ACOs, Innovation and Edison

070209_edison_bulbUnited Healthcare announced this week that it will double to $50 billion annually over the next five years the value of contracts it has with doctors and hospitals based on quality and outcome measures. United is currently paying over $20 billion annually to doctors, hospitals and ancillary care providers under contractual arrangements based on value produced (i.e., quality outcomes over cost).

United’s Chief Medical Officer, Dr. Sam Ho, notes that “any bonuses will have to be earned and no longer a product of turning a page on a calendar – this is not a passing fancy for us. The United Healthcare strategy basically has expanded the accountable care concept to an accountable care platform.” Beyond just the symbolic importance, United has the largest provider network in the U.S. and already has accountable care relationships in place with over than 575 hospitals, 1,100 medical groups and 75,000 physicians.

Now, the glass-half-empty folks in healthcare are going to look at this move by United as somewhere between tyrannical, prehensile or just plain foolish, depending on individual perception, as well as position. They will argue this is just another example of non-provider influences in healthcare stealing more power from the patient. They will remind us again how HMOs failed and that ACOs are but profiteering wolves clothed in retrofitted HMO attire.

Of the two most significant challenges that ACOs face, creating financial incentives that are theoretically aligned with less care instead of more is certainly reminiscent of managed care circa 1990s – and it is a risk that must be aggressively monitored and mitigated. The other primary challenge – the inherent subjectivity of measuring patient outcomes – will have a dramatic impact on many areas of future healthcare delivery, not just provider networks and insurance contracting. It’s a challenge that will have to be effectively addressed if we ever have any hope of increasing access without bankrupting the country.

I think there are two ways to look at these challenges: in the context of the past where abundant evidence of failure exists – or in the future, where evidence of failure has not yet been created. There is a critically important difference between the two. The former is the world of intellects and philosophers, while the latter is the world of innovators and entrepreneurs. Case in point: Thomas Edison.

In failing continually to invent the light bulb Edison once remarked, “I have not failed. I’ve just found 10,000 ways that won’t work.” In similar fashion he once said, “negative results are just what I want. They’re just as valuable to me as positive results. I can never find the thing that does the job best until I find the ones that don’t.

I am not suggesting that unbridled experimentation is either wise nor prudent when the results impact human lives. But I also choose to resist the defeatist attitude among folks who become overly dependent upon history as a means of defining the future. While those who fail to learn from the past may be damned to repeat it – those who live in the past are damned to avoid innovation for fear of failure.

The underlying premise of the ACO model – financial reward for keeping people healthy, rather than reimbursement of costs for trying to make sick people well – represents a dramatic paradigm shift in thinking for this country that transcends all aspects of healthcare delivery. We should not expect it to be widely embraced in the short run. We should rightly expect a healthy amount of skepticism. And we shouldn’t be shocked if the model fails.

Those allowances, however, should not be permitted to thwart progress toward achieving expanded access to quality care, particularly for the least fortunate among us. If the failures of the past weighed most heavy on the efforts to define the future, we should not have to worry about how to make quality care available because there never would have been the advances achieved worth making available. Edison also once said that, “the doctor of the future will give no medication, but will interest his patients in the care of the human frame, diet and in the cause and prevention of disease. ~

Will he be right?

Cheers,
  Sparky

Mandate Delay: Chuckhole or Sinkhole?

AARepublicans have failed to thwart it. The Supreme Court refused to kill it. A majority of Americans decided not to abandon it through a national referendum election. And it would appear Nancy Pelosi has still not taken the time to find out what’s in it.

Earlier today when asked whether there could be, “any virtue” in last week’s announcement that businesses with 50 or more full-time employees will not have to begin complying with ACA reporting requirements until 2015 (a year delay), she responded, “no – absolutely not.  I don’t think it’s virtuous at all.  In fact, the point is, is that the mandate was not delayed.  Certain reporting by businesses that could be perceived as onerous — that reporting requirement was delayed, partially to review how it would work and how it could be better. It was not a delay of the mandate for the businesses, and there shouldn’t be a delay of the mandate for individuals.”

Mind you now businesses are being exempted from the codified penalty associated with failing to report how many full-time employees they have, the number of hours they work and how much those individuals have to pay for company-sponsored health insurance coverage. While employers are, “encouraged” to provide affordable insurance for their workers in 2014 there will be no penalty if they do not. That’s not a delay? Who is her policy advisor anyway? Dennis Kucinich?

Aside from the side show of political haberdashery that is by no means the singular purview of Ms. Pelosi nor the Democratic party there are some potentially critical ramifications of the Administration’s decision to delay implementation. On the one hand, because a majority of businesses with 50 or more employees already offer healthcare benefits (e.g., 94% of businesses with 50-199 workers offer coverage while only 1% of US workers are employed by companies with 50 or more employees that do not offer health benefits) the delay’s impact on coverage expansion is not going to be significant.

On the other hand, the delay is nothing less than a giftwrapped political grenade in the hands of the GOP and every interest group in opposition to any element of the ACA. Now called into question will be the workability of not only the employer mandate but other elements of the Act, such as the all-important Individual Mandate, Insurance Exchanges, Medicaid expansion and on and on. If critics are right that the ACA is a bureaucratic house of cards built on a shaky table, well then this delay could be viewed as removing the matchbook from under the table’s leg.

There is also the pragmatic side of this discussion that argues it is better to delay and use that time wisely to ensure implementation is as effective and economical as possible. But it would seem to me the implementation of the IM will be more complicated than the EM because of numbers and nature: there are a lot more individuals than businesses, and by their very nature many (most?) of those individuals don’t have the inherent technical wherewithal to collect and provide the information that will be required for the IM. Delaying implementation of the Individual Mandate would, I believe, be a death knell for the ACA, and I think most Democrats (and, of course, Republicans) share that view now.

It may be a monumental task for many Democrats next summer having one foot on the campaign trail and one finger in the Capital Hill dike that is holding back a full repeal of the Affordable Care Act. If they are not already in place, the Administration had better abandon all hope of allowing partisanship to influence resource decisions. Not getting the right people in the right place to withstand the oncoming attempts to sacrificially slaughter the IM and exchanges before they even get started will be a political nightmare for the Democratic party that may take several decades to overcome.

Cheers,
  Sparky

Healthcare Strategy Lesson From Gettysburg

GThis past weekend my son and I traveled to Gettysburg to partake in the 150th Anniversary celebration. It was our third trip together there, the last being four years ago when he was six. I have been there at least eight times myself dating back to when I was his age.

You have to be of a certain ilk to enjoy returning to a small town in the summer sweatbox of southern Pennsylvania so many times expecting it to offer more than the time before. Yet for me it has – and did so again this time. Now, I am admittedly one those individuals whose interest and fascination in the Civil War has been manifested in owning more books on the subject than I should ever hope to read.

That perceived restriction is in good part due to the other areas of interest that compete for my attention. Chief among those, I am particularly interested in most all aspects of military strategy. The word, strategy, after all is from the Greek word, stratēgia (στρατηγία), meaning the art of the troop leader or general – to command and provide generalship.

To be sure, I have learned a great deal about organizational strategy and strategic planning from contemporary writers such as Porter, Mintzberg, Ansoff and Chandler to name but a few, but in due time I have found most of their thinking reflects new ways of viewing the foundational principals of strategy that can be found in the works of military strategists such as Sun Tzu, Alexander, Napoleon, Bismarck – and Robert E. Lee.

On my visits to Gettysburg what I enjoy most is walking the battlefields and just looking at the surrounding countryside. Beyond its purely aesthetic benefit I try to imagine what faculties, training and experience it would have taken to translate observation into action (i.e., if I were a commander, how would I have deployed my forces). What makes that three-day conflict so intriguing for the military historian are the strategies employed by both sides in seeking tactical advantage through positioning. Who familiar with the Civil War has not heard of Little Round Top?

If you are an organizational strategist, you cannot help but appreciate the dynamic relationship of planning and positioning. Effective planning is measured by the ability to achieve a future position while being developed based upon current position. And this is where very often strategic planning at healthcare organizations falls well short of its promise. In my experience, the inability – or perhaps unwillingness – to develop a comprehensive and realistic understanding of their organizational current state before engaging in planning efforts is the single biggest mistake healthcare organizations make. It is also the singular key to successful planning efforts.

Too often healthcare organizations get caught up in the chaos that defines their environment. They spend significant amounts of time and effort trying to understand what is happening around them, unfortunately at the expense of understanding what is happening within their own organizations. The old saying of, “if you don’t know where you are going, any road will get  you there” has recognized validity. But the blinding attraction of imagining a better future can also serve as a siren to organizational leadership causing them to lose sight of practical realities.

The key lesson that was reinforced for me on this latest trip to Gettysburg was that while the ability to envision how infrastructure and topography could be utilized to establish tactical advantage, in order for underlying strategies to be effective the commanders of both armies had to first understand the capabilities of their forces. They had to understand the relative effectiveness of munitions based on distance, angle and elevation. They had to understand how and when troops could be deployed and redeployed between positions. They had to understand why holding a position is ultimately critical to being able to achieve a position.

From a strategic planning perspective, these are lessons I think have tremendous applicability to healthcare organizations, particularly as they seek to make sense of the ever changing regulatory environment in which they operate. If I were to borrow from the old adage, “measure twice – cut once,” I would offer that in organizational strategic planning it is wise to spend one hour envisioning where you want to be for every two hours assessing and understanding where you are right now.

Cheers,
  Sparky

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