And then Wal-Mart from right field…

Wal-Mart: the giant…health care integrator?

Wal-Mart‘s (astonishing?) announcement Tuesday from The New York Times:

Wal-Mart Stores is striding into the market for electronic health records, seeking to bring the technology into the mainstream for physicians in small offices, where most of America’s doctors practice medicine.

Evidently the retailing giant will partner with Dell (hardware) and eClinicalWorks (software) to complete the service.  Installation, maintenance, and training will be included.  The product will be offered through the Sam’s Club brand.  It’s going to be (relatively) cheap, too.  More details:

“We’re a high-volume, low-cost company,” said Marcus Osborne, senior director for health care business development at Wal-Mart. “And I would argue that mentality is sorely lacking in the health care industry.”

The Sam’s Club offering, to be made available this spring, will be under $25,000 for the first physician in a practice, and about $10,000 for each additional doctor. After the installation and training, continuing annual costs for maintenance and support will be $4,000 to $6,500 a year, the company estimates.

An affordable EMR option.  Waiting, patiently, for the reaction on this one.  (Mr. Osborne’s quote above is interesting, too.)

Hospital shakeout good for hospitals?

Staggering study from Thomson Reuters revealing frightening realities facing the nation’s hospitals in 2008’s third quarter (via the Los Angeles Times):

  • approximately 50 percent had negative margins
  • the median total margin was zero
  • reimbursement rates shrinking
  • cash on hand hit historic lows

The study indicates that no hospital is doing particularly well; the economic effect spans the spectrum: from rural hospitals to academic medical centers.  Hospitals have long depended upon additional income from investments to sustain operations; a dependency that is proving difficult at the moment.  Improving financial performance through operations is an equally difficult task as Americans cut back on health care services during this recessionary time. From United Press International (via @jenmccabegorman):

Kaiser Family Foundation’s healthcare tracking poll found 53 percent of Americans say their household cut back on healthcare due to cost concerns in the past 12 months.

Twenty-seven percent report putting off healthcare they needed, 21 percent say they have not filled a prescription and 15 percent say they cut pills in half or skipped doses to make a prescription last longer.

Sixteen percent report putting off care for a more serious problem, either postponing a doctor’s visit related to a chronic illness such as diabetes or delaying major or minor surgery.

The reality is that it is a tough time to be in business of any form, even traditionally recession resistant health care.  Hospitals have been diligently working to reduce costs and continue to do so according to Fierce Healthcare, “Given these projected losses, 47 percent of hospitals expect to make staff cuts, and 69 percent plan to cancel or delay equipment purchases, according to a survey by Novation.”

Chris Ellington, chief financial officer of University of North Carolina Hospitals, told Marketplace that a hospital shakeout is probable, “There will be some winners and losers over the next year in health care, for sure.”

A shakeout may be exactly what the hospital industry needs.  It may provided the needed impetus to spur business model innovation in health care delivery.

Clayton Christensen, Jerome Grossman, and Jason Hwang provide the explanation in their (somewhat) recently released book, “The Innovator’s Prescription: A Disruptive Solution for Health Care,” (it’s the health care release in Christensen’s disruptive innovation series) writing that the value proposition of doing everything for everybody has never been a successful business model.  General hospitals currently exist to provide all services; the author’s claim that is not efficient or cost conscious.

Its not that we don’t need hospitals.  “We will always need hospitals.  We will just need fewer of them, as scientific progress continues to move more diseases along the spectrum from intuitive medicine toward precision medicine.”

One of their arguments is that hospitals need to deconstruct their operations into two business models: solution shops and value-adding process activities.  Read Scott Shreeve’s review for a break down on the theory and terminology part one, part two.

Solution shops should be focused on optimizing the delivery of accurate diagnosis and recommend the most effective therapy (think the institute model at Cleveland Clinic, “specialists, equipment, and procedures are knitted together across each of the potentially relevant organ system specialties;” as opposed to dysfunctional silos).

Value-adding process clinics take a patient with a definitive diagnosis and treat their condition “effectively, conveniently, and economically” (think Shouldice in Canada or Cancer Treatment Centers of America; organizations with a distinct focus on specific treatments).

The book explains:

The solution to the cost problem in hospitals, in other words, is not efficiency within that business model.  Rather significant improvement will come only through the creation of fundamentally focused business models that in the end are highly disruptive to the present profit formulas of general hospitals.

Health care people should at least read the book; it’s difficult to do their arguments justice without reproducing the entire chapter (+ there is lots more).  Admittedly there are skeptics; what potential solution doesn’t?  Regardless, the examples of success the authors use hold sway.  Health care has tried controlling costs with little past success.  Trying something completely revolutionary may be exactly what health care delivery needs.

Learning to manage people

I’m closing in on six (+) years (the + is for my victory lap at the undergrad level) of business-related education and I’ve yet to take a class explicitly intended to teach me how to manage people.  Now, there might be some sort of academic theory against teaching someone how to manage people but I studied organizational management for four + years and now, upon reflection, wonder why I’ve never taken such a class.

Maybe it’s not sexy enough.  But organizations expect us to know how to manage when we get there (kind of like personal money management, but we’ve seen what that assumption has done to many Americans’ finances).  Yet the common reality is that people (many? most?) quit their jobs because of their managers (not hard evidence, but it will do here).

All that to get to this: Aaron Swartz’s Raw Thought has a post on Non-Hierarchical Management—a very appropriate primer on management basics for anyone new to the responsibility (or, for that matter, anyone who isn’t any good at it).  Lots of good thoughts, especially this one (a smart person once told me that his job was to clear obstacles for physicians, he described his job as a problem solver, good stuff):

Point 5: Clear obstacles.

This is the bulk of what non-hierarchical management is about. You’ve got good people, they’ve got good responsibilities. Now it’s your job to do everything in your power to help them get them done.

A good way to start is just by asking people what they need. Is their office too noisy? Did they get confused about something you said? Are they stuck on a particular problem? Are they overwhelmed with work? It’s your job to help them out: get them a quieter office, clarify things, find them advice or answers, shift some stuff off their plate. They shouldn’t be wasting time with things that annoy them; that’s your job.

But you have to be proactive as well. People tend to suffer quietly, both because they don’t want to come whining to you and just because when you’re stuck in a rut all your attention is focused on the rut. A key part of being a manager is checking in with people, pointing out that they’re stuck in a rut, and gently helping them out.

Some think non-hierarchical management (NHM) is hooey.  I think health care is in desperate need of letting more people make more decisions especially at the patient care level (as front line as it gets) and NHM is a start.

Anyway, good luck in that new management role.

ADDITION: An acquaintance made an in-person comment today that “management is common sense.”  I’d amend: management is composed of common sense principles.  The problem is that “common sense” is defined differently by different people.  And not everyone is lucky enough to have “it.”

The first of many…

With traditional revenue sources tightening hospitals are looking for new markets.  Example given (somewhat under the radar):

The Cleveland health-care giant today announced a new partnership with MinuteClinic, which runs walk-in medical practices inside CVS Pharmacy stores.

Under the multiyear deal, the Cleveland Clinic will provide medical supervision for MinuteClinic’s nine Northeast Ohio locations, including a site that recently opened in the FirstMerit Tower building on South Main Street in Akron. (Akron Beacon Journal)

Some hospitals have tried retail clinics of their own lending credibility to the value proposition (if hospitals are doing it, it must be worth the risk, right?).  This partnership gives MinuteClinic local brand strength, it gives the Cleveland Clinic a new market, and it gives patients access to convenient health care.

Win/win/win in my book.  Except that the model has shown not to lower costs.  Can’t win ’em all.

Solution: Performance Contracting (taking the cue from education)

While nearly all American institutions are in a state of flux, two are worth highlighting: public education is failing and health care is floundering.  It could be said that one suffers from too little money, while the other suffers from too much.  Striking then are the similarities between the two’s troubles.  How to define quality?  How to define performance?  How to improve (everyone has an opinion)?  How to attract the best and brightest?  How to combat shortages?  Caretaker or improver?  Penalize poor performance or provide more assistance to difficult situations?  More government involvement or less?

Performance contracting is one proposed solution.

Michelle Rhee has been getting a lot of press lately.  Deservedly so, accounts of her story have been remarkably positive.  Rhee has taken over the failing Washington D.C. public school system with every intention of turning it around.  A big part Rhee’s plan is hiring the best teachers.  But how to do that?

The New York Times Magazine released its Year in Ideas issue, Rhee’s two-tier teacher contract was highlighted:

The basic deal: surrender some job security in exchange for the potential to earn a much higher salary. Under the proposed contract, each Washington teacher would choose between two alternatives. The red tier, the more cautious option, would require teachers to give up a few seniority protections in exchange for a considerable pay increase. Teachers choosing the riskier green tier would lose even more tenure and seniority rights. They would spend the first year of the new contract on probation, at the end of which they could be fired. But if they were good enough to survive, they would receive huge raises, before long earning as much as $131,000 a year in salary and performance bonuses, more than twice the average salary for an American public-school teacher.

But the application of pay for performance isn’t just for individuals within the organization, it can be applied to the organization as well.  Take this example from Ohio’s tertiary educational institutions (provided through the Columbus Dispatch):

State colleges would need to prove that their undergraduate students are getting ahead to receive full state funding under a new proposal making its way through the Ohio Board of Regents.

Now, state funding is based on a college’s size. But within four years, more than 30 percent of the money for four-year schools could be based on their performance. For community colleges, a 30-70 split would happen in 2015.

“We’re moving from rewarding schools for the number of students in their seats to the number of students completing courses, degrees and walking out the door to get jobs,” said Bruce Johnson, president of the Inter-University Council, which represents the four-year schools.

It makes sense.  Paying physicians and hospitals strictly upon the number of procedures performed is an archaic approach.  Some measure of performance needs to be added (and rating the complication of a case isn’t one).  Medicare, ever our favorite payer (a mover and shaker, nonetheless), is moving in that direction.  As value-based purchasing (pdf) gains traction with government bureaucrats (and corporate America) it would behoove the health care delivery sector to intensively explore performance contracting.  Hospitals will go first, physician payment is sure to follow.

Health care is not going to escape the era of pay for performance.  It’s really not too foreign of a thought: get paid according to how well one performs.  But debates of what exactly constitutes high quality holds the discussion from moving ahead.  The discussion then, in earnest, needs to begin.

Consumerism: Patients Need Partners

Recent reports have been gloomy on the consumerist movement in health care.

The Center for Studying Health System Change released a report recently that indicated today’s patients still find physicians how they used to: through word of mouth and referrals from other physicians.  Patients have also used quality and price information sparingly to aid in health care decision making.

The WSJ Health Blog highlighted (another CSHSC) report that concluded the number of patients who have utilized retail clinics “turns out to be modest.”

What’s going on?  Three possibilities:

  1. Patients are still spending someone else’s money (all health care dollars flow from households, but patients never actually touch it and don’t have the ability to use the cash in another fashion, as they say: perception is reality).
  2. Resources to compare quality and price information are slim (but growing).  We don’t agree on what constitutes quality (metrics or outcomes or patient experience) or how to report price (charge or cost, discounted or not?).
  3. Trust is still a factor.  This interweb thing is still relatively new…especially to health care.  Could it be that patients still trust their personal (mostly offline) networks more than an online network (which, by the way, seems the way people will find physicians: through online networks (word of mouth) accompanied by data)?  It should also be noted that the majority of patients utilizing health care services today are older and thus, much less likely to be comfortable with depending upon online resources for decision making.

A BusinessWeek article highlights consumerist proponent Regina Herzlinger and her approach to health care reform.  The article states that Herzlinger’s ideal world would contain:

  • Consumers tailor their own health-care coverage, navigating in a national insurance market.
  • Everyone must buy insurance, and the federal government maintains strict oversight to ensure price and coverage fairness.
  • Small, disease-specific hospitals care for patients who don’t need all the services offered by medical centers.
  • A national database contains the prices and outcomes for procedures at every hospital and clinic, so consumers can make informed choices.
  • Individuals get generous tax breaks to buy their own insurance, with subsidies for those with low incomes.

Here’s the important part:

Herzlinger doesn’t want anyone but consumers managing. Only then, she says, will innovations be unleashed that improve quality. “People can choose from 240 models and makes of cars pretty intelligently,” she says. “Why do we assume they can’t do the same when it comes to their health?” She notes that her suggestions are “relatively low-cost,” which makes them even more attractive given the financial crisis.

The idea sounds good in theory (and it may prove to be the solution in action).  But, as of right now, this young movement has failed to truly take hold (young is the operant word, here).  There are likely multiple causes, but the most significant is this: health care is complicated.  That has not, and will not, change overnight.  We have normative behaviors that have been ingrained since the beginning of modern medicine and that, very basically, takes time to change.

Although somewhat controversial, programs being offered by companies like OptumHealth (a subsidiary of UnitedHealth) can act as the perfect bridge into consumer-driven health care in situations that allow for analysis and discussion.  These companies provide free assistance to patients and families when they seek treatment by helping them assess quality (there are some concerns, rightly so, that an insurance company particpating in such decision-making may have a conflict of interest).

From the Minneapolis Star Tribune:

… OptumHealth and a variety of competitors are compiling sophisticated report cards that rate hospitals and medical centers by critical measures such as staff expertise, patient mortality, outcomes and cost.

Their reach is huge and growing. OptumHealth alone serves some 40 million health plan members and managed 5,000 transplants last year. The national Blue Cross and Blue Shield Association, with a similar strategy, covers 100 million people.

Their conclusion so far: Given a choice and guided by an expert like Imig, patients generally will head for the highest-quality center, even if it turns out to be far from home, friends and family.

Talk to any physician; no one expects or wants individuals to be self-diagnosing even though information is available on every disease and treatment options.  The same goes, at least for now, for quality and cost data: patients need partners.

The successful innovation agenda

Jim Carroll had a very intriguing post at World Health Care Blog last week on health care innovation.  The post is a keynote at a conference in 2020.  His reflections provide insight to the ten biggest changes in health care since 2008.  The changes are drastic.  They’re innovative.  They’re also exactly where we need to go.

Coming back to the present, the changes Carroll writes of can form a very interesting innovation agenda:

  1. Move to a system of preventative care.
  2. Enable virtual care through bio-connectivity.
  3. Embrace Health 2.0.
  4. Improve the management of change within the health care organization.
  5. Provide service in the health care environment.
  6. Connect every device.
  7. Utilize the cloud and its power.
  8. Deliver medical knowledge to providers as needed.
  9. Ensure the system can handle ever-increasing scientific velocity.
  10. Build optimism, always optimism.

Does your organization have an innovation agenda?  Has your organization made innovation a foundational pillar for future success?  Does your organization’s definition of innovation include more than buying the latest and greatest technology?

A faltering economy makes now a wow time to get started.  After all, the pressure is on to get the ship in order.  It’s not just a time to drastically cut costs, it’s also a time to find opportunity.

Daniel Roth at Wired writes:

With the world’s economies apparently snowballing into a deep recession, it feels uncomfortably Pollyannish to see signs of hope. But for the bravest inventors and entrepreneurs, conditions are ideal to pounce on a business opportunity. In periods of economic turmoil, people are hungry and work cheap, and entrenched companies often concentrate on in-house cost-cutting instead of exploring new markets, which can explode with the next turn of the business cycle.

Here is why:

This doesn’t mean that big new ideas emerge because of turmoil—in fact, the data shows no relationship between major breakthroughs and economic conditions. But the benefit of a global money drought is that competition tends to vaporize (ed: in hospitals, vaporize should read contract). And for some, the stress of tough times has an amazing way of concentrating the mind on the way forward.

But the opportunity-seeking organization can’t enter the innovation game willy-nilly.  It must be a concerted effort with defined measures of success.  Measuring innovation can be difficult.  As PSFK recently highlighted, the Boston Consulting Group has published a report seeking to answer the question, “(H)ow effective is the push to innovate when there are no real measures of its rewards?”

From BCG:

Companies undermeasure, measure the wrong things, or, in some cases, don’t measure at all, because they are under the mistaken impression that innovation is somehow different from other business processes and can’t or shouldn’t be measured. The potential cost of this error – in terms of poorly allocated resources, squandered opportunities, and bad decision making generally – is substantial.

BCG recommends implementing an “innovation-to-cash” process to ensure success (read about it here, pdf).

The key, as with other initiatives, is accountability.  BGG:

Make innovation a central concern to your top people by tying a substantial part of their compensation to it. Don’t pretend that people will make innovations, by definition a long-term pursuit, a priority when virtually all of their pay is tied to meeting either next quarter’s numbers or some vague and far-off target they can barely influence.

It’s an innovator’s market.  Approach it deliberately.  Do so intelligently.

The (dis)incentives of transparency

Paul Levy (CEO of Beth Israel Deaconess Medical Center in Boston and health care transparency champion and CEO blogger): “Shouldn’t there be some correlation between what you get paid for doing something and the quality of what you do?”

That quote from an intriguing exposé of sorts in The Boston Globe (a fair presentation of the situation in my opinion).  The bottom line: Partners Healthcare in Boston (generally) makes quite a bit more (around 30 percent) than other hospitals in the state (Massachusetts has lots of good hospitals, especially in Boston).  So the question is: why?  Here’s the secret: it’s less about quality and more about market control.  What’s more is that it is happening in nearly every corner of this country.

Okay, so the free market is the United States of America.  Economists have a list of conditions in order for markets to be “perfectly competitive;” they include: large numbers of anonymous buyers and sellers, easy mobility of resources, homogeneous goods, and perfect access to information.  Health care, more or less, fails on every condition.

It is very difficult to efficiently, effectively, and equitably distribute resources when a market fails.  What that translates to is that health care costs more than it needs to (for a multitude of reasons).  But the argument here is that more information would prevent such wide disparities in payment (especially when a requisite increase in quality is not the reason for a higher price).  If insurers knew what hospitals collected from other insurers; if hospitals knew what insurers paid other hospitals; if patients and payers could effectively compare quality; if hospitals could benchmark quality against other hospitals; a more efficient, effective, and equitable distribution of health care dollars would occur.

All of that above summed up in one word: transparency.  We need: complete financial and quality of care transparency.  Watch health care costs fall and quality improve as hospitals start competing on outcomes and cost effectiveness instead of on market share and perceived notoriety.

Ross Dawson at Trends in the Living Networks writes:

Secrecy has its place in business, but it is highly over-rated. In most cases there is no valid reason not to share information, just a disinclination to give away things. We are going to see transparent models increasingly favored moving forward.

A disinclication indeed.  Transparency is the future.  It’s how we’re going to improve our health care system.

England Gets Offensive on Obesity

Yikes! From the Mirror:

It is the biggest health challenge facing the nation – nine out of 10 adults and two-thirds of children will be obese or overweight by 2050.

Holy _ _ _ _!

Nine areas in England are developing programs to combat rising obesity through local and national government matching funds.  They’re calling the areas “healthy towns” with the hope that eventually it will become a country-wide effort.

Each town is trying something different; the plans range from grow-your-own vegetable gardens to bike maintenance help to encourage more cycling.  Tower Hamlets is rewarding restaurants that offer healthier choices (ed.: a Quarter Pounder is a Quarter Pounder is a Quarter Pounder).

At least they’re doing something.

Manchester may have the most promising approach.  From the Associated Press/Yahoo News:

Manchester is hoping to fight fat with a reward system that works like a retail loyalty card. But instead of earning credit for opening their wallets, residents will be rewarded for keeping their feet on the treadmill and their fridge stocked with healthy food.

Starting next fall, Manchester residents will be able to swipe their rewards cards and earn points every time they buy fruits and vegetables, use a community swimming pool, attend a medical screening or work out with a personal trainer. Points can be redeemed for athletic equipment, donations to school athletic departments and personal training sessions with local athletes.

The programs are part of a 400 million pound (the currency, not the unit of measure) effort to help Brits get fit.  We will watch with interest…

Improving Health

A boon to Health 2.0 and health in general:

But before they can benefit from online government, many Americans must get online. The US ranks 15th out of 30 industrialized nations in the percentage of citizens with access to the Internet. Obama promises to make Internet access as commonplace as telephone service.

With high-speed internet access all patients will have access to online interactions (and not just email!) with providers.  Patients could be monitored from home if they need it.  Patients would have access to healthy living information.  Patients could manage their PHRs, find doctors, and compare quality of hospitals.  The benefits of universal access for health care are nearly endless.