By JOE FLOWER

There are no winners in the fee-for-service game.

It’s time to toss the whole business-as-usual model — for your own good and the good of your customers.

The emerging Default Model of health care — the “consumer-directed” insured fee-for-service model in which health plans compete to lower premiums by bargaining providers into narrow networks — not only does not work for health care’s customers, it cannot work. This is not because we are doing it wrong or being sloppy. By its very nature the Default Model must continually fail to bring our customers what they want and desperately need. Ultimately it cannot bring you, the providers, what you want and need.

Take a dive with me into the real-world game-theory mechanics of the health care economy, and you will see why. It’s time to rebuild the fundamental business models of health care.

Continue reading “Dump the Business Model”

Joe Flower 

Health care is fragile. It survives in a much narrower band of circumstances than most of us realize. Right now many hospitals and systems are having a second down year in a row. They’re consolidating, laying off people, working through major shifts in strategy — all because of what we must admit (if we are honest) are relatively minor economic shifts, such as small reductions in utilization and Medicare payments, a blunting of accustomed price rises, and stronger bargaining from health plans.

If minor revenue stream problems put your entire institution in jeopardy of chaotic deconstruction, it cannot be called robust.

At the same time, an increasing number of vectors outside the sealed world of health care could overwhelm and kill your institution, from climate chaos to pollution disasters to epidemics and the loss of antibiotics.

Continue reading “Surviving Healthcare”

By David C. Kibbe, MD  & Vince Kuraitis

Everywhere we turn these days it seems “Big Data” is being touted as a solution for physicians and physician groups who want to participate in Accountable Care Organizations, (ACOs) and/or accountable care-like contracts with payers.

We disagree, and think the accumulated experience about what works and what doesn’t work for care management suggests that a “Small Data” approach might be good enough for many medical groups, while being more immediately implementable and a lot less costly. We’re not convinced, in other words, that the problem for ACOs is a scarcity of data or second rate analytics. Rather, the problem is that we are not taking advantage of, and using more intelligently, the data and analytics already in place, or nearly in place.

For those of you who are interested in the concept of Big Data, Steve Lohr recently wrote a good overview in his column in the New York Times, in which he said:

“Big Data is a shorthand label that typically means applying the tools of artificial intelligence, like machine learning, to vast new troves of data beyond that captured in standard databases. The new data sources include Web-browsing data trails, social network communications, sensor data and surveillance data.”

Applied to health care and ACOs, the proponents of Big Data suggest that some version of IBM’s now-famous Watson, teamed up with arrays of sensors and a very large clinical data repository containing virtually every known fact about all of the patients seen by the medical group, is a needed investment. Of course, many of these data are not currently available in structured, that is computable, format. So one of the costly requirements that Big Data may impose on us results from the need to convert large amounts of unstructured or poorly structured data to structured data. But when that is accomplished, so advocates tell us, Big Data is not only good for quality care, but is “absolutely essential” for attaining the cost efficiency needed by doctors and nurses to have a positive and money-making experience with accountable care shared-savings, gain-share, or risk contracts.

Continue reading “The Power of Small”

By JOE FLOWER 

What motivates a healthcare executive?

Remember Flower’s Laws of Behavioral Economics? The first two are:

1. People do what you pay them to do.
2. People do exactly what you pay them to do.

That is, it’s not general. It’s not “be a good doctor.” It’s more like, “Do lots of complex back fusion surgeries.” What’s more profitable gets done more.

I know that some people say that money has nothing to do with people’s motivation in healthcare, and that’s fine, I totally respect that opinion. You’re just in the wrong section. You want Aisle C, between Dr. Seuss and the Disney fairy tales.

But what about healthcare executives? What gets them more money? What constitutes hitting it into the cheap seats for them?

There are of course lots of compensation surveys. There’s a whole industry of people who do that. But they don’t tie compensation to anything specific. So when someone does a study that does look at correlations, that’s interesting information. One came out a few months ago in JAMA’s Internal Medicine .

Karen Joynt, MD, and her colleagues used 2009 data, so things might be beginning to change now. And they only looked at CEOs, so we will have to speculate whether the same things apply to other C-suite suits.

What did they find? They found great variation in the salaries, with a mean (average) salary of $595,781, a median (half are above and half below) of $404,938). The nearly $200,000 difference tells us that the sample is skewed by a smaller number of really large salaries at the top.

There is nothing surprising in the size of the salaries or their variation. That’s normal for any industry. No matter how much you might think that healthcare is special and different and sacred, it is nonetheless a very big business. In many or most towns, the hospitals and health systems are the biggest businesses in town. A typical suburban three-hospital system might have an annual budget in the $5 billion range.

What correlates with a higher salary? Size.

More beds means a higher salary ($550 for each extra bed, to be exact). Teaching status means $425,078 more — in other words, doubling the median. And most teaching hospitals are much bigger than average. Urban location gets you more, but this is likely also a marker for size, or the cliché phrase “big city hospital” wouldn’t roll off the tongue so easily. High tech gets you more, too. Hospitals with high technologic capabilities paid their CEOs $135,862 more than hospitals with low levels of technology — but this again is likely a marker (a co-variate) for size and teaching status.

Continue reading “So That’s What You Get The Big Bucks For?”

By CHARLES ORNSTEIN

This story was co-published with NPR’s “Shots” blog.

In the name of patient privacy, a security guard at a hospital in Springfield, Missouri, threatened a mother with jail for trying to take a photograph of her own son. In the name of patient privacy , a Daytona Beach, Florida, nursing home said it couldn’t cooperate with police investigating allegations of a possible rape against one of its residents.

In the name of patient privacy, the U.S. Department of Veterans Affairs allegedly threatened or retaliated against employees who were trying to blow the whistle on agency wrongdoing.When the federal Health Insurance Portability and Accountability Act passed in 1996, its laudable provisions included preventing patients’ medical information from being shared without their consent and other important privacy assurances.But as the litany of recent examples show, HIPAA, as the law is commonly known, is open to misinterpretation – and sometimes provides cover for health institutions that are protecting their own interests, not patients’.

“Sometimes it’s really hard to tell whether people are just genuinely confused or misinformed, or whether they’re intentionally obfuscating,” said Deven McGraw, partner in the healthcare practice of Manatt, Phelps & Phillips and former director of the Health Privacy Project at the Center for Democracy & Technology.For example, McGraw said, a frequent health privacy complaint to the U.S. Department of Health and Human Services Office of Civil Rights is that health providers have denied patients access to their medical records, citing HIPAA. In fact, this is one of the law’s signature guarantees.”Often they’re told [by hospitals that] HIPAA doesn’t allow you to have your records, when the exact opposite is true,” McGraw said.

I’ve seen firsthand how HIPAA can be incorrectly invoked.

In 2005, when I was a reporter at the Los Angeles Times, I was asked to help cover a train derailment in Glendale, California, by trying to talk to injured patients at local hospitals. Some hospitals refused to help arrange any interviews, citing federal patient privacy laws. Other hospitals were far more accommodating, offering to contact patients and ask if they were willing to talk to a reporter. Some did. It seemed to me that the hospitals that cited HIPAA simply didn’t want to ask patients for permission.

Continue reading “Are Patient Privacy Laws Being Abused to Protect Medical Centers?”

By Michael Turpin

When the Cleveland Clinic announced job and expense reductions of 6% in 2013, the healthcare sector took notice.

Did the world-renowned hospital and healthcare research center, with 40,000 employees and a $6 billion budget, really believe it did not possess the heft to take on the increasingly turbulent sea changes in American healthcare? Or was this yet another stakeholder using Obamacare as cover to drive draconian change?

Both sides of the political aisle were quick to make hay of the announcement, with conservatives blaming reform for eliminating jobs while liberals questioned the timing of the cuts when the Cleveland Clinic was posting positive growth. The answer from Eileen Sheil, corporate communications director, was apolitically straightforward: “We know we are going to be reimbursed less.” Period.

The question of reimbursement reform and the unintended consequences of the Affordable Care Act are weighing on the minds of hospital executives nationwide as independent, regional and national healthcare systems grapple with a post-reform marketplace. The inevitable conclusion that the unsustainable trend in American healthcare consumption is now at its nadir seems to have finally hit home.

These days, America’s hospitals are scrambling to anticipate and organize around several unanswered questions:

• How adversely will Medicaid and Medicare reimbursement cuts affect us over the next five years?
• Can we continue to maintain our brand and the perception that any employer’s PPO network would be incomplete without our participation?
• Can we become a risk-bearing institution?
• Can we survive if we choose not to become an accountable care organization (ACO)?
• Will the ACO model, by definition, cannibalize our traditional inpatient revenues?
• Can we finance and service a hard turn into integrated healthcare by acquiring physician and specialty practices?

Go It Alone or Join a Convoy?

Mergers and acquisitions remain in high gear in the hospital industry—“the frothiest market we have seen in a decade,” according to one Wall Street analyst. “Doing nothing is tantamount to signing your own death certificate.”

Many insiders believe consolidation and price deflation is inevitable in healthcare. Consolidation, however, means scarcity of competition. If we operate under the assumption that scarcity drives costs higher, we may not necessarily feel good about consolidation leading to lower costs unless mergers are accompanied by expense cuts that seek to improve processes, eliminate redundancies and transform into a sleeker, more profitable version of one’s former self.

Bigger may not always be better, but bigger seems to have benefited a select group for the last decade.

Continue reading “The Perfect Storm: Health Reform and America’s Hospitals”

By Val Jones, MD

In a policy environment where quality measures and patient satisfaction ratings are becoming the basis for reimbursement rates, one wonders how VMS software is getting traction. Perhaps desperate times call for desperate measures, and the challenge of filling employment gaps is driving interest in impersonal digital match services? Rural hospitals are desperate to recruit quality candidates, and with a severe physician shortage looming, warm bodies are becoming an acceptable solution to staffing needs.

As distasteful as the thought of computer-matching physicians to hospitals may be, the real problems of VMS systems only become apparent with experience. After discussing user experience with several hospital system employees and reading various blogs and online debates here’s what I discovered:

1. Garbage In, Garbage Out. The people who input physician data (including their certifications, medical malpractice histories, and licensing data) have no incentive to insure accuracy of information. Head hunter agencies are paid when the physicians/nurses they enter into the database are matched to a hospital.

To make sure that their providers get first dibs, they may leave out information, misrepresent availability, and in extreme cases, even falsify certification statuses. These errors are often caught during the hospital credentialing process, which results in many hours of wasted time on the part of internal credentialing personnel, and delays in filling the position. In other cases, the errors are not caught during credentialing and legal problems ensue when impaired providers are hired accidentally.

Continue reading “Vendor Management Systems and the Commoditization of Physicians and Nurses”

By Paul Keckley

A study by Stanford researchers in the current issue of Health Affairs is likely to intensify growing tension between health insurers and hospitals.

At issue: the impact of physician-hospital consolidation, or vertical integration as some academics prefer to call the trend.

The researchers analyzed 2 million claims submitted to insurers by hospitals from 2001 to 2007, evaluating the impact on hospital prices, volumes (admissions), and spending for privately insured, non-elderly patients. Using data from Truven Analytics MarketScan.

They constructed county-level indices of prices, volumes, and spending and adjusted for enrollees’ age and sex. “We measured hospital-physician integration using information from the American Hospital Association on the types of relationships hospitals have with physicians.”

What they found is not surprising: vertical integration involving physician-hospital consolidation results in better care and higher costs. They found hospital prices increased 2%-3% each time physician-employing hospitals’ market share increased by one standard deviation. And overall spending on services at the hospitals that employed physicians increased while the utilization of services (volume) at those hospitals didn’t change.

They  concluded the following:

“We found that an increase in the market share of hospitals with the tightest vertically integrated relationship with physicians—ownership of physician practices—was associated with higher hospital prices and spending.

We found that an increase in contractual integration reduced the frequency of hospital admissions, but this effect was relatively small. Taken together, our results provide a mixed, although somewhat negative, picture of vertical integration from the perspective of the privately insured.”

What’s the significance of the study?

1-Hospitals and physicians will bolster their position that vertical integration is necessary to improved outcomes. The shift from volume to value via accountable care organizations, bundled payments, medical homes, and value based purchasing require closer collaboration between physicians and hospitals.

“Clinical integration” is central to each, and payers– Medicare and private insurers– are promoting these risk-based contracting efforts energetically while cutting reimbursement rates for services aggressively. So the provider position is this: ‘We get better results. We built what you said you wanted.

It’s costly to make the change, especially while since Medicare and Medicaid don’t cover our costs, demand is soaring and our bad debt from the uninsured increasing. You told us to build it, but you don’t want to cover our costs.’

Continue reading “A Closer Look at Physician-Hospital Alignment”

By JEFF GOLDSMITH

At the end of March, Congress decreed a year-long postponement of the implementation of ICD-10, a remarkably detailed and arcane new coding scheme providers would have been required to use in order to get paid by any payer in the US (“bitten by orca” is but one of the sixty thousand new codes ).

The year postponement gives caregivers and managers a little more time to prepare for a further unwelcome increase in the complexity of their non-patient care activities.

In the spirit of Jonathan Swift, who famously proposed in 1729 that the Irish sell their children as a food crop to solve the country’s chronic poverty problem , I have a suggestion about how to cope with the steady rise in complexity of the medical revenue cycle.

Beginning when ICD-10 is implemented, there should be no patient care whatsoever on Fridays, permitting nurses and physicians to spend the entire day catching up on their charting and documentation, and other administrative activities.

Physicians, nurses, and others involved in patient care already spend at least a day a week of their time on this process now, but it is interspersed within the patient care workflow, constantly distracting clinicians and interrupting patient interaction.

Hospitals are solving this problem with a medieval remedy:  scribes who follow physicians around and enter the required coding and “quality” information into the patient’s electronic record on tablets.   Healthcare might be the only industry in economic history to see a decline in worker productivity as it automated.

Continue reading “A Modest Proposal: Charting Day”

By John Haughom, MD

On April 29, Dr. Daniel Croviotto published an editorial in the Wall Street Journal, “A Doctor’s Declaration of Independence,” in which he argued that it is time to “defy healthcare mandates issued by bureaucrats not in the healing profession.”

Dr. Croviotto does a good job of articulating his frustration with the increasingly burdensome bureaucracy and regulations placed on care. Many physicians and nurses share his frustration. I once did, until I saw a way out of the cynicism and frustration – a way that can improve the quality and lower the cost of care for all Americans.

No matter how misguided we think the federal government is in its electronic health record mandate or other requirements, simply defying mandates as Dr. Croviotto proposes is not  likely to accomplish much. Those who signed the Declaration of Independence knew it was only an initial step toward ridding the country of tyranny. They had to create a new vision for a better, more effective government.

Similarly, the medical profession needs to move beyond cynicism to create a vision for a better, more effective healthcare system.

Continue reading “A Declaration of Independence Is Only the Beginning”