All Posts By

Daniel McLaughlin

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

Financing, Health Policy, Leadership, Operations Improvement

Optum’s strategy for ACO development

docsMinnesota is proud to be the home town of UnitedHealth Group (UHG), the largest health insurance and health services company in the United States. UHG provides services to over 97 million Americans.

On January 31, 2013, Chris Pricco, senior vice president of accountable care solutions at Optum, presented the UHG perspective on accountable care organization (ACO) development over the next 5 years. This event was co-sponsored by the Minnesota Chapter of the American College of Healthcare Executives.

If you were to attend one event that would encapsulate the future of the American health care system – this was the event. Here are some key points from Mr. Pricco’s presentation.

The most important trends in health care delivery today:

  • Providers are under market share, profitability and consolidations pressures
  • Cost shifting is rising to unsustainable levels
  • CMS is radically revising its payment methodologies
  • Commercial providers are implementing aggressive pay for performance systems
  • Providers are beginning to take and manage risk

As providers move into the ACO and quality payment environment, several key strategies must be effectively executed:

  • Redesign the organization’s care delivery model to be attractive to the market
  • Develop methods to manage risk
  • Optimize contracts with payers and providers in the system
  • Effectively integrate all providers into the system
  • Measure and improved consumer engagement
  • Increase effective branding and marketing at the retail level

The need to move from a fee-for-service environment to a value-based payment system is challenging for most delivery systems. However, Optum’s experience is that this shift is happening to all systems today.  Continue Reading

Uncategorized

The Challenge and Opportunity with Big Data in Health Care

By: Daniel McLaughlin, M.H.A.

The expansion of Electronic Health Records is presenting an unprecedented opportunity to make significant improvements in the American health care system. However, for this opportunity to be realized, new methods of data management and analysis that are uncommon in health care will need to be deployed.

Organizations that have mature electronic health records have conquered the challenge of moving data from operating systems into data warehouses and are using them for substantial improvements. For example, a question that had challenged researchers for many years was whether traditional low-priced blood pressure control was as effective as newer, more expensive drugs. To answer this question, NIH conducted an extensive trial that took eight years and cost $120 million. The results indicated that: the oldest and cheapest of the drugs, known as thiazide-type diuretics, were more effective at reducing hypertension than the newer, more expensive ones.

However, some patients did not respond to these drugs and needed to use the newer drugs – but which ones? Unfortunately, NIH did not have the funds to conduct a follow up study. By the time the NIH study was complete, however, Kaiser Permanente had an extensive electronic health record and data warehouse. By using real patient data in their warehouse and traditional statistical methods, the researchers had the answer in 18 months for $200,000.

Although traditional scientific methods and statistical tools work well for some health care questions, they cannot be easily applied to many interesting questions such as:

 

  • Which doctors have the most cost effective risk adjusted care patterns based on actual cost of care – not charges?
  • What are the characteristics of patients that can predict the level of non-compliance with discharge orders and the probability of re-admissions?

The challenge of answering these questions is best illustrated by the complexity of the data bases. A standard electronic health record for a patient will have over 2,700 fields. A charge master for a hospital can easily contain 20,000 separate services and prices. Traditional statistical methods flounder in this environment.

Fortunately, data mining professionals (particularly in retail) have developed new tools such as market basket analysis, classification algorithms, association rules, cluster analysis and neural networks to understand these massive data bases. Hopefully, these techniques will soon migrate to health care to support substantial improvements in care delivery.

To learn more about how the new tools of data mining and other technologies are changing the business of health care, attend the UST Executive Conference on the Future of Health Care on Friday, November 9, 2012 at the University of St. Thomas Minneapolis campus.

Financing, Health Policy, Leadership, Operations Improvement

The Health Care Execution Challenge

This article was originally published in the spring 2012 issue of B. Magazine.

Health care organizations lag behind most successful businesses in executing high-quality business plans

In 2001, the Institute of Medicine published Crossing the Quality Chasm, a seminal work identifying the chasm between what is known about providing high-quality health care and what actually is being delivered. Ten years later, this chasm still exists and was a key factor leading to the publication of Make It Happen: Effective Execution in Healthcare Leadership, a book published by Health Administration Press, a division of the Foundation of the American College of Healthcare Executives.

As director of the Center for Health and Medical Affairs at the Opus College of Business, I long have been engaged in the health care delivery system throughout the Midwest and the nation. The focus of the center is to “support improvements in the leadership and management of health care systems through research, community outreach and the collaborative development of innovative professional and executive education programs.” Conducting research for and writing this book not only furthered the goals of the center but can, as a member of HAP’s editorial board notes, “advance health care leaders from developing a plan and letting it sit on the shelf to full and robust execution.”

The Challenge

The failure to execute is a common problem in many organizations but more so in health care. Barriers include an incredibly complex system, splintered leadership, strategies that vacillate between financial goals and patient care, and no external pressure strong enough to force change.

Effective execution, however, is the key to high performance for most of America’s successful corporations. Executing strategies effectively and quickly is well-known in the general business world, but it appears not to have crossed the chasm into the health care field. One way to bridge this gulf is to provide more effective education and training to health care leaders nationwide in the area of practical and efficient execution.

In 2009, during the Health Care UST MBA Washington, D.C., seminar, I had the opportunity to meet Dr. Carolyn Clancy, director of the Agency for Healthcare Research and Quality. A primary goal of AHRQ is to improve the processes needed to effectively move major clinical research findings from scientific literature to widespread use by the clinician.

AHRQ agreed to provide funding to the Opus College of Business to develop a new, effective execution curriculum for health care leaders and managers. For more than a year, I consulted with OCB faculty members on best business practices outside of health care and also visited some of the leading health care delivery organizations in the Midwest, including HealthPartners, Essential Health – Duluth, Marshfield Clinic in Marshfield, Wis., and Twin Cities Orthopedics to examine their systems for execution.  Continue Reading

Financing, Health Policy

How much will my health insurance cost?

With the Supreme Court ruling the Affordable Care Act constitutional, attention is now shifting to the details of the law – especially how the individual market will function in the insurance exchanges.

I had the opportunity to work on the Clinton health reform plan in 1992–1993. As part of this work, the White House sent us to various groups to present the proposed plan. I usually spoke to provider groups. At the beginning of the presentation, I always asked the audience to “Please raise your hand if you know someone who is uninsured or who has difficulty getting health insurance.” Almost all the hands in the room were raised.

My guess is that this question would yield similar results today. Although it’s likely that many health professionals are already working on implementing sections of the ACA (such as ACOs, medical homes, reducing re-admissions, etc.), they may not have paid a lot of attention to the individual market insurance details. Here are some basics to remind us of the details and some resources to share with any friends who are uninsured.  Continue Reading

Leadership

Catholic Health Care Leadership

32139066_smBuilding on more than 20 years of graduate and professional education for health care leaders, the University of St. Thomas is pleased to announce a new program in Catholic Health Care Leadership. The program is designed to increase the mission alignment within executive teams who are dealing with profoundly complex leadership issues while caring for patients as an expression of the healing ministry of Jesus.

“One of the needs for a program like this is that Catholic health care organizations competing in today’s marketplace need to be distinctive,” stated the program’s lead faculty, Michael Naughton, Ph.D. “What is crucial to the distinctiveness of Catholic health care is to have leaders who have a deep sense of what it means to be leading a Catholic health care system.”

The program’s admissions advisor, Marlin Meendering, M.Div., has spoken with leaders of more than sixty Catholic health care organizations across the U.S.  Reflecting on those conversations, Marlin stated, “Most Catholic health care systems are already heavily invested in ministry formation or mission integration programs. Our program will complement their efforts because our focus is on leadership formation, especially for physicians. How do a physician and his/her team effectively lead within the context of Catholic health care? Because of our experience in leadership formation, we are confident that the program will refine critical leadership skills, deepen understanding, strengthen team effectiveness, and increase personal career satisfaction.”

This leadership program integrates the important requirements for executive development with the unique dimensions of formation in Catholic health care. The program will include four quarterly modules of four days each and has these distinctive features:  Continue Reading

Leadership

Leadership at the Marshfield Clinic

Dr. Laura Nelson, Chief Medical Officer, Marshfield Clinic

Dr. Laura Nelson, Chief Medical Officer, Marshfield Clinic

On December 2, 2011, the University of St. Thomas held its graduation ceremony for its 17th cohort of the Health Care UST MBA. The commencement speaker was Dr. Laura Nelson who is the Chief Medical Officer of the Marshfield Clinic and a 2001 graduate of the Health Care UST MBA program.  

She spoke about the challenges of leadership in today’s chaotic environment and presented a list of key “leadership survival” insights that she has learned thus far. The Marshfield Clinic is one of the best delivery systems in the country and much of their success is due to leaders such as Dr. Nelson.

She shared with the graduating class some of her observations on what it takes to be a successful leader:  Continue Reading