My pre-mortem examination of the hospital business model

  • encyclopedias
  • newspapers
  • movie rentals
  • theaters
  • airlines
  • magazines
  • libraries
  • broadcast television
  • wireline phone companies
  • record companies
  • DEC
  • Xerox
  • department stores
  • SUN
  • H-P
  • GM
  • A&P
  • Circuit City
  • Most US hospitals

In his book, “How the Mighty Fall,” Jim Collins describes the path to a business failing.  His five phases are:

  1. Hubris born of success
  2. Undisciplined pursuit of more
  3. Denial of risk and peril
  4. Grasping for salvation
  5. Capitulation to irrelevance or death

To those, I add a sixth, right between 3 and 4, “Dumping Ballast.”

  1. Hubris born of success
  2. Undisciplined pursuit of more
  3. Denial of risk and peril
  4. Dumping ballast
  5. Grasping for salvation
  6. Capitulation to irrelevance or death

Dumping ballast is the elimination of key components to lighten the ship.  Perhaps you remember seeing the movie version of Jules Verne’s novel,  the Mysterious Island.  In it, prisoners of the Civil War escape in a hot air balloon.  The balloon is ravaged by storms and looks like it will go down in the sea.  To keep it aloft the crew tosses everything overboard, things they would need if they reached land.

I think most hospitals in the US are concurrently working on stages 3 and 4.  The first step is to quit denying that they have a problem.  The second step is to recognize that some of what they discarded will prove critical to their chances of survival.

What do you think?

saint Paul M. Roemer
Chief Imaginist, Healthcare IT Strategy

1475 Luna Drive, Downingtown, PA 19335
+1 (484) 885-6942
paulroemer@healthcareitstrategy.com

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Contact me: Google Talk/paulroemer Skype/paulroemer Google Wave/paulroemer

And now for something completely different

My new favorite toy is Prezi.com.  This prezi link is for a speech I am giving Tuesday at ICSI on what hospitals should do to increase their revenues.  For those expecting bullet points, this is the wrong place to look.

I welcome your feedback, especially since their is very little text.  I come from the school of wanting people to listen to what I saw, rather than read my slides–otherwise I don’t need to be there.  Besides, people don’t take notes at the movies, why should they during a talk.

http://prezi.com/ved_jyx95m_d/

saint Paul M. Roemer
Chief Imaginist, Healthcare IT Strategy

1475 Luna Drive, Downingtown, PA 19335
+1 (484) 885-6942
paulroemer@healthcareitstrategy.com

My profiles: LinkedInWordPressTwitterMeetupBlog RSS
Contact me: Google Talk/paulroemer Skype/paulroemer Google Wave/paulroemer

Why is the large provider business model obsolescing?

Margaret Thatcher said, “Anyone who finds themselves on public transport after the age of 26 must consider themselves a failure.” There’s probably some sort of corollary for anyone twice that age that spends part of every day writing to imaginary people on the web.

When I write I like to pick a side and stand by it instead of standing in the middle of the road where you can get run over by the traffic from both sides. Likewise, I don’t look for consensus around an idea. Consensus is the process of everyone abandoning their beliefs and principles and meeting in the middle. When was it decided that meeting in the middle is beneficial? So, achieving consensus about a problem is nothing more than that state of lukewarm affection one feels when one neither believes in nor objects to a proposition.

Having this approach to solving business problems tends to yield a high number of critics. I don’t mind critics; those are the same people who after seeing me walk across a swimming pool would say that my walking only proves that I can’t swim. I rather enjoy it when someone offers a decidedly personal attack on something I wrote if only because it means they can’t find a legitimate business principle on which to base their argument. I love the debate, and I don’t expect anyone to agree with me just because I say it is so.

In trying to promote a different way of looking at the large provider business model, I’ve learned that it’s not possible to lead from within the crowd. The “as-is” was created by history, by followers. The future will be created by someone who believes it can be done better. I believe firmly in the notion that improving the business model by building off the current one is like trying to cure a cold with leeches.

The approach that has been used to grow the business for the last fifty years is that the hospital is responsible for everything. And yet, who is responsible for the hospital? Who is accountable for the fact that the business model is obsolescing itself?  We have loads of new stuff—expensive stuff.  No other industry can tout new and improved better than healthcare.  However, in those industries new and improved means faster, smaller, cheaper–it means adding services to reach significantly more customers, not fewer.

Each new and improved procedure with its more costly overhead has application to a smaller percentage of the health population, thereby allocating that overhead across fewer patients.  In turn, that makes the low-margin services unprofitable.  Those services will be cut lose, picked up by new entrants with lower overhead.  Those entrants will make a good business out of services discarded by hospitals.  The cycle will repeat, as it has for decades.  The profitable new entrants will move up-market.

Is it a question of scale versus scope, or scale and scope?  What happens if instead of continuing to repeat the cycle, large healthcare providers were to invert it?  What makes them more relevant, adding the capability to perform a procedure used once a month or one used once an hour?  Which is more important to the future model, inpatient care or outpatient care?  I suggest that “in” or “out” will become irrelevant.

Those phone booths in the photo used to be the way to make public calls, now you can’t even find a booth.  Maybe some day someone will take a photo of a group of hospitals stacked next to each other in a vacant lot.

saint Paul M. Roemer
Chief Imaginist, Healthcare IT Strategy

1475 Luna Drive, Downingtown, PA 19335
+1 (484) 885-6942
paulroemer@healthcareitstrategy.com

My profiles: LinkedInWordPressTwitterMeetupBlog RSS
Contact me: Google Talk/paulroemer Skype/paulroemer Google Wave/paulroemer

Why do witches burn?

Some argue that skewed logic is better than none at all. I’m not some people. What is skewed logic? It’s drawing an errant conclusion from a set of facts. If A and B, then C. For example, in Monty Python and the Holy Grail, there is the discussion to deduce if a woman is a witch.
Why do witches burn?
Villager: Because they’re made of…..wood?
B: Goooood!
Other Villagers: oh yeah… oh….
B: So. How do we tell whether she is made of wood?
One Villager: Build a bridge out of ‘er!
B: Aah. But can you not also make bridges out of stone?
Villagers: oh yeah. oh. umm…
B: Does wood sink in water?
One Villager: No! No, no, it floats!
Other Villager: Throw her into the pond!
Villagers: yaaaaaa!
B: What also floats in water? …
King Arthur: A Duck!
Villagers: (in amazement) ooooooh!
B: exACTly!
B: (to a villager) So, *logically*…
Villager: If…she…weighs the same as a duck……she’s made of wood.
B: and therefore…
Villager: A Witch!
All Villagers: A WITCH!

Let’s depict this like a business problem.


There you have it. So campers, where could we possibly heading with this? Here’s where. We’re starting a hospital; THEREFORE we need an ENR.  Washington is giving away money; therefore we need an EHR.

If that logic was correct, if that logic was both necessary and sufficient how would we know it? One way is we would see a bunch of doctors running towards EHRs rather than away from them. The reason this logic is faulty is that the lifeblood of the EHR is about one thing—the records.

So, if the EHR is made of wood and weighs the same as a duck…

Should you listen to the voices in your head?

Well, for starters, if you don’t nobody else will.

Just because I’m paranoid, doesn’t mean the voices in my head aren’t real. What voices?  They don’t like it when I speak of them, so I am going to speak in parentheses so they do not hear me.)

Riding the in the car yesterday with my son, the radio was playing Barber’s adagio, a mournful and eerily melancholy piece. It has long been one of my favorites.  I tried to get my son to turn off his PSP long enough for him to try to develop an appreciation for it.

He asked me to tune the radio to what he calls ‘his’ station while I kept extolling the specific virtues of the adagio, of Barber, and of classical music in general. I intended to win him over to my way of thinking.

The phrases I used to bolster my opinion kept coming to me, although I knew not from where.  I soon reached the point where I knew that I was no longer speaking to him, but role playing the very same discussion I had had with my father when I was about the same age as my son. Déjà vu. I have become my father’s son. The voice in my head was my father’s and I was not even charging my father rent for the space.

Do you hear the voices? No, not those voices. The ones you hear at work when you realize that the person speaking to you is your other self. The same voice you hear when you go out after work with your friends and begin to talk shop. By the third glass of wine the conversation has shifted from swapping stories about the craziest patient to wondering aloud when the company is ever going to learn how to fix their business. By glass five, you’re fixing it for them, diagramming solutions on cocktail napkins.

A word of encouragement. Listen to the voices. I bet you’ve come up with some great ideas. They won’t do anyone any good locked up in your head. Let them out. Show someone who can do something about it what you wrote on the napkins.

What exactly is healthcare 2.0?

I tend to take a slightly different bent on Healthcare 2.0, a bent which does not intentionally tie to the notion of Internet 2.0, but rather to the notion of an industry desperately needing to reinvent itself.

A few definitions may bring some sense to the discussion. I find it helpful to distinguish the business of healthcare from the healthcare business. I think of the healthcare business as the clinical side, and the business of healthcare as what it takes to make dollars and sense of it all.

Although the healthcare business in the United States is world class in many areas, in many hospitals the business of healthcare is mired in a 0.2 business model. It is often run like a franchised fiefdom of duplicative and ineffective cost and revenue silos—I’m going to duck for a moment in case anyone disagrees strongly with me.

I’m back. This 0.2 business model is being forced into a 2.0 model whether it wants to go there or not. Whether it is capable of making the journey is debatable. The model is regulated, and is about to be reregulated—to what—nobody knows. What national leadership there is is busy waving the magic IT wand thinking that will facilitate the transition from the dark ages and support the business model of National Healthcare—which, by the way, has little if anything to do with the model providers need to run their business.

EHR, if done wrong will be nothing more than a multi-multi-million dollar scanner. Providers will indeed be paperless. However, paper is not the problem. The goal should not be the elimination of paper as though paper is a bad thing. If efficiency equates to speed, to doing something faster, the goal should not be efficiency. It is possible to streamline bad processes and do them faster.

To get to Healthcare 2.0 using my definition, to redefine the business of healthcare, providers must move towards being effective, towards solving business problems, eliminating waste and duplication, retaining doctors and patients, and running it like a real business.

My best – Paul

What are the risks of HIT and EHR?

It is refreshing to know that the voices I am hearing need not be my own.  When I try to summarize the issues for my own edification, I always circle back to the same few issues.

• No single person is both responsible and in authority regarding HIT and EHR. Provider-world pauses with each new pronouncement from Washington as though the missing EHR Dead Sea Scrolls had just been discovered in the reflecting pool.
• Those who implemented EHR did so without any idea that rules would be imposed after the fact.
• EHR is expected to serve two business models:

o Washington’s N x M patient/doctor connectivity effort
o A provider’s unique business objectives, none of which have anything to do with a patient in Atlanta being able to connect to a doctor in Anchorage.
• What model would providers be following if there were no Meaningful Use
• If the current EHR national rollout model was any good, providers would be racing to the front of the line to implement EHR instead of having to be offered rebates.
• The national rollout plan lacks viability for several reasons:

o No standards
o HIEs are each being developed in their own vacuum
o A horde of vendors whose mission does not tie to the national rollout or the providers’ business model and who have no incentive to adopt standards
o The requirements and dates for Meaningful Use will probably change once providers have tailored their systems to meet Stage 1
o The requirements for Stages 2 & 3, which may cost providers six zeroes preceded by some number greater than five, don’t exist.
o An ROI can’t be calculated on meeting Meaningful Use
o Both the likelihood and the impact of healthcare reform on HIT and EHR, just got vaguer by some order of magnitude.

I firmly believe the right EHR and CPOE will be great for hospitals. Providers will be better served by finding answers to the question, “What’s in it for me,” rather than, “What do they want me to do?” Unless of course, providers want them running their business.

What are the success factors for EHR?

I just arrived in-country—I was in Wisconsin for two weeks.  I’ve been to forty-seven states, and Wisconsin has to be one of the friendliest.

Anyway, let us begin.  Not long after graduating with an MBA from Vanderbilt, I returned to Vandy to interview job candidates.  With me, was my adult supervisor, the VP of human resources—a stunning older woman; about thirty-five.  At dinner, she invited me to select the wine.  Not wanting to appear the fool, and trying to control my fawning, I pretended to study carefully the wine list.  Not having a clue, I based my selection entirely on price.  I had little or no knowledge of the subject; nonetheless, I placed the order with all the cock-sureness of a third-grader reciting the alphabet.

A few moments later Wine-man returned with a bottle, angled it towards me, and stood as rigid as a lawn statue.  After a few seconds my adult paused and motioned my attention towards Wine-man.  I remained nonplussed.  “You are supposed to tell him that the bottle he is holding is the one you ordered.”

“He knows it is what I ordered, that is why he brought it.”  I thought they were toying with me.

A few seconds later there was a slight popping sound and then Wine-man placed the cork before me on my napkin in a manner similar to how Faberge must have delivered his fabled egg to Tsar Alexander III for his wife Empress Fedorovna.  They were both staring at me, not the Tsar and the Empress—Wine-man and my adult.  “You are supposed to smell the cork.”  And so I did.

“Now what?”

“If it smells bad, it means the wine may be bad.”

To which I replied, “This is the Opryland Hotel—have you seen the wine prices?  They don’t sell bad wine.”  She nudged me with her elbow.  I could tell I was wowing her.  I smelled the cork.  “It smells like a cork,” I whispered to Wine-man.  He smiled and poured a half inch of wine in my glass.  I thought he was still pulling my lariat.

I looked bemusedly at the mostly empty glass, held it out to him, and asked him if I could have some more—I was thirsty.  Rather than embarrass me further, with a slight nod of her head my adult instructed the Wine-man that my sommelier class was over—any further proof of my inadequacies would be of limited marginal value.  Any chance that we would have gone dancing later that evening was about as flat as the wine.  I should have ordered a beer.  I was good at beer.

For those who are still reading, if you are wondering if I am actually going to make a point, here it comes.  I’m not fond of segues, so don’t blink.

Sometimes, a little guidance is helpful—even if it has to come in the form of being led around like camel with a ring through its nose.  One of my on-line friends, a nurse who teaches nursing—seems like a good fit–asked me what are the success factors for EHR.

Often, what is important in a leader is having the knowledge and temerity to ask the right question.  In healthcare it appears that the number of executives with answers may exceed the number asking questions.  Value is often measured by scarcity.   Good questions, especially around EHR and Meaningful Use, seem to be in short supply.

Here’s my take on some of the critical success factors:

  • Adult supervision—this is not defined by the age on your driver’s license
  • Invest time to plan your EHR plan; 6-9 months for a fair sized hospital
  • Actual written requirements (an RFP) that comes from your business strategy
  • A written healthcare information technology plan
  • Invest more than half of your time and effort in work flow alignment, change management, and training.
  • Should your plan seek to meet Meaningful Use
    • By when
    • How
    • What drives your strategy—Washington or your business model

Pretty simple things.  The right things usually are—like knowing what to do with the wine cork.

How to improve EMR adoption-a guest blog

The well-written guest blog which follows is by Richard Hom, Public Policy Consultant, Richard Hom Consulting.  http://grandrounds4ods.com.  You can also find him on Twitter at grandrounds4ods.  Thanks Richard for contributing.

Medical providers across the country are grappling with many medical care issues. Of the many, one that has received much attention, thought and talk has been computerized electronic medical records (EMR).  Although not a novel idea, EMR use and adoption have regained center stage as economic stimulus funding from the Federal Government has been dangled as an added incentive.

The monetary incentive, though, has not overcome the resistance and hesitation that providers have toward EMRs.  More urgent problems that preclude EMR adoption dwindling reimbursement, rising malpractice premiums and an array of private and public regulatory issues that smother provider authority.  In this atmosphere of medical practice the promise of the benefits of EMR adoption has not outweighed the attention gained by the aforementioned issues.

If EMR adoption is to spread and embraced by the medical community, more tangible and direct benefits may be needed. For example, with EMR use, physician accountability is enhanced by legible and available documentation of patient care. Tying EMR use to malpractice premiums would be an attractive carrot, just as a non-smoker might benefit with health or automobile insurance.

Likewise, EMR use should benefit a physician’s patients by easing information sharing.  Therefore, an initiative to lessen the burden of eligibility of benefits or referrals to specialists would be welcomed.

Finally, electronic presentation of Explanation of Medical Benefit forms (EOMBs), rejections and electronic resubmission should further invite greater EMR participation. In this one area alone, the blizzard of paper correspondence surrounding reimbursement is a significant problem area that may be lessened with EMRs and practice management software.

In summary, a cash incentive may attract medical providers, but only those providers who already may have successful office workflow processes and may require only a cash incentive. For the remaining, though, relief from the paper flow, claims submission,and  malpractice premiums may be the carrot that will move more providers to EMR adoption.

Should you consider avoiding Meaningful Use?

Where were we?

There are a few things stuck in my craw—imagine that.  One is Meaningful Use.  The other is also Meaningful Use.  Permit me to address these one at a time.  I’ll start with Meaningful Use.

Are you kidding me?  Who are these people?  To disguise that of whom I write, let’s invent some aliases, Dr. B and Dr. H.  For all the meetings, all the pronouncements, you’d think sooner or later one of them would state, “There is no way any of this makes sense.”

Why do you say that Paul?  May I?   What if you threw a party and nobody came?  What if you held a $40 billion lottery and nobody won?  Here are the rules.  A handful of people less than seven feet tall decide to buy homes in a community.  All the homes have door openings that are seven feet high.  New people move into the community.  One day the homeowner’s association mandates that all homeowners must build homes with door openings that are seven feet high.  Most homeowners ignore the mandate.  The association then decides to offer the homeowners rebates if they comply with the mandate, and penalize them if they don’t.  Most of the homeowners ignore the mandate.

Indifferent to the fact that their mandate isn’t working, the association decides to add new rules, rules that affect the homeowners who already built homes with seven foot tall doors, and those who didn’t.  One of the rules is that the seven foot tall doors must now be eight feet tall; another mandates that all roofs must be in the basement.  Homeowners who comply will win the lottery.  Those who don’t won’t.

How does the lottery pay out?  It doesn’t.  They made it impossible for anyone to get the money.   Suppose you gave a lottery and nobody won?  Suppose you made it so obtuse that nobody cared if they won.

That’s where I think we are with EHR.  The smart healthcare providers are asking themselves the question, “What if we make a business decision not to meet the Meaningful Use requirements?”  “What if we decide what is and isn’t meaningful.”

There are 2 “business models” in play—the national healthcare model, and the model your firm follows—they have different goals.  I asked my client, “When you made your selection of EHR, did you have any hint that the government was going to create rules to manage what it does?”  I assume their answer is a lot like yours—“Not at all.  We were worried about FDA oversight, but nothing like the stimulus.  The PQRI was available as an incentive to use ePrescribing, but really small potatoes.”

The national healthcare model under development will create an infrastructure such that every patient can be connected to each physician via a series of HIEs and the N-HIN.  To get there, they need you—they can’t do it without you.  What do they need from you?  Participation.  Participation by having and EHR, ePrescribing, and CPOE.

Even if it were to work, what’s in it for you?  Very little.  They know that—that’s why there are payments and penalties.  Most hospitals like the idea of implementing EHR.  Given the choice those same hospital executives would choose to listen to an entire Celine Dion CD if it would allow them to skip implementing CPOE.

If there are not many good business reasons to meet Meaningful Use, why should you build an entire strategy around it?  You wouldn’t paint your hospital pink simply because Washington said you should, although given a choice between the two ideas, pink sounds pretty good.  Let’s say you take them up on meeting Meaningful Use.  You build your strategy, drop current initiatives, implement these systems, train your people—then what?  Indeed.  What happens if the government changes its mind?  Moves the dates, changes the requirements?

In order to go for Meaningful Use you must be able to suspend your ability to think rationally.  If you do not think the HIE and N-HIN model will work—I have not met anyone who thinks it will—why even give Meaningful Use another thought.

My client is a group of 14 hospitals—they could get millions of ARRA dollars.  If you don’t have more than one hospital, your ARRA rebate will be much less.  They have already installed EHR and CPOE.  To get the millions they have to spend millions.  What happens if they spend it and the feds change their direction?  What then?  What do they do with the eight or nine figures of systems they build to follow Washington’s lead?  Take them out?  Modify them?  What happens to their business model as a result of all of this “leadership” from the ONC?

What should you do?  That’s up to you.  Here’s an idea or two.  First, ask yourself what your EHR/HIT strategy would be if there was no ARRA money.  (You do have a written HIT strategy, don’t you?)  Second, decide if you think that the current national roll out strategy will work.  Third, figure out what you won’t be able to do if you have to invest even more time and money meeting Meaningful Use.  Next, add up all the money it will cost you to meet their requirements and compare that to what they will pay you.  I bet the costs are more than the rebate.

I think Meaningful Use won’t exist in 3-5 years.  I think the N-HIN won’t be available by then either.

Here’s the real kicker for hospitals that have more than two beds.  If you have not yet selected your EHR vendor you shouldn’t even be thinking about meeting Meaningful Use for the first year because you can’t there in the time available to you.  That take’s the pressure off, doesn’t it.