Value Isn’t Working

HC FrustrationVALUE. I have written quite a bit in this space over the past three-and-a-half years on the role of value in healthcare and how it has been purported to be used as an effective public policy tool. Just type in, “value” on the search box to the right and 10 such posts will appear for your reading pleasure. But I haven’t written about value in the context I am about to now.

Earlier this week Paul H. Keckley, Managing Director of the Navigant Center for Healthcare Research and Policy Analysis, posted The Meaning of “Value” in Healthcare to the Health Care Blog.  In that post he argues rightly that the significant shortcoming of value as a driver of anything in healthcare is that it is not being defined by end users – i.e., patients, or consumers as it were. In stark contrast to what I have advocated in the past I would go beyond that.

Keckly muses of a system where consumer-driven healthcare is manifested in the dissemination of knowledge and information that empowers rational decision-making and the efficient allocation of resources. Where he stopped short – whether by omission or design – was to suggest the best means of achieving that nirvana. I will pick up the ball and take it a little further.

It is not enough to advocate for consumer-driven empowerment as the means of leveraging value in our healthcare system.  We must also recognize the stark reality that current healthcare policy – and in particular, the Affordable Care Act – is a tremendously effective impediment to achieving that empowerment.

I remain as convinced as ever that value – Porter’s axiomatic assertion that outcomes over cost will drive achievement of the IHI’s Triple Aim – is key to delivery system improvement. But I am terribly disillusioned that value can be effective in a system that is controlled in such a manner that it is determined artificially and arbitrarily by the likes of academics, bureaucrats, administrators and consultants.

Alternative payment models – and the care delivery models that are being developed in response to the artificial financial incentives they are offering – are doomed to ultimately fail because they lack the inert ability to leverage value as it is perceived by the individual consumer, one person at a time. By failure I do not mean they will be soon to go away – but they will not achieve the shared goals referenced above. Disagree?

  ~ Sparky

Medicine’s Tragedy of OR

Thanks to Dr. Paul Wiseman for sharing the NY Times op-ed article,  How Medical Care Is Being Corrupted, via LinkedIn this afternoon. Article authors Pamela Hartzband and Jerome Groopmannov are on the faculty of Harvard Medical School and co-authors of Your Medical Mind: How to Decide What is Right for You.

    The article deals with an old nemesis in healthcare policy: individual incentives. More particularly, how the misalignment of individual incentives can often be the Trojan horse befalling well-intended policy initiatives.

    Idealistically, as patients we we want our doctors to have our best interests in mind at every touch point of our experience with them. And fortunately, I believe that continues to by and large hold true. But the forces pushing against physicians to maintain that altruistic objectivity and autonomy on our behalves is being vehemently tested by what the authors describe as, “financial forces largely hidden from the public [that] are beginning to corrupt care and undermine the bond of trust between doctors and patients.”

    Though coming from different sources the common thread is the push toward value-based payments. I have written here in the past on value and value-based healthcare. The theory is market-based sound logic: value = outcomes/cost. The challenge, as I have written before, starts within a few nanoseconds after you start to contemplate how to objectively assess outcomes and whose value are we talking about?

    As Hartzband and Groopmannov importantly note, there is a challenging conflict between what is perceived as valuable for population health (i.e., in the aggregate) versus what is valuable for individual health. Physician payment incentives are increasingly being created based upon broad public health metrics (e.g., incidence of hypertension and hyperlipidemia, which are both often treated with medications that can be very effective – but also have significant side effects that can vary significantly from one individual to the next).

    So it doesn’t take too many connected dots to imagine the potential conflict of interest between wanting to hit the metrics versus doing what’s in the best interest of the patient. And the challenges are compounded when it’s not just the rewards that are in play – but the potential punishment for not following prescribed protocols from third parties – e.g., poor ratings publications and/or loss of base payments. That’s what is known in the non-scientific world as getting it coming and going.

    So what the authors propose is the establishment of legislation that would make public information available on, “the hidden coercive forces” that could be at the root of physician-patient incentive misalignment due to the aforementioned consequences of well-intended policies. That may not be enough, but it’s an important recognition that the policies may not work as intended. I note, however, that they do not recommend going backwards to the past era of, “paternalism, where doctors imposed their views on the patient.”

    Progress often means a couple of steps forward and a few back. Trying, learning and adjusting. This is a fundamental difference in  thinking among healthcare policy types that believe we just have to give Adam Smith’s invisible hand wider breadth. Way back in 1995, Jim Collins (Good to Great) wrote an article, (Building Companies to Last), in which among other areas of recognition – that even back then noting that relying on lessons of the past would not suit us well in a world of transformational change – he discusses embracing the genius of the “and.” This is a theme that has pervaded much of his work since.

    Too often those critical of policy initiatives jump for self-satisfactory joy whenever they come across fair and objective criticism of those initiatives. But such criticism, if you can get by the politics (yeah, I know), doesn’t have to be viewed through the prism of the Tranny of Or. It can be viewed as an opportunity to learn and work toward the Genius of And.

      ~ Sparky

Photo Credit: Alex Merto

Much Ado About Value

I was recently honored when Greg Scandlen took time to consider and write about some of the work I shared with him that has been produced by Michael Porter on value-based healthcare delivery. Mr. Scandlen is a regular contributor for the National Center for Policy Analysis’s Health Policy Blog, and in his article,  Value Based Payments, he argues that attempting to use the concept of value to drive systemic improvements in the US healthcare delivery system is misguided because of the inherently subjective and multidimensional nature of patient outcomes (Porter has used the equation of Value = Outcomes/Cost as the basis of arguing for industry transformation).

Michael Porter, “is generally recognized as the father of the modern strategy field, and has been identified in rankings and surveys as the world’s most influential thinker on management and competitiveness.” He has extensively researched and written on healthcare, establishing a comprehensive body of work that supports the need for reorganization of our healthcare system framed around value-based delivery.

After collaborating with Elizabeth Teisberg on their seminal work, Redefining Healthcare, in 2006 Porter wrote an article in 2010 for the New England Journal of Medicine: What is Value in Health Care? This is the article Mr. Scandlen references in his article. There are several additional contributions from Porter that add meaning and understanding to the value paradigm discussion, and these include:

Measuring Health Outcomes: The Outcome Hierarchy, a supplementary appendix to the above-referenced NEJM article;
How to Solve the Cost Crisis in Health Care (with Robert Kaplan) in the September 2011 edition of Harvard Business Review; and
The Strategy That Will Fix Health Care (with Thomas Lee) in the October 2013 edition of Harvard Business Review

There are a couple of areas where my perception of value as a catalyst for delivery transformation differs from Scandlen’s.

First, while I agree it’s true individual value is a subjective reality, my understanding of Porter’s work does not advocate for creating objective measures of value on behalf of the patient. In the October 2013 article referenced above Porter writes, “in healthcare, the overarching goal for providers, as well as for every other stakeholder, must be improving value for patients, where value is defined as the health outcomes achieved that matter to patients relative to the cost of achieving those outcomes.”

Second, Scandlen takes issue with Porter’s claim that, “in any field, improving performance and accountability depends on having a shared goal that unites the interests and activities of all stakeholders,” arguing that is counterintuitive to how competitive markets function – which Porter himself advocates for and has written about extensively. But I think Scandlen has too narrowly applied this axiom. Using his own example of how difficult it would be to imagine IBM, Apple and Microsoft having a shared goal, I would argue the goal they shared was to develop and provide lower-cost personal computing capacity and technology to individual consumers.

This wasn’t a coordinated or collusive effort to limit competition or share profits – it was a market-driven opportunity that each corporation recognized independently to bring value to consumers and be rewarded accordingly. Porter recognizes that in healthcare, in order for providers and organizations to transform delivery models based on value they must all recognize – and act upon –  the perceived economic benefits of creating value for the patient.

The graphic accompanying this post provides the six steps outlined in the October 2013 HBR article that Porter argues healthcare organizational leadership, patients and health plans/employers must pursue to achieve a high-value care delivery system. The key concepts embodied include integrated care delivery, transparency, outcome-measurement, accountability and geographic expansion of specialized capabilities (e.g., what the Cleveland Clinic has been doing through affiliations such as their recent minority interest in Akron General Hospital).

Finally, I do not believe measuring outcomes (the ubiquitous challenge facing Porter’s value equation) is a long-term effort in futility. Porter’s outcome hierarchy was an attempt to recognize and address the multidimensional nature of outcomes that Scandlen identifies. Many other such similar efforts are ongoing across the world. With the continual advancement of Big Data, the ability to monitor, analyze and report on patient-related data and information across the full spectrum of an outcome will continue to become more and more useful: to providers, insurers – and most importantly, patients.

Where the concept of outcome measurement runs into its biggest theoretical challenge is when payment models such as ACOs and episodic payment bundling seek to use such data to objectify achievement of patient value as a measurable statistic (i.e, benchmarking) used as an incentive to influence provider behavior. But the old adage of not being able to manage what you cannot measure is a critical element of value-driven performance improvement that I believe Porter effectively argues is at the heart of transforming our delivery system.

Value-driven payment models are in their genesis. Any type of industry transformation at this juncture is going to endure understandable resistance and criticism.  The train has left the station. Industry transformation based upon value-driven performance is already well entrenched as represented by organizations such as St. Joseph Mercy Oakland Hospital (Pontiac, MI), Adirondack Medical Home Pilot (NY) and Dignity Health, Hill Physicians and CalPERS.

There is legitimate concern that data and analysis on outcomes will be used to supplant patient choice. I don’t believe that is what Porter and colleagues had in mind when writing about value-driven healthcare delivery. Of course that doesn’t mean their intentions won’t be bastardized in the interest of bureaucratic ignorance and expediency. This risk must be carefully guarded against, but it does not in and of itself change the important role value must play in transforming our healthcare delivery system.


Healthcare 2014: The Untrends List

One week into the new year, and here I am already probably tearing at the limits of content relevancy, thinking about how to write something meaningful on what to look for in 2014. What are the emerging industry trends and drivers that healthcare executives need to understand and reflect in their 2014 strategic planning? What’s the competitive landscape going to look like? How will diverging synergies of clinical partnerships impact silo management tendencies? How many overused business school concepts can be stuffed into a blog post?

To be candid, I really wanted to write something here that was keen on unique insights and observations. That had a lofty air containing pearls of wisdom. But the more I thought about what to write the more daunting became the effort of where to start, what to include and how to organize my thoughts without losing you to confusion and boredom in the first paragraph.

And being confused myself under the weight of my inability to organize that thinking it dawned upon me that I was tripping over the most common intellectual obstacle: failure to accept that too often our desire to embrace the complex hides our fear of accepting the wisdom of simplicity.  And that reminded me of the scene below between Billy Crystal and Jack Palance in City Slickers. It epitomizes the challenge we have in accepting simplicity.

Curly’s One Thing

So what’s the ONE THING that healthcare providers need to focus on in 2014? Easy answer: the same thing they needed to focus on in 2013. And 2005. And 1919. VALUE. But just as our understanding of life can be both simple and difficult – so too can learning to strategically position a healthcare organization around value.

The concept of providing value is ancient.  Yet the ability to create, deliver and capture value is an increasingly important – and contextual – competitive advantage when resources become constrained at the same time demand is accelerating. Value-based pricing and cost reimbursement models are only a part of the value-driven healthcare paradigm. It’s the small top part of the value delivery pyramid (or perhaps iceberg is a more fitting analogy).

Critically important to understand is what the patient values. And even more important is accepting the processes that patients use for determining and comparing relative value does not easily lend itself to linear thinking or evidence-based protocols. Similarly, the individuals who create and bring value to patients cannot be made to fit into standardized care delivery machines. And understanding how they assess and compare relative value is every bit as important in creating a competitively superior healthcare offering.

Healthcare providers are increasingly being asked to share in the risk of care delivery economics. I know that must sound ironically distasteful to many, since they have already for centuries borne the ultimate risk of patient outcomes. But on the whole, I believe it’s an oddity of our healthcare financing system – not a perverse entrapment designed to reallocate resources away from production – that seeks to align the incentives of multiple participants around value.

If, however, that understanding is ultimately manifested in just measuring and promoting value – without creating and delivering value – value-driven pricing and reimbursement models will necessarily fail, whether that’s payment bundling, ACOs or medical homes. But – those organizations that learn to create and deliver value by strategically positioning themselves in lieu of the industry migration toward integrated care delivery will survive whether those new models succeed or not.

So my list of trends and drivers for 2014 is simple: value, value & value.


What’s Your Performance Improvement Strategy?

If you are a post-acute/long-term care provider still sitting on the sidelines waiting for a clearer understanding of how Healthcare Reform is going to impact your organization’s future, well then all I can say is, “Good luck with that – let me know how it works out for you.”

In an article published this past weekend (Medicare Seeks to Curb Spending On Post-Hospital Care), Kaiser Health News’s Jordan Rau reported on the wide variability in Medicare spending on post-hospital care across the county – and the attention that it is getting from CMS. Attention that is quickly turning to targeting: as in even more deeper cuts in reimbursement.
Several of the examples included:

Medicare recipients in Connecticut are more than two-times more likely to be admitted to a nursing home than residents in Arizona.

Medicare spends an average of $8,800 on a patient’s home healthcare in Louisiana – while spending $3,800 in New Jersey.

The rate at which beneficiaries receive post-acute services covered by Medicare in Chicago is three times the rate in Phoenix.

And the aggregate economic impact of variability in per capita spending is substantial. As the growth in post-65 age cohorts continues to accelerate both the inherent cost contribution (demand) as well as cost-push inflation (a result of seeking to satisfy that demand with scarce resources) is increasing. As reported in the Kaiser article, Medicare spending on PA/LTC, “has grown at 5 percent a year or faster in 34 of the nation’s 50 most populous hospital markets in recent years.”

The article goes on to describe the perceived reasons behind the variability that has captured CMS’s attention:

Misaligned incentives: Hospitals have not historically been economically impacted by the consequences of post-hospital care delivery, while PA/LTC providers have been incentivized to drive utilization based upon maximizing reimbursement rather than the appropriateness of the setting.

Information asymmetry: Very often PA/LTC referrals are a function of personal relationships and familiarity between those responsible for discharge planning and those responsible for marketing available beds.

Provider ambiguity: The evolution and confusion that today characterizes post-acute care services and settings (and the impact technology is having on care settings – e.g., telemedicine) often impairs market competition.

Lack of care coordination: While post-discharge readmissions have captured the popular media’s attention because of the ACA payment penalty, it’s the underlying lack of care coordination between acute and PA/LTC providers that results in cost inefficiencies extending well beyond avoidable readmissions.

These concerns, taken together with other indicators of potential waste and inefficiency (please refer to the article cited), will drive tremendous pressure in the years ahead to lower Medicare post-hospitalization expenditures (thus the chainsaw metaphor). How PA/LTC providers address these pressures will mean the difference between staying in business – or not.

When thinking about performance improvement as a vehicle to address this challenge remember this: more than any other singular criteria, successful PA/LTC organizations that survive the next decade will have learned to trade on value. Value in healthcare is quite simply the patient’s satisfaction with the care delivery experience divided by the cost to provide that experience (with the notable understanding that a patient’s satisfaction is typically augmented by their families’ satisfaction). With or without the Affordable Care Act, that is where the industry is headed.

But what does it mean to, “trade on value?” To help Pub visitors begin thinking about that I have provided a few fundamental questions that you might want to ponder – or discuss with colleagues:

  1. What’s most in demand?
    If Medicare, Medicaid and private insurers were to evaporate tomorrow, what core service offerings that you provide would be the most likely to still generate revenue? What distinguishes those services from others?
  2. Where do we fit in the care continuum?
    Forget the fancy charts and graphics of think tanks and consultants showing you where you fit. Think about the patients you care for every day from the perspective of their overall care experience: where does your organization provide the greatest value to that patient’s recovery along the care continuum?
  3. Who wants to work with us?
    How do potential partners in your market determine their value? Based on that understanding, can you enhance their value? What are the risks that you would lower it? Can you effectively address those risks?

  4. How do we protect and enhance our core value?
    In healthcare, more than any other industry, the innate ability to produce value is primarily attributable to direct caregivers. What should you be doing today to ensure you protect that most valuable resource? And what should you be doing tomorrow to help those caregivers increase the value you provide to patients?


It’s About Value, Stupid

The title of this post is a reminder to myself and not intended to offend the millions of other participants in healthcare to whom its application may or may not apply. I remind myself of this assertion quite often – primarily because I believe it provides the singular most important connection between the practice of healthcare and the business of healthcare. It also has the theoretical advantage of transcending many of the political realities of public policy because it reinforces commonly held beliefs regarding individual liberties, morality, as well as social consciousness.

That is why I am very excited about a new initiative I wanted to share with Pub visitors: last week, the New England Journal of Medicine announced a new collaborative publishing initiative with Harvard Business Review. Beginning on September 17th, new articles are being shared daily via the Insight Center for Leading Health Care Innovation.  Over an eight-week pilot period new articles will be posted daily, “from numerous experts across health care and business communities.” The content shared will be free during this pilot phase, so I strongly encourage you to at least take a few minutes to peruse the variety of information and insights offered there.

One of the most prominent initial contributors, Michael Porter, has written and spoken at length on Value in Healthcare. In fact, he and his coauthor, Elizabeth Olmsted Tiesberg, published Redefining Healthcare in 2006, in which they argued that historically health care systems have competed to shift costs, accumulate bargaining power and restrict services – rather than create value for patients. To address this shortfall Porter and Tiesberg have offered specific policy recommendations they believe can help reposition the potentially positive effects of market competition from between health plans, networks and hospitals to where it would be a lot more effective in producing value: i.e., at the level of diagnosis, treatment and prevention of high cost illness and conditions.

I should also note (and recommend) Porter’s latest article featured in the October issue of HBR and coauthored by Dr. Thomas Lee (CMO at Press Ganey), The Strategy That Will Fix Health Care. Porter and Lee rightly argue that healthcare providers are the only ones who can ultimately reframe the US healthcare delivery system into one that delivers high value. They discuss six interdependent components:

1. Organizing around patients’ medical condition
     rather than  physicians’ medical specialties
2. measuring costs and outcomes for each patient
3. developing bundled prices for the full care
4. integrating care across separate facilities
5. expanding geographic reach and
6. building an enabling IT platform

I think they purposely left off #7, pushing the camel through the eye of a needle. Please don’t take my sarcasm for lack of interest and support, but I am of an age where I tend to be a realistic chap. Between the theory espoused on the pages of HBR and the practice that is often manifested in care providers’ growing frustration with the obstacles they face in caring for their patients lies the enormous ball of yarn, which has been healthcare public policy in the US for the past 50 years.

I do believe, however, the value paradigm offers great promise in building a healthcare system where lower cost and higher quality are not viewed as a diametric choice but rather complimentary results of market competition. But there are indeed miles to travel before any such paradigm shift can be realized.

Value is not a foreign concept to healthcare, so I want to be wary of conveying the sense that a silver bullet exists, just waiting to be found so that in a single shot our delivery system can be cured. But value – whether seen through the prism of a patient’s ability to assess a surgical procedure, an insurer’s ability to assess the quality of an outcome or a nurse’s ability to assess the fairness of his or her employment contract – is way too often obfuscated to the point where it cannot serve the purpose of driving competitive performance.

I am hopeful the contributors to the new Center will be mindful of this observation as they seek to promote the potential benefits of a value-driven healthcare system.


The Healthcare Value Equation

Prior to leaving for Denver and the LeadingAge Annual Meeting & Exhibition last week I posted here in the Pub several questions I was anxious to have answered by LeadingAge members.  I was not disappointed by the vibrant and impactful discussions and sharing of ideas that has come to epitomize that event.  Indeed, I learned a great deal of incredibly valuable insights, as usual.  But it was what I did not observe that – while not terribly surprising – has me nonetheless concerned about many member organizations’ futures.

Overall, I would characterize the leadership view at most organizations toward Healthcare Reform and its attendant ramifications as being acutely aware, justifiably concerned and yet still very uncertain about what types of organizational changes will be required to survive.  And where there is a greater level of certainty, the perceived changes needed tend to be of a more tactical and pragmatic nature, rather than transformational.

I realize this is to be expected because change is anathema to our human psyche.  Even changes that bring about sought after and desired results in our lives are usually disruptive, requiring adaptation, resiliency and an unplanned exertion of focus and energy.

The dynamics of organizational change are such that if you take the individual energy required to adapt to change and then multiply that by the number of individuals comprising an organization, the product will be exponentially higher.  This is primarily owing to differences in the means and speed at which individuals accept and adopt to change.  And the process by which an organization reconciles these differences is a function of effective organizational change management.

Whenever I give a presentation on Healthcare Reform I share what I have learned as a student of Michael Porter’s work on Value-Based Healthcare.  I seek to convey the singular concept that will serve as the platform upon which all future performance improvement efforts must be based.  I refer to this concept as the E = mc2 of future healthcare delivery: Value = Outcomes/Cost.   This is also the formulaic basis upon which leadership teams at organizations that provide healthcare must base their organizational change efforts.

This may seem like a simple enough concept, particularly when we compare its application in almost any other industry in which a product or service is exchanged for currency (or another product or service).  In healthcare, as we know, our delivery system has largely obfuscated the applicability and worth of this formula – first through employer-provided insurance beginning during World War II and then several decades later and subsequently through complex provider payment designs developed by Medicare, Medicaid and commercial insurers.

As Porter asserts, today healthcare providers compete on bargaining power, volume and control of the patient, rather than value.  The demographic and economic realities of this 21st century require a paradigm shift in the competitive model of healthcare delivery, where market advantages will be achieved through actual and perceptual positions of value created for the patient.  Such a shift cannot be achieved through incremental improvements in cost reduction and process improvement – however grandiose the means of pursuing such goals may be.  It requires a transformational shift in how the healthcare organization views itself.

It also requires a new way of thinking about how we understand and define Outcomes; and how we track, analyze and report on Costs.  I will write more on these topics in the future.  But for now, my message is that those senior housing and care organizations that embrace this way of thinking – and determine how to manifest an organizational strategic positioning based on value – will be much more likely to survive and even thrive in the future.