The system is unstable. We are already seeing the precursor waves of massive and multiple disturbances to come. Disruption at key leverage points, new entrants, shifting public awareness and serious political competition cast omens and signs of a highly changed future.
So what’s the frequency? What are the smart bets for a strategic chief financial officer at a payer or provider facing such a bumpy ride? They are radically different from today’s dominant consensus strategies. In this five-part series, Joe Flower lays out the argument, the nature of the instability, and the best-bet strategies.
Cost. Get serious control of your costs. Most providers I talk to are dismissive. “Yeah, yeah, you’ve been saying that for 10 years. We’re on it, believe me.” But I don’t believe them. Observation of the industry makes it clear that most healthcare providers have not gone after costs with nearly the ferocity of other industries. Some providers that I have worked with and interviewed over recent years have gotten their full cost of ownership down to a level where they can survive on Medicaid rates (that’s not a typo, I mean Medicaid) and build bigger, stronger systems at the same time. They have proven it can be done. But this is far from the industry norm. In the new competition, getting your costs seriously down is not the way to win. It’s just the price of admission. In the new competition, any entity that can deliver any particular service at a lower price will steal that business from you. You need to be that entity.
Overtreatment and waste. Do a deep and honest analysis of how much of your book of business is actually not effective, not necessary, does not deliver value or satisfaction to the customer—because that book of business is likely to wither away under alternative financing arrangements. Keep in mind that among various studies, the low estimate of how much of healthcare delivers no real value to the customer (an estimate by doctors about their own specialties) is 20%. The high end (in a PricewaterhouseCoopers study) is 54.5%. Most studies and estimates cluster around 35%.
Abandon monopolistic practices. An “all system” fee-for-service contract hidden from public scrutiny is smart, but not wise. It may help this year, maybe next year, but in the longer run it creates vulnerability to political attack, legislation, and lawsuits, and also to shifts in the market. A semi-monopoly position allows you to charge a premium for your products, but it locks you into that ability to charge a premium. As the market shifts and finds ways around paying high prices, you will find that you will be forced to compete at the lower prices, but you will not have developed the partnerships, the strategies, and the product lines to do that. If there is no competition in your area, then compete with yourself to forestall lower-cost competition developing.
Birth your competition. The growth area in the new healthcare competition will be: “How to cut into the hospital’s bottom line by keeping people out of the hospital.” The most competitive business models in healthcare will be in the business of cutting off hospitals’ revenue streams upstream. Get into this business model, even if you are a hospital. Especially if you are a hospital. Get into this business and get better at it than any potential competition. Create high-performance bundled programs with deeply managed costs well below the industry median. Get into contracts with large buyers for particular niches in which you give financial and quality performance guarantees. If you can’t guarantee that you can drop the cost and improve the quality, you will lose that business to someone else who can show that track record and give that guarantee.
Put yourself into all the business models that are disrupting you, such as outpatient clinics, community clinics, mobile vans, mini-hospitals, stand-alone emergency departments, onsite clinics, personalized management of complex cases, direct-pay primary care and others. Make these businesses able to compete for market share by unshackling them from hospital pricing and facilities fees.
Risky? Sure, but you do not want to end up being just the super-expensive job shop at the end of the line that every single customer and buyer is making every effort to avoid.
In 1807, in an effort to spite the British and French for shipping interference (and forced recruitment of American citizens into military service), the United States Congress passed an Embargo Act, effectively shutting down trade with these two countries. Britain and France quickly found other trading partners; the US, then limited in our capacity to sell products outside our borders, was left with a devastated economy and a gaping hole in our face. It took only weeks before Congress passed a loophole; they repealed the act within 15 months of its passing. It was a great lesson in unintended consequences.
Today, ignoring history, both Republicans and Democrats seem to spar continuously around healthcare: whether the message is about tearing down the Affordable Care Act or about some version of Medicare (For-All, For Whoever Wants It, For America, or For Better or Worse), both parties are terribly wrong.
Assuming the social imperative for healthcare is to eliminate preventable morbidity and disability (and associated costs) and improve (or sustain) quality of health of all our citizens (in order to help as many of them as possible remain productive, contributing members of society), another approach to ‘universal care” would be to flip the figure/ground relationship for our current efforts: instead of developing better payment systems, let’s develop and commit to a universal clinical operating framework that ensures that every member of society has the same opportunity to optimize their health status.
“Centralizing” the methodology around a universal model for how we plan for care, and allocate resources to ensure care plan goal achievement, would be far more valuable to society than centralizing the sources of funds to pay for care, because then we’d know what we’re paying for.
We Need Legal Assaults On The Greediest Providers!
When a patient is hospitalized, or diagnosed with a deadly disease, they often have no choice about the cost of their treatment.
They are legally helpless, and vulnerable to price gouging.
We need more legal protection of patients. In some cases we need price controls.
Next in this three-part series, I discuss how we could challenge Big Pharma by lessening regulation of generic drugs, having the government take over production and establishing price review boards.
Assault Phase Three – Challenge Big Pharma
Step One – Less Regulation of Generic Drugs
If an off-patent drug has been approved by other first-world nations, this would
constitute automatic approval by the FDA.
The price gouging around Epipen would have ended quickly,
if new versions of genetic drugs did not require an FDA approval process. We
should let reputable drug companies produce whatever generic drugs they want.
On Episode 88 of Health in 2 Point 00, Jess and I talk about all of the IPOs occurring in health tech today. First up is Livongo, with their IPO valuation set at $2 Billion, they have the highest valuation but I wonder if they will be able to grow at the same rate and expand to other sectors to serve their patient populations. Health Catalyst is up next, with their IPO valuation set at $800 Million, it will be interesting to see if they are going to continue down their enterprise play or switch over to SaaS, and last is Phreesia (that has been around longer than the other two) with its IPO valuation set at $500 Million that acts as a front door to the EMR management system- Matthew Holt
If my hypertensive patient develops orthostatism and falls and breaks her hip, I fully expect the orthopedic surgeon on call to treat her. I may kick myself that this happened but I’m not qualified to treat a broken hip.
If my anticoagulated patient hits his head and suffers a subdural hematoma, I expect the local neurosurgeon to graciously treat him even though it was my decision and not his to start the patient on his blood thinner. After all, brain surgery is tricky stuff.
Why is it then that primary care docs, sometimes myself included, feel a little annoyed when we have to deal with the consequences of psychiatric medication prescribing?
My psychiatry colleagues diligently order the blood work that is more or less required when prescribing atypical antipsychotics, for example. But when the results are abnormal I get a fax with a scribble indicating that the PCP needs to handle this.
We need to just deal with that and appreciate that there has been communication between treating providers. Because that doesn’t always happen. Particularly with medication prescribing, we don’t always get a notification from our psychiatry colleagues when a patient is started on something new because their records are so much more secret than ours.
The other day I sat in my monthly conference with staff from the Behavioral Health Home that I serve as the medical director for. I consult on clinical and policy matters.
Introduction Every day and in every corner of the country, innovative health care leaders are conceiving of strategies and programs to manage their patients’ health, as an alternative to treating their sickness (see Figure 1).
The value-based contracts that have proliferated in this
country over the past decade and which now account for about half of the money
spent on healthcare allow these wellness investments to make good financial
sense in addition to benefiting patient health.
However, a phenomenon in health coverage in the US is
increasing costs, destabilizing care continuity and holding back the potential
of value-based care. It prevents us from making the long-term investments we
Churn refers to gaining, losing, or moving between sources of coverage. Every year, approximately a quarter of the US population switches out of their health plan. Reasons can be voluntary or involuntary from the perspective of the beneficiary (see Table 1) and vary from changes in job status, eligibility, insurance offerings, and preference, to non-payment of premiums, to unawareness of pending coverage termination.
At its April 4, 2019 meeting, the staff of the Medicare Payment Advisory Commission (MedPAC) asked the commission to discuss a very strange proposal: Doctors who treat patients enrolled in Medicare’s traditional fee-for-service (FFS) program must join an “accountable care organization” (ACO) or give up their FFS Medicare practice. (The staff may have meant to give hospitals the same Hobbesian choice, but that is not clear from the transcript of the meeting.)
Here is how MedPAC staffer Eric Rollins laid out the proposal:
“Medicare would require all fee-for-service providers to participate in ACOs. The traditional fee-for-service program would no longer be an option. Providers would have to join ACOs to receive fee-for-service payments. Medicare would assign all beneficiaries to ACOs and would continue to pay claims for ACOs using standard fee-for-service rates. Beneficiaries could still enroll in MA [Medicare Advantage] plans. (p. 12 of the transcript)”
first question that should have occurred to the commissioners was, Are ACOs
making any money? If they aren’t, there’s no point in discussing a policy that
assumes ACOs will flourish across the country.
only two of the 17 commissioners bothered to raise that issue. They asserted
that Medicare ACOs are saving little or no money. Those two commissioners – Paul
Ginsburg and commission Vice Chairman Jon Christianson – did not mince words.
Ginsburg said ACO savings were “slight” and called the proposal to push doctors
into ACOs “hollow” and premature. (pp. 62-63) Christianson was even more
critical. He said the proposal was “really audacious,” and that no “strong
evidence” existed to support the claim that ACOs “can reduce costs for the
Medicare program or improve quality.” (pp. 73-74) Ginsburg and Christianson are
correct – ACOs are not cutting Medicare’s costs when Medicare’s “shared
savings” payments to ACOs are taken into account, and what little evidence we
have on ACO overhead indicates CMS’s small shared savings payments are nowhere
near enough to cover that overhead.
Breaking down silos and talking about health tech’s biggest issues, Hayley Hovious of the Nashville Health Care Council explains how her organization is convening difficult conversations across the healthcare ecosystem by starting with the “burning platform.” What does that mean and how will addressing it head-on help improve healthcare in Nashville and beyond? Listen in to find out.
Filmed at the Together.Health Spring Summit at HIMSS 2019 in Orlando, Florida, February 2019.
Jessica DaMassa is the host of the WTF Health show & stars in Health in 2 Point 00 with Matthew Holt.
Get a glimpse of the future of healthcare by meeting the people who are going to change it. Find more WTF Health interviews here or check out www.wtf.health.
On Today’s episode of healthin2point00, Jess asks me about the CVS & Aetna’s merger, CSweetner & HIMSS new partnership in women’s health care, HLTH’s new pledge with Parity.org, Noona Healthcare getting acquired by Varian Health Systems. And as Jess point out, all health tech deals somehow involve me! Jess also did an interview with AHIP, you can watch her here:If you are in Boston, join us at Society of Participatory Medicine’s conference at #CHC2018- Matthew Holt