Strategy

Why is the large provider business model obsolescing?

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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

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Key questions for CEOs and their Boards

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Been there, done that, got the T-shirt.  Everybody who thinks they have their arms around EHR and healthcare reform, take one step forward……whoa, where are you going Sparky?

The questions below resulted from a round-table discussion I recently had  with six healthcare executives about EHR and healthcare reform. The topic we discussed was what questions should C-Level executives be prepared to answer and what questions should boards be asking. What do you think? Are their others you’d add?

Are we taking adequate advantage of stimulus funding to improve our readiness?

How is health care reform going to impact our business and when?

Are we doing enough to be ready to succeed in an environment where we get paid for outcomes rather than inputs?

Are we ready to comply with Federal policies for Electronic Health Record reporting and sharing?

Are we achieving our own business improvement standards? Do we have the right standards?

Are we ready to use web 2.0 technologies to improve clinical outcomes for our clients?

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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How many Sigmas does it take to change a hospital?

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I wrote this in response to some comments I received on my piece in HospitalImpact.org.

I do not advocate assembly line medicine, especially at a hospital. I go out of my way to stay out of the healthcare business, the clinical side of healthcare, an area in which I have no background other than having been a patient.

If the hip replacement analogy was a poor choice–my bad. The point of the piece was not the hip replacement, rather the seemingly inability to answer basic business questions relating to how the business of healthcare is run.

I think there is a need for the independence and the je ne sais quoi nature of care. I just happen to think that the business of healthcare and the healthcare business can coexist in a more business-like manner. There are hospitals which get it right, and those which get it much less right.

Some of it has to do with costs, some with waste–wasted time, wasted opportunity, some with ineffectiveness, and some with planning. If one hospital can do X for thirty percent less than another, I think it is worth exploring what accounts for the delta. If another hospital can perform twenty percent more procedures with the same level of resources, that is worth investigating. There is no point keeping metrics unless one is willing to improve them.

I am not big on efficiency. In many cases, efficiency implies speed. It is possible to perform poor processes at a speed which will make your head spin. Lots of hospitals are toying with Lean. Lean works best with a valid set of processes. Without a valid set of processes–best processes–there are not enough Sigmas to justify the expense.

Then there are the cost cutting advocates. Cost cutting is a dead end strategy.  Every manager worth their salt can cut costs–less than one in a hundred can increase revenues. What do you do when there are no more costs to cut? Are you more effective, or net-net did you simply replace the brewed coffee with Folgers? Want to cut costs? Lock the doors. But that does not solve anything.

If none of these questions can be answered today, what happens in five years? New entrants will have gobbled up many profitable services and will be able to do so because they do not have “Big Box” overhead. Reform will have forced another business model on large providers. Payors and pharma will continue to battle for their share of each healthcare dollar.

I think hospitals can grab an even larger portion of that dollar, but I do not think they can do it without changing how they approach the business of healthcare.

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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Who should be able to answer these business questions?

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I wrote this piece for Hospital Impact, published April 22, 2010.  (Not the title I would have chosen.)

http://www.hospitalimpact.org/index.php/2010/04/22/planting_the_seed_why_assembly_line_medi?blog=1&c=1&page=1&more=1&title=planting_the_seed_why_assembly_line_medi&tb=1&pb=1&disp=posts

Now that spring is in full bloom, I’ve been doing a little gardening. My dogs are the anti-gardeners. No sooner do I turn my back after planting something, there they are, happily digging away and ceremoniously digging it up. I don’t know if that’s because they don’t like the particular plant, or just happen to disagree with where I planted it.

Today I discovered the youngest dog uprooted a plant and replaced it with a Reece’s Peanut Butter Cup. Perhaps she wanted to grow a candy tree.

One thing that always confuses me about gardening is this: When I plant a one-gallon shrub, I dig a two-gallon hole. I place the gallon shrub in the two-gallon hole and proceed to fill the remaining one gallon hole with the two gallons of dirt lying next to it. Without fail, there is never enough dirt to fill the hole. Perhaps you can tell me what I am doing wrong.

Here is another area of confusion for me: When you walk or are wheeled into a hospital, neither you nor anyone else knows the answer to anything.

That is astonishing. Nobody can tell you:

* With whom you will interact.
* How long you will stay.
* What will happen to you.
* How it will happen to you.
* When it will happen to you.
* Who will be doing the happening.
* Exactly when it will happen.
* Whether it will need to happen again.
* What it will cost.
* What you will be charged.
* What will be covered.
* How much you will owe.

I am stupefied. How can anyone run a business like this? My daughter knows what her lemonade stand costs per cup. Wendy’s knows the cost of a bag of fries and a large Frosty. Porsche knows the cost of a Cabriolet, the cost of the shift knob, when the wheels will arrive at the factory, when they will be placed on the car, who will build it, who will inspect it, and who will sell it. They can tell you exactly who will touch the car, when they will touch it, and what those people will do to it.

The only thing anyone at a hospital may be able to tell you is whether HBO is billed separately. If I wanted to fly into space with the Russians, I would know the answer to each of those questions. The cost, for example: $50 million.

Why can’t a hospital do this? Because it doesn’t know the answers. It is not because anyone is keeping this information a secret–it’s because they really don’t know. The truly strange thing is that they seem to be okay with not knowing.

Recently, I reconnected with a good friend whom I haven’t seen in years. He is the vice president of finance for a large hospital. He used to be an accountant–a very detailed and precise profession, unless you’re one of the guys who used to do Enron’s books. (The only thing I remember about accounting is that debits are by the window and credits are by the door–if I’m in the wrong room, I’m at a total loss.) This business must drive him nuts!

And so I’ve been wondering; would hospitals be more profitable if:

* They had a P&L by patient?
* They had a P&L per procedure?
* The steps for the same procedure, say a hip replacement, were identical each time?
* They had answers to any of the questions you read above?

Of course they would!

Some areas of healthcare already discovered this tautology–Lasik, endoscopy, the Minute Clinic. Assembly-line medicine. Some people say those words with an expression on their face as though they’d just found a hair in their pasta. The office of my Lasik surgeon looked more impressive than the lobby of my Hyde Park hotel. It may leave a bad taste in the mouth of some, but for others, they are laughing all the way to the bank.

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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I’d hate to be thought of as superfluous

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If you and I agreed on everything, one of us wouldn’t be needed.

Of the many special things associated with growing up in this country, one is held dearly by every American eight-year old male who owned a flashlight and an AM transistor radio with an earplug. During those long hot summer nights when the adults sat on the back stoop nursing a bottle of Carling and waiting for their window air conditioners to suck out enough of the heat to make the inside of the house bearable, thousands of boys across the country lay under their bed covers, with a flimsy plastic earplug dangling from their ear as they continued to turn the dial to tune in the lone radio station covering the home team. In spite of the static, they faithfully kept score for their favorite baseball team in the back of their black and white Composition notebook.

The scorecard was homemade, carefully drafted using a pencil and something relatively straight to draw the lines that separated each of the nine innings. Unlike today, when the concept of team has given way to the concept of personnel whose loyalty lies with the highest bidder—free agents, the lineup for the home team rarely changed by more than a player, the pitcher, and had been mostly the same for years.

My team was the Baltimore Orioles. Their team pennant hung on my wall, a team photo was on my dresser along with my membership card to the Junior Orioles. Under the blanket with me was my taped-up shoe box containing my collection of baseball trading cards, sorted by team and held together by rubber bands I had removed from the Baltimore Sun. A few hundred stale sticks of the pink powdered bubble gum that came with each five-pack of cards was stacked neatly in one end of the box. The cards for the opposing team were spread before me so I could get the lineup and study their batting statistics.

What made me think of this was that yesterday my son and I went to see a minor league game. Although the grass was just as green, and the hot dogs smelled the same, nothing was the same. Still, it beat a stick in the eye. Things change. Baseball changed, and nobody conferred with me before changing it. I didn’t see a single person keeping a scorecard, let alone a dad teaching his son or daughter how to keep it. The only constant throughout the game was the commercialization, to the point where it made it difficult to simply follow the game.

That’s progress. Or maybe not. Some progress is good. Some progress doesn’t exist even though everybody around it believes that it does. Buying technology doesn’t in and of itself confer progress, it simply means you bought more technology. For those who are so fond of metrics, look up some ten-year old figures and see. See if patient satisfaction has increased. Still not convinced? Add up all the money you’ve spent on improvements and technology during those ten years and divide it by the percentage of decrease or increase of any decent metric. Was it worth it? I bet not.

Ray, people will come Ray. They’ll come to Iowa for reasons they can’t even fathom. They’ll turn up your driveway not knowing for sure why they’re doing it. They’ll arrive at your door as innocent as children, longing for the past. Of course, we won’t mind if you look around, you’ll say. It’s only $20 per person. They’ll pass over the money without even thinking about it: for it is money they have and peace they lack. And they’ll walk out to the bleachers; sit in shirtsleeves on a perfect afternoon. They’ll find they have reserved seats somewhere along one of the baselines, where they sat when they were children and cheered their heroes. And they’ll watch the game and it’ll be as if they dipped themselves in magic waters. The memories will be so thick they’ll have to brush them away from their faces. People will come Ray. The one constant through all the years, Ray, has been baseball. America has rolled by like an army of steamrollers. It has been erased like a blackboard, rebuilt and erased again. But baseball has marked the time. This field, this game: it’s a part of our past, Ray. It reminds of us of all that once was good and it could be again. Oh… people will come Ray. People will most definitely come.
-Terrance Mann in the movie, “Field of Dreams”

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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The Spandex Insecurity—the Ego has Landed

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Now before you get all upset about the sexist picture, at least read a little bit of this to see why I selected it. Yesterday morning, five miles into my run, I was feeling pretty good about myself. I had passed seven runners, had a nice comfortable rhythm, no insurmountable aches, and Crosby Stills & Nash banging away on my MP3. I don’t like being passed—never have. Some people say I’m competitive. They say other things too, but this is a family show.

I’m a mile away from my car when I see a slight blurring movement out of the corner of my left eye. A second later I am passed by a young woman wearing a blue and yellow, midriff revealing spandex contraption. Her abs are tight enough that I could have bounced a quarter off of them. She is pushing twins in an ergonomic stroller that looked like it was designed by the same people who designed the Big Wheel. I stared at her long enough to notice that not only was she not sweating, she didn’t even appear winded. She returned my glance with a smile that seemed to suggest that someone my age should consider doing something less strenuous—like chess. Game, set, match.

Having recovered nicely from yesterday’s ego deflation, today at the gym I decide to work out on the Stairmaster, the one built like a step escalator. I place my book on the reading stand, slip on my readers—so much for the Lasik surgery, and start to climb.

Five minutes into my climb, a spandex clad woman chipper enough to be the Stepford twin of the girl I encountered on my run mounts the adjoining Stairmaster. We exchange pleasantries, she asks what I’m reading, and we return to our respective workouts. The first thing I do is to toss my readers into my running bag. I steal a glance at the settings on her machine and am encouraged that my METS reading is higher than hers, even though I have no idea whether that is good or bad.

Fifteen minutes, twenty minutes. I am thirsty, and water is dripping off me like I had just showered with one of Kohler’s full body shower fixtures. I want to take a drink and I want to towel off, but I will not be the first to show weakness. Sooner or later she will need a drink. I can hold out, I tell myself. Twenty-five minutes—she breaks. I wait another two minutes before drinking, just to show her I really didn’t need it.
She eyeballs me. Game on. She cranks up her steps per minute to equal mine. Our steps are in synch. I remove my hands from the support bars as a sign that I don’t need the support. Without turning my head, I can see that she’s noticed. She makes a call from her cell to demonstrate that she has the stamina to exercise and talk.

When she hangs up I ask her how long she usually does this machine—we are approaching forty minutes and I am losing feeling in my legs. She casually replies that she does it until she’s tires, indicating she’s got a lot left in her. I tell her I lifted for an hour before I started; she gives me a look to suggest she’s not buying that. I add another ten steps a minute to my pace. She matches me step for step.

Fifty minutes. I’m done toying with her. I tell Spandex I’m not stopping until she does. She simply smiles. Her phone rings and she pauses her machine—be still my heart—and talks for a few minutes. I secretly scale down my pace, placing my towel over the readout hoping she won’t notice. She steps down from the machine. My muscles are screaming for me to quit, but I don’t until I see that she’s left the gym.

Victory at any cost. What’s the point? For what was lost, for what was gained (McKendree Spring). Men and women. Customers and companies. Most parties will deny they are competing, yet neither will yield. The customer is always right. Turns out it makes a better bumper sticker than it does a business philosophy. Nobody’s business policies reflect that attitude. If anything, were you to listen to what CSRs are instructed to do for the callers and compare that with what they are instructed not to do for the callers, it’s clear that their mandate is to minimize the negative impact to the firm, without regard to the negative impact to the customer. Remember the last time you tried to dispute an insurance claim?

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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How daughters relate to EHR

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The other night as I’m sitting on a hard bleacher watching my seven-year-olds baseball practice I noticed the mom sitting next to me looking a little forlorn. Being naturally inquisitive, I asked if everything was okay.

“I lost his glove,” she replied.

Noticing a glove on her son’s hand, she saw my look of confusion. “Not his. My husband’s. I had it with me last Thursday, and I left it here.”

“I don’t suppose this was a new glove. Judging by the look on your face I’d say this was his favorite glove; thirty years old, supple, broken in, fold flat as a sheet of paper.”

“Twenty-five years,” she corrected as she lowered her eyes.

“It’s rained the last three days,” I told her, which caused her to grimace even more. Having nothing better to do, I flayed her emotions. “I bet that glove meant the world to him. He probably planned on giving it to your son in a few years. The glove probably reminds him of some of the big events in his life, every scar, each stain on the leather, points to something important. You know, if it was outside for a few days, the field mice will have chewed on the leather.”

She brushed away a tear, and headed to the lost and found.

“Any luck?” She shook her head in despair. “In some countries, if a wife does something life that, the husband can sever the relationship, literally,” I said as I made a slashing motion with my hand. She made the briefest of smiles. At least she knew I was pulling her lariat. Reeling her in, I continued.

“You’re not thinking of spending the night at home, are you? If you are, you should at least call someone and let them know of your plans. He’ll heal over time,” I told her. “But he won’t forget it. Twenty years from now the two of you will be watching something on TV, and something will remind him of the glove YOU lost.”

Fast forward to last night. My daughter and I are getting out of the car so I can coach her and her softball team in the playoff game.

“Is your glove in the trunk?” I asked. This is after I spent several minutes grilling her at home about whether she had everything she needed for her game.

“I hope so,” she said shamelessly as I popped the trunk for her. “You hope so?” I repeated with an edge in my voice.

“It’s not here Daddy.”

I left her with her friends and drove home to look for it. Ten minutes. Nothing. For some reason, I looked in the trunk. There it was. Death by 1,000 cuts.

Does it all come down to baseball gloves?  “I hope so.”  What kind of a response is that?

Will these EHR expenditures help? I hope so.

Can you confirm for me that user satisfaction won’t fall any further? I hope so.

Are we ready for the changes coming to the business model?  I hope so.

Do you think we should continue to employ you? I hope so.

Paul M. Roemer
Chief Imaginist, Healthcare IT Strategy

1475 Luna Drive, Downingtown, PA 19335
+1 (484) 885-6942

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The RHIO Answer

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It may be helpful as you read this to use your highlighter on the screen to accentuate the important parts or some white-out for the parts you don’t favor.

Do you ever kick an idea around, speaking about it, writing about it, until at some point you finally capture it in a way that makes sense to you?  That’s how I reason things through.  I write like I’m talking aloud and sometimes it lands in my lap.

That just happened to me as I was trying to get my arms around what it is about the concept of the RHIOs that has been bothering me.  Bear with me.  I was on LinkedIn emailing someone using the ‘send a message’ feature.  I was returning an email which she was returning which I had initiated.  The process works like this.  I get an email from LinkedIn telling me I have a message.  I go to LinkedInm read the message and send a reply via LinkedIn.  She receives an email indicating she has a message, goes to LinkedIn, and so forth and so on.

Do you see it?  In this scenario, what is the added value provided by LinkedIn?  Nothing.  It’s all hat and no cowboy.  LinkedIn serves simply as a pass through, contributing nothing.  I wrote in my message to her, “Send me your email address, I feel like I’m in my own RHIO.”

When is a RHIO not aRHIO?  When there’s no need for it.  Is there any functionality intended for the hundreds of RHIOs which couldn’t be dealt with at the N-HIN?  What do you think?

“Who moved my cheese?”

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Sometimes you find something that is too good to mess with.  The following comes from “Who Moved My Cheese” by Spenser Johnson.  It is the perfect allegory for healthcare.
Change Happens
They Keep Moving The Cheese
Anticipate Change
Get Ready For The Cheese To Move
Monitor Change
Smell The Cheese Often So You Know When It Is Getting Old
Adapt To Change Quickly
The Quicker You Let Go Of Old Cheese, The Sooner You Can Enjoy New Cheese
Change
Move With The Cheese
Enjoy Change!
Savor The Adventure And Enjoy The Taste Of New Cheese!
Be Ready To Change Quickly And Enjoy It Again & Again
They Keep Moving The Cheese.
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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We’re losing money, but making it up in volume.

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I wrote this in response to an article in modernhealthcare.com titled New doc payment system needed
I posted this question on a dozen healthcare Linked in groups; How Can Doctors and Hospitals Make Money in a Post-Reform, Health 2.0 World?  The reason for the question was to probe for ideas for a speech I am giving in May at ICSI.
My takeaway of the responses is that every approach seems to be triage.  I see the business of healthcare, as juxtaposed to the healthcare business (the clinical side) as a 0.2 business model.  Plus or minus variants of IT, the business continues to run in much the same manner it has for the last fifty years.

Analyzing the model, it appears appears to me to be similar to the pattern created by dropping a pebble into a pond–ever expanding circles, but circles none-the-less.  Sort of a fractal business model, each fractal differing only by size.

The business of healthcare could not be facing more fundamental changes–most of which are external, most of which are unknown.  This is especially troubling for an industry whose P&Ls more closely resemble those of GM than of Apple.
It is time to stop relying on the adages, “We don’t know where we are going but we are making really good time,” and, “We’re losing money but we are making it up in volume.”
Rule number one for change–executives must admit they have a busted business model.  Rule number two–executives cannot change Rule number one.”
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