Leadership

Health Care Can Learn from Other Business Models

 

The U.S. health care market, $3.2 trillion in 2015 (17.8% of GDP), is so complex and encumbered by multitudes of regulations, standards, payers, providers, and programs that it begs the question, can it learn something from other markets and businesses? Conventional wisdom on the part of health care leaders is that it likely would not.  People may be exhausted with the failure of the health care debate to move forward.  The frustration may be accompanied with the hope that health care’s 100-year-old business model will soon be positively disrupted by some emerging technology.  This denotes the failure of consensus building by our elected officials and leaders of our health care institutions.  Is it worth re-trying the dialogue, perhaps under different conditions?  Following are some thoughts built on the reopening the health care policy discussion.

  1. Domain development – The Twin Cities is renowned for the development of domains, i.e. organizational initiatives, which assist its citizens, corporations, and government to facilitate decision making across a spectrum of interests not readily addressed by traditional groups. The Citizens League, the Keystone Club, and the Downtown Council are examples of domains that influence decision-making that affects our local community by providing insight and perspective.  Is it possible to have a health care council that focuses on our local and regional needs, and common good?  Would such a council bring perspective to the needs of patients of all types and resources relative to the range of services available?  This council would not be a policy making body.  Rather it would provide a non-partisan, non-political format to provide thought leadership on health care issues.
  2. Participation – We have a number of programs that require participation such as drivers licensing, social security, property taxes, etc. Why is participation in the funding of health care (the mandate) considered such an intrusion by the government? How can a market function if its customers can elect not to participate until they need services and their expectation is that the cost will be as if they contributed all along? What is the role of government as a primary insurer of those most vulnerable to health care access problems? Minnesota’s health care insured market is in sharp decline, dropping from 293,000 enrolled in 2014 to 190,000 enrolled in 2017.  Are there any new models that address the participation issue?
  3. Market Focus – Is it possible to be successful in health care without serving an entire market? Conversely, is it possible to be successful if one provider can selectively choose its patients while another is required to care for all? Does it make sense to take a broader view of the range of patients across our community and the array of service providers, with a goal of aligning patient segments in the most cost-effective manner? Is there a community benefit to the intense competition for commercially-insured patients among our providers or does this result in needless and redundant investments at a high cost to patients? This is not a proposal to regulate the market, but rather one to level the playing field for providers and to create a true market.
  4. Create shared centers of excellence Can we find mechanisms to encourage the creation of specialty health care services that support all providers, improve access, and reduce or eliminate unneeded investment, without corrupting the marketplace? Can markets be created among health care service providers that optimize the sub-systems of health care, such as emergency care, coding, pharmacy, etc.
  5. Catalyze market strategy – Current health care strategy in our community appears to be singularly focused on the acquisition of patients, generating volume to offset the fixed costs of delivering health care; it is an evolving form of cannibalization that pits providers against each other without necessarily providing better access or more cost efficient operations. Are there strategic options appropriate to a competitive environment that make better use of resources and talent?

Health care management is continually seeking innovative solutions to care delivery processes.  The past few years have seen innovation focused on data technology.  We are proposing to insert the innovation process into the health care management system where systems’ constraints are addressed openly in light of possible trade-off and solutions.

 

Jack Militello and John McCall
St. Thomas Center for Innovation in the Business of Health Care

Health Policy

Health Care: A Mess or New Direction?

A recent New York Times article (3/28/17) noted that Medicaid is becoming the driving force in health care reform.  It has surpassed Medicare in the numbers of Americans covered and provides for the medical needs for one in five Americans, approximately 74 million people of all ages.  This includes 40% of American children.  The proposed Republican health care legislation would reduce Medicaid expansion in light of its growing coverage and end the federal government’s open-ended commitment to pay a significant share of the states’ Medicaid costs.

The Times points out the reluctance of even Republican legislators to place their constituents in jeopardy of losing Medicaid coverage.  These constituents are categorized by the Times as mostly lower-wage workers with incomes up to 138% of the poverty level ($16,400 for a single person).  Legislators are worried about losing treatment for people addicted to opioids, children, people with disabilities, and the elderly in nursing homes.

The picture painted in the Times has led us to reflect on who are the recipients of the benefits of federal health policy.  This, in turn, leads to concerns about economic earning disparities throughout the country.  A Pew Research Center study (5/11/16) reports that from 2000 to 2014, the share of adults living in middle-income households fell in 203 of the 229 metropolitan statistical areas studied, while upper-income rose in 172 and lower-income increased in 160. These areas accounted for 76% of the nation’s population in 2014. With the apparent decline of the middle class comes a decline in employer-based health insurance.  56% of the non-elderly U.S. population obtained insurance via employer-paid plans in 2014, according to the Kaiser Family Foundation.  Kaiser also notes that 77% of Medicaid beneficiaries are in households with an employed worker.  The United Health Group states that of the 324 million people in the U.S, employer-sponsored insurance covers 174 million, Medicaid and related state-based health programs cover 75 million, Medicare covers 56 million, and exchanges cover approximately 10 million. Approximately 28 million people remain uninsured.

The middle-class is shrinking, the Medicaid eligible population in increasing, workers are losing employer coverage or having it reduced, and a sizable portion of the population elects not to join the health care insurance pool.

These conditions demand a change in public policy, not just health care policy.  Recognizing systemic interaction with health care and society makes change all the more difficult.

  1. While household income is rising, it is not keeping pace with the rise in health care costs, including those directly incurred by consumers as out-of-pocket expenses, increased employee contributions, increased employer contributions, and increased government spending on behalf of consumers.
  2. Growing income disparities are a potential issue but difficult to assess. We might be experiencing an increase of both wealthy and poor people at the expense of the middle class, but the two phenomena may not be directly related. The implication for health care is both the unaffordability of health care and the low participation rate of employer-paid insurance for a growing segment of our population.
  3. In addition, there is a growing disparity between the tax-subsidized/employer-insured and the uninsured employed. More employers are limiting or eliminating health care coverage as part of compensation packages.
  4. Our population is aging and consuming more health care. At the same time, fewer numbers of people are working and paying taxes.
  5. Health care technology is proliferating but unlike in other industries, health care technologies tend to increase health care costs. We are not experiencing a Moore’s Law effect in health care.

These are demographics and economic phenomena that should be affecting public policy in relationship to health care.  The ACA/AHCA dilemma seems to be two sides of the same coin, and at best, partial solutions to the problem, and at worst, further corruptions to a complicated, unstable marketplace. The political process is stalemated by partisan anger and ideological rigidity. Health care legislation and public policy are limited focus efforts to deal with only those actions in the reach of legislation while ignoring other major forces in the market, leading to uncertainty about outcomes and higher risk.

Health care is a mess and it appears we are unable to meaningfully address it until it becomes a national crisis with people being hurt along the way.  Smart people are trying to solve parts of the systems and failing.  We have to reflect on Friedrich Hayek’s statement, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Health care is a mess but not hopeless.  However, a new direction is necessary.  We need a new model for health care for the entire country, not because it’s the best way to resolve the issue, but likely the only way.  How do we move from the status quo to something better?  In the simplest terms, it takes vision and leadership. Someone has to envision what a better, more successful, more fulfilling health care future looks like and lead the way.  There are too many legacy-system actors driving health care systems design with special attention to protecting their own interests. Health care providers are working under a hundred year-old business model that suffers from an entrenched bureaucracy, uncertain revenue streams, misguided strategies, bloated infrastructure, and poor business practices.  Commercial insurance has been very selective in who they insure, which has earned them billions of dollars.  Product and service providers in pharmaceutical and device industries have made significant profitable investments in the current health care structure.  All are thoroughly invested in their legacy positions.  Lawmakers are no longer able to come together to represent the common good.  These groups are unable to discuss systemic change, let alone make the necessary changes we need to have a functioning health care system that takes care of everyone.

A new direction has to be established.  Steve Hilton in More Human suggests that a system based on the broad principle of ‘single-payer, market provider’ with real consumer sovereignty, could move health care in a more humane direction.  Nassim Talib in Antifragile highlights the danger and costs caused by treatments that result from our deeply rooted desire to intervene.  Elisabeth Rosenthal in An American Sickness provides a list of shopping tools for consumers to provide control of treatment.  However, how do we get there?  The parameters of the discussion have to be changed.  There needs to be a path that better defines policy alternatives that are understandable to all of us.  Markets in both insurance and health care delivery have to be structured so the consumer can understand differences and make educated choices that serve their needs.  Innovation needs to fuel not just quality of care but cost effectiveness and productivity.

Let’s begin by agreeing on principles, such as who gets coverage. Should be everybody, right? Then we figure out how much it is going to cost. The insurance companies can tell you in days how much it would cost to insure the entire U.S. pool. Then figure out a policy for who needs to pay for it, but do not allow anyone to opt out when they’re healthy and opt back in when they are not. If you opt out of social security, you do not get it later. We pay for many things that are “public goods”, like defense, and do not have an option. Then figure out a way to dismantle the artificial bureaucratic barriers in order to inspire the private sector to compete aggressively for a share of the world’s largest health care market. Finally, make it all effective now, not later, and set up points in time where we can make corrections and course adjustments, because we won’t get this right the first time.

As long as this is a Democrat/Republican, Liberal/Conservative issue, we run the risk of destroying a major part of our economy and quality of life, all for the sake of not being able to work together for a common purpose.

 

Jack Militello and John McCall
University of St. Thomas
Center for Innovation in the Business of Health Care

Health Policy

Trump Care 8 minute videos

The Opus College of Business health care programs is tracking the current activities of Congress and President Trump to “Repeal and Replace” the Affordable Care Act.  OCB faculty and community experts provide a short video discussion about pending issues and progress every few weeks.  The most current videos are provided below:

Week 1

Week 2

Week 3 

 

Health Policy

Medicare Payment for Physicians Comes of Age

Copyright Health Administration Press Jan/Feb 2016, Used with Permission

Leadership, Operations Improvement

What the Science of Motivation Can Teach You about High Performance

danielpink

Daniel Pink

By Cindy Lorah

The opening keynote address of the American Medical Group Association (AMGA) meeting in Orlando, March 15, featured Daniel Pink, author of A Whole New Mind and Drive, who shared his insight on the science of motivation and some of its implications for health care.

First, he looks at our “intrinsic” knowledge of motivation – what people generally believe and act on regularly. Namely, that rewarding a behavior gives you more of it and punishment for a behavior gives you less.  Social scientists have basically been testing this “hypothesis” for years, and the result is that “sometimes” this holds true, but not nearly as often as we generally think…and this can lead to big mistakes.

This type of “IF – THEN” motivation (IF this action happens, THEN you will get this reward/punishment) has been shown to be great for simple and short-term tasks. However, it is not great for complex, long-term situations. One key study showed that as long as a task involves only mechanical skills, bonuses work as expected. However, once the task calls for “even rudimentary cognitive skills,” a larger reward led to poorer performance. Although this may seem wrong on a profound level, it is not surprising to social scientists. People love rewards and tend to focus intently on achieving them. However, if people need to think creatively and multi-dimensionally, you do not want to motivate single-minded focus.

An example pertaining to health care are studies looking at pay-for-performance initiatives. One study showed there “is not evidence that financial incentives can improve patient outcomes,” and a second showed that there is no evidence that pay-for-performance in hospitals led to a decrease in 30 day mortality.

To be clear, it is a fact that money is a motivator. It matters a lot, but its effects are nuanced. People are exquisitely tuned to norms of fairness. People need to be paid enough to “take money off the table” and to be perceived as being paid fairly.

Assuming “fair” compensation exists, there are 3 motivators for enduring performance:  Autonomy, Mastery, and Purpose.  Continue Reading