Sunday, June 10, 2007

Time to call HBS?

This post is about strategic planning in the Boston health care market. I hope you will respond with your reactions and thoughts. As a friend of mine likes to say, "there is no monopoly on brains" when it comes to these matters, and I welcome your judgment -- and that way I won't have to pay money to strategic planning experts from Harvard Business School!

Here's the scene. BIDMC is a very fine hospital in a city with lots of very fine hospitals. (We are blessed in Boston to have really wonderful clinical care in so many places.) Our two largest competitors are part of a network (Partners HealthCare System) that has beautifully executed its business plan and therefore has substantial leverage over the three main insurance companies in the state, which has resulted in higher rates for the hospitals and physicians in that network. BIDMC and the other hospitals and affiliated physician groups get rates that are under the price umbrella negotiated by the dominant system.

As "Avis" to this "Hertz", we have adopted a plan to position ourselves as a low-cost and high-quality provider in this region. We have done so because we believe that demands from the public and financial pressures on insurers will over time put substantial pressure on the academic medical centers, and that we will best situated for the future if we are known for both high quality and low cost. As you have seen on this blog, we aim to be quite transparent with regard to our clinical outcomes. Also, we hope to achieve operating efficiencies to lower our unit costs. (Note to unions: We do not intend to do that by squeezing our workforce. Quite the contrary, we intend to be the preferred place for people to work because of an environment that provides respect and opportunities for them.)

And, consistent with that strategic visions, on this blog and elsewhere, I have argued that insurance companies should pay us all based on the quality of our clinical results and not based on market power.

A recent posting by Charlie Baker on his blog makes me wonder if this makes sense. (I do not think he intended this result.) He said the following:

One can argue that Partners sets the table for everyone else - and that all providers benefit from their negotiations. If Partners gets “X” out of their negotiations with TAHP, HPHC, BC/BS of MA, etc., then everyone else gets some percent of “X,” which might be, in fact, higher than it would have been if Partners didn’t set the bar so high to begin with. When Partners decided some seven or eight years ago that they were going to demand huge rate increases year after year after year out of the private employers and health plans to “re-balance” the health care system in MA, most other providers benefited from that. They didn’t get the increases that Partners got, but they shadowed the increases Partners got, which was still substantial.

Beyond Charlie's point, there is also little or no indication from corporate purchasers of health insurance in this state that they are interested in insurance products that are based on quality of care. If there were interest in that, the insurers would have developed products along those lines by now. Further the state has been maddeningly slow in posting comparative figures on outcomes that are useful and meaningful to consumers.

So, here is the question. Since BIDMC has and will continue to have an excellent clinical reputation and very good relationships with community hospitals, multi-specialty groups, and other referring physicians, should we abandon our call for structural changes in the payment system? Would we be better off just living with the current arrangement, i.e., receiving rates that are just below those provided to the dominant provider network? Sure, we would never catch up with them in terms of earnings potential, but we would do better than most hospitals in the region. As consolidation and closures continued in the state, we would inherit a share of the clinical volume that will be passed along.

Of course, we would continue to make progress with regard to improving the quality and safety of patient care because that is our mission, but we would not choose to bear disproportionate costs of being innovative compared to other hospitals, and we would discourage talk of such extra innovation in our negotiations with insurers.

Before you comment on all of this, please remember that health care is not like other industries, in which companies are rewarded in the marketplace for being the high-quality, low-cost provider. That situation does not yet exist in the health care system. So, am I better off being a industry leader with regard to that approach, or am I better off biding my time and continuing to follow the traditional path until there is a real sign of change in the marketplace?

29 comments:

BC said...

Paul,

I don't mean to sound like a broken record, but the key missing piece here is price transparency. If I were a patient with a high deductible insurance plan or I had a plan that included meaningful differential hospital copays based on cost-effectiveness, I would have a much greater incentive to choose the lower cost facility assuming the quality is competitive. If I make it clear to my referring doctor that I care about costs, whether I am paying or my insurer is paying, and he or she can readily access actual insurer reimbursement rates paid to the various hospitals, surgeons, and other providers, it would be a lot easier for the doctor to steer me toward the most cost-effective providers. It is also useful to note that most insurance plans have a lifetime benefit cap, so insureds should not be completely oblivious to costs.

As for quality, suppose it could be measured in a way that the affected providers find acceptable and appropriate. Ten hospitals and/or ten surgeons are ranked from one to ten. It could well be that the difference between one and ten is the college equivalent of an A+ and an A- which could mean that the patient would be in good hands with any of them. In the case of surgical procedures in particular, adjusting the patient mix for risk and complexity is less than a precise science so there could be an incentive at the margin to avoid the most complicated cases in order to maximize overall outcome scores.

My experience in numerous other industries (energy is a good example) suggests that when the price moves up significantly relative to the cost of other goods and services, users of that product prove to be surprisingly ingenious in figuring out ways to use less of it per unit of their own activity. For energy, it means designing more energy efficient cars, buildings, appliances, equipment, etc., replacing driving with telecommuting, or shifting to cheaper energy sources. If people could easily see that a given procedure could be done for, say, 10%-15% less at BIDMC vs MGH or BWH and the quality is comparable or better, you should, over time, be rewarded with more patients while the high cost hospitals should lose market share. Without price transparency, however, how is that supposed to happen?

Chandler said...

Radical change is neither feasible nor prudent in the current environment. The tools to clearly measure quality between institutions are underdeveloped and truthfully, not yet valued by the market. I'm sure you are well aware of this. So I would imagine your question is really:

BIDMC will continue to pressure payors for maximum reimbursement, so how do we prepare for future change while differentiating ourselves in the market?

I think your instinct that cost and quality are the correct places to focus on the long term. Financial markets are slowly moving to this realization, as can be seen by David Brailer's new $700M private equity firm. Long term is the key modifier. I don't think that any one institution - even those with stature of BIDMC's - will single handed accelerate changes in the reimbursement system.

Perhaps the solution is to focus efforts on improving internal operations in preparation for a future where cost and quality are more important, rather than trying to move the reimbursement system...i.e. get in front of the market and waiting for it to come to you rather than trying to convince the market you are right.

This could be done in many ways...some of which you have described on your blog (lean production, clinical protocols, etc.) But you could also drive improvement through novel techniques. Look at Geisinger's CABG "warranty" which charges a single upfront fee then covers all health expenses for the next 90 days. Internally, this will drive them to improve quality and costs to not lose their shirts. Externally, it may help to move market share to their confident position. It is kind of like how LBO debt can improve effectiveness in the business world by forcing managers to pay interest from operating cash flow. I'm certain there are many more innovative techniques that can help drive an organization, but some of this will take risk.

In summary, I think those institutions that have placed themselves under constant pressure to streamline work flow, increase labor productivity, and measure their own quality will be well prepared for a future where total cost containment, rather than revenue growth, is a primary driver.

Ileana said...

Paul,

I think that you will not win by trying to negociate with insurers, I think you need to create the change, you need products that patients would pay to have.

I think you are in a very good shape by having an in-house IT system. Maybe create new products by using technology and sell them to patients, even if they are not reimbursed or covered by insurance? In time, they would be covered if useful and you would negociate the price because only you have them.

If it is successful, this would give you a competitive advantage and it would cost you way less than it would cost others, because it is built into your existing system and maintained by your personnel.

As an example, I would pay some amount to get personalized emails from my doctor. Personalized can mean as little as: send this message to all patients that are registered and have high blood pressure and high cholesterol. Maybe you already have that with PatientSite, but I am sure there could be more complex ideas.

I think you need to use your IT system... this is one of the things that would give you the competitive advantage.

Alexis said...

At first I thought this was two different realms of thought: a business realm and a moral realm. I thought that business needs to aim towards the stable increase of profit margins, while the moral obligation is towrads the good of the patient.

But I don't think they're mutually exclusive, in the end. Or, at least, I think moral policy can become a self-fulfillingly sound business policy in a long-term forecast.

bc has a good point - one way to drive consumer concern about health markets is through price transparency. Price transparency may begin with quality transparency - a task which you are already tackling - though it has to become even more accessible/publicized if it's going to succeed. Of course, whether or not innovation will pay off is a hazy future with many biased opinions. However, the public perception is one of general disgruntlement, and some sort of change is long overdue. One might argue that your job is essentially to predict this change and guarantee that BIDMC is in the best position to navigate it successfully. Thus, being innovative is part of your job description. Conversely, of course, you also have to know "when to hold 'em and when to fold 'em." But if someone like me with no business sense can feel a tension in the air, then perhaps your instincts of pursuing transparency are correctly pointing you towards the correct anticipation of the coming market.

Moreover, by working towards transparency, you are creating the change you would like to see. You are biasing the future market towards your interpretation of patient care and health systems. Thus, you're in a unique position to create the niche for BIDMC to fill - the real change you're looking for. If you're going to set the stage, you might as well be the star.

Art Vandelay said...

I believe you maintain your current trajectory. Continue to call for structural change, which will be slow in coming, as you are best positioned to handle this given your EMR/CPOE/Clinical Decision Support integrated into your daily clinical practices. Pricing transparency just further pressures your competition to "keep up with the Jones-es" which will require financial and human capital to work through the challenges. Meanwhile, you continue to advance your capabiliites (facilities, information systems, processes). If nothing happens, you are still the leader in insurance postings (assuming you do a good job on collections) and have continued to pressure your competition to catch-up. If the payment system evolves, you are still best-positioned to execute. Although there are questions as to when quality pays, we are all in healthcare to "advance the health status of the community" - this is not a decision that is contrary to your mission.

Anonymous said...

From a strategic standpoint, I'd be paying close attention to the hospital medicine movement (www.hospitalmedicine.org). Hospitalists are a strategic way to achieve lower costs and provide high quality care. I hope that some of the savings achieved from this miraculous movement are put towards providing care to underserved populations rather that making the insurance companies and/or hospitals richer.

Anonymous said...

Paul;
Wow, all of the above commenters reflected every single one of my thoughts on the subject, especially the concept that national change is inevitable and your job is to be prepared and ahead of the curve.
The only thing I can add, which I am sure you already know (many CEO's only pay lip service to this but I bet not you), is that innovation is a culture throughout an institution, not just something the CEO does. Your post coincided with my reading an article in Business Week regarding how Six Sigma had improved processes and profits at 3M but stifled innovation - it ends with some employee quotes: "(the new CEO) has brought back a spark around creativity." "We feel like we can dream again."

While implementing the suggestions of all the above excellent commenters, you can redouble your efforts to instill a culture of innovation in your staff, all the way down to the custodians. This will do as much to prepare you for the coming future as anything else.

Lastly, I have one question, coming from the clinical side of medicine and not the business side. Your statement, " but we would not choose to bear disproportionate costs of being innovative compared to other hospitals, and we would discourage talk of such extra innovation in our negotiations with insurers" confuses me a bit, since I am a concrete thinker. Can you give an example of something you would innovate carrying a disproportionate cost? And why would you "discourage" such talk with insurers - words are cheap?
I got lost on that one, thanks.

Charles Maynard said...

It is encouraging that BIDMC is willing to critically evaluate what it needs versus what it wants, and, depending on what such self-analysis determines, adjust its course, as necessary. For the sake of argument, we should assume that the first priority for BIDMC is to uncompromisingly provide the highest quality, most affordable health care that both maximizes patient safety and yields the best possible clinical outcomes. Given that assumption, strategically, as BIDMC identifies and prioritizes its goals, structural change in the payment system, while worth pursuing, should most realistically becomes a long-term goal.

In the short-term, BIDMC is faced with the realities of its size and position in the market place, the current terms of its managed care agreements (both language and reimbursement), increasing overhead costs, and decreasing revenue. The priority for BIDMC becomes, then, to strengthen its current position while maintaining a presence in the fight for structural change in the payment system – the one does not have to exclude the other, but the success of one can build upon the other.

Potential next steps could include:

 To increase its size and position in the market place (and defray its disproportionate costs of being innovative), BIDMC could consider affiliating with other like-minded facilities, partnering with local employers, and identifying and enhancing its “halo” service areas.
 To improve the terms of its managed care agreements and increase revenue, BIDMC could audit the terms of the top 3 commercial payors for compliance and provide notice of intent to re-enter negotiations.
 To decrease overhead costs, BIDMC could establish a minimally acceptable operating margin, engage in a cost-to-charge analysis and modify, as appropriate, streamline workflows, and establish a consistent source for replacing high turn-over nursing and ancillary service positions.

A working (optimistic) estimate is that 60% of BIDMC reimbursement is comprised of government programs, self pay, charity care, and bad debt. Your top 3 commercial payors most likely account for 80% of the remainder – not giving BIDMC much to work with when maximizing reimbursement. I would expect the break-out of inpatient (IP) versus outpatient (OP) to be 20% IP and 80% OP.

Commercial payors have known and forecast against this trend for the last 5-10 years and, as a result, negotiated for as many fixed price OP rates, as possible, having focused their efforts on ASC groupers/flat rates, laboratory fee schedule, radiology fee schedule/flat rates, ER flat rates, minimal annual chargemaster increases, and negligible annual rate escalators. Renegotiation of managed care terms should either eliminate or minimize these and any other reimbursement terms that are no longer financially feasible.

Additionally, to counter the oftentimes questionable reporting used by commercial payors when attempting to (not) reimburse pay-for-performance “bonuses,” BIDMC should establish their own utilization and quality audit and reporting capabilities as well as ensure acceptable performance targets.

By first strengthening its negotiating position both tactically (by engaging in strategic affiliations and partnerships) and financially (by maximizing reimbursement and minimizing inefficiencies), BIDMC is best able to achieve its longer-term goal of structural change in the payment system. This approach allows BIDMC to continue to be not only innovative but fiscally responsible.

PETER said...

THIS IS NOT SO HARD TO FIGURE OUT, NOT EVEN FOR A COUNTRY CARPENTER: BIDMC HAS ACCOMPLISHED A REMARKABLE FINANCIAL TURN AROUND. BIDMC TREATS GROWING NUMBERS OF PATIENTS TO SOME OF THE WORLD'S BEST MEDICAL CARE. BIDMC IS ON FIRM FINANCIAL FOOTING AND GROWING. SO...WHAT ARE YOU GOING TO FIX? SHOULDN'T MEDICAL PROFESSIONALS AND THEIR ADMINISTRATORS DETERMINE WHICH OPERATING MODELS TO FOLLOW...NOT THE BEAN COUNTERS?

Dave W. said...

Paul,

It is daring to ask a question of Strategy to the court of public opinion. It is a great discussion to be had and a difficult set of decisions to see with clarity in any type of crystal ball. However, I do believe the people who read your blog and keep pace with Healthcare policy, changes, and activism may indeed have some thoughts on the matter to help influence you - though the usefulness of our comments are yet to be determined, and mine should be no less suspect.

Although a call over to HBS, and more specifically to Michael Porter (Porter/Teisberg: Redefining Healthcare)and his lot could spark some interesting strategies and approaches, I believe BIDMC is already heading in the right direction and should continue down that path. The Cardiovascular Institute is one way to chip away at the enigmatic way in which Healthcare has been delivered in the past, and the move towards coordinated, patient-centric and condition specific approaches carved out and piloted in the current system are a recipe for success. Continuing to differentiate BIDMC within the pack will lead to a better bottom line, provided the changes that are occuring fall in line with patient-centric, value-driven (not necessarily always 'cost reducing') delivery of care.


There may be short term tactical advantages to keeping the status quo in terms of reimbursement plans, and there are not always immediate returns (ROI) in the current system for providing higher value but for lower cost care. However, short term tactical approaches may limit the upward opportunities that could start to be captalized on today.

Although I would not suggest abandoning the price controls in place now (strong negotiating power with Partners and the Payors), moving towards the more transparent patient centric care of the future would behoove us all (Patients and Provider Organizations). If BIDMC continues to increase transparancy in terms of outcomes on procedures then the value/price paradigm can begin to take shape. If BIDMC reduces the complexity/volume of procedures required but can demonstrate that overall care over the lifetime of a patient has improved (i.e. with less care needed) then value will drive increased volume to your organization. Most patients (and payors) would want to choose the route of care that keeps them healthiest, with the least amount of services needed. (i.e. who likes spending 2 weeks in a Hospital as a patient??)

If that equates to higher initial surgical costs, or a different course of care that can be proven to be more beneficial, then we're on the right track. Sacrificing the revenues of increased procedural volume of unnecessary or defensive medicine, will result in more overall patient volume and hopefully drive to more innovative ways of improving the care cycle for specific diseases.


Without first movers such as your institution, we will continue in the quagmire of "he said/she said" with no organization willing to proactively move the market forward and volunteer results in order to improve the accuracy of them over time. If there is no baseline to compare from, there is no way to compare providers on anything except word of mouth, advertising, and general surveys. (Did you see the billboard heading into Boston claiming ER wait times of less than 15 minutes? Does that mean more efficient or that no one in the 'know' would ever go there?)


If industry moves too slow, legal regulations will follow (i.e. Legally mandated reporting of surgical/central/etc infection rates, as evidenced by pending legislation in NJ, PA, and Texas among others). Intermountain Healthcare in Utah and the quality improvement they have driven there is a great example of being able to improve the care while reducing overall costs to the system. With more of this type of data it is a lot easier to have those negotiations with the Health Insurance companies - but without the data to back it up, will be a difficult path to get down.


As BIDMC gains a better handle on their internal metrics, protocols, and procedures and is able to promote this in the marketplace, it will provide BIDMC with better leverage over the long term in having the correct reimbursement of associated costs come to you. It will be a tumultous time to get there, but sitting back now will only prove more harmful in the long run.


Lastly, as you get your internal house in order, you can actively recruit/partner with Provider groups and institutions that covet the same qualities that BIDMC is and make quality/data reporting and certain standards required to participate in the BIDMC networks.

This will become your competitive advantage.

Best Luck and Regards,
Dave W.

Paul Griffiths said...

Hi Paul,

In working with our clients across the US, this is an issue we grapple with a lot. I'll try and state my experience first and my opinion second.

It's good to remember the modern hospital predates insurance -- as far as I understand it, hospitals began as means to attract doctors to a community and insurance started to rally a community to take care of one of its own. In essence, both systems were designed to provide benefits for those included in their communities.

Nationwide, I note a general 45-min drive rule: no matter how urban or rural the hospital, it's hard to run a good emergency room and PCP practice more than about 45 minutes drive from patients. (For a dialysis patient, you can bet drive-time is a major consideration for treatment.)

A rising trend in healthcare is patients' willingness to travel for the "best" care. Now, what that means may vary from patient to patient, but as more healthcare is elective or interventional and as access to information about competing hospitals increases and as healthcare insurers try to influence patient choice, a funny thing happens: traditional geographic service barriers erode. Patients who have access to why BIDMC might be better than the facility they are nearest, might consider making the trip to Boston.

So, for BIDMC, patients coming from the Cape is a good thing -- you're able to extend your marketing and brand beyond what you could do previously.

The cost of indigent care, however, is centralized around that geographic barrier -- it won't move. Since hospital systems must bare this cost, these well-reimbursed, elective procedures are precious -- those hospitals on the Cape don't want to lose patients to BIDMC. Instead, they try to establish the same programs, to capitalize on their proximity.

About five specialties seem to keep most hospitals in the black: heart, cancer, neuro, ortho, and some combination of labor and delivery or infertility treatments. If this is true, all hospitals are competing on the same product line -- differentiation in the minds of the incoming patient becomes an absolute requirement. (The reason, again, why you'd walk an extra block for Starbucks.)

That said, here's my opinion: there's plenty of room for running your hospital a different way. There's no reason, for example, checking into a hospital for an elective procedure can't be as simple as checking into a hotel. Even if I choose to stay, for example, at Budget Suites, I can provide all my information ahead of time... well, you get the picture. But this does take leadership, innovation, and a desire to change.

I will tell you that my wife and I had both of our kids at BIDMC for three specific reasons: we thought the nurses were much happier to be working there (and it showed), we had a friend recommend an OBGYN to us, and we switched insurance plans.

Can you influence more people like me to seek elective care at BIDMC? You bet. And I'd be happy, personally, to tell you my opinion as to how, if you're interested. After all, it's what we do at MedTouch. (And, I hope, we're much more cost-effective than Michael Porter, though I am a fan.)

Best of luck,

Paul Griffiths
CEO
MedTouch
pgriffiths[at]medtouch.com

Richard Wittrup said...

1. Your strategic plan should be based on things you can do, not on things you depend on others to do (like paying for quality).

2. I can think of two possibilities for turning superior quality and low cost into a competitive advantage.

3. In the case of superior quality, if you believe that BIDMC is generating superior outcomes in some particular field (like heart surgery), you could so claim in your advertising, quoting the figures that cause you to believe you are better than the competition. Your competitors would complain about that, but they would be on the defensive. You also run the risk that your competition would produce better numbers, but I’m inclined to believe they are not as good as everybody thinks they are.

4. As to lower cost, the opportunity lies in the field of managed care. That is not so much a matter of reducing unit cost as of one of really managing care so as to reduce the cost per case. But if BIDMC could learn to do that, it could become attractive to managed care programs like Medicare Advantage and would have leverage in negotiating rates with them.

Richard Wittrup

Anonymous said...

This is an outstanding discussion, abnd very educational. I have sent this link to the business correspondent of the Washington Post (where I, and - get it? - Congress, live). I suggest someone send it to the Boston Globe. These issues and discussion desperately need to get into the public sphere.

Andrew Dreyfus said...

Paul:

Strategic planning looks to the future, and my advice would be to plan on a future where health care delivery is based on measured, not reputational, value. I believe that BIDMC and other hospitals and physician groups should prepare for a world where payments are based on not on volume and intensity, but on mutually agreed upon measures of efficiency and quality.

Why? The growth of health spending is unsustainable to those paying the bills: employers, individuals, and government. So what to do?

We must begin by targeting the excess spending in our fragmented delivery and financing system. Some of this spending relates to the complexity of our insurance system, and as payers we are working to address that.

Experts tell us that the greatest opportunity to moderate the growth in health spending is by making care safer and more effective, thereby eliminating what the Institute of Medicine and others describe as spending on care that has little or no medical value, and in many cases, actually harms patients.

For example, hospitals across the country have had great success improving outcomes and reducing costs by targeting infection rates. On a larger scale, the federal demonstration project with the Premier hospitals showed that the institutions with the highest performance on quality measures were also more efficient.

So, with costs rising at unsustainable rates, and growing evidence showing a connection between increased quality and reduced cost, I’d orient my strategic plan around payment reform in which private and public purchasers increasingly pay for the quality, not the quantity of services.

Andrew Dreyfus
Blue Cross Blue Shield of Massachusetts

Rural H Economist said...

1 - When all else fails, contemplate your mission, then determine how the strategic issues you are dealing with fit.

2 - The market does respond to quality. Just not in the same terms as you choose to define it. If your organization does not meet the quality threshold that is expected, your patients, physicians, and specialists will leave faster than you can spell p4p and you will be yet another one of the institutions that have closed or been subsumed.

3- Of course the insurance companies don’t care... duh.

Grady said...

Sorry for the punt, but the answer is “both”…

Your doubts about the low-cost/high-quality strategy are well-founded, given the absence of purchaser initiatives to reward lower cost or improved quality. The right strategy at least into the medium-term is to milk the current system and the pricing umbrella created by Partners. If the status quo will survive anywhere it will survive here, given the symbiotic relationship between academic medical centers and the overall MA economy as well as the wealth of MA relative to other states. Besides, if/when the backlash comes, Partners will bear the brunt…

That being said, as the underdog in the market, you have an opportunity (and better incentives) to prepare for a longer-term future where purchasers do reward cost and quality. Thinking like an underdog probably makes cultural change easier (see below), and getting lean now increases your ability to be disruptive when the time comes.

Increasing operating efficiency now also creates margin to reinvest in infrastructure and programs that consumers will value and that will benefit you in a more transparent/competitive future. This might include technology initiatives (PatientSite, Lotsa Helping Hands), service delivery innovation (why not compete on retail care a la MinuteClinic? How about wait-time guarantees in the ER or urgent care clinics? Turnaround time guarantees for outpatient procedures?), or better handoffs and care coordination among BIDMC-affiliated providers. All of these could make BIDMC a stronger consumer brand (and improve quality of care).

Best of luck…

leanne berge said...

Overall, I think your strategy is the best strategy you have. As Avis, you have to try harder to distinguish yourself, not with size, but with value. So, its then about how to best leverage the value. And that’s the hard part - self promotion, etc helps, as you wait for the bigger transparency movement to gain more traction (and I believe it eventually will). I don’t see a better alternative, e.g.. be less efficient, lesser quality and still not be Partners? How will that win? No, I think you know what you’re doing, so keep on doing it!

Anonymous said...

Easy for you to say, Mr. Dreyfus. Why should Levy be out front on this? You are the alpha dog. Are you promising to help his hospital have a better margin than they would otherwise get? That is the heart of Levy's problem. You talk about the long-term trend, but he's gotta get through the next few years first. Meanwhile, you send extra money to his competitors. It's like Blue Cross and Partners have a private deal going: "Let's not shake the boat. We'll let the little guys take the risks."

charlie baker said...

Wow - this is interesting. First of all, kudos to you, Paul, once again, for shaking the tree. And I appreciate the fact that Andrew and Leanne both put their names out there for those of us who already know who they are.

As one of the instigators of this discussion, I'd offer the following thoughts...
1) The health plans in this market - which is the only one I profess to know really well - do care about quality, and to the extent that we can, have tried to invest in it and pay for it. Admittedly, it's money on the margin, but it's been a place to start. More needs to be done.
2) Quality/price/value in health care that's defined by anyone other than an independent third party - like the Comm. of MA - is viewed with suspicion (Rural H's comment above is a good example). Plans and providers can use and incorporate publicly available data on cost and quality that's generated by someone else, but data we each originate is not usually well received.
3) The overall advice you're receiving across these posts is, I believe, correct. That unless you are the Alpha Dog in a market space, you have to use performance metrics to make your case - internally and externally. It's the same way for health plans. If it's all about size, brand, advertising budget and the like, it's more likely to be about the Alpha Dog than it is to be about Harvard Pilgrim. If it's about day-to-day performance, third party validation (we did get the highest JD Power scores in the nation), and measureable performance, then we have some chance to level the playing field. The same is true for BIDMC.
4) Andrew's right about public reporting and metrics, and probably payment, too. That day is coming. I just can't tell if it's next year, the year after, or ten years from now. But given how long it takes to implement big changes in health care, the best time to start on a reform agenda that's directionally correct is usually now.
5) There's a financial collision coming with Medicare - and maybe Medicaid, too - that will test us all. Again, I don't know if that's next year, five years or ten years from now, but it seems kind of inevitable. Having a real handle on your financial and operational position vis.a.vis. others when that time comes will help ensure some stability for your own organization through the crash.

Anonymous said...

Jeez, Charlie. You're just like Mr. Dreyfus. Levy's gotta make a business decision now. You guys are in the driver's seat. And you don't know whether he'll make more or less with the idea you are suggesting? Anon June 12, 8:44AM.

Anonymous said...

How about a flat rate per patient/doctor hour. (With penalties - mild or severe for for falling below some pre-established quality level.) PLUS a bonus for being the most effective in an area or specialty. Too bad patients don't pay something - until they get better, might get better faster. Too easy???

Anonymous said...

You know, not to be combative, but I have to agree somewhat with anon 3:49. The insurance company representatives in these comments seem to be taking a helpless posture, like all these things are out of their control and they are as much victims as anyone else. Or that they are perceived as bad guys and no one believes what they say (ref. Mr. Baker's #2)so why try.

I am not playing the favorite American game of finding someone to blame for any given problem, since personally I think our health care system is what we, Americans, wanted and therefore got - and the fact we can't afford it is related to why we have one of the lowest savings rates in the world. (e.g. "just because I can't afford something doesn't mean I can't have it anyway.")

But let's see someone step up to the plate and take some real action, otherwise known as putting your money where your mouth is.

Insurance companies, who are at least sharing the driver's seat with Medicare (yes, you are) need to transform themselves into something better resembling the patient advocates and disease management companies described in Michael Porter's book rather than just concentrating on the traditional insurance posture of risk avoidance. Or at least do SOMETHING transformative and disruptive. Don't just sit and collect the premiums, take a few minor incremental steps around the margins, and complain while you are making money.

Anonymous said...

boy, you really have got a million dollars worth of consulting advice ! I doubt if HBS could have done better.

Anonymous said...

Paul,

What about setting up a negotiating group with some of the other high quality/low cost providers not in the Partner's Network?

If you show insurance companies that they could/would save money at a facility (or multiple facilities) that can provide excellent care at lower costs, you may have a negotiating chip.
Size does not guarantee quality. With healthcare reimbursement transitioning to Pay-for-performance, size of network should be trumped by the quality of care provided by the hospitals within that network.

Paul Levy said...

Sorry, not legal under the antitrust laws.

Sachi said...

you might want to consider this report as you build your strategy
http://www.nehi.net/CMS/admin/cms/_uploads/docs/Boston%20Paradox%20-%20Full%20final%20report.pdf

Its pretty extensive and provides a good insight into the greater boston healthcare market, both present and future.

SFG said...

Merge with the other two academic medical centers? ;) You can call it 'Spouses' to pick up the anti-gay-marriage crowd. Oh wait, you're in Massachusetts.

What kind of antitrust regulator lets MGH and BWH merge I don't know (did the attorney general have a son in med school who suddenly got his first choice at MGH with lousy board scores and grades?), but now you're stuck. Hmmm. I actually think your current strategy of pointing up metrics like inhospital infections is a good one. Especially once VRSA finally shows up. The customer service initiative is also a nice idea; I'm sure there must be a fair deal of pompousness at Man's Greatest.

Still, I don't know what strategy you could employ that Partners couldn't just copy and do better with their greater resources.

charlie baker said...

All - read Reed Ablelson's story in today's New York Times and you'll understand why I think Massachusetts needs a funded, fully functioning Cost and Quality Council. There will be dialogue - public dialogue - in Pennsylvania about what people get for what they pay - driven by the public distribution of cost and quality information that's been collected and distributed by a third party. That's the best way to engage the public - and the provider community - on this issue.

Anonymous said...

Mr. Baker;
I read the article and it's interesting, but, like your idea for MA, is too narrow in scope. With patients going overseas for health care, we at least need data for the entire U.S. What about the patient who is trying to decide between some MA hospital and, say, the Cleveland Clinic for his rare condition requiring open heart surgery? Or what if you are that patient's insurer; wouldn't you like the data?

I recently picked up the following information referenced by another blog, regarding the AHRQ's request for feedback on a national quality data organization:

"ederal health care policy-makers have asked the health care community for feedback on an idea whose time has come, they believe: the creation of a formal organization to govern data on health care quality to make it more useful to health care researchers, planners and providers.

The Agency for Healthcare Research and Quality (AHRQ), which studies health care performance measurement, issued a request for information on creating the organization, which it is calling a “national health data stewardship entity” (NHDSE).

NHDSE would set national standards and offer guidance on sharing and aggregating data on health care quality and efficiency. It would be designed to be open and impartial in its decision-making, AHRQ said." (See www.govhealthit.com/article10298 for entire article.)

Oh, and this still doesn't mean your company couldn't decide to have a pilot project
to reimburse Boston hospitals based
on a measured outcome such as 30 day operative mortality on,
say, coronary artery bypass surgery. Do some thinking out of the box.