Posts tagged ‘#delivery system reform’

Five things I think I think about how the health care delivery system is changing

I have the opportunity to speak to a number of provider groups in the course of my work, and many recently have asked about the big picture of how care is changing. Here are some of my answers:
• Getting bigger is in. The current dynamics favor larger entities. Despite our Marcus Welby mental ideal, the facts on the ground favor large entities that have access to capital (i.e., availability of money). Modern American health care delivery is very different from the Marcus Welby days. Then, one could convert the front parlor of a house into a waiting room and a back room into an exam room, hang a shingle, and voila! You had a doctor’s office. These days, it takes a lot of infrastructure, including an electronic medical record, computers, billing software, etc. to set up the same office, and all those things cost money. If you can have several providers sharing that infrastructure, it gets cheaper per provider. More than that, being competitive in the new market means understanding one’s performance precisely, and improving that performance continually. Understanding performance and improving it also takes time and money, and it’s disproportionately expensive for small providers to do so. This means large groups and institutions that can invest in their own infrastructure on a long-term basis have an advantage. There is some irony in this, as there is some literature that says the practices that are most successful in creating high quality care at a low price, are small. But nonetheless, the capital-intensive environment that is American health care in 2015 favors big.
• Vertical integration is in—again. After a couple of waves of integration between doctors and hospitals and then subsequent waves of disintegration, it looks like this one is more likely to be permanent. Statistics show that more physicians now work for large integrated systems than those that remain independent. Accenture, a large consulting firm, estimated that in 2013, only one in three physicians remained independent. Physicians employed by larger entities are now the majority, and a growing segment of the population.
• Getting closer to where patients are, is in. One of the anomalies of medicine vs. other goods and services in America is that people still have to drive somewhere and often wait to obtain those services. Think about how other goods and services have evolved. Much of our consumer economy has migrated to the Internet, through Amazon, eBay, and other online retailers, where customers shop at their own convenience rather than during “store hours”. Amazon is up, Sears is down. Some entrepreneurs are following this model and bringing health care closer to where patients are already. We haven’t quite gotten to health care being delivered predominantly over the Internet, but we’re trying to get closer to the customer nonetheless. Evidence of this trend: CVS has just agreed to acquire Target’s in store clinics and pharmacies for $1.9 billion. And why not? People were going to Target anyway. Why shouldn’t you be able to pick up a flu shot where you buy sneakers or milk? The key is offering your services where people are going to be anyway, rather than forcing them to make a special trip to access what you have to offer.
• In(patient) is out and out(patient) is in. Many services are migrating from the inpatient setting to outpatient, and outpatient into residential. Part of the reason is cost, but there are other forces that favor this. One is the continued mass customization of our society. A recent commercial says, “Sort of you isn’t really you.” Why should consumers settle for a standard product when it can be customized to them? This is getting cheaper by the day as computers make this mass customization inexpensive and easy. A business card company advertises that it can print hundreds of business cards for you, each with a different image on it. So why should my hip replacement be done in a hospital when it can be done safely, closer to home, and more cheaply for me as a low-risk patient at a surgical center? The hospital is still there for the high-risk patient if need be, but there’s no reason to waste all that high-tech shininess (and cost) on someone who doesn’t need it.
• Quality is getting customized, too. Part of the problem of buying value in health care is making it relevant to the individual purchaser. We have very broad and general measures, but few of these speak to the average patient. How do other industries handle this? By surveying and adjusting services endlessly. By doing so, they evolve from a general definition of quality to one specific to each customer. I use a travel site to plan all my trips, business and leisure alike. Recently the website started showing me hotel picks that are selected “just for me”. What they are doing in the background is taking my past search parameters and applying them to new cities I visit. If I booked a midrange, quiet hotel in the center of the city the last few times, that’s what the program will look for in the next city. Health care is a little harder because we access it episodically and with widely varying intensity, depending on our health needs. Despite this, it is possible now to predict much more precisely what services are more likely to be satisfying to individual patients through the power of big data. The upshot of this is that the power to predict quality and satisfaction is migrating from institutions (e.g., NCQA certification) to crowd-sourced individuals who are more and more empowered to find information relevant to them individually, and contribute their own experience to the pool for the next customer.
These five trends mirror what has happened in other industries over the past couple of decades. Sellers get larger and more comprehensive to relieve the consumer of the burden of putting together a satisfying experience on their own. Buyers get more discriminating as sellers put together more satisfying products through customization. As what sellers offer gets more satisfying, our tolerance for less-than-satisfying services and experiences goes down. Such is the endless cycle of improvement that free markets foster.
The upshot of this is that it is no longer enough to offer services; those services have to be fine-tuned to the potential customer, offered at times and places convenient to that customer, and then executed expertly to produce a good outcome at a good price, within a good patient experience.

June 24, 2015 at 3:19 PM 4 comments

The Institute for Healthcare Quality, Safety, and Efficiency at the University of Colorado Hospitals

I recently attended a graduation of sorts, from something called the Institute for Healthcare Quality, Safety, and Efficiency at the University of Colorado Hospitals. What I saw was dozens of people organized into several teams. Each team was from a different hospital unit, and each team had a project to improve quality, safety, and efficiency for its respective unit. They had used Lean and other methodologies to identify root causes, implement changes, and measuring the effect of those changes. If you’re from another industry, none of this sounds at all unusual. If you are from health care, you recognize that this is terribly unusual. In fact, this was only the second graduating class for the Institute.
Such training is old hat in many other industries, especially manufacturing. A friend who runs a health care systems engineering school tells me that one of the reasons he’d shifted into health care is that traditional industry is saturated with process improvement engineers, and there are no new opportunities for his graduates there. However, the use of industrial engineering methods in health care is relatively recent, particularly on the scale to which IHQSE aspires for its institution.
There are many possible reasons for this slow adoption, but some would argue that one of them is that process improvement hasn’t been profitable in health care under current payment systems. It simply doesn’t fit with the business model. If one is paid for activity, reducing activity through improved efficiency reduces revenue. So why would a very successful business like UCH engage in revenue reduction on any significant scale?
It’s a critically important question. A basic tenet of Clayton Christiansen’s work at Harvard Business School is that only rarely do institutions that succeed under one business model participate in the development of the one that disrupts and replaces that model. The temptation to resist change and perpetuate the last successful revenue model is just too great in most instances. And yet, that’s essentially what a hospital accustomed to being paid fee for service does when it engages in process improvement.
Likely several things are going on. It’s hard to argue with reducing harm the system does to patients. But that’s always been true, and it doesn’t explain why we did so little before, and why programs like IHQSE are now proliferating around the country. The number of financial penalties for system failures is also increasing steadily, like nonpayment for readmissions and obvious errors, like wrong side surgery (e.g., operating on the left leg when it’s the right that needs fixing).
But I hope a larger shift in thinking is happening, and that it’s good for the system and its patients. I think it may finally becoming orthodoxy in American health care that the seemingly endless stream of dollars that financed its expansion over the past couple of decades, is coming to an end. In a restricted top line growth environment, profitability increasingly depends on efficiency. And so I hope what we are watching is health care adapting to an emerging environment where efficiency and efficacy isn’t just the right moral thing to do for patients, it’s the best business model. Payers and purchasers are starting to change from paying for activity to paying for outcomes at a set price and a set quality standard. In that environment, it makes all kinds of business sense to do things effectively and efficiently, because it reduces waste, waste that the seller of the service pays for, not the buyer.
I dearly hope this is true. One of the nice things about this shift, even though it puts financial pressure on providers, is that it creates a financial benefit by improving care for patients. Suddenly making care safer, more satisfying for patients, and less expensive is good business. It was very heartening to see how proud the teams were of making their care safer, better, and more efficient. They were truly excited that they could improve the way they do things, and not simply accept that some error, even some harm, was an acceptable standard. To put it more simply, it seems to feel good to do better for the people they are entrusted to serve and the institution for whom they work, simultaneously.

January 14, 2015 at 3:50 PM Leave a comment


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