By JOE FLOWER

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.

Providers:

• 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.

By BOB HERTZ

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

By KIP SULLIVAN, JD

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)”

The 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.

But 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.

Continue reading…

Here’s the live stream of today’s Society for Participatory Medicine’s conference in Boston:

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

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