Are healthcare providers hearing the wake-up call?

Sometimes the last people to know that an organization is about to hit a catastrophic iceberg are the leaders of the organization, even though they spend millions on writing strategic plans to avoid such an event.  It can be too devastating to leadership to consider that one’s oftentimes beloved institution, with a culture that has one’s own stamp on it, grown by close colleagues, is about to be threatened to its very foundation.  It can be too devastating to acknowledge that our beliefs may no longer be true, our skills may no longer be adequate, and/or our very way of life within the institution needs to change.  Adults hate change…why look into the abyss?

I’m actually worried for the hospital systems of the U.S.  I don’t think they realize that the game may be changing so radically that it may feel like they’ve hit an iceberg, regardless of the fact that they are wealthy institutions, rich in capital and knowledge.  Consider the following recently publicized facts:

I. The largest company dedicated to meeting the health and well-being needs of Medicare beneficiaries (UnitedHealthcare) and the largest retirement community in the country (The Villages) have formed an exclusive relationship designed to create "additional health benefit options and facilitate coordinated, comprehensive care" at a new patient-centered health system for Medicare consumers.

  • Threat:  The payer has hired the primary care staff, including MDs, and bypassed the traditional health system, except for specialty care which it will better control.

II. The proportion of companies with more than 20,000 employees offering High Deductibles went from 41% in 2007 to 59% in 2012. "If we’re not already at the tipping point for [consumer-directed health plans] — and we may well be — at this rate of growth, it’s coming soon," said Sharon Cunninghis, Mercer’s U.S. business leader for health and benefits.

  • Threat:  Consumers are beginning to see the "list price" for health care and realizing what Steve Brill so adeptly revealed in "Bitter Pill", Time Magazine:  prices are too high, and large, insular health systems, basing negotiations with payers on a "discount %" methodology, have not been paying attention to true costs.

III. Memorial Sloan Kettering Cancer Center, IBM, and WellPoint (a managed healthcare company) announced earlier this year that they are teaming to incorporate Watson, the supercomputer, into medical practice.  As "MedGadget" reported, "medical literature evolves at the blink of an eye, and it is impossible even for the most learned of physicians to keep up with all the data involved in . It’s in fact estimated that only 20% of what the average doctor practices is evidence-based."

  • Threat:  if Watson-like technology has the magnitude of impact that Google has had, large amounts of the bureaucratic apparatus of health care may no longer be needed.  Consider a world where the physician really isn’t the person with the answer, the computer is.  Consider how the power would transfer from the health system (who has the docs) to the patient and the payers.  I’m not sure it is possible to fully imagine the impact on the organizational design and management structure required by a health system when it’s the patient who is directing care using their mobile device.

IV. The Harvard Medical School invited David Goldhill, author of Catastrophic Care, How American Health Care Killed My Father, to speak with Ashish Jha, Professor of Health Policy and Management, Harvard School of Public Health.  Clearly, Mr. Goldhill is becoming a force for the voice of the patient in driving health care.  He believes that health systems have treated the payers, not the patient, as the customer in heath care and that they must now be made accountable to the patient.  He is not to be underestimated.  If you remember Ross Perot, you realize that one man, with a platform and a message, can indeed radically change the public debate.

  • Threat:  the threat here is that new institutions arise that really "get it".  As the UnitedHealthcare example shows, a newly configured organization can develop a new delivery model based on consumer knowledge, price transparency, partnership with the patient and widely disseminated medical knowledge.  Wow.  Are our health systems ready for this?

These are just some of the tectonic shifts occurring on the ground and in the press.  Those who "will not see" these shifts are likely to be doomed.  Those who don’t have the fortitude to address these trends head on could be doomed.  Those who do have the courage to take on the magnitude of change could still be doomed.  And those who have the courage to take on the change and the brilliance to design the future, versus longing for the past, will not be doomed.

Advice to those who want to be part of the solution?  There are 3 changes you can make immediately that would improve the likelihood of weathering the changes to come:

  1. Start hiring from other industries… finance people, IT people, HR people, supply chain people, customer service experts, call center experts, again, you get the idea.  All roles but your core clinical ones should have a good percentage coming in from non-healthcare industries.  Service-based industries, most likely.
  2. Specialize:  put the power with the service line chief.   The challenges are just too large to take on at the global level.  Reduce the power of the central infrastructure, except where centralization is key to cost reduction (i.e. supply chain).  Hold the service line chief accountable for Triple Aim plus revenue growth and staff talent.  (For more information, read our whitepaper on Accountability in Healthcare. 
  3. Get your chargemaster out, look at it and start managing pricing seriously on a rational basis.  Develop cost models based on real costs, not RVUs.  Consumers will get the hang of this soon and the earlier your house is in order, the better it will be.

Leave a comment