Joining Matthew Holt (@boltyboy) on #THCBGang on Thursday August 17 at 1pm PST 4pm EST are futurist Jeff Goldsmith: medical historian Mike Magee (@drmikemagee); policy expert consultant/author Rosemarie Day (@Rosemarie_Day1); and patient safety expert and all around wit Michael Millenson (@mlmillenson);
You can see the video below & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.
By MATTHEW HOLT
Our 20th birthday continues with a few classics coming out. Back in 2005 I was really cutting a lyrical rug, and would never miss a chance to get that Cambridge training in Marxism into use. This essay about whether health care should be a public or private good has always been one of my favorites, even if I’m not sure Starbucks is still making Frappuccinos. And 18 years later the basic point of this essay remains true, even if many of you will not have a clue who Vioxx or Haliburton were or why they mattered back then!
Those of you who think I’m an unreconstructed commie will correctly suspect that I’ve always discussed Marxism in my health care talks. You’d be amazed at how many audiences of hospital administrators in the mid-west know nothing about the integral essentials of Marx’s theory of history. And I really enjoy bring the light to them, especially when I manage to reference Mongolia 1919, managed care and Communism in the same bullet point.
While I’ve always been very proud of that one (err.. maybe you have to be there, but you could always hire me to come tell it!), even if I am jesting, there’s a really loose use of the concept of Marxism in this 2005 piece (reprinted in 2009) called A Prescription for Marxism in Foreign Policy from (apparently) libertarian-leaning Harvard professor Kenneth Rogoff. He opens with this little nugget:
“Karl Marx may have suffered a second death at the end of the last century, but look for a spirited comeback in this one. The next great battle between socialism and capitalism will be waged over human health and life expectancy. As rich countries grow richer, and as healthcare technology continues to improve, people will spend ever growing shares of their income on living longer and healthier lives.”
Actually he’s right that there will be a backlash against the (allegedly) market-based capitalism — which has actually been closer to all-out mercantilist booty capitalism — that we’re seen over the last couple of decades. History tends to be reactive and societies go through long periods of reaction to what’s been seen before. In fact the 1980-20?? (10-15?) period of “conservatism” is a reaction to the 1930-1980 period of social corporatism seen in most of the western world. And any period in which the inequality of wealth and income in one society continues to grow at the current rate will eventually invite a reaction–you can ask Louis XVI of France about that.
But when Rogoff is talking about Marxism in health care what he really means is that, because health care by definition will consume more and more of our societal resources, the arguments about the creation and distribution of health care products and services will look more like the arguments seen in the debates about how the government used to allocate resources for “guns versus butter” in the 1950s. These days we are supposed to believe that government blindly accepts letting “the market” rule, even if for vast sways of the economy the government clearly rules the market, which in turn means that those corporations with political influence set the rules and the budgets (quick now, it begins with an H…).
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BY KIM BELLARD
You may have seen that last week the California Public Utilities Commission (CPUC) gave approval for two companies to operate self-driving taxicabs (“robotaxis”) in San Francisco, available 24/7 and able to charge fares. Think Uber or Lyft but without drivers.
It has seemed inevitable for several years now, yet we’re not really ready. It reminds me, of course, of how the future is coming fast for healthcare too, especially around artificial intelligence, and we’re not really ready for that either.
The two companies, Cruise (owned by GM) and Waymo (owned by Alphabet) have been testing the service for some time, under certain restrictions, and this approval loosens (but does not completely remove) the restrictions. The approval was not without controversy; indeed, the San Francisco police and fire departments, among others, opposed it. “They are failing to regulate a dangerous, nascent industry,” said Justin Kloczko, a tech and privacy advocate for consumer protection non-profit Consumer Watchdog.
The companies brag about their record of no fatalities, but the San Francisco Municipal Transportation Agency has collected almost 600 “incidents” involving autonomous vehicles, even with what they believe is very incomplete reporting. “While we do not yet have the data to judge AVs against the standard human drivers are setting,” CPUC Commissioner John Reynolds admitted, “I do believe in the potential of this technology to increase safety on the roadway.”
I’m willing to stipulate that autonomous vehicle technology is not quite there yet, especially when mostly surrounded by human-driven vehicles, but I also have great confidence that we’ll get there quickly, and that it will radically change not just our driving but also our desire for owning vehicles.
One of the most thoughtful discussions I’ve on the topic is from David Zipper in The Atlantic. He posits:
A century ago, the U.S. began rearranging its cities to accommodate the most futuristic vehicles of the era, privately owned automobiles—making decisions that have undermined urban life ever since. Robotaxis could prove equally transformative, which makes proceeding with caution all the more necessary.
Continue reading…by MATTHEW HOLT
So to celebrate 20 years, we’ll be publishing a few classics for the next week or so. This is one of my faves from the early days of THCB, back in 2006. It’s interesting to compare it with Jeff Goldsmith’s NEW piece from yesterday on vertical integration because at the time a pair of Harvard professors, Michael Porter and Elizabeth Teisberg were telling hospitals to change their operations in a way that seemed to me were going to destroy their business–cut down to one or two service lines they were best at and stop with the rest. McKinsey picked up on this and I went to town on why they were all wrong. In fact in the next decade and a half, despite all the fuss and consulting fees generated, almost no hospital system did anything other than merge horizontally with local competitors, stick up its prices, and buy feeder systems of primary care doctors or ally with/bribe specialists to keep their procedural referrals up. The result is the huge regional oligopolies that we have now. Despite all the ignoring of their advice, I don’t think Porter/Teisberg or McKinsey went broke in that same period.–Matthew Holt
McKinsey, an organization that prides itself on increasing the amount of consulting dollars it gets paid by improving the strategic direction of American business is making another foray into health care.
You may recall their last study on CDHPs was roundly criticized (see Tom Hillard for a good example including a hilarious and brutal smackdown of their research methodology in the last couple of paras), and this time they cleverly aren’t bothering with data—in fact they’re basically copying Porter and Teisberg. The piece, by Kurt Grote, Edward Levine and Paul Mango, is about hospitals and how they need to get into the 21st century.
And of course the idea is that hospitals need to change their business approach. Well, given that I hadn’t noticed a rash of hospital closings and the the industry as a whole has been growing its revenues pretty successfully over the years, what exactly are the problems?
The rise of employer-sponsored insurance in the 1930s and 1940s, and the emergence of government-sponsored insurance in the 1960s all insulated hospitals from the need to compete for patients. Today hospitals are “price takers” for nearly 50 percent of their revenues, which is subject to the political whims of the federal and state governments. Hospitals are also required to see, evaluate, and treat virtually any patient who shows up, solvent or not. Furthermore, physicians were productive because hospitals put a great deal of capital at their disposal. Yet these hospitals didn’t enforce standardized and efficient approaches to the delivery of care. At many hospitals today, doctors still bear only limited economic
responsibility for the care decisions they make. Little wonder that it is often they who introduce expensive—and sometimes excessive—nonreimbursable technologies or that hospitals not only suffer from declining margins but are also performing less well than other players in the health care value chain
The piece then has a pretty incomprehensible chart that compares the EBITDA (profit) of hospitals compared to drug companies and insurers. Surprisingly enough they make a whole lot less EBITDA than those businesses–although long time THCB readers will know we’ve been well down that path. And apparently their margins got worse and then better (from 25% in 1990 to 15% in 1995 to 10% in 2000 but back up to 15% in 2004).
McKinsey’s answer, basically filched from Porter/Teisberg, is for hospitals to specialize in particular service lines, stop being generalists and start trying to please the consumer who’ll be choosing among them. As a general mantra, this might be good for consultants to stick up on Powerpoint, but to be nice it’s massively oversimplified, and to be nasty it’s just plain wrong for most hospitals for the current and foreseeable medium-term future.
Their analysis ignores the fact that there are (at least) three broad categories of hospitals–inner city and rural safety-net providers, big academic medical centers, and suburban community hospitals. Each of these has a completely different audience, completely different set of incentives, and more to McKinsey’s point, different profit margins.
Right up front they talk about the 50% of revenue that comes from the government–but for the first two categories, it’s more than that! And for everyone, as public programs grow, it’s going to be increasing.
Those hospitals relying on Medicare make most of their money but playing very careful attention to the DRG mix. The ones who play that game well and make most profit on Medicare outliers (like the for-profits McKinsey features in its metrics) don’t really want to change that by stopping their patients becoming those outliers, because if they get better at treating patients, they make less money. Brent James’ famous Intermountain story tells the truth, and until Medicare really changes the way it pays, you don’t want to be ahead of that curve. Intermountain may have spent more than 10 years leaving money on the table, but those rich Mormons can afford it.
Meanwhile, for the mainstream community hospitals, as more and more services and patients leave the building, the imperative is not to change their business model, it’s to get their hands on that revenue that’s leaving with them. That’s why most big hospitals are now-co-investing with physicians in specialty hospitals et al. But while that’s a defensive battle to build better “hotels” for the star surgeons, it’s still about building better “hotels”–not junking the model of being the nicest possible host to the big time admitting surgeons.
The McKinsey/Porter/Teisberg theory is of course that if you get good at one service line, you’ll be attractive to consumers, and that they’ll choose you. There is more truth to this notion now than there was five years ago, but not much more. Doctors choose hospitals for their patients. That’s always been the case, other for those that get admitted via the ED, and that’s a function of location. That’s why hospitals suck up to surgeons. But even when consumers make choices, they’re not very active consumers beyond the deductible, and basically all hospital spending is beyond the deductible, and even in the cash non-hospital business (the stuff like genetic testing) most consumers take their doctor’s advice.
Which leads of course to who the other real consumer for the hospital is, and that’s the third party payer. First rule of dealing with payers is to figure out how to play the Medicare system well enough that you make it very profitable, but not too “well” that you get busted, a la Columbia/HCA, Tenet & St Barnabas.
Second rule is that you need to get bargaining strength against the health plans. No one can pretend that health plans really care in a global sense about having their providers cut costs and improve care delivery. They may say they care about it, but health plans add a chunk on the top of what they pay providers and stick that to their clients (usually employers) — who basically take it in a mealy mouthed way.
There is, though, a fight in any local market about where to draw the line on hospital pricing. But this fight is not about having providers from outside (or even within) the region swooping in to capture all a payer’s business with better pricing on certain service lines, and payers moving patients to these disease-specific treatment centers. Well, it is about that in the McKinsey/Porter/Teisberg fantasy land, but in reality the fight is about setting global pricing for all the services a payer needs for its members in that region.
Continue reading…So in this week of THCB’s 20th birthday it’s a little ironic that we are running what is almost a mea culpa article from Jeff Goldsmith. I first heard Jeff speak in 1995 (I think!) at the now defunct UMGA meeting, where he explained how he felt virtual vertical integration was the best future for health care. Nearly 30 years on he has some reflections. If you want to read a longer version of this piece, it’s here—Matthew Holt
By JEFF GOLDSMITH
The concept of vertical integration has recently resurfaced in healthcare both as a solution to maturing demand for healthcare organizations’ traditional products and as a vehicle for ambitious outsiders to “disrupt” care delivery. Vertical integration is a strategy which emerged in US in the 19th Century industrial economy. It relied upon achieving economies of scale and co-ordination through managing the industrial value chain. We are now in a post-industrial age, where economies of scale are in scarce supply. Health enterprises that are pursuing vertical integration need to change course. If you look and feel like Sears or General Motors, you may well end up like them. This essay outlines reasons for believing that vertical integration is a strategic dead end and what actions healthcare leaders need to take.
Where Did Vertical Integration Come From?
The strategy of vertical integration was a creature of the US industrial Revolution. The concept was elucidated by the late Alfred DuPont Chandler, Jr. of the Harvard Business School. Chandler found a common pattern of growth and adaptation of 70 large US industrial firms. He looked in detail at four firms that came to dominate markedly different sectors of the US economy: DuPont, General Motors, Sears Roebuck and Standard Oil of New Jersey. They all followed a common pattern: after growing horizontally through merging with like firms, they vertically integrated by acquiring firms that supplied them raw materials or intermediate products or who distributed the finished products to final customers. Vertical integration enabled firms to own and co-ordinate the entire value chain, squeezing out middlemens’ profits.
The most famous example of vertical integration was the famed 1200 acre River Rouge complex at Ford in Detroit, where literally iron ore to make steel, copper to make wiring and sand to make windshields went in one end of the plant and finished automobiles rolled out the other end. Only the tires, made in nearby Akron Ohio, were manufactured elsewhere. Ford owned 700 thousand acres of forest, iron and limestone mines in the Mesabi range, and built a fleet of ore boats to bring the ore and other raw materials down to Detroit to be made into cars.
Subsequent stages of industrial evolution required two cycles of re-organization to achieve greater cost discipline and control, as well as diversification into related products and geographical markets. Industrial firms that did not follow this pattern either failed or were acquired. But Chandler also showed that the benefits of each stage of evolution were fleeting; specifically, the benefits conferred by controlling the entire value chain did not last unless companies took other actions. Those interested in this process should read Chandler’s pathbreaking book: Strategy and Structure: Chapters in the History of the US Industrial Enterprise (1962).
By the late 1960’s, the sun was setting on the firms Chandler wrote about. Chandler’s writing coincided with an historic transition in the US economy from a manufacturing dominated industrial economy to a post-industrial economy dominated by technology and services. Supply chains re-oriented around relocating and coordinating the value-added process where it could be most efficient and profitable. Owning the entire value chain no longer made economic sense. River Rouge was designated a SuperFund site and part of it has been repurposed as a factory for Ford’s new electric F-150 Lightning truck.
Why Vertical Integration Arose in Healthcare
I met Alfred Chandler in 1976 when I was being recruited to the Harvard Business School faculty. As a result of this meeting and reading Chandler’s writing, I wrote about the relevance to healthcare of Chandler’s framework in the Harvard Business Review in 1980 and then in a 1981 book Can Hospitals Survive: The New Competitive Healthcare Market, which was, to my knowledge, the first serious discussion of vertical integration in health services.
Can Hospitals Survive correctly predicted a significant decline in inpatient hospital use (inpatient days fell 20% in the next decade!). It also argued that Chandler’s pattern of market evolution would prevail in hospital care as the market for its core product matured. However, some of the strategic advice in this book did not age well, because it focused on defending the hospital’s inpatient franchise rather than evolving toward a more agile and less costly business model. Ambulatory services, which are today almost half of hospital revenues, were viewed as precursors to hospitalization rather than the emerging care template.
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Hard to believe it but 20 years ago (Aug 12 2003) I started writing THCB! Somehow 20 years later it’s still here. Lots of changes over the years. Hundreds of people have written for THCB, thousands have been interviewed on it, and we’ve made a little dent in the world of health care.
Next week we will run some new articles, new interviews and re-run a selection of the greatest hits….
By MIKE MAGEE
In 2002, psychologist Emily Pronin and her co-authors, in an article titled, You Don’t Know Me, But I Know You: The Illusion of Asymmetric Insight, laid out the concept of “Naive Realism.”
As she explained, “We insist that our ‘outsider perspective’ affords us insights about our peers that they are denied by their defensiveness, egocentricity, or other sources of bias. By contrast, we rarely entertain the notion that others are seeing us more clearly and objectively than we see ourselves. (We) talk when we would do well to listen…” Point well taken, but these (most would agree) are trying times.
The problem of our divisions is certainly worse now, two decades later, than when it was first labeled. 2023 headlines speak to “political polarization,” “division,” “factual inaccuracy,” and “loss of civility.” And yet, we hold tight to the “rightness”of justice under the law, and set out to demonstrate with extreme confidence that our democratic institutions, under assault, have mostly held.
Madison was well aware of extreme labeling of opponents as “unreasonable, biased, or ill-motivated.” He warned on February 8, 1788 in Federalist 51 that “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In forming a government which is to be administered by men over men, the great difficulty lies in this: you must first enable government to control the governed; and in the next place oblige it to control itself.” His solution? Our legal system, and checks and balances.
Hamilton, in the first paragraph of Federalist 1, tees up the same issue, in the form of an unsettling warning. He writes, “It has been frequently remarked that it seems to have been reserved to the people of this country, by their conduct and example, to decide the important question, whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend for their political constitutions on accident and force.”
The “force” on January 6 was no accident. Hours before the armed insurrection of Congressthat morning, USA Today published “By the numbers: President Trump’s failed efforts to overturn the election.” The article led with, “Trump and allies filed scores of lawsuits, tried to convince state legislatures to take action, organized protests and held hearings. None of it worked…Out of the 62 lawsuits filed challenging the presidential election (in state and federal courts), 61 have failed…Some cases were dismissed for lack of standing and others based on the merits of the voter fraud allegations. The decisions have came from both Democratic-appointed and Republican-appointed judges – including federal judges appointed by Trump.”
By all accounts, our nation and her citizens, owe our Judicial branch (its judges, lawyers, and legal guideposts) a debt of gratitude.
Continue reading…BY KIM BELLARD
I came across a phrase the other day that is so evocative, so delicious, that I had to write about it: “lazy girl job,” or, as you might know it. @#lazygirljob.
Now, before anyone gets too offended, it’s not about labeling girls as lazy; it’s not really even about lazy or even only girls. It’s about wanting jobs with the proverbial work-life balance: jobs that pay decently, don’t require crazy hours, and give employees flexibility to manage the other parts of their lives. Author Eliza Van Cort told Bryan Robinson, writing in Forbes: “The phrasing ‘lazy girl job’ is less than ideal—prioritizing your mental health and work-life integration is NOT lazy.”
The concept is attributed to Gabrielle Judge, who coined it on TikTok back in May (which is why I didn’t hear about it until recently). According to her, it means not living paycheck to paycheck or having to work in unsafe conditions. She believes job flexibility doesn’t mean coming in at 10 am instead of 9 am because you have a dentist appointment; it means you have more control over your hours and when you get your work done. If Sheryl Sandberg was all about “leaning in,” Ms. Judge is about leaning out.
Ms. Judge explained to NBC News:
Decentering your 9-to-5 from your identity is so important because if you don’t, then you’re kind of putting your eggs all in one basket that you can’t necessarily control. So it’s like, how can we stay neutral to what’s going on in our jobs, still show up and do them, but maybe it’s not 100% of who we are 24/7?
“I’m only accepting the soft life, period,” she says.
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By ARJUN GOSAIN
In the United States alone, one in ten people live in poverty, 10.2% of households are food insecure, and more than half of people living below the poverty line are transportation insecure. These statistics represent social determinants of health (SDOH) measures that describe a patient’s experience outside hospital walls.
Health.gov defines SDOH as “the conditions in the environments where people are born, live, learn, work, play, worship, and age that affect a wide range of health, functioning, and quality-of-life outcomes and risks.” This definition argues that a patient’s experiences are just as crucial if not more telling than their biology.
And this makes sense as a person who is housing insecure may not have the same access to nutritional food, transportation, or social support. Additionally, some patients, in their efforts to maintain health, may experience discrimination based on their skin color or religious beliefs.
Some studies have found SDOH can drive up to 80% of health outcomes. This means that the traditional healthcare model—hospitalization, healthcare delivery, and treatment—only affects a mere 20% of a person’s overall health. To tap into this 80%, healthcare professionals need data. However, SDOH data collection poses significant challenges.
Before we dive into data collection, let’s review the specific measures of SDOH and why they should take top priority among healthcare professionals.
SDOH concepts include:
These contributing factors cannot be ignored since, as previously stated, they can directly impact up to 80% of health outcomes. Thus, organizations that choose to neglect SDOH factors are only focused on the 20%.
This is why providers must find ways to address SDOH in a meaningful and productive manner, which is where SDOH data comes in. The collection and analysis of SDOH data can help providers identify at-risk populations to provide informed, effective interventions. Measures like patient needs assessments and population-level health disparity analysis can let providers get to the root cause without the guesswork.
SDOH data collection is a sensitive topic. After all, if a patient is experiencing abuse or is unemployed, they most likely would not disclose that information outright. Providers also have limited time to ask additional questions because many feel rushed during routine consultations and may not have the resources needed to collect SDOH data.
Beyond SDOH data scarcity, there is the issue of standardization. How providers collect housing data, for instance, can vary across definitions and measurements, making quantifying data difficult. So, how can providers offer whole-person care with limited data and a lack of definitive measurements? The solution is three-fold.
Continue reading…BY KIM BELLARD
For better and for worse, our healthcare system is built around physicians. For the most part, they’re the ones we rely on for diagnoses, for prescribing medications, and for delivering care. And, often, simply for being a comfort.
Unfortunately, in 2023, they’re still “only” human, and they’re not perfect. Despite best intentions, they sometimes miss things, make mistakes, or order ineffective or outdated care. The order of magnitude for these mistakes is not clear; one recent study estimated 800,000 Americans suffering permanent disability or death annually. Whatever the real number, we’d all agree it is too high.
Many, myself included, have high hopes that appropriate use of artificial intelligence (AI) might be able to help with this problem. Two new studies offer some considerations for what it might take.
The first study, from a team of researchers led by Damon Centola, a professor at the Annenberg School for Communication at the University of Pennsylvania, looked at the impact of “structured information–sharing networks among clinicians.” In other words, getting feedback from colleagues (which, of course, was once the premise behind group practices).
Long story short, they work, reducing diagnostic errors and improving treatment recommendations.
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