Health Futures Blog
4 months ago
permalink
The Price of Weakness
Russian elite special forces have seized police stations and city halls all across Eastern Ukraine, while 40 thousand Russian regular troops, with tanks and attack helicopters, mass on the Ukrainian border.  
Following exactly the same script as the one used to seize Crimea, Russia is plainly preparing to annex large parts of a neighbor, using the pretext of protecting Russian speaking residents from a “fascist   Ukrainian government” backed by the West.  A Russian warplane buzzed a US Destroyer in the Black Sea for ninety minutes, daring it to shoot him down.
President Obama has told Russian President Vladimir Putin that “there is still time for a diplomatic settlement”, as if there is any reason to seek one.  And his fearsome press secretary Jay Carney, who looks like a kindergarten teacher in his ill fitting suit and oversized glasses,  warns that “there will be costs” if Russia continues its actions.  
Another red line, perhaps?  Like the one Syria crossed when it gassed its own people (and did so again by dropping chlorine gas on innocent civilians just this weekend?)
Russia had taken Obama’s measure, and is convinced that  he is afraid to act.  Our European allies are much more concerned with their business relationships with Russian oligarchs and their supplies of natural gas than with naked aggression against a neighboring sovereign state.  
 If I were the Baltic states of Latvia, Estonia and Lithuania, I’d be practicing up on my Russian…

The Price of Weakness

Russian elite special forces have seized police stations and city halls all across Eastern Ukraine, while 40 thousand Russian regular troops, with tanks and attack helicopters, mass on the Ukrainian border.  

Following exactly the same script as the one used to seize Crimea, Russia is plainly preparing to annex large parts of a neighbor, using the pretext of protecting Russian speaking residents from a “fascist   Ukrainian government” backed by the West.  A Russian warplane buzzed a US Destroyer in the Black Sea for ninety minutes, daring it to shoot him down.

President Obama has told Russian President Vladimir Putin that “there is still time for a diplomatic settlement”, as if there is any reason to seek one.  And his fearsome press secretary Jay Carney, who looks like a kindergarten teacher in his ill fitting suit and oversized glasses,  warns that “there will be costs” if Russia continues its actions.  

Another red line, perhaps?  Like the one Syria crossed when it gassed its own people (and did so again by dropping chlorine gas on innocent civilians just this weekend?)

Russia had taken Obama’s measure, and is convinced that  he is afraid to act.  Our European allies are much more concerned with their business relationships with Russian oligarchs and their supplies of natural gas than with naked aggression against a neighboring sovereign state.  

 If I were the Baltic states of Latvia, Estonia and Lithuania, I’d be practicing up on my Russian…

5 months ago
permalink
What I Do for a Living
Can Hospitals Survive, Part II
by Jeff Goldsmith
 
in 1980, while working at the University of Chicago Pritzker School of Medicine, I wrote an article for the Harvard Business Review  entitled “The Health Care Market: Can Hospitals Survive?”. (http://www.healthfutures.net/pdf/w-chs.pdf)  This article, and the book which followed, argued that hospitals faced a tripartite existential threat:  
1)  ambulatory technologies that would enable physicians to compete successfully with hospitals at lower cost in their offices or freestanding settings, 2)  post-acute technologies that would enable presently hospitalized patients to be managed at home and 3) rapidly growing managed care plans that would “ration” inpatient care and bargain aggressively to pay less for the care actually provided.
 I predicted a significant decline in inpatient care in the future, and urged hospitals to diversify into ambulatory and post acute services.   Many did so.  A smaller number, led by organizations like Henry Ford Health System of Detroit and Utah’s Intermountain Health Care, also sponsored health insurance plans and became what are called today “Integrated Delivery Networks” (IDN’s). 
 In the ensuing thirty years, US hospital inpatient census fell more than 30%, despite ninety million more Americans.   However, hospitals’ ambulatory services volume more than tripled, more than offsetting the inpatient losses; the hospital industry’s total revenues grew almost ten fold. 
 Ironically, this ambulatory care explosion is now the main reason why healthcare in the US costs so much more than in other countries.  We use far fewer days of inpatient care than any major country in the world.  But as the McKinsey Global Institute showed in 2008 (http://www.mckinsey.com/insights/health_systems_and_services/accounting_for_the_cost_of_health_care_in_the_united_states) ambulatory care (by hospitals, physicians and freestanding providers) accounts for two thirds of the difference between what the US spends on healthcare and what other countries spend, far outstripping the contribution of higher drug prices or our multi-payer health financing system.  
 Hospital Revenue Growth Comes to an End
 Today, hospitals face another moment of existential threat. In this post, I describe the sources of that threat, the strategies some hospitals have adopted in response, and why these strategies are likely to be ineffective. I end with a description of what hospitals should be doing instead.
 Hospitals’ long run of uninterrupted revenue growth has come to an end. An advanced warning of problems was the cessation of growth in hospitals’ ambulatory volume-  from better than 7% in 1995 to scarcely more than 1% by 2010-2011,  according to the American Hospital Association.   Additionally, inpatient admissions, which briefly spiked upward from 1997 to 2003, began a second leg of decline in 2009, with hospital inpatient volumes down for the last five years.  CitiGroup’s monthly tracking survey suggested that hospitals lost about 4% of their admissions in 2013.    https://ir.citi.com/69mHpcM4J1E%2BNzsCVXq2ABXUNhhNyTzCQhx99pVRz9hIUQSdAznsoQ%3D%3D. In addition, most hospitals are generating low single digit unit price increases.
 
The resulting dearth of top line revenue growth in the face of continued growth in expenses has catalyzed a spreading wave of hospital layoffs.  What is interesting about these layoffs is that market-leading institutions-from the Cleveland Clinic to Indiana University Health and St. Vincent in Indianapolis to KentuckyOne in Louisville to INOVA in DC to Vanderbilt University- are reducing their staff, suggesting that even a commanding market presence and concomitant leverage with payers hasn’t prevented cash flow from drying up.  
 Has Health Reform Played a Role?
 Some observers believe the Affordable Care Act has helped slow hospital use.  Health reform may indeed have played a role, but not in the way analysts have suggested thus far.  Non-ACA changes in Medicare policy and a host of other factors have probably played a larger role.
 For example, reduced readmissions may have contributed perhaps 130 thousand  avoided admissions to the 2013 decline.  (http://online.wsj.com/news/articles/SB10001424052702304617404579304483562111024).  But against a base of 34 million plus admissions, this is a barely noticeable four-tenths of a percent reduction.  ACO’s, another possible driver, cover not even 6% of the US population (http://healthaffairs.org/blog/2014/01/29/accountable-care-growth-in-2014-a-look-ahead/).  No-one has yet quantified ACOs’ effect on hospital admissions, but their effect so far is likely to be even smaller.
 On the other hand, a concerted push by Medicare to reclassify sub-acute admissions as observation stays (which accelerated last October with the ill-fated “two midnights” rule from CMS) may have had a bigger impact on reducing acute admissions than anything in ACA.   Since 2004, observations stays per Medicare beneficiary have grown 34% while acute admissions per beneficiary have declined by almost 8% (http://online.wsj.com/news/articles/SB10001424052702303376904579135732284488114). 
 The ACA’s hospital payment reductions (0.5% a year in DRG updates) seemed minuscule in the first couple of years, but their  cumulative effect on hospitals’ revenues, when added to the 2% reduction from the sequester, has unquestionably damaged hospitals economically.  And for hospitals in the two dozen states that elected not to expand their Medicaid programs, the ACA’s cut in disproportionate share (DSH) payments has been a gratuitous source of additional damage.
 However, health reform’s most significant effect on hospitals may be the result of ACA’s soft caps on health plan rate increases.     Insurers have clamped down hard on their hospital contract renewals, even for “unavoidable” institutions like major teaching hospitals and regional IDNs.  This is because they expect to be unable to increase their own revenues to compensate for any future rise in claims costs.  Double digit hospital rates increases have disappeared. 
Despite all these regulatory impacts, the fact that the momentum changes in inpatient admissions began in 2003 and for outpatient volume in 1995 argue that other factors have been at work than the fairly recent political ones.   Beyond those mentioned above, the main drivers of the spreading top line weakness for hospitals include:
 a dearth of new ambulatory technologies that would attract additional patients
a sharp cost-shift in health plans toward patients (as enrollment in consumer directed health plans have quintupled since 2007 to over 30 million), 
the emergence of radiology benefits managers who reduce discretionary imaging use
the gearing down and retirement of the entrepreneurial generation of baby boom physicians 
 Entrepreneurial Boomer Docs Gear Down
 The  generational change in medical communities has been underestimated as a potential contributor to the hospital revenue slump. Seventy hour a week entrepreneurial baby boomer docs are retiring and are replaced by frightened, debt-burdened 35 hour a week Gen Y salaried docs.  The baby boom docs began reaching retirement age co-incident with the 2003 slowdown in hospital admissions.  However, many of them were trapped short of retirement by the 2008 stock market crash and freezing of the medical real estate market. 
 Long before the crash, many baby boom physicians had already, as one of them put it, “taken their foot off the gas”.  They began withdrawing from hospital practice, and insisting that hospitals hire hospitalists to manage their patients.   Elliot Fisher’s 2006 ACO paper noted that 38% of physicians in their national sample had no Medicare hospital billings (sampled in 2002-2004).  http://content.healthaffairs.org/content/26/1/w44.full?sid=7b21d835-a7ec-49b9-b895-04882b4232b0     That number is certainly higher now.
 The result of gearing down of older physicians’ practice activity is that a shrinking percentage of hospital admissions is coming from community docs. A steadily rising percentage of admissions are passing through hospital emergency rooms.  Some 70% of admitted Medicare patients came through the ER in 2011 according to MedPac http://www.medpac.gov/documents/Jun13DataBookEntireReport.pdf).  That number is also almost certainly higher now. 
 Hospital Strategic Response. 
 Some hospital managements have responded to the deepening slump with a frenzy of deal-making: merging with other hospitals into larger enterprises that the bankers and consultants have assured them will have “economies of scale” and leverage with payers.  Hospital merger activity doubled in the wake of health reform and continues rising. (http://www.nytimes.com/interactive/2013/08/13/business/A-Wave-of-Hospital-Mergers.html?_r=0)
 Hospitals are also attempting to offset the declining growth in ambulatory volume by buying up the practices of formerly independent physicians and incenting them to use the hospital’s ambulatory services.    According to AHA, the number of docs employed full time by hospitals rose 50% from 2003 to 2012, to about 100 thousand (not counting interns and residents).   According to MGMA, hospitals lost an average of  $206 thousand per employed doc in 2012 (the difference between guaranteed salary and other practice expenses and collected revenues) and many are not generating enough new ambulatory services volume to offset these losses.  
 The physician practice losses, euphemistically called “physician investments”, are compounded by rising payments for physicians taking night or weekend call in ER’s and ICU’s, medical directorships and other forms of physician subsidy.  Income subsidies to physicians have become hospitals’ fastest growing expense. Today, hospitals’ most urgent cost management challenge is to reduce physician subsidies that serve no strategic purpose.
 “It’s Either Make Deals or Run the Business”
Both the merger and practice acquisition booms are questionable long-term strategies.  While some mergers are probably a sensible solution for hospitals that are not viable any longer as freestanding entities, many others simply move the locus of management’s ulcer across town or out of town without adding measurable value for patients.
 The mergers also come with a steep opportunity cost.  As one Wall Street analyst said on CNBC last year:  “It’s either make deals or run the business.”  It’s pretty much impossible to do both at once, particularly as the hospital business is changing due to the insurance market and payment reforms accelerated by ACA. 
 Health exchanges could add another twelve million folks to the 30 million that already have high deductible coverage. .  It is possible that by the end of the next recession, as many as triple the current 30 million people will be in high deductible plans.   Those plans sharply raise the out-of-pocket cost of using the hospital, our most expensive healthcare site    A sign that this has had an effect:  most hospitals report their sharp rise in bad debts during and after the recession came from insured patients who could not pay their share of the bills.
 But the emergence of narrow or tiered networks will have a more significant effect on hospitals- by further reducing hospital bargaining leverage with health plans.    For example, as a Medicare Advantage subscriber, I don’t need every hospital or specialist in the region in my health plan’s network- only my doctor, the hospital he uses and the key specialists I’m likely to need and their hospital(s).    My narrow network MA plan was $4000 a year less expensive than the Medicare supplement plan that would have provided me access to everyone. 
 Even for a fortunate baby boomer, it just wasn’t worth $4000 of out-of-pocket premium expense to have maximum access.  Hospitals that pursued market consolidation strategies (merging with in-town competitors, for example) will find health insurers raising the out of pocket cost for access to them, and LOTS of patients trying to avoid them, because they have grown so expensive.
 That means that hospital strategy will have to shift, not only because of value-based purchasing incentives to reduce care defects, readmissions, etc., but because consumer choice based on value will increasingly drive hospital volumes. An indicator that financial  markets think we are headed this way:  the recent explosive Initial Public Offering for Castlight Health,  a firm that helps consumers estimate the cost of a hospital procedure and find the highest value service.  Castlight has a market capitalization of $3 billion.  http://www.forbes.com/sites/zinamoukheiber/2014/03/14/health-it-soars-with-castlight-health-ipo/
 Creating value for consumers will require something approaching a revolution in hospital management- whose vanguard we can see in institutions like Virginia Mason and ThedaCare that have adopted patient-centered LEAN operating principles. http://healthaffairs.org/blog/2011/02/07/virginia-masons-clinical-transformation-hard-work-big-payoff/   Hospitals that spent the last decade working to become “unavoidable” may have trouble refocusing on what patients and their families really need- affordable, reliable and compassionate care.
 What Am I Advising Hospitals To Do:
 Rightsize (e.g.markedly reduce) Physician Income Subsidies, as mentioned above
Eliminate Layers of Management between the Patient and CEO
Empower Front Line Caregivers to Eliminate Waste, particularly of Time
Eliminate Avoidable Medical Errors and Care Defects 
Smooth and Light the Patient’s Pathway through the Care Episode
Become the Hospital of Choice in Their Communities and Regions
 Patients do not realize that as many as five or six layers of management may separate their frontline caregivers from the CEO of their hospital.   Those layers not only consume salary dollars in large chunks.  They also deaden management’s response to problems on the nursing units, in the operating suites or intensive care units where the real work is done. 
 At Virginia Mason, for example, any frontline caregiver can “stop the line” by immediately halting care processes which threaten the patient’s safety.  Top management attention is focused on eliminating the source of risk to patients.  Front line caregivers can also convene a rapid, multi-disciplinary analysis of a problem with patient flow, and craft solutions that can be implemented across the institution. 
 This focus on improving patient flow can not only reduce the length and cost of an episode of care.  It challenges caregivers to build protocols and standardize the response to routine clinical problems in a way that makes it predictable for patients and families.  These steps help eliminate some of the “mysteries” of hospital operations, and make patients and families feel like valued customers of the hospital, not just cogs in a clinical machine.  This enfranchisement of the patient and family leads to higher patient satisfaction scores and a stronger likelihood of repeat business.  
 While policymakers continue to debate whether the lengthening pause in overall health cost growth will continue, I believe the hospital contribution to that pause is not “temporary”, but represents a fundamental shift in the hospitals’ position in a tightening health care market.   Coping with this sea change will require a completely different set of competencies, as well as a fundamental change in management philosophy.
An earlier version of this posting appeared in The Health Care Blog on March 14.

What I Do for a Living

Can Hospitals Survive, Part II

by Jeff Goldsmith

 

in 1980, while working at the University of Chicago Pritzker School of Medicine, I wrote an article for the Harvard Business Review  entitled “The Health Care Market: Can Hospitals Survive?”. (http://www.healthfutures.net/pdf/w-chs.pdf)  This article, and the book which followed, argued that hospitals faced a tripartite existential threat: 

1)  ambulatory technologies that would enable physicians to compete successfully with hospitals at lower cost in their offices or freestanding settings, 2)  post-acute technologies that would enable presently hospitalized patients to be managed at home and 3) rapidly growing managed care plans that would “ration” inpatient care and bargain aggressively to pay less for the care actually provided.

 I predicted a significant decline in inpatient care in the future, and urged hospitals to diversify into ambulatory and post acute services.   Many did so.  A smaller number, led by organizations like Henry Ford Health System of Detroit and Utah’s Intermountain Health Care, also sponsored health insurance plans and became what are called today “Integrated Delivery Networks” (IDN’s). 

 In the ensuing thirty years, US hospital inpatient census fell more than 30%, despite ninety million more Americans.   However, hospitals’ ambulatory services volume more than tripled, more than offsetting the inpatient losses; the hospital industry’s total revenues grew almost ten fold. 

 Ironically, this ambulatory care explosion is now the main reason why healthcare in the US costs so much more than in other countries.  We use far fewer days of inpatient care than any major country in the world.  But as the McKinsey Global Institute showed in 2008 (http://www.mckinsey.com/insights/health_systems_and_services/accounting_for_the_cost_of_health_care_in_the_united_states) ambulatory care (by hospitals, physicians and freestanding providers) accounts for two thirds of the difference between what the US spends on healthcare and what other countries spend, far outstripping the contribution of higher drug prices or our multi-payer health financing system.  

 Hospital Revenue Growth Comes to an End

 Today, hospitals face another moment of existential threat. In this post, I describe the sources of that threat, the strategies some hospitals have adopted in response, and why these strategies are likely to be ineffective. I end with a description of what hospitals should be doing instead.

 Hospitals’ long run of uninterrupted revenue growth has come to an end. An advanced warning of problems was the cessation of growth in hospitals’ ambulatory volume-  from better than 7% in 1995 to scarcely more than 1% by 2010-2011,  according to the American Hospital Association.   Additionally, inpatient admissions, which briefly spiked upward from 1997 to 2003, began a second leg of decline in 2009, with hospital inpatient volumes down for the last five years.  CitiGroup’s monthly tracking survey suggested that hospitals lost about 4% of their admissions in 2013.    https://ir.citi.com/69mHpcM4J1E%2BNzsCVXq2ABXUNhhNyTzCQhx99pVRz9hIUQSdAznsoQ%3D%3D. In addition, most hospitals are generating low single digit unit price increases.

 

The resulting dearth of top line revenue growth in the face of continued growth in expenses has catalyzed a spreading wave of hospital layoffs.  What is interesting about these layoffs is that market-leading institutions-from the Cleveland Clinic to Indiana University Health and St. Vincent in Indianapolis to KentuckyOne in Louisville to INOVA in DC to Vanderbilt University- are reducing their staff, suggesting that even a commanding market presence and concomitant leverage with payers hasn’t prevented cash flow from drying up.  


Has Health Reform Played a Role?

 Some observers believe the Affordable Care Act has helped slow hospital use.  Health reform may indeed have played a role, but not in the way analysts have suggested thus far.  Non-ACA changes in Medicare policy and a host of other factors have probably played a larger role.

 For example, reduced readmissions may have contributed perhaps 130 thousand  avoided admissions to the 2013 decline.  (http://online.wsj.com/news/articles/SB10001424052702304617404579304483562111024).  But against a base of 34 million plus admissions, this is a barely noticeable four-tenths of a percent reduction.  ACO’s, another possible driver, cover not even 6% of the US population (http://healthaffairs.org/blog/2014/01/29/accountable-care-growth-in-2014-a-look-ahead/).  No-one has yet quantified ACOs’ effect on hospital admissions, but their effect so far is likely to be even smaller.

 On the other hand, a concerted push by Medicare to reclassify sub-acute admissions as observation stays (which accelerated last October with the ill-fated “two midnights” rule from CMS) may have had a bigger impact on reducing acute admissions than anything in ACA.   Since 2004, observations stays per Medicare beneficiary have grown 34% while acute admissions per beneficiary have declined by almost 8% (http://online.wsj.com/news/articles/SB10001424052702303376904579135732284488114). 

 The ACA’s hospital payment reductions (0.5% a year in DRG updates) seemed minuscule in the first couple of years, but their  cumulative effect on hospitals’ revenues, when added to the 2% reduction from the sequester, has unquestionably damaged hospitals economically.  And for hospitals in the two dozen states that elected not to expand their Medicaid programs, the ACA’s cut in disproportionate share (DSH) payments has been a gratuitous source of additional damage.

 However, health reform’s most significant effect on hospitals may be the result of ACA’s soft caps on health plan rate increases.     Insurers have clamped down hard on their hospital contract renewals, even for “unavoidable” institutions like major teaching hospitals and regional IDNs.  This is because they expect to be unable to increase their own revenues to compensate for any future rise in claims costs.  Double digit hospital rates increases have disappeared. 

Despite all these regulatory impacts, the fact that the momentum changes in inpatient admissions began in 2003 and for outpatient volume in 1995 argue that other factors have been at work than the fairly recent political ones.   Beyond those mentioned above, the main drivers of the spreading top line weakness for hospitals include:

 a dearth of new ambulatory technologies that would attract additional patients

a sharp cost-shift in health plans toward patients (as enrollment in consumer directed health plans have quintupled since 2007 to over 30 million),

the emergence of radiology benefits managers who reduce discretionary imaging use

the gearing down and retirement of the entrepreneurial generation of baby boom physicians

 Entrepreneurial Boomer Docs Gear Down

 The  generational change in medical communities has been underestimated as a potential contributor to the hospital revenue slump. Seventy hour a week entrepreneurial baby boomer docs are retiring and are replaced by frightened, debt-burdened 35 hour a week Gen Y salaried docs.  The baby boom docs began reaching retirement age co-incident with the 2003 slowdown in hospital admissions.  However, many of them were trapped short of retirement by the 2008 stock market crash and freezing of the medical real estate market. 

 Long before the crash, many baby boom physicians had already, as one of them put it, “taken their foot off the gas”.  They began withdrawing from hospital practice, and insisting that hospitals hire hospitalists to manage their patients.   Elliot Fisher’s 2006 ACO paper noted that 38% of physicians in their national sample had no Medicare hospital billings (sampled in 2002-2004).  http://content.healthaffairs.org/content/26/1/w44.full?sid=7b21d835-a7ec-49b9-b895-04882b4232b0     That number is certainly higher now.

 The result of gearing down of older physicians’ practice activity is that a shrinking percentage of hospital admissions is coming from community docs. A steadily rising percentage of admissions are passing through hospital emergency rooms.  Some 70% of admitted Medicare patients came through the ER in 2011 according to MedPac http://www.medpac.gov/documents/Jun13DataBookEntireReport.pdf).  That number is also almost certainly higher now. 

 Hospital Strategic Response. 

 Some hospital managements have responded to the deepening slump with a frenzy of deal-making: merging with other hospitals into larger enterprises that the bankers and consultants have assured them will have “economies of scale” and leverage with payers.  Hospital merger activity doubled in the wake of health reform and continues rising. (http://www.nytimes.com/interactive/2013/08/13/business/A-Wave-of-Hospital-Mergers.html?_r=0)

 Hospitals are also attempting to offset the declining growth in ambulatory volume by buying up the practices of formerly independent physicians and incenting them to use the hospital’s ambulatory services.    According to AHA, the number of docs employed full time by hospitals rose 50% from 2003 to 2012, to about 100 thousand (not counting interns and residents).   According to MGMA, hospitals lost an average of  $206 thousand per employed doc in 2012 (the difference between guaranteed salary and other practice expenses and collected revenues) and many are not generating enough new ambulatory services volume to offset these losses.  

 The physician practice losses, euphemistically called “physician investments”, are compounded by rising payments for physicians taking night or weekend call in ER’s and ICU’s, medical directorships and other forms of physician subsidy.  Income subsidies to physicians have become hospitals’ fastest growing expense. Today, hospitals’ most urgent cost management challenge is to reduce physician subsidies that serve no strategic purpose.

 “It’s Either Make Deals or Run the Business”

Both the merger and practice acquisition booms are questionable long-term strategies.  While some mergers are probably a sensible solution for hospitals that are not viable any longer as freestanding entities, many others simply move the locus of management’s ulcer across town or out of town without adding measurable value for patients.

 The mergers also come with a steep opportunity cost.  As one Wall Street analyst said on CNBC last year:  “It’s either make deals or run the business.”  It’s pretty much impossible to do both at once, particularly as the hospital business is changing due to the insurance market and payment reforms accelerated by ACA. 

 Health exchanges could add another twelve million folks to the 30 million that already have high deductible coverage. .  It is possible that by the end of the next recession, as many as triple the current 30 million people will be in high deductible plans.   Those plans sharply raise the out-of-pocket cost of using the hospital, our most expensive healthcare site    A sign that this has had an effect:  most hospitals report their sharp rise in bad debts during and after the recession came from insured patients who could not pay their share of the bills.

 But the emergence of narrow or tiered networks will have a more significant effect on hospitals- by further reducing hospital bargaining leverage with health plans.    For example, as a Medicare Advantage subscriber, I don’t need every hospital or specialist in the region in my health plan’s network- only my doctor, the hospital he uses and the key specialists I’m likely to need and their hospital(s).    My narrow network MA plan was $4000 a year less expensive than the Medicare supplement plan that would have provided me access to everyone. 

 Even for a fortunate baby boomer, it just wasn’t worth $4000 of out-of-pocket premium expense to have maximum access.  Hospitals that pursued market consolidation strategies (merging with in-town competitors, for example) will find health insurers raising the out of pocket cost for access to them, and LOTS of patients trying to avoid them, because they have grown so expensive.

 That means that hospital strategy will have to shift, not only because of value-based purchasing incentives to reduce care defects, readmissions, etc., but because consumer choice based on value will increasingly drive hospital volumes. An indicator that financial  markets think we are headed this way:  the recent explosive Initial Public Offering for Castlight Health,  a firm that helps consumers estimate the cost of a hospital procedure and find the highest value service.  Castlight has a market capitalization of $3 billion.  http://www.forbes.com/sites/zinamoukheiber/2014/03/14/health-it-soars-with-castlight-health-ipo/

 Creating value for consumers will require something approaching a revolution in hospital management- whose vanguard we can see in institutions like Virginia Mason and ThedaCare that have adopted patient-centered LEAN operating principles. http://healthaffairs.org/blog/2011/02/07/virginia-masons-clinical-transformation-hard-work-big-payoff/   Hospitals that spent the last decade working to become “unavoidable” may have trouble refocusing on what patients and their families really need- affordable, reliable and compassionate care.

 What Am I Advising Hospitals To Do:

 Rightsize (e.g.markedly reduce) Physician Income Subsidies, as mentioned above

Eliminate Layers of Management between the Patient and CEO

Empower Front Line Caregivers to Eliminate Waste, particularly of Time

Eliminate Avoidable Medical Errors and Care Defects

Smooth and Light the Patient’s Pathway through the Care Episode

Become the Hospital of Choice in Their Communities and Regions

 Patients do not realize that as many as five or six layers of management may separate their frontline caregivers from the CEO of their hospital.   Those layers not only consume salary dollars in large chunks.  They also deaden management’s response to problems on the nursing units, in the operating suites or intensive care units where the real work is done. 

 At Virginia Mason, for example, any frontline caregiver can “stop the line” by immediately halting care processes which threaten the patient’s safety.  Top management attention is focused on eliminating the source of risk to patients.  Front line caregivers can also convene a rapid, multi-disciplinary analysis of a problem with patient flow, and craft solutions that can be implemented across the institution. 

 This focus on improving patient flow can not only reduce the length and cost of an episode of care.  It challenges caregivers to build protocols and standardize the response to routine clinical problems in a way that makes it predictable for patients and families.  These steps help eliminate some of the “mysteries” of hospital operations, and make patients and families feel like valued customers of the hospital, not just cogs in a clinical machine.  This enfranchisement of the patient and family leads to higher patient satisfaction scores and a stronger likelihood of repeat business.  

 While policymakers continue to debate whether the lengthening pause in overall health cost growth will continue, I believe the hospital contribution to that pause is not “temporary”, but represents a fundamental shift in the hospitals’ position in a tightening health care market.   Coping with this sea change will require a completely different set of competencies, as well as a fundamental change in management philosophy.

An earlier version of this posting appeared in The Health Care Blog on March 14.

5 months ago
permalink
Onion Strikes Again!
This remarkably plausible item from the Onion marks President’s Obama’s attendance at a 3 day management seminar in Washington: http://www.theonion.com/articles/white-house-sends-obama-to-3day-management-seminar,35624/
Better late than never, I guess… .

Onion Strikes Again!

This remarkably plausible item from the Onion marks President’s Obama’s attendance at a 3 day management seminar in Washington: http://www.theonion.com/articles/white-house-sends-obama-to-3day-management-seminar,35624/

Better late than never, I guess… .

permalink
Great Moments in Public Health:  Guinea Government Bans Fruit Bat Soup!
In response to an outbreak of the terrifying Ebola virus,  the West African government of Guinea bans bat soup: http://www.nytimes.com/2014/03/27/world/africa/guinea-government-bans-bat-soup-to-halt-ebola-outbreak.html?_r=0
Bats are the principal biological reservoir of Ebola, whose infections are 90% fatal.    Fruit bats are a popular food in West Africa, “usually cooked in a peppery soup or smoked over a fire”.    
Yum!    

Great Moments in Public Health:  Guinea Government Bans Fruit Bat Soup!

In response to an outbreak of the terrifying Ebola virus,  the West African government of Guinea bans bat soup: http://www.nytimes.com/2014/03/27/world/africa/guinea-government-bans-bat-soup-to-halt-ebola-outbreak.html?_r=0

Bats are the principal biological reservoir of Ebola, whose infections are 90% fatal.    Fruit bats are a popular food in West Africa, “usually cooked in a peppery soup or smoked over a fire”.    

Yum!    

5 months ago
permalink
ObamaCare!
In case you missed it…https://www.youtube.com/watch?v=UnW3xkHxIEQ
3.2 million viewers can’t be wrong.

ObamaCare!

In case you missed it…https://www.youtube.com/watch?v=UnW3xkHxIEQ

3.2 million viewers can’t be wrong.

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Our Hollow Navy
Theodore Roosevelt famously said “Speak Softly and Carry a Big Stick”.  A possible reason for our flaccid response to foreign outrages: a hollow Navy.   We actually have about 100 ships deployed in regions that matter, including three of our nominal eleven aircraft carriers.  The remainder are in port, or being repaired.   Creative accounting is required to get to the 293 ships in our fleet:  http://online.wsj.com/news/articles/SB10001424052702303563304579443490102014208?mod=hp_opinion&mg=reno64-wsj
This article suggests that our Navy is as small as it’s been since 1917.  No wonder no one really listens to what the US has to say.. . 

Our Hollow Navy

Theodore Roosevelt famously said “Speak Softly and Carry a Big Stick”.  A possible reason for our flaccid response to foreign outrages: a hollow Navy.   We actually have about 100 ships deployed in regions that matter, including three of our nominal eleven aircraft carriers.  The remainder are in port, or being repaired.   Creative accounting is required to get to the 293 ships in our fleet:  http://online.wsj.com/news/articles/SB10001424052702303563304579443490102014208?mod=hp_opinion&mg=reno64-wsj

This article suggests that our Navy is as small as it’s been since 1917.  No wonder no one really listens to what the US has to say.. . 

5 months ago
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How to Deal with a Bully?
Why, you tell him that if he doesn’t stop, you’re going to tell his mother!  Vladimir Putin has annexed a piece of a formerly sovereign neighbor, the Ukrainian province of Crimea.    Our response:  sanctioning eleven peripheral Russian and Ukrainian politicians, many of whom have no foreign financial holdings: http://online.wsj.com/news/articles/SB10001424052702304747404579445171323503270?mod=hp_opinion&mg=reno64-wsj
The logic of what Putin is doing applies with equal force to the Baltic states, Latvia, Estonia and Lithuania. There are lots of “homeless Russians” in those places, “intimidated” by the free societies around them.
 Our US policy so far seems to be premised on the fact that Putin has made some kind of mistake in Crimea:  we’re providing him face-saving “off ramps” before we get really serious.
In case anyone hasn’t noticed, Putin’s actions come after the President’s budget announced massive US defense cuts and after our embarrassing failure to stop his murderous proxy, Bashar Al-Assad, from slaughtering his Syrian countrymen.   Putin knows exactly what he’s doing.  He’s made a correct judgment that we have no stomach to confront him.  We’re almost daring him to go further.  
He and his cronies have made tens of billions in private wealth selling the west natural gas and oil.  Managing their wealth, which is kept in the west in dollar-denominated assets,  has generated tens of millions in fees for western bankers.   We’ve got a huge opportunity to help the rest of Europe wean itself from Russian energy sources by opening up energy exports to the EU.
We will know we’ve actually struck Russian nerves when we attack the sources of their wealth, and the ruble descends to the level of the Argentinian peso. We will actually strike Russian nerves when we sanction the billionaires around Putin and Putin himself.  (We’ve already given them weeks of “off ramp” time to move their money).    Putin is betting that the west is too irresolute to sacrifice our wealth to stop him.  Let’s see if he’s right.  

How to Deal with a Bully?

Why, you tell him that if he doesn’t stop, you’re going to tell his mother!  Vladimir Putin has annexed a piece of a formerly sovereign neighbor, the Ukrainian province of Crimea.    Our response:  sanctioning eleven peripheral Russian and Ukrainian politicians, many of whom have no foreign financial holdings: http://online.wsj.com/news/articles/SB10001424052702304747404579445171323503270?mod=hp_opinion&mg=reno64-wsj

The logic of what Putin is doing applies with equal force to the Baltic states, Latvia, Estonia and Lithuania. There are lots of “homeless Russians” in those places, “intimidated” by the free societies around them.

 Our US policy so far seems to be premised on the fact that Putin has made some kind of mistake in Crimea:  we’re providing him face-saving “off ramps” before we get really serious.

In case anyone hasn’t noticed, Putin’s actions come after the President’s budget announced massive US defense cuts and after our embarrassing failure to stop his murderous proxy, Bashar Al-Assad, from slaughtering his Syrian countrymen.   Putin knows exactly what he’s doing.  He’s made a correct judgment that we have no stomach to confront him.  We’re almost daring him to go further.  

He and his cronies have made tens of billions in private wealth selling the west natural gas and oil.  Managing their wealth, which is kept in the west in dollar-denominated assets,  has generated tens of millions in fees for western bankers.   We’ve got a huge opportunity to help the rest of Europe wean itself from Russian energy sources by opening up energy exports to the EU.

We will know we’ve actually struck Russian nerves when we attack the sources of their wealth, and the ruble descends to the level of the Argentinian peso. We will actually strike Russian nerves when we sanction the billionaires around Putin and Putin himself.  (We’ve already given them weeks of “off ramp” time to move their money).    Putin is betting that the west is too irresolute to sacrifice our wealth to stop him.  Let’s see if he’s right.  

5 months ago
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What Does Phil Jackson Want?
Hope you can reach this hysterical WSJ article on how desperate the hapless New York Knicks are to hire their former reserve Phil Jackson, proud owner of eleven (!) NBA rings, to coach their team: 
http://online.wsj.com/news/articles/SB10001424052702304704504579431441282920568?mod=WSJ_hps_MIDDLE_Video_Top&mg=reno64-wsj
Jackson was a neighbor during his astonishing 6 championship run in Chicago (lived a half a mile away in Bannockburn and never saw him once). It was a privilege to watch him work his magic: coaxing intensity and effort from a bunch of high strung, very highly paid kids, the Chicago Bulls,who clearly revered him, and wouldn’t have done what they did without his guidance.  The fact that he did it again in LA shows it was him, not the players, that made the difference.  
I’d suggest him as a Presidential candidate, but he’s WAY too cool to do something so foolish, which is why I don’t think the Knicks can hire him.  
This is an extraordinary leader who has earned his rest in Montana!

What Does Phil Jackson Want?

Hope you can reach this hysterical WSJ article on how desperate the hapless New York Knicks are to hire their former reserve Phil Jackson, proud owner of eleven (!) NBA rings, to coach their team: 

http://online.wsj.com/news/articles/SB10001424052702304704504579431441282920568?mod=WSJ_hps_MIDDLE_Video_Top&mg=reno64-wsj

Jackson was a neighbor during his astonishing 6 championship run in Chicago (lived a half a mile away in Bannockburn and never saw him once). It was a privilege to watch him work his magic: coaxing intensity and effort from a bunch of high strung, very highly paid kids, the Chicago Bulls,who clearly revered him, and wouldn’t have done what they did without his guidance.  The fact that he did it again in LA shows it was him, not the players, that made the difference.  

I’d suggest him as a Presidential candidate, but he’s WAY too cool to do something so foolish, which is why I don’t think the Knicks can hire him.  

This is an extraordinary leader who has earned his rest in Montana!

6 months ago
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North Korea from Space
This light signature photo from space shows North Korea (the large dark place) at night.  The tiny white dot in the middle is Pyongyang, a city of 3.2 million. China, which effectively abandoned Communism under Deng Xiaoping, sprawls to the north. Seoul, South Korea’s capital, with about three times Pyongyang’s population, stretches toward the border.
One picture is worth a million words.  

North Korea from Space

This light signature photo from space shows North Korea (the large dark place) at night.  The tiny white dot in the middle is Pyongyang, a city of 3.2 million. China, which effectively abandoned Communism under Deng Xiaoping, sprawls to the north. Seoul, South Korea’s capital, with about three times Pyongyang’s population, stretches toward the border.

One picture is worth a million words.  

6 months ago
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We’re Going to Miss Joe Biden!
Who was it who defined a gaffe as someone telling you it exactly how they see something at the wrong time or in the wrong place, an inconvenient truth.   Joe Biden is sometimes referred to as a “gaffe machine” by the reporters who cover him.  Here are some of his greatest hits, courtesy of POLITICO: http://www.politico.com/magazine/story/2014/02/joe-biden-bidenisms-103689.html#.Uw8scf2grS4

We’re Going to Miss Joe Biden!

Who was it who defined a gaffe as someone telling you it exactly how they see something at the wrong time or in the wrong place, an inconvenient truth.   Joe Biden is sometimes referred to as a “gaffe machine” by the reporters who cover him.  Here are some of his greatest hits, courtesy of POLITICO: http://www.politico.com/magazine/story/2014/02/joe-biden-bidenisms-103689.html#.Uw8scf2grS4

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