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ONC & CMS Proposed Rules – Part 5: Business Models

Grant Barrick
Dave Levin

By DAVE LEVIN, MD and GRANT BARRICK

The Office of the National Coordinator (ONC) and the Centers for Medicare and Medicaid (CMS) have proposed final rules on interoperability, data blocking, and other activities as part of implementing the 21st Century Cures Act. In this series, we will explore the ideas behind the rules, why they are necessary and the expected impact. Given that these are complex and controversial topics open to interpretation, we invite readers to respond with their own ideas, corrections, and opinions. In part five of this series, we look at how competition unlocks innovation, and how the proposed rules may disrupt the balance between innovation, intellectual property (IP), and supporting business models.  

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The recent publication of proposed rules by ONC and CMS set off a flurry of activity. In anticipation of their implementation, the health care industry is wrestling with many questions around business models. What practices inhibit competition and innovation? How do we balance the need for competition while protecting legitimate intellectual property rights? How can vendors ensure profit growth when pricing is heavily regulated? In this article, we will examine how competition unlocks innovation and the possible disruptions the proposed rules may bring for innovation, intellectual property (IP) and supporting business models.

Unlocking Innovation via Competition

In most markets, innovation is driven forward by competition. Businesses compete on equal footing, and their investment in R&D drives innovation forward. Innovation in health care has been dramatically outpaced by other markets, leading to an urgent need for both disruptive and evolutionary innovation.

What is inhibiting health care innovation? The rules identify a combination of tactics employed in health care that restrict the free flow of clinical data, such as:

  • NDAs
  • Confidentiality Clauses
  • Hold-harmless Agreements
  • Licensing Language

These tactics slow innovation by contributing to an environment where stakeholders resist pushing the boundaries — often because they are contractually obligated not to. The legislation and proposed rules are designed to address the ongoing failure of the market to resolve these conflicts.

As the rules are finalized, we will continue to monitor whether the ONC defines these practices as innovation stifling and how they will implement regulations — both carrot and stick — to move the industry forward.

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How to Avoid Being a Dumb-Ass Doctor, Blog Edition

Evil Dr Rob Part 2It’s been two years since I first started my new practice.  I have successfully avoided driving my business into the ground because I am a dumb-ass doctor.  Don’t get me wrong: I am not a dumb-ass when it comes to being a doctor. I am pretty comfortable on that, but the future will hold many opportunities to change that verdict.  No, I am talking about being a dumb-ass running the businessbecause I am a doctor.

We doctors are generally really bad at running businesses, and I am no exception.  In my previous practice, I successfully delegated any authority I had as the senior partner so that I didn’t know what was going on in most of the practice.

The culmination of this was when I was greeted by a “Dear Rob” letter from my partners who wanted a divorce from me.  It wasn’t a total shock that this happened, but it wasn’t fun.  My mistake in this was to back off and try to “just be a doctor while others ran the business.”  It’s my business, and I should have known what was happening.  I didn’t, and it is now no longer my business.

This new business was built on the premise that I am a dumb-ass doctor when it comes to business.  I consciously avoided making things too complicated.  I wanted no copays for visits (and hence no need to collect money each visit).  I wanted no long-term contracts (and hence no need to refund money if I or the patient was hit by a meteor or attacked by a yeti).   The goal was to keep things as easy as possible, and this is a very good business policy.

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Dump the Business Model

flying cadeuciiThere 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.

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An Epic Fail for Massive Open Online Courses?

Coursera, the popular massive open online course (MOOC) platform, intrigues. With over 5 million students served and $85 million raised—both numbers are first among the “MOOC platforms”—it’s the type of company that captures the imagination of people in Silicon Valley who dream of transforming sectors.

Its reach and emerging focus on K–12 professional development were prime reasons that we at the Clayton Christensen Institute, along with the Silicon Schools Fund and the New Teacher Center, recently offered a MOOC on blended learning through Coursera.

But Coursera has always given me reason to pause as well. It’s never felt to me like its initial incarnation could possibly disrupt higher education. Why? As I’ve told its team, offering courses from the top universities online and claiming that at last, anyone anywhere can access the best learning in the world isn’t correct.

The reason is that the top universities do not offer the best teaching and learning experiences. Instead, their faculty members are incentivized heavily to focus on research at the expense of teaching. If a professor seeking tenure at one of these institutions receives a teaching award, it is often said that that professor has just received the kiss of death for her tenure hopes. If students learn at these institutions, it’s often not because the teaching is so good, but because the students are so talented that they can absorb anything thrown at them (and it’s worth noting that just because a professor is entertaining, does not mean it’s a good learning experience).

Putting these courses online often makes them worse. Not only do professors not know how to teach well in person, but also their lack of understanding of the basic principles of sound learning design causes them to exacerbate these problems as they put these experiences online, which can become more problematic as students from all walks of life with many different learning needs are now theoretically able to take these courses.

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Dropping Out

After 18 years in private practice, many good, some not, I am making a very big change.  I am leaving my practice.

No, this isn’t my ironic way of saying that I am going to change the way I see my practice; I am really quitting my job.  The stresses and pressures of our current health care system become heavier, and heavier, making it increasingly difficult to practice medicine in a way that I feel my patients deserve.  The rebellious innovator (who adopted EMR 16 years ago) in me looked for “outside the box” solutions to my problem, and found one that I think is worth the risk.  I will be starting a solo practice that does not file insurance, instead taking a monthly “subscription” fee, which gives patients access to me.

I must confess that there are still a lot of details I need to work out, and plan on sharing the process of working these details with colleagues, consultants, and most importantly, my future patients.

Here are my main frustrations with the health care system that drove me to this big change:

  1. I don’t feel like I can offer the level of care I want for my patients. I am far too busy during the day to slow down and give people the time they deserve.  I have over 3000 patients in my practice, and most of them only come to me when there are problems, which bothers me because I’d rather work with them to prevent the problems in the first place.
  2. There’s a disconnect between my business and my mission.  I want to be a good doctor, but I also want to pay for my kids’ college tuition (and maybe get the windshield on the car fixed).  But the only way to make enough money is to see more patients in my office, making it hard to spend time with people in the office, or to handle problems on the phone.  I have done my best to walk the line between good care and good business, but I’ve grown weary under the burden of having to make this choice patient after patient.  Why is it that I would make more money if I was a bad doctor?  Why am I penalized for caring?
  3. The increased burden of non-patient issues added to the already difficult situation.  I have to comply with E/M coding for all of my notes.  I have to comply with “Meaningful Use” criteria for my EMR.  I have to practice defensive medicine to avoid lawsuits.  I have more and more paperwork, more drug formulary problems, more patients frustrated with consultants, and less time to do it all.  My previous post about burn-out was a prelude to this one; it was time to do something about my burn out: to drop out.Continue reading…

Bad Directions

I love the GPS analogy for health care.  Patients need a GPS for their health, showing them the reality of their past, present, and future health.  The analogy has not only shown me how I want to give care for my patients, it has also given me insight into the pitfalls of automated medical care.

Way back in the days when GPS was new, the rental care company Hertz advertised “NeverLost,” a GPS on your dashboard (if you forked out the extra money for it).  I was asked to give a talk in Oregon, and decided I would try out this cool new technology (since others were picking up my bill).  While I found it overall very useful, there were a couple of times it didn’t work as advertised.

  • I needed a sweatshirt, so  I used the NeverLost for directions to a Wal-Mart.  It worked!  It gave me flawless directions to a Wal-Mart store…in Las Vegas (over 1000 miles away).  I stopped at a gas station and they told me that there was actually a Wal-Mart 1/2 mile down the road.
  • Then, when I was trying to get to Crater Lake, “Never Lost” repeatedly directed me down dirt roads, some of which had trees fallen across their path.  NeverLost was quite perturbed when I didn’t follow its direction, nagging me to make an immediate u-turn back toward the tree in the road.

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The Facebook-ACO-Military-Industrial Complex

Investors just ponied up well over $100 billion for a piece of the social media giant Facebook. While Mr. Zuckerberg and his co-founders deserve a hearty congratulations, I find some eerie parallels between Facebook and accountable care organizations.  The similarity does not bode well for either business model.

1. The users are not the customers: Facebook sells its users to marketeers.  ACOs sells its patients’ health care utilization to insurers.

2. It’s the data and it’s not yours: Facebook’s targeted ads are constructed off of prior usage patterns. ACO’s shared savings calculations are built off off actuarially determined health care utilization patterns.

3. Sovereign hostility: Washington DC views information technology and health care as distractions from the true task at hand: restoring the U.S. manufacturing base.

4. Do you care, really? Now that the wunderkids in charge of Facebook have made their millions, it remains to be seen if they’ll work as hard in delivering value to its users.  Ditto for all the salaried docs working for ACOs, who no longer have to arrive early, skip lunch and stay late.

5. The long term: Yahoo once was the darling of internet investors.  Even if ACOs have initial success, is a better care model being developed as you are reading this?

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The X Questions

Ten existential questions will make the difference between stumbling into the future and thriving

The questions have changed. The key strategy questions that the C-suite must be asking—and getting answers to—are different now than they were in the past, even from what they were last year. Most of today’s health care CEOs and C-suite leaders are missing many of the key questions they need to ask to drive strategy now, this year, this budget, in order to survive the next three to seven years. Which ones are you missing?

A New Mind-set

Today and for the next few years the weather of this industry will be dominated by pervasive, discontinuous change. Structures, revenue streams, relationships of every level: All are shifting in fundamental ways. Specifically, the weather will be driven by:

  • invention and propagation of new business models;
  • shifting risk onto both the provider and the patient, accompanied by building of new risk-based relationships, contracts and alliances;
  • smart primary care coming to the fore as the foundation of health care, driving most business models;
  • digitization and automation going wall to wall and beyond the walls—accompanied by powerful new info-capacities, from “big data” strategic analysis to new ways of reaching and bonding with customers; and
  • a striking new need for efficiency and effectiveness in response to rapidly rising demand as the baby boom ages, the baby boom health care workforce ages and disengages, and the newly insured increase their use of health care facilities.

Most of these factors, except the very last, are not dependent on the health care reform act, and will not change much if the act is altered or set aside.Continue reading…

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