Are We Nimble Enough to Survive?

Thursday, May 31, 2018 | Joel Sauer

Success in evolution is all about adaptability. Evolution of a species happens over millions of years. In health care, we don’t have that kind of time!

It has become cliché to talk about the speed at which the health care industry is evolving, but let’s face it – it really is changing fast. Hastening our progression is the influence of industry outsiders like Amazon, Apple, Berkshire Hathaway, Google, JP Morgan and Walmart — just to name a few. Even if it were just these well-funded and mega-influential players pushing us along, there would be reason for concern, but they are joined by some very big fish within our own industry positioning to disrupt the ecosystem. These include but are not limited to Cigna, CVS, Walgreens and UnitedHealth Group.

UnitedHealth Group is not so quietly creating a full spectrum, vertically integrated mega health care company – or perhaps its own industry. Through its physician arm, OptumCare, UnitedHealth now employs over 30,000 physicians! If that number doesn’t worry us, Optum is in the process of acquiring DeVita Medical Group, which will add another 17,000 physicians (the FTC is still weighing whether or not to allow this). That would make it one of the largest physician employers in the United States, up there with HCA, Kaiser and the like.

Need more haunting? Optum also purchased Surgical Care Affiliates, adding ambulatory facilities, and the Advisory Board is now armed not only with claims information (from UnitedHealth), but has quality and clinical data as well. The crazy thing is, we as providers (hospitals & physicians) actually paid and are paying to give them these data!

Clearly these companies smell an opportunity – or may have simply run out of patience waiting for the health care industry to figure out how to control costs. Regardless, none are known for sitting idly by and some, like Google and Apple, have disruption and innovation as a core mission.

Likewise, changes have occurred within the more traditional provider environment too. National health systems have merged with or acquired other health systems, regional health systems have acquired stand-alone hospitals and physicians have moved from private practices into hospital/health system employment. In fact, a recent Avalere Health study found that the migration to employment has been so swift that now over 40 percent of the nation’s doctors are employed by hospitals. The 2018 MedAxiom Annual Survey data finds that three quarters of cardiovascular physicians are now integrated with a hospital or health system.

The strategy behind the above consolidation is that size matters, and this obviously has wisdom when considering the depth of resources of the non-industry forces taking aim at healthcare. But is bigger enough? Or does it simply exacerbate an already stodgy, bureaucratic machine?

In my travels I see dozens of health care organizations each year, some that are part of huge national hospital companies, some that are part of regional systems and still a few that are a single hospital, owned and controlled locally. All share a similar trait: tight discipline on budgets and very methodical (read “slow”) decision making.

In the case of the national and regional systems, major decisions are held at a centralized level where “major” is uniquely defined, but in some cases as small as a $5,000 authority is held by the local CEO. At the front lines, managers rarely have the power for decisions measured in hundreds of dollars. While this is indeed impressive discipline, is it the right strategy in such a dynamic world? I worry the answer is “no.”

Consulting work nearly always involves conversations with multiple key constituents within a health care organization, providing a very candid look into the inner workings of “how things really are.”  An all-too common story I hear is how replacement positions – not a new position, but turnover of budgeted staff – sit empty for months awaiting approval. In the meantime, tremendous inefficiencies are created adding costs elsewhere (e.g., overtime) or worse, extending backlogs. When the latter occurs, you can predict with high certainty that negative side effects, like losing patients to competitors or seeing a spike in readmissions, will occur.

A similar tale is often told around broken or inadequate clinical equipment, direct and integral components for the production of top line revenue. Something simple like a downed treadmill awaiting repair approval can back up testing in the nuclear or echo labs, negatively impacting patient care and again increasing the opportunity for competitor leakage.

When I check back on these situations, which I routinely do, the positions always get filled and the equipment is always repaired. So it’s not a matter of whether the “yes” will eventually come, it’s simply a matter of timing. Given this, is what’s passing as fiscal responsibility really, in the most optimistic definition, just non-value bureaucracy and, at its worst, dangerous delays? When organizations like Amazon, Apple and Google are swimming in our waters, is taking 6 – 9 months to fill an open medical assistant position in a busy ambulatory office a smart business strategy? Or is it carefully rearranging deck chairs on the Titanic? 

These are examples of fairly straightforward operational “blocking and tackling” decisions, so our nimbleness around true strategic course changes are often even more glacial. Perhaps scarier is that we often don’t commit the time or resources to consider strategy, particularly to look outside our typical care paradigms or to focus on advancing patient value. We should feel confident that the forces outside the provider community have spent time and money on strategy and are now executing. Every day the headlines scream out the next move on the chess board.

Avoidance or delay in adaption often comes from misaligned economics, which distracts us from what really matters (think deck chairs). In my world of cardiovascular medicine, this could be a turf battle between vascular surgery and cardiology over peripheral work, instead of focusing on overall PV programmatic development. Or it could be battles over compensation distribution or call coverage between cardiology subspecialties instead of considering the overall team. Likewise it is common for provider deployment strategies to favor individual physician efficiency over that of the cardiology team and/or the patient’s value perspective.

Now I’m not naïve and I know these are huge issues, and they are directly related to personal compensation and workload – very important stuff. They are also an indictment of how we get paid from third parties, still predominantly on a fee-for-service basis, and that as hospitals/health systems we need to change how we compensate providers. However, they are still examples of a disconnect between what’s currently important (funded) within our provider community and where health care needs to go. History suggests that whenever such a disconnect exists, disruptive influences emerge.

The vast majority of Americans believe our current health care system is too expensive and that it works only “somewhat well” (2017 CVS Health Report, “The State of Health Care in the United States”). At the same time, most economists predict that US global competitiveness will suffer as health spending trends past $5 trillion, consuming more than 25 percent of gross domestic product (figure below). Despite all this spending, the US can’t crack the top 25 on the World Health Organization’s worldwide health system rankings. Fundamentally changing these facts – not just slowing inflation curve, but actually reducing our spend per American and improving the overall health of the nation – requires true innovation and wholesale re-engineering. This is most likely the focus of the companies mentioned in the opening paragraphs (think menacing looking icebergs to continue the metaphor).

On a regular basis and as recently as last week I hear from hospital and health system leaders the need to hang onto and grow the volume-based revenue stream and funnel volumes to the highest reimbursement care setting. While this makes logical sense given current fiscal realities, it also makes me terribly uneasy. Are we really going to be able to predict when the fulcrum on value flips? Or can we be sure the transition will happen long enough for us to avoid catastrophe? Seems a bit like timing the stock market, which I’ve been advised against my entire life.

Microsoft founder, Bill Gates, is credited with saying that in general we tend to overestimate the pace and impact of change in the short term, but woefully underestimate it in the long run. The transition to value has been underway well over five years now, which means we may be entering the long run for change and impact. The tipping point may be very near.

To be fair, cardiovascular medicine is ahead of most other specialties when it comes to the transition to value, having spent decades creating and advancing quality registries and appropriate use criteria, re-organizing itself around service lines and in general trying to push the envelope. Still there’s a long journey ahead of us and we’re part of a much bigger and very complicated ecosystem. However, this leadership role is needed now more than ever and time is off the essence.

Survival in the long run is not about being the biggest or baddest. It’s about adaptability. The T Rex proved that. We must find a model that allows our organizations to become highly adaptable while at the same time creating appropriate accountability and fiscal responsibility. These do not have to be mutually exclusive.  

Not to be dramatic, but our survival depends on it!

 

 

 

 

Illustration: Lee Sauer

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