “practically to zero.”
“’Come on,’ the general surgeon finally said. ‘We all know these arguments are bulls---. There is overutilization here, pure and simple…the way to practice medicine has changed completely. Before it was about how to do a good job. Now it is about, how much will you benefit?”
Dr. Gawande digs further and proves, in fact, patients in McAllen get more of just about everything – more diagnostic testing, more hospital treatment, more surgery, more home care – than patient nationwide.
Read the article for yourself. You’ll be amazed.
But that’s not the point of today. Yesterday’s NYT article is. It contained some scary stuff. I am going to quote at length here, sorry…
“As part of the larger effort to overhaul health care, lawmakers are trying to address the problem that intrigues Mr. Obama so much — the huge geographic variations in Medicare spending per beneficiary. Two decades of research suggests that the higher spending does not produce better results for patients but may be evidence of inefficiency.”
“Members of Congress are seriously considering proposals to rein in the growth of health spending by taking tens of billions of dollars of Medicare money away from doctors and hospitals in high-cost areas and using it to help cover the uninsured or treat patients in lower-cost regions.”
“The Senate Finance Committee recently suggested that one way to pay for health care overhaul would be to reduce geographic variations by cutting or capping Medicare payments in “areas where per-beneficiary spending is above a certain threshold, compared with the national average.”
“Another proposal would spare health care providers in low-spending, efficient areas from across-the-board cuts in Medicare payments.”
“Dr. Langberg [a senior vice president at Cedars-Sinai Medical Center in Los Angeles] endorsed the goal of covering the uninsured, but said, “We do not believe that rushing to make large cuts in Medicare payments to hospitals is the right way to fund that coverage.”
The reason this got my cackles up was fear of what I see as a tremendously flawed premise. The logic chain goes something like this: 1. Universal coverage is a must [not necessarily], 2. This will be expensive for a variety reasons – a public plan, increased utilization etc. [very true but again, based on a shaky foundational assumption], 3. Providers are paid too much, let’s move cash from care to coverage and overhead [there’s certainly merit to attacking overuse and duplication but that will only go so far, and do any providers think they are paid too much?], 4. That’s not going to be enough money, we’re going to need more and since employer sponsored benefits are sacrosanct [not true] we’ll have to tax those too.
Today I will begin to read the legislative analysis of the 615-page bill that came out of the Senate Health, Education, Labor and Pensions Committee yesterday, but early reports lead me to expect the worst.
So where is all this going? On Monday I posted about hospital CEO’s in a real American town and their differing views on the right strategy for the future. Late last week I sat in on some consumer focus groups to hear them talk about and react to statements about hospital quality. A fascinating study. By and large people know two things: Cleanliness and “reputation,” which, when pressed they can’t elaborate, clarify or define.
I’m confounded because I see all three of these points as deeply, importantly connected. If “reputation” is some nebulous trigonometry of chance, our Big Dog hospital from Monday might be on the right track because better outcomes and lower costs might just not matter to people. But, if some form of payment system reform incentivizes and rewards integration and best practices, maybe, Hospital #2 might be well situated in theory, but if no one goes there, does it really matter? So then that leaves an increasingly larger Federal infrastructure (remember we expanded coverage and costs so now we’re all on the hook for even more) with only one tool to impact both behavior and costs – the hammer of pricing. But now it’s not just pricing on 25%-50% of your business, it could be much more. That makes the hammer bigger and the pain of being hit greater.
God-freaking-dammit Charlie, back up the bus! Go back to the New Yorker article. Think this through. What does the Dartmouth (and others) analysis tell us? It tells us we have a long way to go in best practices implementation and integration before we’re ready pile on a bazillion dollars in new costs! It means we should partner with payers of all stripes to test and trial incentive payment programs to advance best practices and integration. Oh and by the way, it’s going to take hospital/health system innovators a few years to re-engineer the delivery system. It’s hard to redecorate your living room when your kitchen’s on fire.
Ugh.
Monday, June 8, 2009
Evolution or De-volution?
Not a big scholarly effort today, just an idea for conversation....
Friday I was involved in a new business pitch. The market situation in this town (metropolitan population 350,000ish) was interesting and one I wanted to share. The prospect hospital is in a three-hospital town. There is a "Big Dog" market leader - 600 beds. The #2 hospital is a vibrant place – 350 beds - that can “provide 90% - 95% of the services” #1 can. The #3 hospital is smaller still – 150 beds - and serves a very distinct local community primarily. While each hospital has its share of dedicated, loyalist physicians, the loyalists skew toward primary care with the specialist community mostly splitting their admissions between the top two hospitals. It is not uncommon for the larger specialty practices to favor the Big Dog, with some specialty practices treating their public assistance patients at #2 and their "good paying" patients at #1.
In some specialties (such as neurosurgery) there is only one practice in town. Recently the Big Dog began an aggressive campaign to buy these exclusive specialties, essentially leaving the other hospitals in the market without access to these capabilities. And for something like neurosurgery, you can imagine the impossibility of both supporting and recruiting a second group to the area. The market's just not big enough to make that practical.
Here's where the strategy discussion begins. The Big Dog's strategy is to become more and more academic. This town is within 2 ½ hours of 3 different urban centers, each with true academic medical center destinations, but Big Dog is embarking on a strategy of greater and greater technological advancement, sub-specialization and crafting a public image as the region's closest thing to the "cathedral of medicine" [my words] mystique that surrounds a larger, urban AMC.
Hospital #2 (our prospect) seems to be a wily competitor. Nice facilities, but not as grand and polished as the Big Dog. Again, providing almost all the same services - including open heart surgery, bone marrow transplant, tomotherapy, DaVinci surgical options for minimally invasive therapies, and the like. Data would indicate #2 is home to higher clinical quality (Core Measures and other data) and lower cost than the #1 (less expensive infrastructure to support).
The CEO at #2 is pursuing a different strategy than the Big Dog. He's not engaging in a medical arms race, not going to try to go claim-for-claim, specialty-for-specialty with #1 (for reasons very practical as well as strategic). In his view, the future of US health care will not necessarily reward bigger, more specialized, more complex, more inpatient focused (Big Dog strategy). He is looking across the continuum of care and embracing the Accountable Care Organization/Medical Home model (although not explicitly) - believing that health reform will incentivize and reward prevention, wellness, health promotion, organization and integration - especially interoperable EMR and data integration - and value/cost efficiency at the institutional/inpatient setting. Philosophically and theoretically it's a powerful counterpoint.
Because #3 is so much smaller as a market competitor, less clinically capable than #1 and #2 and more community based we can respectfully leave it out of this conversation.
Thinking about human behavior and the strategy of competition, what might be the winning approach? People certainly admire large, shiny new buildings, equate technological advancement and specialization with quality and capability. More powerfully, they also tend to derive a significant measure of confidence from these kinds of organizations. And, in health care, patients want to be confident in their care decisions.
But then there's economics and the specter of reform. Demonstrated quality and lower cost can be powerful market tools for competition, though currently there’s little evidence they can move market share. Integration *might* be marketable as more in line with the future of health care while massing inpatient resources could be seen as backward looking, duplicative and part of the health care cost problem.
It's a fascinating situation because it's not theoretical. This is a real market. These are real hospitals treating real patients, wooing real physicians and making real capital allocation decisions based on strategies. The hospitals are going to go down different paths. One's strategy will be more successful than the other's.
I understand and admire each hospital's vision. This seems like sheer force (e.g., Big Dog) vs. betting on a vision of the future much different from today. It’s a bold gamble – perhaps the one #2 is forced to take – that could leave #2 slugging it out for every last high margin admission as consumers struggle to get their mind around some difference based on “system-ness.” That said, a unique worldview, scaled appropriately, can be powerful (see also: Mac vs. PC) and profitable, if not visionary and respected. To make that strategy work, though, product has to match communications; the promoted difference, attitude and advantages have to be real.
I won’t advance any strategic recommendations or conclusions at this time, as there is more info to gather. But, what do you think it will take for each of these hospitals to succeed on their chosen path?
Friday I was involved in a new business pitch. The market situation in this town (metropolitan population 350,000ish) was interesting and one I wanted to share. The prospect hospital is in a three-hospital town. There is a "Big Dog" market leader - 600 beds. The #2 hospital is a vibrant place – 350 beds - that can “provide 90% - 95% of the services” #1 can. The #3 hospital is smaller still – 150 beds - and serves a very distinct local community primarily. While each hospital has its share of dedicated, loyalist physicians, the loyalists skew toward primary care with the specialist community mostly splitting their admissions between the top two hospitals. It is not uncommon for the larger specialty practices to favor the Big Dog, with some specialty practices treating their public assistance patients at #2 and their "good paying" patients at #1.
In some specialties (such as neurosurgery) there is only one practice in town. Recently the Big Dog began an aggressive campaign to buy these exclusive specialties, essentially leaving the other hospitals in the market without access to these capabilities. And for something like neurosurgery, you can imagine the impossibility of both supporting and recruiting a second group to the area. The market's just not big enough to make that practical.
Here's where the strategy discussion begins. The Big Dog's strategy is to become more and more academic. This town is within 2 ½ hours of 3 different urban centers, each with true academic medical center destinations, but Big Dog is embarking on a strategy of greater and greater technological advancement, sub-specialization and crafting a public image as the region's closest thing to the "cathedral of medicine" [my words] mystique that surrounds a larger, urban AMC.
Hospital #2 (our prospect) seems to be a wily competitor. Nice facilities, but not as grand and polished as the Big Dog. Again, providing almost all the same services - including open heart surgery, bone marrow transplant, tomotherapy, DaVinci surgical options for minimally invasive therapies, and the like. Data would indicate #2 is home to higher clinical quality (Core Measures and other data) and lower cost than the #1 (less expensive infrastructure to support).
The CEO at #2 is pursuing a different strategy than the Big Dog. He's not engaging in a medical arms race, not going to try to go claim-for-claim, specialty-for-specialty with #1 (for reasons very practical as well as strategic). In his view, the future of US health care will not necessarily reward bigger, more specialized, more complex, more inpatient focused (Big Dog strategy). He is looking across the continuum of care and embracing the Accountable Care Organization/Medical Home model (although not explicitly) - believing that health reform will incentivize and reward prevention, wellness, health promotion, organization and integration - especially interoperable EMR and data integration - and value/cost efficiency at the institutional/inpatient setting. Philosophically and theoretically it's a powerful counterpoint.
Because #3 is so much smaller as a market competitor, less clinically capable than #1 and #2 and more community based we can respectfully leave it out of this conversation.
Thinking about human behavior and the strategy of competition, what might be the winning approach? People certainly admire large, shiny new buildings, equate technological advancement and specialization with quality and capability. More powerfully, they also tend to derive a significant measure of confidence from these kinds of organizations. And, in health care, patients want to be confident in their care decisions.
But then there's economics and the specter of reform. Demonstrated quality and lower cost can be powerful market tools for competition, though currently there’s little evidence they can move market share. Integration *might* be marketable as more in line with the future of health care while massing inpatient resources could be seen as backward looking, duplicative and part of the health care cost problem.
It's a fascinating situation because it's not theoretical. This is a real market. These are real hospitals treating real patients, wooing real physicians and making real capital allocation decisions based on strategies. The hospitals are going to go down different paths. One's strategy will be more successful than the other's.
I understand and admire each hospital's vision. This seems like sheer force (e.g., Big Dog) vs. betting on a vision of the future much different from today. It’s a bold gamble – perhaps the one #2 is forced to take – that could leave #2 slugging it out for every last high margin admission as consumers struggle to get their mind around some difference based on “system-ness.” That said, a unique worldview, scaled appropriately, can be powerful (see also: Mac vs. PC) and profitable, if not visionary and respected. To make that strategy work, though, product has to match communications; the promoted difference, attitude and advantages have to be real.
I won’t advance any strategic recommendations or conclusions at this time, as there is more info to gather. But, what do you think it will take for each of these hospitals to succeed on their chosen path?
Thursday, June 4, 2009
The "In" Crowd
Triangulation. That’s really what this project is about; I grab a thing from here, a thing from there, some stuff from over yonder and find a thematic link that intrigues me (at least) and you (hopefully).
Today’s exercise in triangulation is just that – two articles on similar topics that spark imagination and discussion.
The first appeared in the Harvard Business Review Blogs where Umair Hague posed the question, “Is Your Innovation Really Unnovation?” His premise: “In the race to innovate, most organizations forget a simple but fundamental economic truth. A new process, product, service, business design, or strategy can only be described as an innovation if it results in (or is the result of) authentic, durable economic gains.”
From there: “Most innovation, well, isn't: it is "unnovation," or innovation that fails to create authentic, meaningful value. The biggest stumbling block to innovation is unnovation: most companies are too busy unnovating to ever learn how to truly innovate.”
His post provides some examples of “unnovation” – The Hummer, Collateralized Debt Obligations, carmakers getting into the financing business – and challenges that “innovation today demands more substance and less hype. [My favorite line coming next!] A bigger SUV with even worse mileage or a razor with yet another blade are only innovative if wearing my socks inside out is too. All three create roughly the same amount of economic value.”
The second point on the triangle, and how this becomes healthcare-relevant, was an editorial piece in HealthLeaders that appeared, coincidentally, the next day titled, “Hospitals May Need Operators, Not Innovators.” In this article, the oft-engaging Philip Betbeze puzzles over the need for innovation in the ranks of hospital leadership. His hypothesis goes, “Maybe we're better off with people who are good at executing, but who are not necessarily idea people. With drastic healthcare reform proposals on the horizon, are we better off with a majority of operators versus innovators? It's possible we are. The industry is already the most regulated on the planet, and I include financial services in that assessment, even with recent unprecedented government intervention in that sector. As government works to further regulate healthcare, are innovators really what is needed? I'm not sure, but…[w]ith further regulation, I'm coming down on the side of the efficient operators.”
There’s certainly merit to Philip’s point-of-view. “So bring on the operators. People who can effectively navigate through bureaucratic hoops and chart a path to profitability without sacrificing patient care. Those are the people healthcare is going to need in the immediate future, where the line between surviving and thriving might live on the razor's edge.” If you don’t have excellent operators at your hospital, you quite possibly guilty of a degree of professional malfeasance.
That said, it led me to wonder, though, what is true innovation in health care delivery? For guidance, go back to Umair Hague’s guideline: “A new process, product, service, business design, or strategy can only be described as an innovation if it results in (or is the result of) authentic, durable economic gains.”
This led me to Michael Porter and Elizabeth Olmsted Teisberg’s 2006 doorstop, “Redefining Health Care.” It’s excellent (but dense), focusing entirely on the question of value and how the health care delivery system has systemically destroyed (unnovated?) value more often than it has created it.
[Sidebar: Maybe another time we can digress on both the destruction of value and the role of non-provider elements within the system have played in creating real value, but I don’t want to get too far off topic right now.]
On page 111 Porter and Teisberg offer a nice guideline in this discussion, “Value in health care delivery is created by doing a few things well, not by trying to do everything. Yet, health care delivery is currently not organized this way—indeed, the current system encourages just the opposite.” When they say "current system" they largely mean reimbursement - both private insurance and Medicare - although other elements, like research funding, professional compensation, rewards and recognition, etc. certainly also contribute.
Further on, they suggest, “The combined effects of experience, scale, and learning create a virtuous circle in which the value delivered by a provider can improve rapidly.” They draw a believable connection between deeper specialization, efficiencies, practice development, innovation and better results, with better results aiding reputation and compelling even greater volume.
The conclusion they suggest, which conforms to Hague’s definition of real value creation and innovation, is that if the US health system encourages and rewards value-based competition on results, the inevitable output will be better product and better quality of life at a lower cost. Real value.
Realists, they do point out, “The relationship among experience, scale, and results is not automatic, especially when providers do not have to compete on results. An important factor is learning.” This sparked a thought…is that like quality? If it’s not planned for, if it’s not an organizational strategic priority, is high-octane, propelling learning unlikely? “Learning requires an active process of review and improvement.”
So, to be part of the “In” crowd, that is the “innovating” crowd, my a-ha was organizational commitments to specialization and active learning with an eye on value creation.
At first I thought I’d end up thinking tools like EMRs, Accountable Care Organizations, and the like would be examples of innovation in health care. But, now, I’m compelled to think that strategic decisions around specialization, delivery system integration and business process tools are just means to an end. Real value creation, real innovation, is the role of learning and the strategic commitment to pursue learning within such a system.
That’s a durable challenge under any regulatory scenario. Operators are necessary, for sure. Innovators are welcome, and needed.
Today’s exercise in triangulation is just that – two articles on similar topics that spark imagination and discussion.
The first appeared in the Harvard Business Review Blogs where Umair Hague posed the question, “Is Your Innovation Really Unnovation?” His premise: “In the race to innovate, most organizations forget a simple but fundamental economic truth. A new process, product, service, business design, or strategy can only be described as an innovation if it results in (or is the result of) authentic, durable economic gains.”
From there: “Most innovation, well, isn't: it is "unnovation," or innovation that fails to create authentic, meaningful value. The biggest stumbling block to innovation is unnovation: most companies are too busy unnovating to ever learn how to truly innovate.”
His post provides some examples of “unnovation” – The Hummer, Collateralized Debt Obligations, carmakers getting into the financing business – and challenges that “innovation today demands more substance and less hype. [My favorite line coming next!] A bigger SUV with even worse mileage or a razor with yet another blade are only innovative if wearing my socks inside out is too. All three create roughly the same amount of economic value.”
The second point on the triangle, and how this becomes healthcare-relevant, was an editorial piece in HealthLeaders that appeared, coincidentally, the next day titled, “Hospitals May Need Operators, Not Innovators.” In this article, the oft-engaging Philip Betbeze puzzles over the need for innovation in the ranks of hospital leadership. His hypothesis goes, “Maybe we're better off with people who are good at executing, but who are not necessarily idea people. With drastic healthcare reform proposals on the horizon, are we better off with a majority of operators versus innovators? It's possible we are. The industry is already the most regulated on the planet, and I include financial services in that assessment, even with recent unprecedented government intervention in that sector. As government works to further regulate healthcare, are innovators really what is needed? I'm not sure, but…[w]ith further regulation, I'm coming down on the side of the efficient operators.”
There’s certainly merit to Philip’s point-of-view. “So bring on the operators. People who can effectively navigate through bureaucratic hoops and chart a path to profitability without sacrificing patient care. Those are the people healthcare is going to need in the immediate future, where the line between surviving and thriving might live on the razor's edge.” If you don’t have excellent operators at your hospital, you quite possibly guilty of a degree of professional malfeasance.
That said, it led me to wonder, though, what is true innovation in health care delivery? For guidance, go back to Umair Hague’s guideline: “A new process, product, service, business design, or strategy can only be described as an innovation if it results in (or is the result of) authentic, durable economic gains.”
This led me to Michael Porter and Elizabeth Olmsted Teisberg’s 2006 doorstop, “Redefining Health Care.” It’s excellent (but dense), focusing entirely on the question of value and how the health care delivery system has systemically destroyed (unnovated?) value more often than it has created it.
[Sidebar: Maybe another time we can digress on both the destruction of value and the role of non-provider elements within the system have played in creating real value, but I don’t want to get too far off topic right now.]
On page 111 Porter and Teisberg offer a nice guideline in this discussion, “Value in health care delivery is created by doing a few things well, not by trying to do everything. Yet, health care delivery is currently not organized this way—indeed, the current system encourages just the opposite.” When they say "current system" they largely mean reimbursement - both private insurance and Medicare - although other elements, like research funding, professional compensation, rewards and recognition, etc. certainly also contribute.
Further on, they suggest, “The combined effects of experience, scale, and learning create a virtuous circle in which the value delivered by a provider can improve rapidly.” They draw a believable connection between deeper specialization, efficiencies, practice development, innovation and better results, with better results aiding reputation and compelling even greater volume.
The conclusion they suggest, which conforms to Hague’s definition of real value creation and innovation, is that if the US health system encourages and rewards value-based competition on results, the inevitable output will be better product and better quality of life at a lower cost. Real value.
Realists, they do point out, “The relationship among experience, scale, and results is not automatic, especially when providers do not have to compete on results. An important factor is learning.” This sparked a thought…is that like quality? If it’s not planned for, if it’s not an organizational strategic priority, is high-octane, propelling learning unlikely? “Learning requires an active process of review and improvement.”
So, to be part of the “In” crowd, that is the “innovating” crowd, my a-ha was organizational commitments to specialization and active learning with an eye on value creation.
At first I thought I’d end up thinking tools like EMRs, Accountable Care Organizations, and the like would be examples of innovation in health care. But, now, I’m compelled to think that strategic decisions around specialization, delivery system integration and business process tools are just means to an end. Real value creation, real innovation, is the role of learning and the strategic commitment to pursue learning within such a system.
That’s a durable challenge under any regulatory scenario. Operators are necessary, for sure. Innovators are welcome, and needed.
Monday, June 1, 2009
It's Geek Time!
Wow, what a wonderful time to be a healthcare geek! The Obama Health Reform train is fully gassed and charging out of the station…coming this weekend to a living room near you!
In case you missed it, Organizing for America has reached out to David Plouffe’s massive database to enlist grass-roots support for the President’s health reform plan. This Saturday (June 6) people will be hosting house parties across America to discuss reform. Whoda thunkit? Tupperware parties across the U.S. to talk about re-engineering the US health system. Funny thing is, I don’t expect these to be “open-sourcing the solution” events, but rather, “call your representative and tell your friends to do the same” kind of things. I gotta find one to attend! Rumor has it these events are motivated, in part, as a response to Rick Scott’s one-man crusade for personal vindication—but dare I digress.
With that as a backdrop, I loved a HealthLeaders piece from last week titled, “Targeted Tax Hikes Would Raise Billions for Health Reforms.” It had lots of potential blog fodder in it, but my favorite lines came from Michael Cannon, director of health policy at the Cato Institute (just to the right of Ayn Rand). Quote, “It’s a flawed premise—that the problem with healthcare in America is we aren’t spending enough.” If you haven’t seen, there’s a bunch of new taxes being floated out there as a way to pay for the increased costs of universal coverage, including a smack on high-fructose corn syrup-containing sodas. A possible “beer tax” has made news recently as part of a higher levy on alcohol. Then there's everything I blogged about last week about "missed revenue" from taxing employer provided benefits and similar targets (hope you're not in love with your MSA/HSA!).
Today, HLM reported from the blogosphere with posts from top government officials, OMB Director Orszag and CBO Director Elmendorf (everybody blogs these days!). Orszag: “Healthcare reform will likely increase total national spending as healthcare coverage expands under current proposals. However, reform actions eventually will slow the growth of healthcare spending. "What we see is that it takes only 10 to 16 years after reform for federal healthcare spending to be lower than it would have been in the absence of reform.”
“Within the 10 year budget window, the impact of healthcare reform on the budget will be "negligible" because the plan is fully paid for [read: taxes]. The short term increase in spending will be offset with greater revenues. Over the longer term, the budget situation "improves considerably" because healthcare spending declines and because taxable compensation increases.”
Looking back over past blog posts, I know some people might suspect I am a conservative Republican in the classic style. I’m not. Seriously. I’m socially liberal and fiscally conservative…that makes me…well…confused mostly. But I am skeptical of Orszag’s assertion that “the situation” will improve because of projected spending declines and increased tax revenue. I think you can plan for the latter but there’s little-to-no proof you should expect the former.
In the HealthLeaders article, President Obama told the footsoldiers, “If we don't get it done this year, we're not going to get it done…We're going to need to mobilize all of you." I wish I knew where the fire was. Yes it’s a huge and growing portion of the national budget, but, jeezus, taxing the snot out of the populace is not a prescription for political survival. At a time when people are seemingly comfortable to forgo medical treatment, telling them you’re going to pile on their burden so they can be better off…it just doesn’t seem like folks are saying they want it.
I suspect universal coverage has to happen. It’s the only thing the President can do by executive fiat (other than car mergers) and claim victory come campaign time. He can’t stand up at a re-election rally and cry, “on my watch we’ve launched 16 demonstration projects of which 7 show real promise and scalability for long-term health system reform some day!” He can, however, say, “they said it couldn’t be done. But we showed the nay-sayers that by ____ (insert date here), every man, woman and child will have the security of health insurance and no American will ever have to wonder about changing jobs, losing their job or making the right choice for their family because of health insurance.”
So, it’s inevitable. It’s going to be a mess. Senator Kennedy’s Health, Education, Labor and Pensions Committee seems ready to buy-off physicians with the promise of a Medicare +10% fee schedule in return for support of some public plan.
I want it all to work, I really do. And, you don’t make meaningful long-term progress without bold, often controversial short-term actions. I must say that, more than anything else, I am surprised at the size of the risk the President and Congress are willing to take.
Oh, and if anyone gets to one of these health care house parties, please post!!
In case you missed it, Organizing for America has reached out to David Plouffe’s massive database to enlist grass-roots support for the President’s health reform plan. This Saturday (June 6) people will be hosting house parties across America to discuss reform. Whoda thunkit? Tupperware parties across the U.S. to talk about re-engineering the US health system. Funny thing is, I don’t expect these to be “open-sourcing the solution” events, but rather, “call your representative and tell your friends to do the same” kind of things. I gotta find one to attend! Rumor has it these events are motivated, in part, as a response to Rick Scott’s one-man crusade for personal vindication—but dare I digress.
With that as a backdrop, I loved a HealthLeaders piece from last week titled, “Targeted Tax Hikes Would Raise Billions for Health Reforms.” It had lots of potential blog fodder in it, but my favorite lines came from Michael Cannon, director of health policy at the Cato Institute (just to the right of Ayn Rand). Quote, “It’s a flawed premise—that the problem with healthcare in America is we aren’t spending enough.” If you haven’t seen, there’s a bunch of new taxes being floated out there as a way to pay for the increased costs of universal coverage, including a smack on high-fructose corn syrup-containing sodas. A possible “beer tax” has made news recently as part of a higher levy on alcohol. Then there's everything I blogged about last week about "missed revenue" from taxing employer provided benefits and similar targets (hope you're not in love with your MSA/HSA!).
Today, HLM reported from the blogosphere with posts from top government officials, OMB Director Orszag and CBO Director Elmendorf (everybody blogs these days!). Orszag: “Healthcare reform will likely increase total national spending as healthcare coverage expands under current proposals. However, reform actions eventually will slow the growth of healthcare spending. "What we see is that it takes only 10 to 16 years after reform for federal healthcare spending to be lower than it would have been in the absence of reform.”
“Within the 10 year budget window, the impact of healthcare reform on the budget will be "negligible" because the plan is fully paid for [read: taxes]. The short term increase in spending will be offset with greater revenues. Over the longer term, the budget situation "improves considerably" because healthcare spending declines and because taxable compensation increases.”
Looking back over past blog posts, I know some people might suspect I am a conservative Republican in the classic style. I’m not. Seriously. I’m socially liberal and fiscally conservative…that makes me…well…confused mostly. But I am skeptical of Orszag’s assertion that “the situation” will improve because of projected spending declines and increased tax revenue. I think you can plan for the latter but there’s little-to-no proof you should expect the former.
In the HealthLeaders article, President Obama told the footsoldiers, “If we don't get it done this year, we're not going to get it done…We're going to need to mobilize all of you." I wish I knew where the fire was. Yes it’s a huge and growing portion of the national budget, but, jeezus, taxing the snot out of the populace is not a prescription for political survival. At a time when people are seemingly comfortable to forgo medical treatment, telling them you’re going to pile on their burden so they can be better off…it just doesn’t seem like folks are saying they want it.
I suspect universal coverage has to happen. It’s the only thing the President can do by executive fiat (other than car mergers) and claim victory come campaign time. He can’t stand up at a re-election rally and cry, “on my watch we’ve launched 16 demonstration projects of which 7 show real promise and scalability for long-term health system reform some day!” He can, however, say, “they said it couldn’t be done. But we showed the nay-sayers that by ____ (insert date here), every man, woman and child will have the security of health insurance and no American will ever have to wonder about changing jobs, losing their job or making the right choice for their family because of health insurance.”
So, it’s inevitable. It’s going to be a mess. Senator Kennedy’s Health, Education, Labor and Pensions Committee seems ready to buy-off physicians with the promise of a Medicare +10% fee schedule in return for support of some public plan.
I want it all to work, I really do. And, you don’t make meaningful long-term progress without bold, often controversial short-term actions. I must say that, more than anything else, I am surprised at the size of the risk the President and Congress are willing to take.
Oh, and if anyone gets to one of these health care house parties, please post!!
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