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” hospital business model (how the hospital is run) was created over time, by followers. I may be wrong, but the most innovative alteration I have seen to the hospital business model in the last decade has been the addition of mini Starbucks, and the revamping of their lobbies to make hospitals look more like hotels.  The future will be created by someone who believes the strategy of how hospitals run 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 services 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.

Healthcare IT: A premonition

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As I walked through the offices of one of my clients last week I kept passing errant lines of code that had fallen to the floor throughout the hospital.  Each time I passed one I retrieved it and dropped it in a folder.  Eating lunch in the cafeteria, I laid the lines of code in front of me on the café table—HIE, EHR, Meaningful Use, HIPAA, and one bit of code on Accountable Care Organizations—not sure how that one got in there; probably written by a healthcare futurist with a pet unicorn.

I was reminded of the time a purchased an unassembled gas grill—why pay an extra hundred dollars to have someone connect Part A to Part B?  As I learned, the reason to pay the hundred dollars is so that at the end of the process you are not left with parts K and Q and no idea where they go.  The grill started just fine.  Apparently, parts K and Q had a lot do with turning off the grill—the lid melted seven years ago, and the grill has served as our home’s eternal flame ever since.

I dare say there are many organizations whose systems are missing important lines of code.  Maybe that is why more than half of the large providers will soon discover their EHR functions more like a multi-million dollar scanner than an EHR.

A major problem for healthcare information technology (HIT) is the disruption it has brought upon itself.  If we are honest about HIT, it was not working all that well before we started disrupting it.  EHR was not a natural fit on the prior architecture.  To make EHR fit required that bits of the old be cut away and new applications had to be hammered and welded into place.  Many chasing Meaningful Use have to take short cuts to meet it.  Getting something to fit is not the same as getting something to function.

Once the EHR is in place, out come the hammers to get EHR to meet Meaningful Use.  The code and interfaces are chiseled away, and functionality is sacrificed.  Now leaders are trying to figure out what must be sacrificed to get ACOs hammered into place.

The old architecture was never architected to support an EHR or an ACO.  That means that many, many hospitals are a few months or one or two years away from having to rethink their EHR strategy.  The short cuts and dropped lines of code will have degraded the EHR’s performance to such an extent that it will have to be replaced.

The next trend in HIT will not be ACOs.  Instead it will be large teams of outside consultants swarming like locusts to provide disaster recovery on hundred million dollar EHRs.

Hospital Business Strategy–One size fits none

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One size fits none, or is it one.  The patient rarely buys what the hospital is selling.  The hospital sells a hip replacement—the patient is buying the ability to play golf for ten more years.

Clayton Christensen conducted a study which showed that seventy percent of today’s patients would have been in the ICU thirty years ago, and seventy percent of the patients in today’s ICUs would have died thirty years ago.  The question the study seemed to leave unaddressed is who is now caring for those patients who were not in the ICU and who didn’t die.  Wanna’ bet most have been outsourced to non-hospital care givers?

There was a successful business model in that group of patients when they were treated at the hospital thirty years ago.  There is an even larger business model today for that same set of patients; only it is no longer owned by the hospital.  Neither are the associated revenues.

Hospitals have more high-end capability—and cost—than the average patient will utilize—sort of an 80/20 rule on steroids.  Each successive clinical breakthrough enables the hospital to solve a problem for a mere handful of patients; one that will have no application to 99% of patients in their service area.

What if instead of continuing to expand the reach for the stars model ad nauseam, the hospital flipped the model on its side and catered to the ninety-nine percent?  What if the business model centered on serving mainstream customers?  But then who or what would handle the other one percent of the cases?  An autonomous business unit could be established to serve those cases, or they could be outsourced to a group which did.

Should you meet Meaningful Use-a PowerPoint

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Here is the presentation on whether one should meet Meaningful Use I am giving in May at New England’s HFMA conference. Please let me know what you think.  http://ow.ly/4Joet

“Our Lady of Perpetual Implementations”

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“There is no use trying,” said Alice;
“one can’t believe impossible things.”
“I dare say you haven’t had much practice,” said the Queen.
“When I was your age, I always did it for half an hour a day.
Why, sometimes I’ve believed as many as
six impossible things before breakfast.”

There are a number of people who would have you believe impossible things.  I dare say some already have.  Such as?

“My EHR is certifiable.”

“They told me it will pass meaningful use.”

“We’re not responsible for Interoperability; that happens at the Rhio.”

“It doesn’t matter what comes out of the reform effort, this EHR will handle it.”

“We don’t have to worry about our workflow, this system has its own.”

Sometimes it’s best not to follow the crowd—scores of like-thinking individuals following the EHR direction they’ve been given by vendors and Washington.  Why did you select that package—because somebody at The Hospital of Perpetual Implementations did?

There is merit in asking, is your organization guilty of drinking the Kool Aid?  Please don’t mistake my purpose in writing.  There are many benefits available to those who implement an EHR.  My point is is that there will be many more benefits to those who select the right system, to those who know what business problems they expect to address, to those who eliminate redundant business functions, and those who implement proper change management controls.

Fitting Your Square Hospital into a Round ACO Hole

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(reposted from this week’s healthsystemcio.com)

I have spent time over the past few weeks speaking with healthcare executives to get their perspective on ACOs, also known as Attorneys and Consultants Opportunities. For the most part, people are in general agreement when it comes to describing the function of an ACO.

So much for the good news. Where the process breaks down is when those same executives were asked to describe what approach is required to enable an ACO to work in a generic hospital.

While there are many people claiming to know the in’s and out’s of ACOs, we all know there is not a lot of expertise regarding how to implement an ACO. There are not a lot of people who have “Been there, done that, got the T-shirt.”

When faced with finding a solution to a problem which I have no way to solve, I find it helpful to redefine the problem into one which I do know how to solve. If I take this approach with ACOs, it helps me to redefine it for what it is—a big, ugly program—a BUP. The good news is that I know what works and what does not work when it comes to dealing with BUPs.

There are two ways to tackle a BUP. One way is to study your organization and figure out how to get the program to work within your hospital’s framework. The other way is to figure out what the program needs to deliver, and then determine what needs to happen to the framework to enable the program to work.

I liken the two approaches to fitting puzzle pieces together. Let us define Puzzle A as the hospital’s framework, and Puzzle B as the ACO program (not an IT program). Under the first approach, you remove pieces from Puzzle B until you get it to fit. The problem with this approach is that by the time you finally get it to fit Puzzle B, the ACO no longer resembles an ACO.

Using the other approach — figuring what pieces must be removed from Puzzle A in order for Puzzle B, the ACO, to remain whole — provides the best chance of creating a viable ACO. One may wish to argue against this approach by saying that to create the ACO requires dismantling part of the hospital’s framework.

Indeed it does, but maybe that is not as bad as it sounds.

Many EHRs were implemented in such a way as to dismantle a lot of their functionality in order to get the EHR to fit the hospital’s framework. This “lesser” EHR is now part of that disrupted framework and has made it even more disrupted.

Perhaps the time has come to think about reengineering the framework before sacrificing the functionality of yet another program.

When your ACO gives you lemons—make Lemonade

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This weekend the temperature warmed enough to cause the neighborhood children to set up the season’s first lemonade stand.  One of the moms suggested the stand be set up in the corner of the cul-de-sac.  By definition, a cul-de-sac is roundish, as in no corners.  When I laughingly questioned the mom as to which corner of the round cul-de-sac she had in mind, she failed to see my humor.

Each of the children brought different supplies; lemons, paper cups, a table, a hand-painted sign, water, and pre-mixed lemonade.

By closing time they had collected twenty-one dollars and seventeen cents.  They met at our house to divide the spoils of their venture, a task that sounded easier than it was.  The corner cul-de-sac child felt the money should be divided equally.  As her only contribution to the venture had been a tablecloth, her suggestion was met with a robust debate.

I suggested they look at using some of the money to pay back those children according to what their supplies cost—according to the children the supplies did not cost them anything because they took them from their homes.

By now you have figured out where this ACO conversation is going.  Without knowing ones’ costs, how can one really allocate profits against those costs?  The children knew what they charged, and they knew what they made, but they knew nothing of their costs.  The same concept applies when viewing the problem of performing a hip replacement instead of simply selling lemonade.

Perhaps providers should start with opening a lemonade stand to get a better understanding of the business requirements, and then work their way up to the ACO model.

EHR: Advice for your next CIO

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With all the efforts underway with EHR, it’s only natural that some efforts will have problems, and those leading the efforts may be replaced.

If you’re the new EHR lead, how do you know what to do tomorrow?  You walk in to your new office; a withered Ficus tree is leaning awkwardly against the far wall, vestiges of a spider’s web dangle from a dead leaf.

You place your yellowed coffee mug on the worn desk, change out of your sneakers, and after rubbing your feet, slip on a pair of black Bruno Magli pumps.  The feel of the supple leather relaxes you.

You spot the three envelopes that are stacked neatly on the credenza.  A hand-written note on Crane stationary reads, “If there is an emergency, open the first envelope”.  You place the three envelops in your YSL attaché case, and go about trying to salvage the EHR implementation.

Three weeks pass.  Things are not going well.  You are summoned to meet with the hospital’s COO.  After checking your makeup, you retrieve the first envelope and read it.  “Blame me,” it reads.  You were going to do that anyway.

Two more months.  The vendor has become a sepsis in the lifeblood of the organization—pretty good word for a math major.  You are summoned to meet with the CEO.  After checking your makeup, you bang your first on your desk, tipping over your coffee, and spilling it all over your Dolce & Gabbana suit.  You don’t have time to change.  You retrieve the second envelope and read it.  “Blame the budget,” it reads.  You were going to do that anyway.

Six months.  Deadlines missed.  Staff quit.  Vendor staff doubles.  Vendor output cut by half.

You are summoned before the board.  You no long check your makeup—you haven’t worn makeup since the day you publically went mano y mano with the head of the cardiology department inside the surgical theater, demanding to see his updated work flows.  You still haven’t been able to get the blood off of your Hermès scarf that he used as a towel.  You are dressed in a pair of faded jeans and your son’s black AC/DC T-shirt, the one with the skull on the back.  You don’t care.

As you reach in the desk drawer for the third envelope, you realize you haven’t had a manicure in four months.  You feel like a disenfranchised U.S Postal employee.  You have become the poster child for the human genome project run amuck.  Somebody is going to lose their DNA today.

You open the third envelope.  “Prepare three envelopes,” it reads.  You were going to do that anyway.

How should a provider approach Meaningful Use?

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Of cabbages—and kings— And how does all that focus on Meaningful Use affect ones’ ability to address ICD-10?

And why the sea is boiling hot—and whether pigs have wings. Lewis Carroll, Out of the Looking Glass. It is a nonsense story, one which cannot be argued.

As are Electronic Health Records (EHR) and Meaningful Use (MU)—at least to date. Measured against any reasonable set of standards, except on a one-off basis, the national rollouts of EHR and MU have failed. I expect it will be even more so next year.
You, the public, have the right to comment, and we have the right to tell you why your comments hold no water. I think it is the inverse of you have the right to remain silent, you just don’t have the ability. I am writing about the ONC and the bone they tossed calling for public comment. They are required to provide for public comment in order to remove the N and the P from the NPRM.

Who among us believes the rule making will markedly shift direction as a result of any of the public comments? That is unfortunate for if they were to shift direction they might find a direction. We don’t know where we are going, but we are making good time getting there. Figures suggest a failure rate of EHR implementations of somewhere between fifty and seventy percent. As healthcare IT resources become scarcer, I expect the failure rate to increase. As providers rush into EHR without a detailed strategy simply to grab the incentive money, there will be more expensive failures. More failed EHRs is not a way to measure progress.
The current cover of Government Health HIT magazine depicts a foot race to meet MU. There is no race if there are no entrants. There may be more people on the cover than will actually qualify for the race, even fewer who will reach the end.

We would be better served if the plan for national rollout of EHR were not written on an Etch-A-Sketch. We don’t know what will be included in Stages 2 and 3 of MU. When will fifty percent of providers have an EHR, not just the software, but one that actually boosts productivity? How about 70% or 80%? Ten years? I ask the same question of the Health Information Exchanges (HIEs). Without unilateral adoption there will be large gaps. Will the national network function with these gaps? To what extent? Will the records only make it part of the way from Patient A to Doctor X?

Having not solved the EHR program on their own, and having no viable plan, the government laid the burden of making EHR successful on the backs of the providers. The government tries to offset the burden by offering financial gratuities—and penalties—to the providers. Not exactly the second coming of the Three Wise Men. Trying to hit the ONC’s targets is a little like playing the confidence game, the shell game. Under which shell will providers find the rules, the plan?
What to do?

It is easy to criticize. Permit me to offer a few suggestions. To the hospitals, if you are not well along the EHR path, do not make a difficult effort more difficult by chasing Gossamer incentive dollars. Stick to your plan. You have multiple failure points which three years from now will make chasing those dollars look like a pipe dream. The failure points? Your plan, the implementation, meeting the MU requirements, passing the MU audit. It does not look very promising to me.

To those hospitals which haven’t started their EHR initiative, or are less than halfway through the passing the failure points, don’t cancel your summer vacation. You have a lot more time to get it right then you have to get it wrong. Pay no attention to the man—or woman; even I can have a moment—handing out the Monopoly money. You won’t be receiving any. From where I sit, that is good news. It will cost a lot more to perform disaster recovery on a poor implementation than the funds you would have received by meeting MU.

How long does a hospital spend planning to build a new hospital wing? For large hospitals, the cost of your EHR will likely exceed the cost of the new wing. Plan accordingly. Invest six or nine months building a plan that might succeed.

For medium and small practices and solo providers you have nothing to lose by waiting a year months other than the resource problem. By then you will find very viable ASP and shrink-wrapped solutions.

Those who follow my blog, healthcareitstrategy.com, know I don’t write to garner favorable replies from those who think they’ve already got it figured out. I write for those who because of EHR have difficulty sleeping. Thanks for reading. As always, I appreciate your comments and disagreements.

How to handicap selecting your EHR

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Several years ago I was invited to go on the ultimate boys’ toys, weekend getaway. A dozen of us flew from Denver to Utah, and then drove to a point somewhere west of Bozeman Montana. It was to be a weekend of sport, a weekend of competition, and a more than occasional libation. To say that the people who organized the trip came from money would be a major understatement. They were in the oil bid’ ness. The father of one of the guys was the CEO of the second or third largest petroleum company in North America. We stayed at his ranch, a 12 bedroom log cabin in the middle of Nowhere, Montana, which is about 20 miles west of Next to Nowhere, Montana.

The weekend’s activities included fly fishing, duck hunting, and Gin Rummy. Each participant was given a handicap rating in each event. The idea behind the rating was that if you are weak in one event, you were paired with an individual who is skilled in that event. In theory, that would level the playing field among the teams. Since I have never fly-fished or hunted I was odd man out. But I was game, and it’s amazing how good one can become at something when one has to fight their way through it.

Let the games begin. We started the competition with a full day of fly-fishing. Our destination was the Madison River, an impressive, fast running, expanse of snow melt. The stretch we would finish was about 150 feet wide, and its average depth was somewhere between waist and chest high. As I would soon learn the bottom was covered with what appeared to be the equivalent of moss covered bowling balls. I was instructed by one of the more experienced fishermen to tie a nymph to the end of the tippet. For those of you who are as novice to the sport as I was, a nymph is an artificial lure which mimics an insect larva. It is designed to lure fish who feed along the bottom, not the nubile young woman referenced in Greek mythology.

We fished for several hours. My legs ached from trying to maintain my balance in the strong current. I was about ready to admit defeat when the tip of my rod bent sharply into the water. Standing perpendicular to the current, I could see as the brightly speckled back of a large rainbow trout turned upstream. Naturally, I turned upstream with it and began to try to reel him in. First mistake. It was at that point that I first realized that the height of the water was now about level with my chest waders. Second mistake. The guys on the other part of the river and along the bank were yelling at me. I thought it was words of encouragement. Final mistake. As it turns out, they were trying to convince me not to turn upstream. At the exact moment that I faced stream head on, was the exact moment my feet lost purchase with those moss covered bowling balls of which I wrote. Turning yet again to my physics, I quickly recalled the equation; force equals mass times acceleration. Instantaneously, I was swept downstream, still clutching my fly rod in my right hand.

Wayne Newton’s first law of fluid mechanics took over; waders, no matter how good they are, if positioned in a plane that is horizontal to the river will fill rapidly with water, just as mine did. The choice with which I was faced was do I save myself and lose the fish, or do I try and land the fish? One of the shortcomings of maleness—I was going to use maledom until I Googled it—is that we rarely have actual choices, especially when we are around other males or for that matter, females. Naturally, I opted to land the fish. My reel had become dislocated from my rod. I remember grabbing the reel and stuffing it down my waders, and as I tried to float my body as though it was a raft without a rudder towards the river’s nearest bank, I began to reel in the monofilament with a hand over hand motion. After several minutes I was standing dripping wet and proudly displaying a 19 inch rainbow trout.

We cooked the fish and played Rummy until about three in the morning, awoke at four, grabbed our shotguns and headed out into the darkness without so much as a cup of coffee. Round three of the competition was to be duck hunting. To this day I’m still unclear as to why we had to hunt ducks while it was still dark. Weren’t there any ducks who needed shooting at brunch time, I inquired? Twelve guys, who collectively smelled like a distillery, and who are operating on an hour of sleep, armed with loaded shotguns, trod through a willow thicket as dawn approached. As I neared the river bank, a startled duck shot skyward. I raised my over and under twelve-gauge shotgun, sort of took aim, and fired a volley. The duck seemed to pause in midair, and then fell like a rock into the racing water. I watched helplessly as my quarry floated away from me. I looked downstream and was pleased to see two men fishing from a rowboat. The duck floated right towards them. A man reached down, retrieved my duck, and dropped it in his boat. He then waved to me. Thinking he was being friendly I returned his wave. He then rowed away with my duck.

It was a great three days. Part of what made the weekend fun with not having to excel at each event. It helped knowing that in areas where my skills were not as good, I could count on the skills of others and vice versa. The idea behind this approach was to build competitive and level teams. That approach works well in mano y mano events like those I described. It works much less well in EHR, HIT and healthcare reform in general.  I’m trying to recall if I wrote previsouly about a meeting I attended with a former hospital CEO.  His take on EHR was the total inability of his peers to have any precience regarding their approach to EHR.  According to him, very intelligent people were making very unintelligent decisions, committing their entire institution to strategies made with almost no data.  Some people can give a better explanation for why they bought their car than they can for why they selected their EHR.   That’s the wrong way to handicap this event.

There are two ways to handicap your EHR.  One way is to look at the program from the perspective of risk assessment and assess–handicap–the risks.  The other way to to be a detriment to the program’s success.  One of these is bad.