Reform Is Coming

Two particularly interesting and important things happened at the end of last week. One, as reported by the New York Times (“Daschle Lays Out a Plan to Overhaul Healthcare”), was presumptive Health Czar Tom Daschle’s visit to friendly confines of the US Senate to chitchat about reform. The article reports he appeared fluent on the topic, didn’t need to resort to notes and enjoyed a very favorable reception from his former colleagues. Granted, it seems he wasn’t thrown too many hardballs, but his message was quite clear: “as we face a harsh and deep recession, the problem of the uninsured is likely to grow.” Acknowledging criticisms of the failed 1994 attempt to address the systems shortcomings, Mr. Daschle asserted, “The[y] are good arguments for undertaking reform in a way that is aggressive, open and responsive to Americans’ concerns,” he said. “They are not good arguments for ignoring the problem.”

While many, like Jeff Goldsmith, had suggested a go-slow approach on health reform, it appears clear something more aggressive will happen. The Administration will join the growing chorus of proposals gathering for consideration and vote.

Which leads to the other item that appeared on Friday. The Commonwealth Fund Commission on a High Performance Health System issues their analysis (part I of II) of Leading Congressional Health Care Bills. It’s an interesting tome and a surprisingly fast read. Admittedly, I have spent the most time on the section dealing with mixed private-public insurance with a shared responsibility for financing advanced through proposals by President-elect, Senator Max Baucus and the “Building Blocks” plan offered by the Commonwealth Fund itself. Ego being what it is, I assume the bill that finally goes to the floors of Congress for debate, vote and conferencing will resemble the President’s view of the universe. He is the “Noun” to the verb “Change.” He gets to claim victory and credit (and, if necessary, blame).

The details of the proposal are fairly clear and widely available. Two items jumped out at me though which are worth mention.

First, Figure 3 of the report compares US Population by Primary Source of Insurance under Current Law and Proposals, 2010. Under the Obama-Baucus-Building Blocks (OBBB) model, the Employer Sponsored insurance market is projected to change very little. – covering 49% of all Americans, down from 53% currently. I personally found that small shift surprising. in the election, the Doom-And-Gloomers often said that if the Goverment was providing and "out" employers would take it. Guess not.

The Connector – the new mechanism that will be the market-maker for insuring the currently uninsured and which is also expected to pick up some people currently covered by Medicaid – will become the third largest “insurer” at an estimate 19% of the population, behind Medicaid/SCHIP (45%) and just ahead of Medicare (10%).

It is expected, in this model, that providers would receive Medicare rates for people insured under the Connector, so Medicare’s fee schedule would cover 29% of the population. An intriguing question. Can hospital operators profitably serve a third of their patient population at Medicare rates? Maybe more intriguing is the financing aspect of the OBBB plan that places a 4 percent assessment on hospital gross revenues and 2 percent on physician revenues to partially fund the expansion of access. Gross revenues, not net. This is an interesting kettle of fish; a tax dressed up in sheep’s clothing. It could certainly impact hospital pricing strategies. I foresee an abundance of multivariate analyses calculating how much prices could increase and still deliver bottom line benefit in excess of new taxes.

Beyond the fun questions of profitable business management and pricing strategies, the bigger question that bubbled up was the issue of tax-exempt status. Once you’ve started to tax, it’s hard to stop.

So if the total uninsured burden on the US economy drops to 1% of the population (4 million people) and the care for 78% of all citizens is paid at Medicare rates or better, what becomes of hospitals’ charitable missions? Losses on serving Medicaid, providing medical education, and under/unfunded research burdens can’t justify millions of dollars of foregone state and local tax receipts. Even if they were to receive credit for the assessments that help fund the Connector program, it seems hospitals will be exposed to a significant, non-defensible assault.

I won’t argue that this is a bad thing. I can imagine a provider revenue boom (not to mention savings in collections, something hosptials particularly stink at). As a marketer, in a land of taxable hospitals, I see incredible marketing opportunities – grow sales at all costs to spread fixed costs across more cases and drive marginal revenue. Relieved of the burden of the uninsured/no-pay patients, does a new “Wild West” of health care competition emerge? Puzzling questions I don’t have full ideas on yet.

But if I were a gambling man, I’d continue to put chips down on “Change.”

“Changes aren’t permanent, but change is.”

Happy Holidays - Hug Your Health System!

This Propeller Head is out of the country on personal business until the New Year. While I am keeping up on the news, I won't have time to post.

Look for the propeller to begin spinning again at high speed come January 11, 2009. With just 9 days before the inauguration there will certainly be a lot to follow.

Be safe and happy!

Low-Cost and High-Quality: An Ill-Considered Goal?

Sometimes synergy just jumps right up out of bed in smacks you across the face.

A while back I started plowing through the IBM Healthcare 2015 documents – and even posted an entry about their opening concepts of the role of delivery networks and personal responsibility in improving health and reducing cost.

The next place I was intending to go was an interesting expansion of the discussion about the various types of healthcare delivery organizations that might emerge from an evolved healthcare ecosystem. IBM titles this conversation, “New Models, New Competencies – Recommendations for Care Providers,” and sets out to challenge the traditional approach of hospitals/care delivery organizations (CDOs) operating under “broad and abstract targets” attempting to be all things to all people and still compete effectively.

If you buy that premise, and I’ve seen little evidence to the contrary, you are quickly lured into a seemingly irrational conversation – the infamous “Low-Cost, High-Quality” debate. That’s where synergy comes in. This morning I finally got caught up on some email and one of the articles in the inbox was a HealthLeaders editorial with the intriguing title, “Improving Your Way to Oblivion.” It’s a rhapsody that echoes the all-to-common strains of the reform debate. How can health care costs continue to rise at meteoric rates without unacceptably crippling the national economy? A reasonable question, and one I’ve puzzled over here before. It seems every time I read something that digs into this question though, the punch line is the same…CDOs must improve themselves so they deliver top-notch quality while constantly pushing costs lower and lower.

The HealthLeader’s author, Philip Betbeze, writes, “[this] is why my panelists from HealthLeaders Media's Top Leadership Teams event are so focused on improving by cutting the cost of care. That's right, they see their long-term survival in being among the low-cost leaders—a counterintuitive concept in an industry that has the power of inelasticity of demand.” He goes on to quote Jeff Thompson, CEO of Gundersen Lutheran Health System in La Crosse, WI – identified by the Dartmouth Atlas as one of America’s highest quality, lowest cost institutions - "The ultimate prize is making the cost not only low enough to compete but to improve health of communities."

Huh?

Our cars will be safer and more fuel efficient if we make them less expensive to produce.

Buy that?

Now, call off the dogs. I understand the principles of efficiency, process improvement and eliminating waste. And yes, since it’s only been 20 years since prospective payment, hospitals are still working on becoming lean operations. But it seems to me this is a flawed philosophy.

The argument goes that, if we make the provision of care efficient based on demonstrated best practices, it will free up dollars in the system to reinvest in prevention and population health. Research from all corners suggests efficiency and cost gains can be made without impacting quality – heck even moving mediocre providers up the quality chain. All good things.

My concern is that this view perpetuates the organizing principle of “all things to all citizens.” To the best of my imagination, no other industry on earth – beyond public utilities, and is that the desired endgame for CDOs? – operates this way. The closest proxy is air travel, where everyone, except Southwest and JetBlue, believe their raison d’être is to provide cheap, economy air travel with perks and premiums for more desirable clients; simultaneously advancing positioning of egalitarian utilitarianism with premium-quality snob appeal. At least the Chrysler K car admitted it was a K car!

It seems to me that model isn’t working for airlines and it won’t work in healthcare. Alternatively, the wonks at IBM suggest CDOs intentionally migrate to one of four delivery models:

1. Community Health Networks, focusing on optimizing access across a defined geography.
2. Centers of Excellence, focusing on optimizing clinical quality and safety for specific medical conditions.
3. Medical Concierges, focusing on optimizing patient experience, differentiating itself on the quality of its service.
4. Price Leaders, focusing on optimizing productivity and workflow.

“Each of these models places different emphasis on the value dimensions of access, clinical quality, service quality and cost. Successful organizations will likely meet a threshold or minimally acceptable level of performance on all four service delivery models and differentiate on one or more models.” I’ve said before that I’m intrigued by this construct. It disassembles the current modus operandi and suggests hospital leaders, strategists and planners do something they hate – make a choice!

The next step in this discussion goes to what IBM labels the Five Strategic Competencies and how they work in different proportions in each model. That’s a conversation for another day.

My question for today is, what would it take to get there? I work under the hypothesis that a minority of US hospitals can truly achieve Low-Cost, High-Quality, and in the attempted pursuit of the panacea-ic goal we’ll end up with some distribution of High-Cost, High-Quality (the Unabashed Dominants), Lower-Cost, Moderately-High Quality (the Model Tertiary Community Hospital), Mid-Cost, Mid-Quality (the Fat Risky Middle), and the Barely-to-Unprofitable Basically Safe (the Yugos). In this scenario, I imagine most Americans receiving healthcare in one of the two last categories. Success!! Not.

The problem is that the reimbursement structure, as it currently exists is discussed as Obama-Care begins to shape up, seems to not jive with the IBM vision of intentional, specialized care models. That is the next thorny question, and one I believe they address in the next chapter of the tome. I’ll get to that.

So, am I just too jaded to believe we can build a network of Southwest Airlines hospitals from sea to shining sea? I have a hunch, A. We can’t and B. It’s not a good goal.

More to come…

I Can't Believe the News Today

Today, I completely intended to charge ahead through the IBM Global Business Services Healthcare 2015 report, diving into the fascinating conversation about new ways to promote health and deliver care, but there are two news stories today that are very distracting/attention getting.

On Sunday, the Boston Globe featured a story on payment differences between Boston-area hospitals. Broken down simply, Partners Healthcare, specifically Mass General and The Brigham, are, gasp, getting paid more by insurers to do procedures, run tests, per admission than non-Partners hospitals. In the end it’s a matter of negotiating clout and the value consumers place on access to those brands.

Today’s Globe contains a follow-up to Sunday’s story, that opens with what I hope is a bit of literary license, specifically; “Leaders of some large academic medical centers and community hospitals called for Governor Deval Patrick to examine how Massachusetts General Hospital, Brigham and Women's Hospital, Children's Hospital, and a few other institutions are able to obtain higher prices from health insurers even though there is, especially for the most common procedures, often no demonstrated difference in the quality of the care delivered by those hospitals.”

When I say I hope there is some license involved, I personally would be disturbed if AMC CEO’s in Boston were actually clamoring for the State (the Commonwealth more accurately) to investigate something. That just smells. Call the State dogs out to sick your competitor when they’ve done nothing more wrong then build their brand and leverage their market position? What’s next? Flying chartered jets to DC in pursuit of a piece of the bailout pie?

Don’t get me wrong. The sentiment of value-based competition on results is something I strongly favor. If Mass General and the Brigham (I believe Boston Children’s is a totally different matter) deliver better value, they should be rewarded in rates and volume. But urging the State to dig around into a private business matter between health plans who freely negotiate with the hospitals on behalf of their members is just wrong. The health plans need to find a better way to play hard ball and Partners’ competitors need to figure out how to close the perception gap with their rivals and figure out how to negotiate the best deals they can. Period.

Then, today’s New York Times leads with the eye-popper, “Health Insurers Offer to Accept All Applicants, on Condition.” In a huge step toward monumental change in the US health system, “The health insurance industry said Wednesday that it would support a health care overhaul requiring insurers to accept all customers, regardless of illness or disability. But in return, the industry said, Congress should require all Americans to have coverage.”

In separate proposals the Blue Cross Blue Shield Association and America’s Health Insurance Plans (no shrinking violets, either of them) announced guaranteed coverage of all pre-existing conditions as long as there is an “enforceable mandate for individual coverage.” This is a dizzying 180-degree spin from the fiasco that was the Clinton Health Reform effort in 1994. Clearly they are saying they want guaranteed risk pool growth in return for accommodating all comers, which makes total sense, and is the only way universal coverage can work anyway. And it places private insurance at the heart of the new system. Quite frankly a smart strategic plan and wise fiscal play in comparison to Senator Kennedy’s loopy “Medicare for all” ideas.

Now the $64,000 question is elucidated in the article, “While insurers would be required to sell insurance to any applicant, nothing would guarantee that consumers could afford it. Rate regulation promises to be a highly contentious issue, since it pits the financial interests of insurers against those of consumers.”

Here’s where some of the 1994 thinking is valuable. To make this all work, it seems like massive regional risk pools and group rating are absolutely essential. It could be done without everyone buying insurance from the feds. State insurance commissions could create and administer the pools. Then it could permit the Government to stay out of the business of collecting premiums but rather use existing structures/bureaucracies to provide subsidies and vouchers to the pool on behalf of lower income Americans. And you could fiddle with the tax code too, if tax credits are needed as the carrot to encourage participation.

It’s all workable. Having the industry inside the tent significantly ups the likelihood something will get done early in the Obama presidency.

Taken together, these two stories present and interesting strategic reality for hospitals. Expanded coverage and increased interest in value-based competition could be a boon for providers. But, the devil is in the details and, once the coverage issue is solved, then we’ll have to get serious about population health and re-engineering the delivery system. Which, in some sense, is refreshing.

And a great segue way to a continued discussion about new ways to promote health and deliver care…

Of Delivery Models. Competencies and Personal Responsibility

So, I donned one of the propeller beanies I keep at home and, over the weekend, waded through one of the publications in the IBM Global Business Services series on Healthcare 2015, “Delivery Models Refined, Competencies Defined.” This book is mostly the supporting text to the executive summary I wrote about last week.

The piece’s thesis is summed up in the opening paragraph (sorry, it’s a little long but a good challenge):

“Healthcare providers can work collaboratively to achieve new milestones in defining, measuring and delivering value, activating responsible citizens and developing new models for promoting health and delivering care, even within growing resource constraints and other challenges. This is important more than ever before as the paths of healthcare systems in many countries are increasingly unsustainable. Moreover, we envision this will lead to a variety of strategic decisions affecting service delivery models and underlying competencies. These decisions could impact the organization’s leadership, culture, business models, organizational structures, skills, processes and technologies.”

There’s a lot in this tome, so I’ll focus today on one idea that is central to their set-up. They build on Porter’s work and the growing chorus of “value” (although the skeptic could wonder if this is a phrase that is soon to lose its meaning through overuse?). “Transforming healthcare requires a corresponding transformation in understanding the value that care providers deliver. In many countries the main focus of care providers is to diagnose and treat sick patients…But, a system that is focused on proactive care strategies, such as personalized prevention, prediction and early detection/treatment and disease management, can help create and maintain a healthier population, possibly at a lower cost.”

There’s nothing too much new here so far. They do later state something I’ve pondered about before in relationship to chronic care and the medical home concept. “There are other potential facets to quality care in a value-based healthcare system: the focus on prediction, prevention, and early detection and intervention; correct and timely diagnosis; the ability to educate patient in managing their conditions and health, and communicate effectively to bolster patient comprehension, compliance, and recall; responsiveness to patient preferences and values, where appropriate; and the ability to coordinate care across venues, care providers and time.”

Now, I wonder aloud, who is doing this and who can really do this? The institutional healthcare superstructure flat-out stinks at it. I giggled aloud at the directive to, “communicate effectively to bolster patient comprehension, compliance and recall.” But boy, for how bad healthcare providers are at this today, it sure is an interesting clarion call for the healthcare communicator of the future. If I were plotting a strategic plan for the marketing communications department of the future, these would be powerful guiding principles that I’d use to challenge the organization.

Complicate this a little further, the document goes next to puzzle on, quite frankly, healthcare’s 800 lb. gorilla; lazy human beings. In “Activating citizens – From ‘fix me’ to personal health management,” they examine the “blind reliance on publicly supported healthcare to compensate for individual health behaviors” which they ultimately determine is an “increasingly unsustainable and unrealistic position,” demanding that “citizen activation has to be a key part of the solution.”

To do this a couple of things have to happen. One is shaped like a carrot; the other is shaped like a stick. The carrot end is the idea of greater individual engagement and activism in their own health decisions. Is it wishful thinking to expect people will ultimately learn more about their health and, as the IBM folks propose, “co-produce healthcare?” I can imagine how this could give rise to a more enlightened populace with a greater satisfaction in their healthcare. But, is it a bridge too far?

The stick end is financial. Will we accept punitive premiums for continued bad health? If a Medicare enrollee maintains and unhealthy BMI and doesn’t bring their Type 2 diabetes under control, will they get nailed with an extra annual premium? Will employers safely follow the lead of places like the Cleveland Clinic and not employ smokers? Further, should we as a system and society be more explicit in the expectation that people have a personal responsibility for financing their health? Should health services be planned like retirement – with the expectation set that very little is guaranteed by society and the rest is yours to fund through a variety of mechanisms? Would that be “mandate” that ultimately pushes people into value consciousness?

The report is practical: “Many citizens, regardless of how well-intended, will not be able to become activated, responsible citizens on their own…they ma need help from a variety of coaches.” They then go on to describe three types of health advisors – health coaches, value coaches and wealth coaches – that would work like contemporary personal financial planners to help people make responsible decisions and plans.

On it’s face it seems like we’ll need a really big stick for that to happen. That said, it would be fascinating to see the activated youth of the 2008 election marching against the AARP legions in Washington DC! Remember what McKinsey & Company reported, that one way to stem out-of-control demand was for the young to finally get angry to the point of refusing to fund the old any longer.

“CDOs [Care Delivery Organizations] can play a key role in helping activate citizens—and that will be increasingly expected by the purchasers of health-related services such as governments, employers or individuals.”

Fascinating implications for institutional healthcare system planners and marketing strategists!

All Things to All People All the Time

Today I just started wading through a series of white papers from IBM Global Business Services titled “Healthcare 2015 and Care Delivery.” The series consists of three parts; Delivery models refined, competencies defined, Healthcare 2015 and U.S. health plans, and A portrait and path to successful transformation. These are not light tomes. Because I have a closet full of propeller beanies, I will be happily devouring the 100+ pages. They will provide great conversation starters for days & weeks to come.

I buzzed through the executive summary today and already like where they are going.

The fundamental thesis of the piece is that “Historically, care delivery organizations (CDOs) could declare broad and abstract targets, or even attempt to be ‘all things to all citizens’ and still compete effectively. But in the future, we believe it will be harder to maintain an undifferentiated service delivery model, whether it be a public or private healthcare system model.”

I couldn’t agree more. We’ve likely all worked at places (either as insiders or advisors) where the Mission and/or Vision statement included some variant on the phrase, “the communities we serve.” The trouble for us has historically been that these CDOs have rarely, if ever, defined “communities” beyond some geographic criteria.

IBM goes on to say, “the increasing focus on value, the rising need to activate responsible citizens, and the changing requirements of care delivery will force many CDOs to adopt and develop service delivery models with new and sharper strategic focus.”

Can I get an “Amen!” from the congregation!

They go on to assert that all CDOs currently fall into one of four service delivery models:

• Community health networks focusing on optimizing access across a defined geography
• Centers of excellence, focusing on optimizing clinical quality and safety for specific medical conditions
• Medical concierges, focusing on optimizing the citizen/patient experience and relationship
• Price leaders, focusing on optimizing productivity and workflow

They are kind in not admonishing many (most?) CDOs for two common faults; not being intentional about who they are, and trying to be 2, 3 or even all 4 of these things simultaneously. The word I keep hearing over and over again is “focus.”

GE got a lot of press—deserved or not—under Jack Welch’s leadership for his infamous, “number one or number two in an industry” strategy. Perhaps more marketing than true business strategy, the sentiment is “focus.” Be good at a finite number of things. It’s the Sony story writ large by new chairman Sir Howard Stringer: “If Apple can create a company with a market cap of $50 billion on the basis of a handful of products and we (i.e., Sony) do it on the basis of a thousand, aren’t we then too much of a department store?”

Said another way, those who try to be 2, 3, or all 4 of these different types of CDOs will lack the focus and differentiable distinction that will make them susceptible to more focused, more excellent competitors.

IBM asserts there are 5 key competencies that CDOs must consider and, depending on the service delivery model they strategically settle on, emphasize in different combinations. Those competencies are:

• Empower and activate consumers
• Collaborate and integrate
• Innovate
• Optimize operational efficiencies
• Enable through IT

What I see here is an powerful framework for strategic planning.

Their final piece of advice: “Develop a plan to transition to the new delivery model—or new ways of implementing existing models [that is, choose what your future is, and, by reduction, explicitly state what it is not, and design the plan to become it]—and develop the new competencies required to support the roles models."

“Last year plus a little more” is not a viable strategy in these transformative times. Healthcare organizations have a long history of reacting—to new regulations, payment model changes, shifts in consumer behavior—instead of planning and executing the plan. This looks like a good framework through which healthcare strategists could organize their thoughts and prepare to influence the future direction of their organizations.

I look forward to sharing more from these books.

The Marginalization of the Healthcare Marketer

Yesterday morning I participated in a new business pitch. In the room were marketing directors from three quite successful hospitals; hospitals with bold plans and the financial strength to be moving full-speed-ahead on a pair of $100+ million building projects and one coming off the grand opening of a new replacement hospital within the last 12 months. These are successful institutions with thoughtful leaders who seem to routinely make wise decisions.

During our conversations we discussed what they’d like to change in their organizations in respect to marketing communications. They replied with a range of thoughts, from staffing to budget questions to more cooperative surgeons. But one comment on which there was quick consensus by the group was, “greater access to senior management.”

They embellished this idea by sharing that they had frequently only “heard about things after they happened” and been asked to manage communications in response. This was a real head-scratcher for us. These are successful businesses. How could marketing be so far out of the loop? We asked about their organizations’ strategic plans and marketing’s role in those plans and heard equally dismal responses. For all their success, here were another three healthcare marketers who, in their organizations’ eyes, just did stuff.

This has been something of a personal cause for me recently. So much so that I called a friend of mine at the Advisory Board Company to chat about it. My friend reported a frightening, albeit unscientific, observation. Over the past four years, she has, with her colleagues, presented in a few hundred hospital executive suites. We all know what it takes to be an Advisory Board member, so these are organizations with a measure of financial strength and an intellectual commitment to “right answers.” To the best of this consultant’s recollection, for all the strategic business development and corporate strategy conversations she’s had, she couldn’t remember one time, let me repeat that, one time, when a VP or Director of Marketing was in the room.

While I can imagine how healthcare marketers got themselves into this position—by not dispelling the “we just do stuff” perception—I’m more disturbed by how little many are doing to get out of it.

Last Fall, Booz Allen Hamilton published a study about The New Complete Marketer in which they reported, “growth in revenue and profitability is strongest among those companies that elevate marketing’s role to the strategic level.” Booz & Company surveyed Chief Marketing Officers at large, consumer-focused firms like Yahoo and Proctor & Gamble where driving sales is the heart of the company’s daily mission. Accountable to Wall Street, these companies trace a very direct path between Point A (current sales) and Point B (future, higher sales) that cuts right through three key disciplines: sales, marketing and product innovation.

To get to Point B, simply put, these experts agreed the best CMOs:

• Put the consumer at the heart of marketing (especially moving from "checking-" or "validating-" focused research to true consumer knowledge research)
  
• Make marketing accountable
• Embrace the challenges of new media
• Recognize the new organizational imperative (“Successful companies are building marketing organizations that leverage and balance generalist and specialist talent.” This refers to building marketing teams that complement category expertise with good, comprehensive marketing skills. Also, “marketing can no longer live on an island.” Marketing has organization-wide responsibility.)
• Live a new agency paradigm (“Every effective marketing program now has a solid base in disciplined metrics that keep department goals closely aligned with the company’s strategic objectives.” This is the heart of transforming away from “just doing nice stuff.” How can your marketing strategies evolve from manufacturing and pushing ideas to co-creation of customer/patient experiences?)
• Remain adaptable

So, it seems the challenge healthcare marketers have not taken up fully is a willingness and ability to demonstrate —and take accountability for— marketing’s role in helping their hospital achieve the goals outlined in the strategic plan.

Something we hear often is, “well that’s all fine and good for [computers/cookies/insurance] but healthcare is different.” The learning is relevant. More and more, healthcare marketers can most definitely learn from other categories where advertising and communications are an established, time-tested element of business strategy. Healthcare may be more complicated, but it’s not all that different. People don’t make important decisions in all the aspects of their life one way and then totally differently when it comes to their health. In the end, principles of quality, value and service are universal. The lessons are transferable.

Access is earned. Start thinking about rebuilding the hospital marketing function along the guidelines these successful CMOs have shown to work. Let’s work our way back into the boardroom.