Categories

Tag: Health care system

The Opportunity in Disruption, Part 2: The Shape of Today’s System

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.

Healthcare CFOs must look at the environment in which their system lives: Since 2007 the actual costs for the average middle-class family for many of the basics of life have decreased in real terms, while their actual costs for healthcare have risen 25%, or even more counting co-pays, deductibles, and out-of-pocket expenses. This long, continuing rise in the costs along with the continuing and increasing unreliability of the healthcare system (“Will it actually be there for me when I need it? Will it bankrupt me?”) create unyielding disruption.

Instability: Omens

I am no fortune teller, but here are some things we can see right now that give us a sense of what’s coming.

  • Political shift: Public opinion has shifted. When polled about actual policies, healthcare has been cited repeatedly as the top concern of voters across the country. Voters’ top concerns are cost, the risk to patient protections in the ACA, and threats to “reform” Medicare by weakening it. The popularity of “single payer” proposals is a direct result of the cost and uncertainty of healthcare, a simple cry to “Do something!” Under this pressure we are more likely to see drastic solutions proposed and passed at the federal and state level or embodied in regulatory changes and lawsuits against industry practices.
  • Degradation of American life: With the opioid epidemic, the rise in suicides, the actual regression in life expectancy, and the increasing income and wealth divide, people increasingly feel that the healthcare industry is just not helping. They feel it is in fact part of the problem. The feeling that there is no one there to help us adds to the desperation of many parts of American society and heightens the political cost of the healthcare issue.
  • Public awareness: Healthcare is intensely personal, visceral. It’s crazy-making. Surprise bills, balance bills, other bills slipped through loopholes in the fine print or even in unwritten industry practices—what the industry considers standard operating procedure, the customers view as shocking, aggressive, and financially crushing.
  • The rebellion of the buyers: The percentage of buyers—such as employers, unions, and pension plans—telling various polls that healthcare costs represent a major problem for their business has more than doubled in the last five years and is now a majority. Buyers are pushing for choices to control costs and manage quality. They are beginning in greater numbers to demand reference pricing tied to Medicare rates, direct access to competitive bundled prices, and price transparency through centers of excellence, high performance networks and accountable care organizations. Some 65% of employers plan on implementing direct primary care in onsite or near-site clinics by 2020. Buyers are increasingly willing to take their beneficiaries elsewhere if your business can’t meet their demands.
Continue reading…

The Opportunity in Disruption, Part 1

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.

“It’s a buckdancer’s choice, my friend. Better take my advice. You know all the rules by now, and the fire from the ice.”

— Robert Hunter, “Uncle John’s Band”              

Chief Financial Officer: tough gig. Seriously. Whether for a payer or a healthcare provider, the CFO’s job is the exact point where the smiling faces on the billboards meet the double entry, the financing, the payer mix, the debt structure. And it all has to work out in the black. It has to do that sustainably, not only this year but next year and five years from now. Best guess? It’s going to get a lot tougher, with shifting revenue streams, market boundaries, new technologies, growing consumer expectations and uncertain politics. 

Raise your hand if you can tell me the significance of these names: Univac, Control Data, Burroughs, Digital, Honeywell, IBM, NCR.

These companies dominated the computer world in 1980. As of 1990, all but IBM were gone, bankrupt, subsumed into some other company, or just out of the computer business. The one that survived, IBM, is the one that said, “Maybe we should at least get a toehold in this new personal computer game, even though it is risky for our main revenue streams.” All the others went “poof.”

A number of factors—radical new technologies with vast potential, ramifying customer frustration, shifting user base—are coming together to put healthcare today at exactly the place the computing world was in 1980.

Continue reading…

Why the Health Care System Is Incapable of Reducing Its Own Costs: A Brief Structural System Analysis

By JOE FLOWER

Leading lights of the health insurance industry are crying that Medicare For All or any kind of universal health reform would “crash the system” and “destroy healthcare as we know it.”

They say that like it’s a bad thing.

They say we should trust them and their cost-cutting efforts to bring all Americans more affordable health care.

We should not trust them, because the system as it is currently structured economically is incapable of reducing costs.

Why? Let’s do a quick structural analysis. This is how health care actually works.

Health care, in the neatly packaged phrase of Nick Soman, CEO of Decent.com, is a “system designed to create reimbursable events.” For all that we talk of being “patient-centered” and “accountable,” the fee-for-service, incident-oriented system is simply not designed to march toward those lofty goals.

Continue reading…

Health Care’s Rube Goldberg Machine. Who Is Responsible?

flying cadeuciiRube Goldberg was an American cartoonist and inventor, perhaps best known for the extremely complicated contraptions he devised for performing the simplest tasks.  Each year, a national Rube Goldberg Machine Contest is held, challenging competitors to devise bizarre contrivances that can shine a shoe or zip a zipper.  One day while watching a group of children marvel at such a machine in a museum, a thought occurred to one of us: As healthcare becomes more complex, the interactions between patients, physicians, hospitals, payers, and communities increasingly resemble a Rube Goldberg machine.

Consider a recent case.  Ms. Jones was a 50-something year old African American woman with type I diabetes, high blood pressure and end-stage kidney disease requiring peritoneal dialysis, a form of dialysis performed nightly at home.  She was recently admitted to the hospital because of an apartment fire that destroyed everything she owned, including her home dialysis equipment and medications.  Once she was hospitalized, the medical team restarted her dialysis, restored her blood chemistries to normal, corrected her blood sugar, and began to make plans for her discharge.  There was just one problem.  They had no place to send her.

Ms. Jones could not return to her apartment, which had essentially burnt to the ground.  She did not qualify for admission to a nursing home.  And she couldn’t afford to rent a new apartment, at a cost of about $1,500 per month.  She had paid for insurance on the apartment for years, but had recently let the insurance lapse to help finance the purchase of an $8,000 living room suite.  The medical team had heard that social service agencies would provide one month’s rent, but it turned out that she could get only one-time distributions of $100 from the Red Cross and $200 from the Salvation Army – not nearly enough.

As the days rolled by, the medical team caring for Ms. Jones began feeling escalating pressure from hospital administration to discharge her.  Her medical problems had been taken care of, and there was no medical need for her to remain in a hospital bed at a cost of $1,500 per day.  The team arranged to get her dialysis supplies delivered to her sister’s house, hoping that she could stay there until she found a place of her own.  But it turned out that too many people were already living there.  Attempts to find temporary housing through friends and her church dead-ended.  Hotels she contacted were all too expensive.  Going to a homeless shelter was not a viable option; it would give her a place to sleep, but she couldn’t perform her dialysis there.  She volunteered that she could live out of her car, for which she reportedly used some of the $300 to buy gas, but it later turned out that she did not have one.

As pressure to discharge Ms. Jones mounted, team members became increasingly frustrated.  Each new hope was thwarted by an opposing reality.  The team had provided their patient with the best available medical care, marshaling the impressive resources of a major academic medical center to solve her acute medical problems as effectively and efficiently as possible.  But now they had run up against a barrier for which they lacked the necessary training and resources – not a medical problem so much as a social one.  Treating acute illness was doable, but looking out for their patient as a whole person with a real life outside the hospital was proving quite another matter.

Continue reading…

Monopoly Anyone? The Battle To Control Health Care

Like children gathered around a card table, America’s special interests are engaged in a high stakes game of Monopoly. But the winner of this game gets more than a day or two of bragging rights; this time the spoils are nothing less than control of our health care delivery system for the foreseeable future.

Let’s meet the players: on one side, Big Medicine; across the table, Big Insurance; and between them, Big Government. There’s room at the table for a 4th player…but we’ll get to that later.

Introducing Big Medicine

To compete in this high-stakes game, Big Medicine is reforming itself into large, multi-disciplinary organizations. Independent hospitals are merging into hospital systems. Hospitals and doctors are coming together as self-regulating Accountable Care Organizations (ACOs).

Continue reading…

Registration

Forgotten Password?