Archive for the ‘Hospitals and Health Networks’ Category

Consumerism and Disruption: Lessons from Florida Blue

Tuesday, February 6th, 2018

As we enter a new year, the healthcare industry is once again all atwitter about the megatrends of the year. Chief among them is the rise of consumerism. I’ve been in the health futures business for over 30 years; Dude, every year is the start of the rise in consumerism.  It’s been the future for a long time.

But there is some validity to the argument that we have reached a tipping point in the role of consumers in healthcare, not the least of which is the increasing responsibilities consumers have for selecting plans, providers and treatment options and more importantly in paying out of pocket for the privilege of choosing.

Consumer “empowerment” to make selection plan and provider decisions is a major shift that has occurred not just in ACA Marketplaces but in Medicare Advantage (which continues to grow rapidly and accounts for a third of all Medicare enrollees) in managed Medicaid where in many states enrollees must make choices, and in the employer-sponsored market where more of the decision-making and economic burden is placed on consumers through higher deductibles and copayments.

Some conservative observers say this latter trend toward rising out of pocket costs is overplayed and cite the fact that relative share of out-of-pocket expenditures as a total of national healthcare expenditures is actually going down over time not up).   Nevertheless, the prevailing sense in the marketplace is that consumers are paying more out-of-pocket in absolute terms and perceive themselves to be paying a bigger share of costs (certainly in the employer-sponsored market).  Consumers are increasingly responsible for choices and are often ill-equipped to make those choices in a way that best serves their health.  (For example, there is a massive body of evidence that now that supports the obvious that high deductible care is a blunt instrument that causes patients to forego both necessary and unnecessary care in almost equal measure).

All actors in the healthcare system are trying to deal with consumerism in their own way. With mega deals such as the CVS acquisition of Aetna being consummated and as healthcare stakeholders anxiously eye Amazon, Apple, Google and Facebook as they lurk on the edge of the healthcare system.  There is considerable anxiety in the healthcare ecosystem about consumerist led disruption of conventional healthcare.

What is Consumerism?

Consumerism means different things to different people. One angle is the increased use of transparency and consumer navigation tools to guide choices particularly when those choices have significant financial incentives attached such as in narrow networks, reference pricing, high deductible health plans, tiered benefit designs and so forth.

A second dimension of consumerism is the sheer importance of consumer experience to providers and plans both in terms of patient acquisition, retention and loyalty as well as patient satisfaction (which increasingly carries dollars with it in terms of patient experience measures in value-based payment under Medicare and in Medicare Advantage).

Third, consumerism in healthcare is seen as a strategic imperative of meeting consumers’ expectations (particularly tech-savvy millennials) who increasingly have ever higher expectations of service industries driven by their positive experience with high technology enabled consumer offerings such as Netflix, Amazon, Uber and Air BNB.

Fourth, is the notion that consumers need to be more proactive and engaged in their own health and wellness and take more personal responsibility for health and lifestyle choices.  As one doctor asked me recently “when are the patients going to be accountable?”

Finally, perhaps the most significant dimension of healthcare consumerism is the economic out-of-pocket costs burden being placed on consumers going forward and the battle that ensues for wallet share in the wellness, health and healthcare industries that are now colliding.

We will cover all five of these threads in this discussion but it is important to recognize that they are different and in some senses complementary.

Healthcare Stakeholders on the Consumerism Journey

Hospitals are behind the curve in their understanding of consumers.   (They are quite advanced in their understanding of patients but that isn’t always the same thing).   Most Americans don’t get admitted to hospital in a year (only about 14%) while 80% of Americans visit a doctor, 90% now have a health plan relationship and probably even higher percentage visit a retail facility with a pharmacy.  Hospitals should know the answer to the basic consumer questions: how many unique consumers do you touch, who are they, what do you do for them, and how is that working for them and you?  As hospitals integrate across the continuum of care, absorb more risk and pursue population health initiatives, these questions become increasingly important.

With close to 90% of Americans having some relationship with health insurers, health plans have made significant strides to be more consumer friendly by improving their navigation tools, their customer service and support functions and their outreach to consumers.   Let’s be clear, health insurers are coming from a difficult position at the bottom of the heap of consumer ratings.  Technology leaders like Apple and elite retail and fast food outlets enjoy Net Promoter Scores in the 70s which are considered world class (Net Promoter Score is a measure of consumer loyalty and willingness to recommend a product or service on a scale of plus 100 to minus 100, a high positive score is desirable, 70-80 is considered world class).  Most of healthcare ranks pretty low in net promoter scores but there are exceptions like Kaiser and the Mayo Clinic.  The health insurance industry generally has negative or low double digit net promoter scores (just ahead of Al Qaeda in their trustworthiness and popularity), but progress is being made and many large insurers now tie executive compensation partly to improvement in net promoter scores and other consumer measures (United, Aetna, And Anthem in particular).

The Case of Florida Blue

So insurers, like others in the health industry are trying hard to reach out to consumers in new ways to enhance the experience.  Perhaps one of the most interesting examples is from Florida Blue (the Blue Cross Blues Shield Plan of Florida) who have a strong consumer focus and indeed have built a significant retail presence over the last few years.

I reached out to Patrick Geraghty, Florida Blue CEO, who was kind enough to walk me through his perspectives on consumerism and disruption from a health insurance point of view.

By way of context, Florida Blue operates under the umbrella of GuideWell Mutual Holding company (that Geraghty also leads) whose combined businesses have a current run rate of $16 billion in revenue with Florida Blue comprising almost 90% of that revenue base.   They operate or joint venture in a number of related business entities in both the insurance space, (such as Florida True Health, a joint venture a Medicaid managed care organization) as well as a portfolio of direct healthcare delivery operations such as medical clinics and freestanding emergency services.

Over the last decade GuideWell built capabilities in consumer navigation and population health acquiring a number of businesses that they seek to expand nationally.  Indeed, despite their obvious focus on the Florida market with 5 million members (almost a third of all Floridians) many of their businesses operate nationwide or in multiple states.  For example, their traditional Medicare business is the fee-for-service Medicare administrator for Medicare jurisdictions which account for 11 states, the District of Columbia, the Indian Health Service at the VA thereby being the back-office processor for millions of Medicare recipients. GuideWell is interacting with millions of consumers in a lot of different ways.

Pat Geraghty who came to lead Florida Blue from Minnesota is an industry veteran with great experience and enthusiasm for the positive role consumerism can play in transforming healthcare. He was kind enough to share his insights about Florida Blues’ pioneering experience in opening retail outlets in support of the core health insurance function and how it relates to the consumerism agenda.

In the last few years Florida Blue has opened 20 retail centers around the state (providing access to 80% of the population of Florida within a 30-mile radius of the centers).   These retail centers are conceived much in the way as an Apple store supports Apple products not just as a sales channel but as a service center, brand presence and product support function.

Geraghty told me: “health care is a system, from coverage to care, and many consumers need support in navigating the system,” much in the way many of us Apple users struggle to get the most out of our seemingly simple devices.  In some sense the Florida Blue retail centers are the “Genius Bar of Health Insurance”.

In exploring the contribution that retail centers have made to Florida Blues strategy, Geraghty laid out the importance of complementing not cannibalizing existing distribution and service channels.   “These retail centers are just one of many channels that support our products and services” he said.

In particular, when the two pilot retail stores were opened some years ago, brokers reacted negatively to the potential of them cannibalizing or undercutting traditional distribution channels to individual and small group purchasers.  Since then, the retail centers were recast and repositioned to supplement and partner with brokers rather than to supplant them.

When I asked Geraghty how Florida Blue got into the retail business he pointed to their analysis of the Massachusetts market (the early pioneer of exchanges) as a harbinger of what might happen under the Affordable Care Act.  Florida Blue examined the experience with the Massachusetts Connector (the pioneering Romney Care Exchange) where consumers would go online to select insurance but many people needed support in making decisions and customizing their selections.   Selecting health insurance is a complex choice “it’s not like buying an appliance” Geraghty said, “there’s a lot of complexity to the product and it is highly personal.”

The Florida Blue retail centers were conceived as a place to help navigate health insurance and healthcare choices and answer customer questions, but increasingly the retail centers integrate and co-locate other health services such as physician groups and wellness.

The retail concept has met with considerable positive feedback from consumers.   In the last year, 300,000 unique customers have visited across the 20 retail sites with customer satisfaction scores of 92% overall and 97% where clinical services are co-located.

The stereotypical user is not a confused, less well-educated, older, non-tech savvy customer as you might imagine.  Florida Blue executives were pleasantly surprised to find that a wide cross section of consumers were using their retail facilities for sales, service and product support such as Florida Blue’s “know before you go” tools that they provide to consumers who are embarking on significant interactions with the medical care system.  Indeed, Geraghty told me that a significant segment of retail customers were younger couples just starting a family who were seriously engaging with health insurance for the first time.

Florida is a particularly interesting state in terms of providing retail choice to individual health insurance consumers because it is home to the largest individual market in the country as measured by exchange enrollment.   Approximately 1.7 million Floridians have signed up for exchanges in 2018 according to CMS, and although, final numbers aren’t yet verified for Florida Blue, a good estimate is that one million members will be enrolled with Florida Blue through the exchange. With this scale and good operational discipline Geraghty told me with regard to the individual market: “we operate in the black”.

In the last year, the entire health insurance industry has experienced the roller coaster of withdrawal of Cost-Sharing Reduction (CSR) support causing strategic chaos and impairing the finances of most insurers in the individual market and accelerating exit from state markets by national players such as United and Anthem for 2018.  Removing CSR funding late in 2017 resulted in 15-30% increase in rates for 2018 in many states.  This is ameliorated for those lower income exchange customers (some 87% of people buying on the exchanges) who are getting some form of subsidy that insulates them from these rate increases (but doesn’t insulate the government from paying even more in premium subsidies).  Perversely, the withdrawal of CSR support in many states has led to bronze plans being even cheaper than 2017 for the lowest income consumers.

For non-subsidy consumers (those over 400% of FPL) rates have increased on average by 30% in Florida as in many states as the elimination of CSRs are priced in for 2018, and similar effects will be likely in 2019 as the repeal of the individual mandate takes effect.

The gap between the subsidy population and non-subsidy consumers will continue to widen in terms of what consumers actually pay with younger, lower income consumers getting plans that are almost free to them while upper and middle income older consumers in the non-subsidized individual market paying more than $1,500 per month (as I was going to do this year in California before getting on full blown fee for service Medicare at about a third of the cost, Yay!   Another column for another time).

The rules of engagement in the individual market must be resolved one way or another politically and economically in the twenty four months preferably to the benefit of all consumers and taxpayers.  The lack of clarity is frustrating health insurance industry leaders and making the lives of actuaries increasingly difficult.  As one CEO of a major national insurer told me recently: “This industry can change dramatically with just one stroke of a pen in Washington”.  The ultimate disruption.

No matter what the political and policy rollercoaster, part of the success Florida Blue has experienced in enrollment is the ability for these retail outlets to provide consumers of all types with an opportunity to truly understand the product and engage with confidence in their choices.

Sparked by the ACA and the rise of individual market Florida Blue deems their retail initiative a success and a key part all of an overall strategy of assisting all consumers in making informed choices. Recently, these retail centers have been expanded to include other services such as health risk appraisals, on site clinical services co-located with partners, and even providing consumers access to “test drives” and advice on selection of “wellness wearables” such as Fit Bits and smart watches.  Florida Blue continues the path of integrating complementary clinical services as their consumer facing strategy develops.

While focused on individual market consumers, members in other lines of business particularly the small group market also make use of these retail centers even though they may have a relationship with agents and brokers but use the retail center to complement the advice.  (Most of their self-insured employer customers have their internal employee benefit tools and navigation aids that are complementary).

Geraghty also told me of a recent acquisition PopHealthCare, a Nashville based company with presence in multiple states.  Geraghty sees this new asset as an exciting opportunity to expand the retail platform to help identify chronically patients in need of clinical services who could potentially have them delivered and managed through a combination of retail clinical offerings and home-based services. This is not dissimilar to the vision that CVS and Aetna’s merger hopes to yield by combining a physical retail presence locally with a sophisticated set of relationships and data analytics tools to identify high-cost populations that may be better treated with chronic care services in the retail and home-based setting.

It is important to point out that retail strategy is by no means the only method of communication with consumers.  Florida Blue (like most insurers) have extremely sophisticated in-bound and outbound call center operations, web-based solutions and digital outreach using multiple technology platforms, all supported by data analytics to help engage with consumers in all of their lines of business from Medicare to the individual market.

Dealing with Disruption

When I asked Geraghty about what keeps him up at night in terms of disruption and where that disruption may come from whether it be Silicon Valley, retail giants like CVS or Amazon or some other weird new upstarts, he adroitly pointed out: “anyone who isn’t paranoid isn’t paying attention.”

“Our goal is to try and disrupt ourselves”, he said which I think is wise advice.  I wrote a book The Second Curve more than 20 years ago about change in business generally (the first curve being the incumbent the second curve being the disruptor).  Great companies that endure like IBM have been successful in disrupting themselves but it is not an easy thing to do.  Certainly other leaders in healthcare such as Providence-St Joseph and Kaiser are pursuing a strategy of self-disruption as a motivation for their teams to continuously innovate.   See a previous column

As Geraghty told me, while healthcare seems ripe for disruption it is not necessarily true that everyone wants to be an insurance company. I’ve described before what I call the mutual disrespect problem within healthcare: everybody thinks everybody else’s job is easy and anyone can do what an insurance company does.  It turns out it’s not that easy to be an insurer as provider sponsored health plans and venture capital backed insurance upstarts alike are finding out.

The real growth and potential disruption is in adjacent services.  A good example is the rapid growth of the Optum division of United Health.   Optum now has annual revenues in excess of $80 billion much of it related to PBM activity.  Similarly, the CVS-Aetna deal is spun around at its core a massive PBM operation.   Incumbents such as Optum, Anthem, Aetna, Cambia and other insurers have significant service and technology businesses and population health offerings.  At the same time, there are a myriad of health 2.0. offerings being developed to compete in these adjacent services.  Geraghty argues that the more intense disruptive activity will occur among these related service offerings beyond traditional insurance.

It makes sense to anticipate that the core health insurance functions of claims processing, network development and customer service and support and so forth will see continue consolidation with more horizontal rather than vertical integration to the degree that regulators allow it.  At the same time, we will see increased competition and disruption and a great sorting out of all of the peripheral service businesses to health insurance.  But no matter what, as we have argued in these columns before, innovation by itself is not enough, Innovation at scale is required.

Lessons Learned

The case for Florida Blue provides insights on the rapidly changing field of consumerism in health.  It also spurred me to think about where we are headed with consumerism in health.  My takeaways:

Meet people in their lives. Florida Blue is meeting people in their lives, in retail environments and on-line with services and support, and navigation tools that enhance the overall healthcare consumer experience.

Make the Complex Simple.  Healthcare is complex it needs to be made more simple and even if we have simpler designs we need to build better support tools for consumers that may involve more retail handholding and decision support.  Health insurance is a complex product and even tech savvy millennials struggle with it, indeed in a recent Aon Consumer Survey found 41% of Millennials say:  “I have stopped trying to figure out what I should pay for medical services and just pay the bill when it comes.”

Scale and Local Market Penetration Matter.  Insurers with significant market share in local markets such as regional Blues plans can have significant influence on provider systems and population health in their geography.  Powerful local plans have an opportunity to set the standards and change the rules of engagement for the entire local health system.

Use Multiple Channels.  Consumers, even millennials are not all digital all the time, sometimes we need a little real help, face to face.

Technology and Policy will expand Digital Consumer Facing Services.  Recent policy and technology changes such as Fast Healthcare Interoperability Resource standards (FHIR), Open Application Programming Interfaces (APIs) and Blockchain tools are all likely to promote inter-operability and create a rich and rapidly evolving environment of consumer facing digital offerings.  This new frontier is not without challenges such as cyber security, data privacy, and fraud and abuse potential, but overall we will see an acceleration in the number, range and hopefully the quality of digitally enabled, consumer facing solutions.  Expect continued competition and disruption in this space.

Navigation tools need work.  In the early 2000s we asked a series of questions in Harris Interactive Surveys about consumers use of report cards on health plans, hospitals, and doctors.  We asked are you aware of them, do you ever use the report card, and did you actually make a change on the basis of the report card.   We did the surveys every year for 10 years and the square root of zero humans ever changed a decision-based on the report card (actually 1%).  I am sure it’s better now (we’ll check this year).   Consumers do want information to make comparisons on cost and quality of plans, providers and treatment options, but we need to get better in consumer decision support.

Free. Great consumer service brands such as Google and Facebook are popular partly because they are free.  (Actually not really free since we users are getting bombarded with commercial messages as you surf, post and like).  In health insurance, there are actually some free or close to free offerings such as Medicaid, zero premium Medicare Advantage and highly subsidized exchange offerings, but generally health insurance carries a consumer cost that is more visible and economically painful every year.  We may not all get to free, but the ultimate goal is to get health insurance and healthcare affordable for all concerned.  Let’s work on that.

Rochester Revisited

Tuesday, November 21st, 2017

In 1953, Marion Folsom left his role as treasurer of the Eastman Kodak Company to serve his country as deputy secretary and then secretary of Health Education and Welfare in the Eisenhower administration. When he returned to Rochester, N.Y., in 1958, he brought with him some new ideas about health care. He was resolved to harness the purchasing power of the private sector to get the best deal for the community.

Since then, the local business community in Rochester has fostered (even demanded) collaboration among health care providers to help manage the cost of care and improve quality for the benefit of their employees and the community.

Rochester still leads the country as a beacon of high performance on cost and quality. For Medicaid, it was hailed by Governor Andrew Cuomo as the most cost-effective in the country. In Dartmouth Atlas and commercial spending analyses, Rochester is a high-value performer. And for commercial self-insured employers like Paychex, the results are remarkable – low deductibles and co-payments not seen by most Americans since the 1990s. If value and affordability are important, we should continue to learn from Rochester.

To fully understand the Rochester story, I reached out to a number of experts: Jim Block, M.D., a former CEO of Johns Hopkins Health System and Case Western Reserve, was a young intern in Rochester in the 1960s. Linda Becker is a former senior executive of Xerox and Kodak who has served as a business community leader and board member for the last 15 years of the Rochester General Health System, one of the two principal integrated systems in Rochester. Her husband, Larry Becker, recently retired as head of Xerox’s health benefits program. (Larry Becker serves on numerous boards and has a long history of galvanizing the Rochester business community on health care.) And Jake Flaitz, who has a distinguished health care career as a hospital administrator, is a benefits consultant and for the last 12 years head of benefits at Paychex.

The early days

In 1969, Dr. Block returned to Rochester to focus on care for underserved communities. He developed pioneering IPAs with the local medical society, built Kaiser-like groups to serve the new Medicaid population, and started HMO-like organizations for underserved populations, including an HMO for the chronically mentally ill. Perhaps the most notable of these pioneering health services activities was his role as the first leader of the Rochester Area Hospital Corporation.

In the late 1960s and early 1970s, Governor Hugh Carey of New York promised voters to rein in public expenditures on Medicaid by slashing budgets. But Rochester business leaders strongly urged the governor to “stay the hell out of Rochester,” because things were going so well in both cost and quality.

In the 1970s, as health care costs continued to rise, four prospective payment pilots were initiated to reform Medicare: in Maryland, New Jersey, Washington State and the cutely titled “province of Rochester.” In the Rochester model, reimbursement rates were standardized for all the players, and there were revenue caps placed on the industry as well as a cost sharing arrangement (shared savings between providers and purchasers on a 50-50 split). After the pilot experiments finished, Rochester had the lowest cost and the highest quality.

Block told me a funny story of how he and his colleagues went to Washington with a multimillion-dollar check to return money to the federal government because of the savings they had achieved with the program. They anticipated a ceremonial greeting in Washington with handshakes and accolades. Instead, the assistant secretary of the health department under the Reagan administration chided them that the model was “too socialistic up there in Rochester.” Instead of selecting Rochester as the model for the nation, the New Jersey experiment was chosen because it was less socialistic and not as complicated to administer.

The early days of Rochester provided other useful insights. A full 3 percent to 5 percent of the Rochester Area Hospital Corporation’s revenues were set aside for an innovation fund. The fund allowed for what we would now call health services research and clinical analytics – developing measures of outcome and measuring both care and cost carefully.

When I asked Block what the relevance of the early Rochester experience was for today’s health challenges, without hesitating he said there are two forces at play: “We’re moving decision making from DC to the states and communities, and we are moving risk for the cost and quality of care back to those states and communities. Regardless of the political direction, these trends seem inevitable.”

Block agreed that these changes are further intensified by employers such as Disney, Boeing, Microsoft and others focusing more on accountable care organizations and shared savings arrangements to reduce costs and improve quality. Block added a fourth contemporary driver: big data. Clinically, and in cost and quality, big data can help steer the selection of provider partners and the management of the entire system. Finally, Block pointed to the role of professionalism (not just financial incentives) in building high-performing clinical teams. As he told me: “We were careful not to monetize health professionals with productivity goals, but rather to support the pursuit of effectiveness and accountability, which resulted in greater efficiency.”

The recent history

When I asked Linda Becker whether the Rochester experience still has relevance today, she was quick to point out that Rochester enjoys the fourth lowest commercial premiums in the country and the lowest on Medicare cost according to the Dartmouth Atlas (some 21 percent less than the national average). Becker attributes these successes to Rochester’s continued ability to cooperate. She also cited the early history of Marion Folsom and the Rochester Hospital Corporation and how they provided the platform of collaboration that exists to this day.

The Rochester history has not been without rocky patches. In the early 2000s some of the collaboration started to unravel as the two main systems, University of Rochester and Rochester General, started competing more aggressively. The business community, however, encouraged renewed cooperation and collaboration.

As Linda Becker told me, employers realized “they can’t expect hospitals to collaborate if they didn’t do it themselves.” Employers then embarked on several initiatives over the coming years that really galvanized the community to improve health and health care. Below are some examples.

Living well initiatives. An early pioneering project in the early 2000s was to encourage community members to “eat well and live well” by consuming more fruits and vegetables and monitoring exercise. For 16 years, employers in the community (now a total of some 500 companies) have their employees participate in this program, which was originally pioneered by the leaders of Wegmans Food Markets.

An engaged and enduring purchaser community. Every Thursday for the last 15 years, human resource and benefits leaders from local businesses and employers such as Rochester Institute of Technology, University of Rochester, Kodak, Xerox, Bausch and Lomb, Wegmans and Paychex have gathered to discuss how they can keep costs down and improve quality. Larry Becker and Jake Flaitz are long-standing members of the Thursday group and explained to me the keys to success. “We all had longstanding relationships in the community,” Larry Becker told me. “CEO support was key,” both men stressed, “but they also delegated and empowered the HR and health professionals to do the work and bring expertise from the companies such as six sigma capabilities,” Flaitz said. Both men agreed persistence was key: “We stayed on message for the long haul.”

Wellness and prevention initiatives. Rochester has communitywide measurement of high blood pressure. Faith-based organizations, barber shops and other local institutions are empowered to collect blood pressure of community members with a registry of 150,000 people. Anyone, regardless of insurance coverage, who is identified as having high blood pressure is referred for immediate treatment. Ongoing financial support for such initiatives is raised through a modest “discharge tax” on hospitals ($23 per hospital discharge). While yearly comparisons are tricky because of constantly evolving national clinical standards for blood pressure management, the best data available are impressive: in 2010 the blood pressure of 62 percent of Rochester residents was in control; it’s now an estimated 78 percent.

The 2020 commission. The business community still provides oversight and management of the number of beds in the community, which has led to a 91 percent occupancy and full use of hospital capacity during flu season. This has forced hospitals to be parsimonious in their length of stay.

Technology assessment. Over 20 years ago, Rochester established its Community Technology Assessment Advisory Board. The board has been assiduous in managing deployment of MRIs, PET scanners and robotic devices within the community. The PET scanner is on a large trailer; it spends half its week at one hospital facility and half at the competitor hospital to prevent the unnecessary duplication of equipment. Hospitals and other providers have to submit new technology applications to the board for approval, for both inpatient and outpatient technologies.

Chronic care innovation. Rochester successfully secured one of the largest Center for Medicare and Medicaid Innovation initiatives (a $26 million grant) to evaluate new care coordination programs, including what many are terming “upstreaming” activities in the management of chronic illnesses. These interventions include cooking classes and social determinants of health approaches.

Best little RHIO in America. Regional health information organizations (RHIOs) have struggled across the country to bring stakeholders together and find a sustainable business model. Yet Rochester has a successful RHIO with all health care facilities participating and a million patient records. It enables all providers to seamlessly share imaging and other lab results and prevent waste and duplication of tests.

Developing leadership competencies. Linda Becker is a pioneer in creating an ongoing fellowship program, now in its fifth year, for senior executives and physicians across the entire value chain, including providers, payers, employers, community agencies, long-term care and suppliers. Using Baldridge Award–like principles, fellows are exposed to finance, legal, process and managerial excellence activities. National thought leaders and experts have educated 217 graduates over its five-year existence. Part of the leadership program involves a shark-tank-type exercise, which has helped invest in innovative and collaborative projects at the community level.

Physician alliance. The Greater Rochester Independent Physicians Association, formed in the late ’70s, is still one of the key platforms for collaboration and contracting with doctors. In addition, each of the major systems has its own accountable care organization that works closely with local insurance partners Excellus and MVP.

Increasing transparency. Linda Becker points to ongoing initiatives to encourage greater transparency on price and quality to help consumers navigate through the system. We’ll stay tuned for news on this front.

Many health services research junkies will appreciate that Rochester was the story of the ’70s and ’80s when corporate giants such as Xerox and Kodak ruled the Rochester roost. In particular, Kodak has gone from 60,000 employees in the Rochester community to less than 3,000. But as Linda Becker told me: “Now we are a large community of small companies,” many of them entrepreneurial technology spin-offs from the corporate giants and their staff.

Lessons for the field

There are a lot of local experiments on payment reform that are worthy of consideration: the Massachusetts top-down approach of monitoring cost and quality (which seems to be working), along with Maryland’s all-payer rate setting, which many argue is a model for others. We will focus on these in subsequent columns.

The Rochester experience provides great insights on a number of factors and forces relevant today that we don’t often discuss:

  • Managing bed and technology capacity is a fundamental tool for reducing cost.
  • An engaged business community – activated to do more than simply play with benefit design, and engaged in the measurement and management of health care delivery – ensures high quality and low cost, and eliminates unnecessary resource use and capacity.
  • As more burden is placed on state and local communities for risk and financial responsibility, local communities must figure out the best way to come together to serve the people.
  • Going upstream to the determinants of health – diet, nutrition and exercise – is critical in primary prevention such as blood pressure measurement.

As Flaitz told me, the Rochester story reflects a local culture that has been built where all stakeholders recognize “We are all in this together.” We need more of that in America.

Ian Morrison, Ph.D., is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to AHA Today and a member of Speakers Express.



Social Determinants of Health: The ProMedica Story

Thursday, September 21st, 2017


Poor education, food insecurity, underemployment and inadequate housing can all harm an individual’s – and community’s – health.

The health care community is showing a significant and growing interest in the social determinants of health (SDOH). The rise of population health, providers’ embracing risk, increased focus on community benefits, and growing scientific evidence have all driven an appreciation that social factors such as income, education and food security can determine health status, health needs and health outcomes.

I’ve previously [] reviewed population health and population health management approaches from 30,000 feet. But a real question remains: How do health systems translate understanding about SDOH into action?

The American Hospital Association has launched a valuable new set of tools focused on eight social determinants: food, housing, education, transportation, violence, social support, health behaviors and employment. (These are the subjects of guides being published nearly monthly through early next year.)

At the AHA Leadership Summit, keynoter Dr. Rishi Manchanda, an evangelist for “upstreaming” as he terms it, urges [] health systems to get ready, get set and go upstream to deal with social determinants.

In my travels, I see many health systems addressing SDOH. But few organizations, in my view, have done more to operationalize their approach than ProMedica, a leading health system based in Toledo, Ohio. ProMedica provides a role model for building a strategy that fully embraces social determinants of health and makes it real for the community it serves. This is its story.

A thriving health system, a community in need

ProMedica is a highly successful, well-respected, integrated delivery system with 332 sites of care, 4.7 million patient encounters systemwide, 13 hospitals, 323,000 lives covered by their owned health plan, with 800+ employed physicians, $3.1 billion revenue and strong financial ratings.

Yet, when ProMedica leaders looked at their community recently, they found that:

  • Toledo rated 99th out of 100 communities in the Gallup Well-Being Index;
  • 70 percent of adults were overweight;
  • 36 percent of low-income families were concerned about having enough food;
  • Lucas County, of which Toledo is the county seat, ranked 88th of 88 counties in Ohio for infant mortality and low–birth weight babies; and
  • 28 percent of youth reported they felt sad or hopeless two weeks in row.

The juxtaposition of a thriving health care system and a community with poor health status galvanized ProMedica leaders to think more broadly of how to engage the community to improve health and well-being.

Starting with obesity

A decade ago, ProMedica leaders undertook a community needs assessment, focusing on the obesity epidemic affecting the Toledo community. But as they dug deeper into the causal factors, there was a surprise. As ProMedica CEO Randy Oostra explained, “The more we kept peeling back the layers, the more we found that the problem was hunger and food insecurity.”

Research has shown that food insecurity leads to health problems along the life span. Pregnant women who live in food insecure households are more likely to deliver underweight babies, while children suffer from more ear infections, colds, stomach aches and iron deficiency. Without an adequate food supply, children also develop more cognitive and physical development problems. In adults, dietary shortfalls and irregular eating patterns can lead to obesity, chronic disease and behavioral health problems. And seniors who are food insecure experience more disability, less resistance to infection and longer hospital stays.

These facts led ProMedica to become a pioneer in the use of a food pharmacy (prescribing food as medicine) and investing in inner city grocery stores with healthy food. ProMedica employees started with a visit to Boston Medical Center’s Grow Clinic, a successful program that had been operating for a decade, to learn how to start their own program. They opened the first ProMedica Food Pharmacy [] in April 2015 in Toledo.

As the ProMedica food security program description states, “The idea of the Food Pharmacy is simple: Food is medicine. As such, a health care professional writes a referral to the food pharmacy for patients that are identified as food insecure. These patients are then able to visit the pharmacy to pick up a supplemental supply of healthy food for their family.”

The results are impressive. According to ProMedica’s internal monitoring, 57,244 patients were screened for food security in 2016; of those patients, 2,243 screened positive. Their average age was 50, and 1,100 of them became new food pharmacy clients.

Among the 4,000 Medicaid patients completing a screen and food pharmacy referral in 2016, ProMedica found that emergency department usage dropped 3 percent, readmission rates dropped 53 percent, and primary care visit rates increased 4 percent.

These are impressive outcomes from an intervention in which food is medicine. If this were a pill, it would be a billion-dollar drug.

Beyond food

Building on the success with the food pharmacy, ProMedica focused on clinical excellence, economic and social determinants, and anchor institutions. (Anchor institutions are nonprofit institutions that, once established, tend not to move location. They include hospitals, universities, arts, churches, entertainment and sports venues – organizations that are place-based and are focused on the long-term welfare of their communities.)

As an anchor institution, ProMedica has used its resources to drive economic well-being; improve housing, education and training opportunities; and create and retain jobs and opportunity.

For example, Oostra and his leadership team have bought and sold a hotel property to keep jobs in the community, invested in real estate development initiatives, relocated ProMedica’s headquarters as part of a downtown revitalization, and used their resources to secure loans and funding investments that have driven an estimated $500 million of new economic development in the Toledo area.

Hospitals are ideally suited to be anchor institutions in creating a virtuous economic cycle: They’re not leaving; they bring resources as an investor; and in many cases, they are the largest employers in their communities.

Screening for SDOH

ProMedica is applying an SDOH screening tool to all patients, whether in the inpatient or in the outpatient environment. The tool covers many of the same factors identified by the AHA, including education, employment, food, housing, transportation and violence. The screeners also ask a series of motivation questions.

It is early in ProMedica’s journey of data collection and review to guide action, but results to date are encouraging. For the initial 340 patients in the pilot from January 31 until June 30, 2017:

  • Two hundred forty-seven patients completed screenings out of 340 patient encounters (73 percent); a quarter of patients declined to be screened.
  • Of patients encountered, 54 percent had positive needs identified and elected connection to services through ProMedica’s Community Care partners.
  • A full 38 percent of those screened had needs in four or more domains.
  • To date, a total of 320 patient needs have been validated.
  • A remarkable 97 percent of needs are either in the process of being resolved (55 percent), or have been confirmed resolved (42 percent). (Only 3 percent remain unresolved, or patients are unable to be reached.)
  • To date, 317 patient community resource referrals have been made as a result of SDOH screening (41 percent to a community food resource, 21 percent to a community financial resource, 11 percent to a community utilities resource, and 9 percent to a community training or employment resource).
  • Perhaps most importantly, a remarkable 87 percent of respondents have high motivation scores to address their challenges.
  • And the punchline is that outcomes and costs are improved. For example, unnecessary neonatal intensive care unit use is declining because of improved treatment for pregnant women as a result of screenings.

ProMedica is embedding this screening tool in clinical workflows and in the electronic health care record, working with a data company partner. It intends to develop an evidence base for continuous evaluation, learning and innovation for its social determinants of health initiatives.

SDOH strategies

ProMedica’s journey teaches us how to turn noble concepts into actions. In particular, the system is addressing governance, advocacy, outreach and leadership opportunities:

Governance. The ProMedica board is composed of sophisticated business and community leaders in Toledo. They are supportive of the strategy and in many instances use their own institutions’ economic and civic advantage to advance initiatives that address social determinants. For example, KeyBank, a leading financial institution in Toledo, has partnered with ProMedica through grants and loans to advance the economic development agenda.

Advocacy. ProMedica and the AARP Foundation have founded a coalition to focus on social determinants. It is a nonprofit organization of 35 members that engages health professionals – from all disciplines and provider models, public health organizations, government officials, the nutrition and food industry, and other organizations – to develop and implement sustainable solutions to improve health and well-being. Its name, the Root Cause Coalition, demonstrates the effect of societal factors such as hunger, need for safe and affordable housing, poor education, lack of transportation, and isolation on the health and well-being of individuals and communities.

Outreach. With ProMedica’s many touch points in the community, including physicians, the system is “meeting people in their lives” to improve their health. Part of the strategy is to destigmatize receiving assistance – even middle class people can have trouble with food security, behavioral issues or employment.

Leadership commitment. Oostra is a strong leader who is passionate about social determinants and sees it not as a sideline but as a key strategic imperative. As he told me: “This isn’t a dabble thing.”

Well said. We will watch your progress with interest and deep appreciation for leading the way.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN’s website and a member of Speakers Express.

Health System Strategic Plans: Ten Common Themes

Tuesday, June 27th, 2017

While America’s health care policy is still uncertain, the strategic direction of most hospitals remains fundamentally unchanged. Nevertheless, there remain many uncertainties, not only about the future of Medicaid and coverage, but also about the commitment to payment reform like the Medicare Access and CHIP Reauthorization Act (MACRA) and bundled payment initiatives. This uncertainty has caused leaders to evaluate the overall commitment to risk-bearing strategies and the pace of change for payment and delivery reform.

Ten Common Themes

Health care systems have been criticized for suffering from groupthink, slavishly following the conventional wisdom. While this may be a valid criticism, the common themes of health systems’ strategic plans do seem to make sense. I see a lot of strategic plans in my travels, and I participate in many health system board retreats in states from California to Maine, Louisiana to Oregon. And I have had the opportunity to interact with leaders and board members from all over the health care ecosystem. In my experience, hospitals and health care system executives draw on some or all of the following 10 common themes in their strategic plans.

Strategic growth. Every health system I’ve ever worked with is trying to grow.

The primary vehicle is not growth through acquisition (although mergers do continue) but organic growth from 1) increasing market share in primary service territory for key service lines and 2) extending into geographically contiguous markets by planting footprints such as ambulatory care centers or primary care physician networks to capture referrals from competitors.

Obviously, there are winners and losers in such a strategy, and not everyone can succeed. Indeed, I have joked that if you add up the strategic plans of all the geographically contiguous health systems in the Midwest, you would need the entire population of China to move to the Midwest to fulfill all of their growth aspirations.

But growth takes many forms, including new partnerships along the continuum of care, and with other nontraditional health care actors, such as retail clinics, free-standing emergency rooms and urgent care clinics.

Regional powerhouses such as Carolinas Health and Texas Health Resources are good examples of systems focused on strategic growth using each of these growth elements.

Consumer engagement. Health care administrators are recognizing that they need to pay better attention to consumer decisions. Increasingly, consumers have high-deductible plans and more responsibility to select plans and providers and to decide on patterns of care (including forgoing care because of cost or seeking out lower-cost alternatives). Health system leaders are focusing on engaging consumers by establishing convenient locations, flexible hours of operation, and creative use of new consumer-facing technologies. Health systems such as Providence have been pioneers in this area.

Consumers also play an important decision-making role in government programs from Medicare Advantage (which accounts for approximately one-third of all Medicare enrollees) to exchange and managed Medicaid consumers who are often required to select plans and therefore choose provider systems. Managed care companies that have strengths in Medicaid (like Centene and Molina) have proven more adept at understanding lower-income consumers and in developing provider networks that are more affordable and effective than their traditional commercial insurance competitors.

Consumer decisions matter not only because they select plans and providers but because their care experience (as measured by patient satisfaction) is increasingly a factor in the financial success of plans and providers. For example, health plans in the Medicare Advantage space are obsessed with star ratings because of the financial and marketing advantage that five-star status brings. Similarly, the growing importance of Consumer Assessment of Healthcare Providers and Systems scores in Medicare, and commercial payment for hospitals, makes consumer satisfaction a primary financial driver of the hospital’s bottom line. Systems like the Cleveland Clinic have concentrated on improving the patient experience, and many have appointed chief experience officers.

Many health systems are actively engaged in enhancing the consumer or patient experience with new consumer-facing tools and technologies (more of which below), improved customer service, process improvement, and training staff to encourage care and compassion. In addition, investment in improving provider satisfaction is seen as a critical determinant of patient experience. For example, many health systems embrace “restoring provider joy in practice” as a fourth element to be added to Dr. Donald Berwick’s Triple Aim.

Several of the tools and technologies that are being deployed have to do with care coordination and support, shared decision making, consumer navigation, and wellness and health promotion. But in my experience, one of the key determinants of patient satisfaction has to do with out-of-pocket costs. Increasingly, as the financial burden is placed on consumers, the financial “gotchas” such as out-of-network charges or alarmingly high deductibles can have a significant negative impact on consumers’ satisfaction with plans and providers. Providers need to take responsibility for communicating with patients clearly, fairly and compassionately about their financial responsibility. And let’s be honest: Consumers on the hook for big cost sharing may still be cranky at the end of the day.

Physician relationships. In every strategic plan I have seen in the last five years, physician relationships are among the top three priorities. This takes many forms. Much of the focus is on both clinical and economic integration with physicians to improve care performance and enhance provider loyalty. While not every health system is on the path to formal vertical integration such as Kaiser’s, almost all health systems have embarked on some form of economic integration with doctors.

Most health systems have three buckets of physicians. The first bucket contains the employed multi-specialty medical group that many systems continue to grow rapidly. The second bucket is composed of a group of loyal and tightly engaged physicians who may be in a formal independent practice association or are the core exclusive medical staff for that whole system. The third bucket is filled with community-based physicians who may have varying degrees of loyalty or exclusivity with the health system.

In my experience, we are seeing more physicians in buckets one and two and fewer in bucket three. But Dr. Dan Varga, chief clinical officer of Texas Health Resources, is smart to point out that to be successful, health systems have to provide what he terms “economic docking opportunities” with all three buckets of these physicians, whether it be through employment at one extreme, joint ventures at the other extreme, or the use of clinical integration organizations to contractually bind the physicians to the system somewhere in between. The three-bucket model is everywhere.

Not only are hospitals engaging in clinical and economic integration with doctors, but they are placing more emphasis on improving physician experience, particularly in the face of a growing recognition that the majority of physicians are suffering from burnout.

There is a “cooling of ardor” toward acquiring and building physician practices, as well as growing anecdotal evidence in the marketplace of both buyers’ and sellers’ remorse. My old line from the ’90s about employing physicians – “Why would you want to capitalize the future income stream of a bunch of passive-aggressive people?” – remains a valid critique of physician employment.

However, there is a growing cadre of younger physicians fresh from medical school whose expectation is not to put up a shingle and spend 100 hours a week in practice. Rather, they are looking for an employment contract with secure earnings and work arrangements that fit with their lifestyle. Young graduates of both genders are gravitating to employed situations. This explains why salaried organizations such as Kaiser, Mayo, the Cleveland Clinic and other large health systems with employed medical groups have little difficulty recruiting physicians. The exception to this generalization is smaller and more rural environments, which have a constant struggle attracting medical staff of all types.

Quality and patient safety. It has been almost 20 years since the Institute of Medicine recognized patient safety concerns in its landmark “To Err is Human” report. Critics argue we have made very little real progress in two decades, despite significant attention to the problem.

But I take a more positive view: My experience is that every health system has put quality and patient safety high on its strategic agenda. Each picks an “operating system” or strategic framework for quality, whether it be Lean, Six Sigma or High Reliability. The systems develop focused initiatives within this broader framework, such as falls prevention or reducing hospital acquired infections. They select specific measures and develop an accountability path to monitor progress and take corrective action. And they develop governance frameworks (whether it be clinical councils as in the case of Memorial Hermann in Houston or “physician compacts” as in Seattle’s Virginia Mason) to engage physicians directly in governing the activities of clinical improvement.

Increasingly, leaders and board members recognize that to have good governance practices, they must give extremely high priority to quality and patient safety initiatives. I am encouraged that this will remain a top priority and that results will improve.

Innovation at scale. Over the last decade, partly as a consequence of investment under the Health Information Technology for Economic and Clinical Health Act, American health care has come into the digital age – electronic health records in hospitals and physicians’ offices have become ubiquitous. The EHR has become table stakes for care delivery. New opportunities are emerging with innovations: Some technologies support population health and data analytics; others such as consumer-facing apps will help engage consumers. Other promising technologies will assist physicians and other caregivers to manage the hassle factor of EHRs, including voice recognition technologies. For example, health care accounts for a full half of Nuance Communications’ business. (Nuance is the leading speech recognition technology vendor.)

One way health systems are improving care is by using scribes, reportedly among the fastest-growing category of health care employment. Scribes are support staff who track physicians either actually or virtually (as in the case of Augmedix, a Google Glass–based system) and enter data into the EHR. In a recent polling of CEOs at an industry conference attended by 150 of the largest health systems in the country, we found a full 56 percent of the audience reported having scribes in their facility – a testament to the need for EHR workarounds.

Two other major innovations concern big data and analytic initiatives using machine learning and artificial intelligence. While the doctor won’t be replaced by robots or software anytime soon, there are major opportunities to enhance clinical decision making and to guide consumers and providers alike through the insights that big data and predictive analytics can provide.

The final intense innovation focus is on virtual health and telehealth. Whether it be enhanced access to specialty consults for rural health care in systems such as Mayo and Avera, or remote monitoring of intensive care unit patients by specialized clinical ICU supervisors at St. Louis–based Mercy Health’s many ICUs, virtual health presents new opportunities for the field to improve quality and reduce cost.

No matter the innovation approach for the set of projects that are prioritized by the institution, the key challenge is innovation at scale. We must avoid what I call the Scout badge problem – one-off pilot projects shown off like merit badges at board meetings but with little meaningful use. Such pilots are useless if they don’t scale and can be a distraction for the clinical enterprise. Technology accelerators such as AVIA or Rockhealth or Health Box play a key role in deploying innovation. AVIA in particular is committed to curating innovative solutions that solve health systems’ key problems and coaching health systems to deploy these innovative solutions at scale.

Culture and people. Almost all health systems have a value-based culture that is manifestly important to the mission of the organization and guides the strategy and behavior of the organization. Many systems are faith-based and guided by the principles and values of their religious sponsors. Many systems have adopted the great Don Berwick’s Triple Aim as their north star.

Other systems such as Ohio Health or Atlantic Health strive to be a best place to work in their community and benchmark themselves against other leading national employers. Across the country, health system leaders are passionate about creating an engaged workforce, and are building respect, reliability, retention and resilience among their employees.

Value and affordability. As financial pressures intensify, with public payment rates likely to be constrained over the long haul and private purchasers concerned about their cost for health care, health systems are trying to work on their underlying cost structure and identify opportunities to improve value and affordability for the various customers. But each stakeholder sees value somewhat differently.

For consumers, value means low out-of-pocket costs, keeping their current doctors, convenience, proximity and, in some cases, reputation of providers. (There is much less institutional loyalty than there is loyalty to physicians, unless the price is right.)

For public purchasers, such as Medicare Advantage plans or Medicare through the proposed MACRA legislation, the criteria for value depend on multiple performance measures, including patient satisfaction, cost effectiveness, meaningful use of EHRs and adherence to quality improvement principles.

For private purchasers, particularly self-insured large employers, value takes many forms: Some are looking for choice, high quality and low unit costs on a fee-for-service, preferred provider organization basis, while others are seeking innovative relationships with providers (including centers of excellence, high-performance narrow networks and accountable care organizations). A subset of employers is experimenting with more direct relationships with health systems including global giants such as Boeing, Disney and Apple.

Clinical differentiation. Most health systems have identified three or four top critical priority areas; however, in my experience, it always ends up being the same three or four: orthopedics, cancer, cardiovascular and neurosurgery, which happens to be where the money is. Very few hospitals claim to be specializing in morbidly obese patients with behavioral health issues or the frail elderly or care for the homeless. Just sayin’.

For academic medical centers, this clinical differentiation is even more concentrated, and many leading such centers are focused on quaternary care in the four service lines, including transplantation, and are betting on a future of personalized (or precision) medicine, including such notables as Stanford and Penn.

Financial sustainability. All health systems have a strategic priority for financial stability or financial stewardship. As the cliché goes: No money, no mission. Every health system must obsess over the financial hydraulics of payer mix (managing the relative balance of unprofitable Medicare and Medicaid business against more profitable commercially insured patients). As public payment grows because of an aging society and widening income inequality, health systems are anticipating a tightening financial future, a future that would be even tighter if coverage is eroded.

As I have noted in previous columns, few health systems have been able to make money on Medicare, but in many institutions, there is a growing recognition that the cross subsidy from private payment may not be sustainable for the long term. Indeed, the pattern I’ve seen across the country is that 2015 was the “best year ever” financially for many institutions, fueled by the combination of a recovering economy and coverage expansion (especially through Medicaid) and increased cost discipline and operational improvement. The increased coverage reduced bad debt for inpatient care, and the improving performance of cost-cutting initiatives launched in the recession yielded positive financial performance for 2015.

Finances for some soured in 2016 and into 2017 partly because Medicare and Medicaid patient loads have grown. There is considerable anxiety in the field that potential health reforms such as the American Health Care Act or its derivatives will challenge finances even further.

Population health and risk-bearing strategy. The one approach with a significant variation in strategy is population health and overall risk-bearing strategy. I have written at length on both of these, most recently about population health, so I refer you to a previous column.


Health system leaders diverge in their attitudes toward risk bearing. At one extreme are those who want no part at all of risk bearing in any form beyond modest pay-for-performance incentives. (This may be a third to a half of all hospitals in the country, according to Nielsen/Harris surveys.) In the middle of the spectrum is clinical integration, where administrators are beyond dabbling and are making very serious efforts to integrate with physicians to contract with health plans – and to embrace improvement in clinical performance on a systematic basis with an aligned medical staff.

Then there are those who are eager to embrace risk (perhaps accounting for as many as 20 percent of institutions). We have identified a group of about 8 percent of leaders who agree with the statement “We will derive the majority of our revenues fully at risk within five years.” (That number has hovered around 6 percent to 8 percent over the last three years of surveys.) A slightly less aggressive version of that risk-bearing strategy is that they are preparing for risk bearings such as accountable care or the opportunity to contract directly for Medicare Advantage (which is a further 10 to 12 percent of hospitals). So, approximately 20 percent of health systems are serious about risk, and this is reflected in the same percentage in surveys reporting that they anticipate having a state health insurance license within five years.

The American Hospital Association has identified 100 health systems that currently have their own health plan. A provider-sponsored health plan strategy remains controversial and is not for the faint hearted. Overall, in my view, there is no clearly preferred risk-bearing strategy; each of the options could work but depends on execution. But remember, bearing risk requires thinking like an insurer, which can be a major challenge for institution leaders still wedded to fee-for-service economics.

Looking Ahead

In a Trump administration with potential health reform to repeal and replace Obamacare still being debated, do you change your strategy? I’ve asked this question of many CEOs across the country, and I’ve participated in many board retreats since the election, all over the country, discussing the issue. I have also had the opportunity to poll CEOs at various meetings in the last few months. My overall conclusion is that most CEOs are committed to staying the course on the strategies, drawing on the 10 common themes outlined above. Obviously, not everyone has exactly the same strategic plan, but certainly there is remarkable agreement on the common themes. Most CEOs and board members are of the opinion that the pursuit of high-value care, through strategic growth and clinical integration, with increased attention to population health, remains the most sensible strategy.

However, there are key uncertainties that a Trump administration reform could impact:

Coverage expansion. This has been very important to the bottom line of all health organizations. But it has been a mixed blessing: On one hand, it has substantially reduced bad debt in every state (especially where Medicaid was expanded, and where previously uninsured patients were newly covered). At the same time, Medicaid expansion permanently impairs the payer mix. We await the final true policy direction, and let’s be clear: deep Medicaid cuts such as proposed in the AHCA would harm most hospitals and be devastating for the most vulnerable rural and safety net institutions. But no matter what the policy outcome, it will have consequences for the financial sustainability and stewardship dimensions of most health system strategic plans.

Payment reform. The second point of concern is the Trump administration’s commitment to continued payment reform. The conventional wisdom is that payment reform, such as MACRA, bundled payment and value-based reimbursement, will remain largely untouched. However, many CEOs expressed concern that the Trump administration’s commitment to bundled payment programs, MACRA and so forth may not be as intense or urgent as if it would have been under a Clinton administration. So, there are many CEOs revisiting not the direction of change but the pace of change, and they await policy clarity.

Consumer responsibility. Consumer responsibility for payment would be even more dramatic if AHCA-type legislation actually passes, intensifying many of the challenges laid out earlier in terms of out-of-pocket costs, consumers seeking lower cost alternatives, and dissatisfaction with care associated with out-of-pocket burdens.

Role of the states. No matter what, states will have more flexibility over the next few years, and CEOs need to pay more attention to their state capitals and policymakers who will play a bigger role in determining the strategic context.  Increased variation across states in terms of policy will challenge multi-state health systems strategic plans and require customization to adjust to what fellow futurist Jeff Goldsmith has called the local “terroir”.

I am deeply impressed by the commitment of all CEOs and their board members to doing the right thing. I have interacted with many over the last few months who tell me “no matter what” they are committed to serving their communities, to delivering high-quality care and embracing the need for affordability. They recognize the importance of belt tightening as they anticipate a more challenging financial environment. They stress the need to innovate their way to care redesign and higher performance. They are preparing to weather fiscal storms that may come. And they are paying renewed attention to operational excellence. Great leaders do all that.

So, stay the course, and continue the work toward higher performance.


Ian Morrison is an author, consultant and futurist based in Menlo Park, California. He is also a regular contributor to H&HN Daily and a member of Speakers Express.


California First

Monday, March 27th, 2017

As Republican moves to repeal and replace the Affordable Care Act race forward, states are likely to gain more flexibility in the form of block grants, enhanced waivers, and flexibility to redesign programs for the uninsured and for Medicaid. But what about big blue states like California and New York? California, in particular, is the sixth largest economy in the world, with a Democratic super majority legislature. What could a super blue state achieve in the new era of states’ rights?

I’m going to take the long-term view and explore possible scenarios for a California-first strategy to expand Covered California, transform Medicaid, combine public and private payment reform initiatives, as well as possibly create new regulatory and tax schemes. A new California governor will be elected in 2018, and he or she may play a pivotal role in defining the state’s, and perhaps even the nation’s, health policy for the decades ahead.

A Big State

With nearly 40 million people, Disneyland, Apple and Google, we Californians are kind of a big deal. We have a huge diverse economy that is doing well. We have a state that is running a budget surplus. And like other big blue states, we pay more in federal taxes than we get back in federal benefits (even after Obamacare).

We have a governor and a legislature with high approval ratings. And we have Democratic super majorities in our legislature.

We embraced Obamacare to the max, and it is going amazingly well (come on, man, if he can say it I can say it. I have some facts coming up, too).

We have reduced the uninsured by more than 5 million (a quarter of all the national improvement in coverage). We have a high-functioning exchange, Covered California, that is a model for the country.

And it is raining like crazy (at least where I live in Menlo Park), so the drought worries are pretty much gone.

Life is good here.

Except for the election.

Californians voted overwhelmingly Democratic; indeed, President Trump would have easily won the popular vote nationally had it not been for losing California by 4.2 million votes.

But remember: California is politically diverse within the state. “California is a big blue state with a thick red stripe down the side,” California Healthcare Foundation CEO Sandra Hernandez told me an interview, referring to the more conservative political orientation of the Central Valley, most of rural California and parts of Southern California.

Challenges under the new administration

We have a Trump administration and a Republican Congress. What happens now for a mostly Democratic California?

I interviewed more than a dozen friends and colleagues who are all key players in the Californian health economy and I had conversations on this issue with more than a dozen more. I talked to insurers, providers, employer groups, health plans, government officials and foundation CEOs. I did it off the record, though many agreed to be quoted on the record for this column.

I asked two basic questions:

  • Will California be able to protect the $20 billion per annum of net new federal dollars that flowed to expand coverage ($15 billion for Medicaid expansion and $5 billion for exchange subsidies)? If not, what happens?
  • Is there an opportunity for California stakeholders to step up and rethink our overall marketplace to protect the gains we have made and to build on our unique strengths?

My overwhelming sense from the interviews is that the Trump administration policies will create serious challenges ahead for Californian health care, particularly in protecting the gains we have made in coverage, payment reform and value-based redesign of health care, but especially in protecting the current flow of federal funds to support those gains. However, there was also a remarkable sense of optimism among all the respondents and a strong determination to roll up their sleeves and (as Californians always do) try to be creative and innovative in improving on those gains in a way that is consistent with California values.

I will do my best to represent the spirit of the discussions here. I take full responsibility for the prose. And this essay of course does not represent in any way the official views of the AHA, as we always make clear in these columns.

So, if you are reading this in hope of a lefty secession manifesto, you came to the wrong place. There are petitions for all that and they are growing rapidly, but as much as many Californians could live with a wall atop the Sierra Nevada (possibly redundant) to keep y’all out, we actually like being American, too.

Gains from Obamacare

“We were all in on Obamacare” – almost all California stakeholders voiced this view.

There is indeed evidence that Obamacare is working for all Californians. Consider this:

  • According to the Centers for Disease Control (CDC) the uninsured rate in California dropped to 7.1 percent as of September 2016 from 17 percent in 2013.
  • The uninsured rate dropped for all racial and ethnic group with the greatest gains among Latinos. Between 2013 and 2015, the number of California Latinos who were uninsured fell by 1.5 million, and the uninsured rate in this population fell from 23 percent to 12 percent.
  • Covered California announced in February 2017 it has added 412,000 new consumers in the most recent (its fourth) open enrollment period for a total of 1.5 million Californians enrolled.
  • An additional 750,000 Californians bought identical (same price, same benefit design) “non-subsidy” plans off the exchange.
  • A full 90 percent of Covered California consumers receive a subsidy which is on average $440 per month, making coverage affordable for lower and middle income consumers.
  • Covered Californian rate increases over a three-year period have averaged 7 percent per annum, more modest than the national picture.
  • Medi-Cal has added 3.7 million Californians to coverage with nearly a third of all Californians now covered by California’s Medicaid program.
  • For a whole host of access to care, coverage and utilization of service measures tracked by a variety of organizations and research groups from the Centers for Disease Control to the Commonwealth Fund, Californians have seen their access to health care services and their health improve because of Obamacare.


The Overall Health Care Industry

Recently, I had lunch with Joe Swedish, Anthem’s CEO, after a fireside chat we did for a group of health care system CEOs. I asked him what should happen nationally and in California.

“Nationally, we need to Repair, Restructure, and Rebuild the Affordable Care Act.  In California, it is imperative that the coverage gains made through Medi-Cal expansion and Covered California are maintained and that sensible insurance market reforms help us cover even more Californians”

California is a big deal for Anthem: “California is a very important state to us across all lines of business: individual, exchange, small and large group, Medicaid and Medicare,” Swedish said. “It accounts for close to a quarter of our members, and we have very important initiatives in the state including Vivity and our reference pricing pilots with CalPERS.”

Anthem Senior Vice President Pam Kehaly, who has responsibility for all of Anthem’s business in the West and for specialty services including all exchanges, confirmed in an interview that indeed a full 22 percent of all Anthem members are in California and stressed Anthem’s leading position in the Covered California marketplace and in the state’s Managed Medicaid initiatives.

Anthem has a big stake in California. But for Kaiser Permanente, California is even more important, accounting for almost three-quarters of its membership with recent California coverage expansion being a major part of Kaiser’s growth. For Blue Shield of California, virtually all of its $5 billion in revenue is earned in the state.

The same is true for some giants in health care delivery based exclusively in California. The University of California campuses are each multibillion-dollar health care enterprises, and California is home to other multibillion-dollar, nationally prominent academic systems including Stanford, Cedars-Sinai and the University of Southern California.

The state has major “California only” health systems such as Sutter in Northern California, Sharp and Scripps in San Diego, and Memorial Healthcare in Southern California.

There are also multistate, multibillion-dollar players with a big California presence such as Dignity Health, Providence/St. Joseph, Centene, Molina and Davita/Health Care Partners, all of which have large shares of their national business in California.

What happens to the Californian health care ecosystem will affect a lot of nationally prominent institutions as well as 40 million Californians.


Weathering the repeal-and-replace storm

Kaiser Family Foundation CEO Drew Altman told me, “If Medicaid expansion stays in place, and tax credits are sufficient to maintain coverage, and block grant details are decent, then California has a fighting chance, including the opportunity to maintain its insurance reforms, provided they are not upended by insurance being sold across state lines.”

That is a lot to ask. Will California do well in the coming food fight for federal dollars in a year of repeal and replace?

Altman was wise to point out that “we are not going to have a real debate about this until we have an actual repeal and replace plan on the table.”

What is At Risk for California

While it is still early in the policy making and legislative process, at this time, it is still useful to ask what is at risk for California.

The short answer is money. As stated earlier, California is getting an estimated $20 billion in new federal money. Clearly that would be at enormous risk in a repeal without an adequate replace scenario.

“But it is more than just the $20 billion,” as Robin Arnold Williams of Leavitt Partners told me. “California has pursued waivers and initiatives such as maxing out provider fees and other special funding arrangements that go far beyond the $20 billion of expansion dollars.”

A forthcoming report from the Public Policy Institute of California on funding the Medi-Cal program lays out in considerable detail the complex financial and policy options involved in funding Medi-Cal, especially because, as the report shows, 65 percent of California’s Medicaid program is federally funded, because of the expansion and other initiatives.

Would the Trump administration enjoy fiscal retaliation against California? One interviewee had a colorful metaphor: “There are some folk who would absolutely relish taking it away. The $20 billion would be like a pile of cocaine on the table at a Studio 54 party in the ’80s.”

Another experienced observer told me more soberly that “the politics don’t line up for California.”

However, repeatedly my interviewees pointed to three factors that would mollify the tendency for overt political retribution against California:

  • Governors in expansion states. A full 32 states have expanded Medicaid, including the vice president’s home state. Sixteen of those states have Republican governors (17 if you count Alaska, a normally red state with an independent governor). They do not want Medicaid expansion to go away.
  • Replace requires bipartisanship. Repeal is easy. Replace is hard and requires bipartisan support, a view that is backed up by law and logic. Budget reconciliation is handy for repeal, not so useful for replace. Moreover, former Utah governor Mike Leavitt and other wise voices are urging Congress to make this new reform effort bipartisan and not “overreach” with a partisan plan that lacks legitimacy, a valid critique often leveled at Obamacare.
  • The role of career civil servants. Andrew Croshaw, president of Leavitt Partners, pointed to the continuity that the civil service plays in maintaining consistency in policymaking. Anyone who has seen the British TV series Yes Minster can attest to the many ways that gung-ho politicians are thwarted and talked down from political overreach by lifetime civil servants.

Nevertheless, as one senior longtime observer of California health care told me: “Overall, California is exposed politically, exposed financially and exposed in terms of current level of provider rates; this is not a good base to be negotiating from.”

Medicaid Block Grants

Block grants seem to be the rage. Talk is everywhere. My colleagues at Leavitt Partners believe that block grants in the rigid form we’ve seen in one isolated example (Puerto Rico) are not likely to happen. More likely is honoring the spirit of a block grant to provide federal fiscal discipline and flexibility to the states, which can be achieved through the considerable waiver authority granted to the secretary through 1115 Medicaid waivers and 1332 waiver authority applied to exchanges. If this is the policy choice, block grants would be more virtual than actual.

But any way you cut it block grant probably means less money.

If we do go down the block grant road toward per capita caps, three key questions will be important (according to industry sources):

  • What is the base year and base amount that the block grant applies to? Is it current spending with expansion dollars included, pre-Obamacare levels, or some yet to be determined redesign of federal matching in Medicaid?
  • What is the annual inflation factor?
  • Will state general funds and other non-federal sources be maintained?

California will have an uphill slog to preserve the flow of federal funds.


A Range of Choices

An extremely wise and experienced public affairs professional counseled me: “Don’t get too smarty-pants, policy wonk on this thing you are writing. Just keep to the broad sketch map of choices.” So here goes:

Left-wing isolationism. Single-payer advocates see this “crisis” as an opportunity to revive aspirations for a single-payer system. Getting the Employee Retirement Income Securities Act and Medicare waivers needed, or the massive increases in taxes on the rich that would be required to sustain it in California, would be unlikely, but that will not stop them from being proposed. Replacing the Obamacare Medicare tax on high income earners (at the state level) may be an early target if the repeal-and-replace legislation removes it at the federal level.

Massive Medicaid à la New York. New York is a big blue state. Its exchange is puny, with fewer than 300,000 members. Instead, New York elected to opt for a basic health plan to expand its already generous Medicaid program. Most of the gain in coverage that has resulted is in Medicaid. A basic health plan idea will be advanced, with considerable pushback from providers. Dude, a third of Californians are already on Medi-Cal – can we realistically add more to the rolls in a Trump administration, particularly if we have to do it with mostly state money?

Public purchasing power à la Washington State. Some proposals may emerge to leverage public spending by Medi-Cal, CalPERS, Covered California, and other state and local government employees and entities, much in the way that states like Washington and Arkansas have done (a topic I explored in a previous column).

A competitive managed care marketplace. When I came to California more than 30 years ago, I met and learned from managed competition guru Alain Enthoven of Stanford. Over the years I came to believe that Alain got it right: Competing integrated delivery systems with cost conscious consumer choice was the right American compromise. The colleagues I talked to recently had great positive energy for a revitalized competitive marketplace based on value, where competition was not just on perceived quality, but on price. They described it as a market where consumers faced meaningful and simple standardized benefit plan designs that encouraged competition not based on actuarial trickery and marketing sleight of hand, but on the underlying performance of the delivery system partners. Covered California could be the vehicle for that marketplace, and stakeholders (including insurers and providers) are willing to come to the table to discuss how such a redesigned delivery system and marketplace might be fashioned, starting with coverage expansion populations. Other respondents cited Oregon’s approach of Medicaid contracting directly with provider groups who form coordinated care organizations as another variant to be considered by California policymakers.

California Darwinism. As the old saying goes: “There is a danger that as the pie shrinks the table manners suffer.” Without multi-stakeholder cooperation and leadership there is a high probability that each stakeholder (from community clinics to academic medical centers and all points in between) hunkers down to protect recent gains and hopes to cut a deal to preserve what it can. This may be likely but not desirable and could hurt a lot of Californians. In addition, as California Health Care Foundation’s founding CEO Mark Smith told me, driving decisions to the state level may aggravate the “political guild steeplechase” that takes place on issues of reform such as scope of practice and telehealth rules, and licensing regulations such as certificate of need.


Common Hopes and Dreams

In my conversations there were several themes for the future that emerged, and there was considerable consensus that California stakeholders need to rally around these themes.

Preserve the gains. Don Crane, CEO of the California Association of Physician Groups, voiced the concerns of many when he told me, “Most California stakeholders want to preserve the gains we have made under Obamacare.”

Create a glide path for the individual market. Nationally, the individual market will collapse without a glide path reassuring insurers that a market may be viable. This is not a uniquely Californian problem, but Covered California is the second largest exchange in the country behind Florida’s.

Behavioral health integration. Spontaneously, almost all interviewees independently identified the need to integrate behavioral health with medical care more effectively within the state. They see this as a huge opportunity to improve efficiency, quality and patient experience, particularly for vulnerable populations. For example, including greater focus on social determinants of health coupled with behavioral health integration and elimination of waste, “we can save billions”, Crane said.

Celebrate our advanced delivery models. Crane and others stressed the importance of preserving and enhancing California’s “unique winning model” of capitated-delegated provider groups underlying much of California’s managed care plans.

Don’t lose momentum on value purchasing and payment reform. Whether employers, insurers or providers, respondents were in agreement that the momentum gained in the Obama years toward value-based purchasing and payment reform should not be lost in the repeal-and-replace process, and that is even more true in California than the nation as a whole.

Remember the most vulnerable. As we have seen, California had one of the highest rates of uninsured before reform. Obamacare reduced that number, particularly for low-income Californians and people of color. Most repeal-and-replace proposals will hurt the most vulnerable, especially in those states with a history of social, economic and racial injustice that has been only ameliorated by a federal response.

Getting along with Trump’s CMS. There is a new sheriff in town and Trump’s Centers for Medicare and Medicaid Services will have different views on waivers and regulations. Californians may have to think about options a little more like Arkansas’ all payer reforms or Indiana’s cost-sharing provisions, no matter if they hurt left coast sensibilities. As Smith said, “Let’s not get too smug about it.”

Revisit the two-plan model for Medi-Cal. California’s Medi-Cal has evolved as a system “separate but unequal” from the rest of California health care, as Smith told me. And it is complicated, because California has also institutionalized a complex two–health plan infrastructure of local and commercial plans at the county level in most counties. Many observers urged that policymakers take this new reform opportunity to revisit the Medi-Cal models over the next decade.


California Values

A lot of interviewees told me we need to continue to reform health care but do it in a way that reflects California values.

People throw around the values word a lot. Let me tell you what I know about California values having lived here for more than 30 years.

We value diversity, decency, innovation and entrepreneurship. It’s why we love Uber and public schools, science and Burning Man, our phones and our surfboards, virtual reality and real reality.

Most of us are immigrants, most of us are non-white, many of us are poor, and some of us lucky ones are really rich and pretty much willing to help the less fortunate. That is who we are.

As the great Lady Gaga says, “We were born this way.”

We are informal, fun, laid back, but incredibly hard working.

We love food and we grow most of yours. We are always the future…and proud of it.


Coming Together

My metaphor for repeal and replace is that it is like breaking up the Beatles and just keeping George and Ringo and expecting it to sound good. Whatever happens in Washington DC, Californians will need to “Come Together” (to use another Beatles metaphor) to respond to a new environment. We can work it out.

Ian Morrison is an author, consultant and futurist based in Menlo Park, California. He is also a regular contributor to H&HN Daily.

The Future of Employer-Sponsored Coverage

Wednesday, January 4th, 2017

Private health insurance offered by self-insured employers is the financial lifeblood of U.S. health care delivery. Commercial payers deliver all of the financial margin for health systems. With the rare exceptions of highly disciplined health systems that manage fairly well on a Medicare level of reimbursement (such as Benefis in Montana, Citrus Valley Health Partners in California, Munson in Michigan and in most good years, Aultman Hospital in Ohio), most hospitals are 15 percent or more from breaking even on Medicare payment levels.

Over the years the differential between public and private payment has widened to the point at which private payers are paying on average 150 percent of Medicare, in some cases (such as prestigious academic centers or small regional systems with dominant market positions) close to 300 percent or more of Medicare.

No mass exit

A pleasant upside surprise of the Affordable Care Act (ACA) was that large employers, as widely projected, did not abandon coverage. While many employers contemplated it, and examined alternatives such as private exchanges or moving more employees to public exchanges, there was remarkably little change in the number of Americans who received health insurance through employment. That is not to say that employers continued to expand coverage to employees – quite the reverse. Kaiser/HRET surveys reveal a steady erosion over the last 20 years in the percent of American workers in all sizes of firms who have health insurance through work.

This gradual decline is not the fault of the ACA. The cause is the progressive unaffordability of health care delivery to self-insured employers; the more stringent corporate rules for the coverage of spouses and dependents; and the increasing differentiation of benefits between full- and part-time workers and between contract staff, temporary workers and the permanent core of highly valued employees in a changing economy.

Health benefits in a post-industrial economy

Much of the change in the relationship between employment and health coverage is part of a broader story: the rise of the post-industrial economy. A lot of people may work at Google but not a lot of people work for Google.

In many of the rapidly growing high-tech employers such as the great global brands Google, Facebook, Apple and Netflix, workers who enjoy full-time permanent status also enjoy incredibly rich health benefits (plus they get gourmet chefs in the cafeteria and get cool bikes to ride around campus). But not everyone in an Apple store or in an Apple call center is in that category, as an in-depth article published in the San Francisco Chronicle documented on November 25.

Apple has 80,000 employees according to the article. Millions more work for contract manufacturers making iPhones in China. At Apple’s Austin, Texas, facility, there are 6,000 employees, up from 2,100 only seven years ago. Most are employed in customer support functions, but there are also upward of 500 engineers who work on new chip sets for Apple’s next generation of laptops. Before becoming full-time employees in the call center, many start as contractors making $14.50 an hour. With luck and great performance, they will graduate to full-time status with generous health benefits and earn $45,000 year.

The same story applies to many great companies such as Disney, Amazon, Wal-Mart or CVS, which have a cadre of highly compensated professional workers and a lot of people making just above minimum wage. Disney employs thousands of “cast members” cleaning rooms at Disneyworld, but it also has high-priced talent making movies and TV shows at Disney Studios, Lucas Film, ABC and ESPN.

Many Americans work in retail and hospitality industries and other low compensation environments with poor health benefits. While President-elect Trump has talked about bringing back well-paying manufacturing jobs with benefits once enjoyed in the Rust Belt, the reality is that the modern manufacturing economy is one of hyper productivity where knowledge workers add tremendous value and manufacturing work is outsourced to other countries. Over the last decade, those countries have built a massive web of sophisticated contract manufacturers and suppliers who make components and assemble your iPhone. I doubt we could manufacture an iPhone in America even if we tried, because we lack the web of capabilities.

On the back of my iPad is etched all you need to know: “Designed by Apple in California Assembled in China.” Trump may be trying to reverse this, but it seems unlikely.

Instead, if you look carefully at the changes in where the jobs are over the last 50 years, you can see a steady and inexorable shift toward the post-industrial economy. Daniel Bell, the great Harvard sociologist, predicted this much in his 1976 classic book The Coming of Post-Industrial Society, the bible for us futurists. In a quote from no higher authority than an Amazon book review, Bell predicted “a vastly different society developing – one that will rely on the ‘economics of information’ rather than the ‘economics of goods.’ … The new society would not displace the older one but rather overlie some of the previous layers just as the industrial society did not completely eradicate the agrarian sectors… The dimensions would include the spread of a knowledge class, the change from goods to services and the role of women. All of these would be dependent on the expansion of services in the economic sector and an increasing dependence on science… Bell prophetically stated ‘… new premises and new powers, new constraints and new questions—with the difference that these are now on a scale that had never been previously imagined in world history.’”

Bell predicted the migration of the U.S. economy from agrarian economy through an industrial economy to an economy dominated by the creation of knowledge, information, science and experiences, including the rise of a “third sector” of massive nonprofit organizations in service industries such as health and education. Sound familiar?


Bell was right. If you look where jobs have been created in the last two decades, it is in services and knowledge work – especially retail, hospitality, professional services such as IT consulting and health care. Manufacturing jobs have steadily declined for decades. This is partly a reflection of enormous improvements in productivity in the manufacturing sector and the transformation in production of many industrial mainstays, such as the steel, auto, chemical and textile industries. For example, in 2016 there were 53,000 coal miners in America and 370,000 steelworkers, while there were 1.4 million home health aides and 4 million nurses actively practicing (including 3.2 million registered nurses and 0.8 million licensed practical nurses).

Many of the workers in the post-industrial economy are in the gig economy. You work in a bar, you go to school, you drive for Uber and you are writing the great American novel, all at the same time. Plus you’re probably uninsured. This is the life of many millennials, even those with college degrees. The death spiral on the exchanges is partly a result of profound changes in the ways young Americans make a living. Starbucks has great health benefits, but many other college-educated baristas are uninsured.

It is against this broader context of change that private employers have to decide how to manage health benefits for a post-industrial workforce.

Employers’ recent history

We know that employers mostly hung in there and didn’t drop coverage because of the ACA, particularly the large, self-insured firms. Moreover, most big corporations assiduously followed the letter of the law in preparing for full implementation of the ACA features, including the Cadillac tax.

It has become fashionable to repeat the classic insight from the election: “Trump supporters took him seriously, but not literally, while the media took him literally, but not seriously.” Well, when it comes to big employers and the ACA, they took it seriously and literally, implementing (well in advance of the time line) the necessary adjustments in qualified health plans, in cost-sharing arrangements to meet actuarial value thresholds, and in benefit design to be compatible with deadlines on the Cadillac tax.

This makes perfect sense to me. Corporate America is run by what I call the compliance police, and they are fearful of getting sideways with major federal initiatives.

Jonathan Gruber of MIT, one of the ACA’s architects, was quoted as saying he could live with the employer mandate being removed in Congress because most large employers provide health benefits anyway. If you follow my line of argument about the compliance police, part of the reason the large employers are still providing benefits is that they anticipated it would be breaking the law to back away from that commitment. If the employer mandate is gone, they might feel a wee bit differently, especially smaller and mid-size employers.

The other major shift employers made in the face of the ACA was exemplified by the reaction to the “exit” opportunity. In Nielsen/Harris surveys from 2011 to 2015, we documented the likelihood of employers “getting out of providing health insurance to their employees.” The number of employers considering this peaked around 2015 and declined sharply in 2016. Employers who had seen private and public exchanges as an exit opportunity realized that these exchange vehicles did not necessarily provide a meaningful alternative to health benefits, given current law.

In every talk I have given to health systems in the past two years I have repeated: The good news is large employers are not leaving; the bad news is large employers are not leaving and are going to be increasingly in your face looking for value.

Indeed, they have done so with a variety of methods, including narrow networks; direct contracting using accountable care organization (ACO) arrangements, as in the case of Boeing, Disney, Intel and Cisco; the use of Center of Excellence models by companies like Wal-Mart, Lowes and the Pacific Business Group on Health (PBGH) consortium; the use of reference pricing schemes, as in the case of CalPERS joining with Anthem in California; and more aggressive case management for all high-cost patients – using Dr. Arnie Milstein’s pioneering Ambulatory Intensive Care Unit (AICU) model developed originally at Boeing.

David Lansky, President and CEO of PBGH told me in an interview that the largest employers who have the resources to develop an alternative approach are doing so aggressively: “once you study on it, you run away from the carriers as fast as you can, and the PBMs are next.  And then you start talking to the providers and seeing what kind of deal you can extract from them, including a very intense working relationship.  Of course this is hard to do, but it’s a symptom of how fed up ALL employers are”.

For example, one health benefits leader at a Fortune 50 company explained to me how in developing a direct ACO contract with local hospitals, one of the hospitals, who stood to lose volume in the new arrangement, voluntarily offered a deeper discount on price: “We don’t want the money, we want you to change the way you deliver care,” the company responded.

Many of these more aggressive purchasing activities have yielded some victories and constitute one of the reasons large employers have succeeded in keeping health benefits trend increases to 4 percent (and among some of the more elite employers as low as 2 percent) in 2016, according to National Business Group on Health surveys. The reason the trend is so low is partly greater rigor in their contracts with providers but also the “benefit buy down” (which is benefit speak for increasing the amount that employees pay for their health insurance through increased premium contributions, higher deductibles and other cost sharing) that employers put in place to ensure they did not exceed Cadillac tax requirements.

Employers have shifted cost to employees, but many may have reached their limits. Anecdotally, we hear of “buy down fatigue” among large employers, and our surveys show that a majority of employers agree they have reached the limits of cost sharing with their employees.

Although large self-insured employers stabilized rate increases at 4 percent per annum through these actions, many realize they must change the payment and delivery system toward value if they are going to sustain their commitment to providing health coverage.

Self-insured employers in the Trump era

It is early days. No one knows what will actually happen legislatively in 2017. But large employers are as anxious as all health care stakeholders about what the new brand of change may bring. There is high uncertainty given the volatility of the political and policy process that is unfolding and given the unpredictability of the Trump administration.

What are employers worried about? Here are a few issues to watch:

Tax-deductibility of employer-sponsored health insurance. This has to be the number one and immediate issue. Currently this is worth $260 billion per annum in tax benefits. If it were to be chipped away at, either in the form of the current law’s planned reinstatement of the Cadillac tax or some Republican proposals to scale back deductibility, this will have a significant negative effect on employers.

Pharmaceutical costs. Rising drug costs are a huge issue for employers and indeed for almost every health care stakeholder I work with. The shift to specialty pharmaceuticals and price gouging, even on generics, is taking its toll. At a recent PBGH board retreat, the top issue raised by all participants was specialty pharmacy, not only because of the salience of the cost (explaining perhaps a full quarter of the increase in trend) but because the private sector options to control pharmaceutical costs are minimal. Trump recognized the drug cost issue in his campaign, but after winning the election his website no longer speaks of controlling prices of drugs. Instead, there are visionary statements about innovation. Pharma may be getting a pass, as evidenced by the easy passage of the CURES Act. But for employers, this issue is not going away. In most commercial health insurance plans (including self-insured plans), per-member per-month drug costs now exceed inpatient hospital costs.

Lansky of PBGH told me in the interview: “employers aren’t just mad about price gouging, but have looked very hard at the pharmaceutical supply chain in order to restructure it – even to the point of talking directly to manufacturers.  They want to challenge the very nature of the business:  formulary placement, the split between medical benefit and the drug benefit; rebates to PBMs; coupons that insulate consumers from cost sharing; Intellectual Property and patent rules, etc.  They know that beating up on the PBMs (like beating up on the health plans) is not productive; the system needs re-engineering and no one is motivated to do it except the employers who are paying”.

The inevitable cost shift. It may be off in the distance, but if coverage is eroded for the 20 million or so who benefitted from the ACA and if the federal money for Medicaid expansion and exchange subsidies is geared back, providers will seek to replace that revenue from employers. Good luck with that, to all concerned.

Employers stepping up to manage their health costs directly. Many of the sophisticated employers will double down on their management efforts with narrow networks or using ACO arrangements and direct contracting. Others like Apple will expand their on-site clinic operations and corporate wellness initiatives (although the track record on wellness saving money is spotty at best).

Déjà vu. The new administration has already signaled greater emphasis on consumerism, transparency, health savings accounts, shopping tools, personal responsibility and “skin in the game.” Most sophisticated employers would say, “Been there, done that, bought the T-shirt.” They believe much of this stuff and they have done it already, so what do they do for an encore?

Partners in value. Sophisticated employers believe that health care does indeed need to migrate from volume to value (but they also expect to pay less if volumes subside). They recognize that opportunities for cost reduction exist within the delivery system, and they do not have the clout as individual employers in any geographic market to demand meaningful change in payment and delivery reform. That is why groups like PBGH have been active partners with Centers for Medicare & Medicaid Services in promoting value-based reimbursement and innovation. These sophisticated employers want to know if they still have a partner in value in the federal government. For example, PBGH has worked for six years in promulgating the AICU model including a $20 million Center for Medicare and Medicaid Innovation (CMMI) project to extend the model to Medicare, and now doing the same with Medi-Cal (using a “health homes” approach).  As Lansky noted: “it’s an example where a very small idea can be aligned with national, over-65, low income, and other public programs to drive actual care transformation”.

Looking for the exit. Finally, depending on what comes out of the sausage-making machine in Washington, employers (especially the compliance police) will take a hard look at the rules of the road and reconsider their ongoing commitment to health benefits. Nothing makes corporate chief financial officers more misty-eyed than the thought that they could really write a check for $10,000 a year and kiss this issue good-bye forever in a defined contribution. As PBGH’s Lansky noted: “either the system gets serious about re-engineering or the exit is the only sensible path.”

Wise policymakers in Washington need to be mindful of the second order effects that the new round of health reform may have on large, self-insured employers. As we contemplate further change, health systems would be well served by engaging with corporate leaders to explain what is at stake for the health care delivery system and in turn, really listening to what these important purchasers want from healthcare. Happy New Year!

Ian Morrison is an author, consultant and futurist based in Menlo Park, California. He is also a regular contributor to H&HN Daily.


Emergency Care

Sunday, November 13th, 2016

The Affordable Care Act has expanded coverage and increased demands on the health care system. In many states, patients without a regular source of care are defaulting to emergency rooms as their touch point in health care, even though coverage expansion holds promise to create more stable and appropriate primary care options. At the same time, in many states such as Texas, Ohio and Colorado, freestanding emergency rooms and urgent care centers are growing like wildfire, worrying critics that cherry picking will undermine the economics of emergency medicine for many community providers. Where are we headed with emergency care?

Emergency and Urgent Care

Across America there is a wide and growing array of ambulatory care options for urgent or emergency care. According to industry sources, there are more than 5,000 hospital emergency rooms, 10,000 urgent care centers, 5,000 ambulatory surgery centers, 2,800 retail clinics and more than 500 freestanding emergency rooms (a phenomenon we will focus on in detail below). This growth in options reflects a broader shift to the ambulatory environment enabled by technology (such as rapid recovery anesthesia) and by consumer preference for rapid treatment in convenient locations.

With the passage of the Affordable Care Act, emergency room activity seems to have increased across the country. Overall in the United States, the number of emergency room visits per 1,000 has increased from 350 to approximately 434 in the last 20 years. Nationally, the promise of the ACA was that providing health insurance would dampen the use of ERs because newly insured patients would have access to a regular source of primary care, but this promise has not been completely fulfilled.

Medicaid recipients are largely immunized from the higher out of pocket cost of ER visits experienced by exchange or commercially insured patients, and this may lead them to seek routine care in the ER more often.  While there is evidence that (over time) primary care options are put in place for the newly covered under Medicaid and through exchanges (see an excellent review by Deloitte by visiting the experience of most provider groups I talk to is that ER use is up, driven largely by Medicaid expansion. We are not going to litigate that particular argument here; suffice it to say there is scholarly research being developed to analyze both the short-term and long-term effects of coverage expansion on sources of care, and stay tuned for a definitive history five years from now.

I became interested in the changing landscape of emergency room use following a Martin Luther King Community Hospital board discussion. I have the honor to sit on the hospital board in Los Angeles and I am very proud of the work our CEO Dr. Elaine Batchlor and her colleagues have done in successfully opening a new community hospital in a unique public-private partnership with the county, the regents of the University of California, UCLA and an independent nonprofit community hospital board (a topic for a future column).

The hospital is doing really well and, in particular, its emergency room is providing this underserved community a vital element in a high-quality health care system.

Wally Ghurabi, a distinguished UCLA emergency room physician, is the chief of staff. Dr. Ghurabi’s group services not only the ER at Martin Luther King but also UCLA’s Nethercutt Medical Center in Santa Monica (thereby nobly treating the whole range of socioeconomic populations in Southern California). The hospital opened just over a year ago, but is now seeing a rate of 70,000 emergency room visits per year.

Dr. Ghurabi told me in an interview that this growth is bimodal. At one extreme is a significant group of patients who could be treated by primary care. At the other extreme, a significant proportion of patients are extremely sick – many with psychiatric and behavioral health issues, or with severe untreated diseases such as diabetes and hypertension, who have been attracted to the new hospital because of its emerging reputation for quality and service and because of its location in the heart of an underserved community with historically limited access to primary and specialty care.

I asked Dr. Ghurabi during our board conversation about freestanding emergency rooms. (California is the only state that outright prohibits the freestanding emergency rooms through the stringent regulatory environment for emergency room status.) Dr. Ghurabi is a veteran ER physician who has trained many residents and fellows in emergency medicine in the United States and has a keen understanding of all ER trends within California and the nation. In an interview, Dr. Ghurabi provided his perspective on what is happening across the country with urgent care and freestanding ERs.

Urgent Care

Dr. Ghurabi explained that urgent care centers are open usually from 8 a.m. until 10 p.m. (California urgent care clinics cannot keep patients over 23 and a half hours in the facility.) Typically, urgent care centers charge at rates that are a third of the emergency department rates. A facility fee is included in the single bill for services rendered in these facilities. They can be located almost anywhere, but typically the desired location is high-traffic areas. (Because this is episodic care, the service may be needed by patients only once every few months.) The socioeconomic status of the location is less important because the goal is volume.

Urgent care centers generally offer very basic on-site diagnostic services, such as plain film X-rays and minimal laboratory services, such as point-of-care testing, with no advanced imaging such as CT or MRI. Industry estimates indicate that 20 to 24 patients per day are required to break even. The regulatory barriers are relatively low as they need only the same licenses as any medical office or clinic. In terms of hospital referrals, they’re not engaged in high-referral patterns to hospitals unless they’re tied by ownership or geography to a specific health system or hospital partner. Urgent care centers are typically staffed by primary care physicians and nurse practitioners; formal emergency medical training is not required.

Urgent care centers are well received by consumers in almost every survey I have seen: Patients greatly value the convenience, short waiting time and speedy resolution of episodic care issues. In many parts of the country, urgent care is being systematized into franchise-like offerings. The market leader Med Express (which was purchased by Optum in 2015) operates, according to its website, in 15 states and has approximately 200 urgent care centers in those states. The clinics are open 12 hours a day, seven days a week to serve consumers. A relatively low percentage (perhaps as low as 2 percent to 3 percent) of visits actually result in a hospital admission compared with the 10 percent to 30 percent of a typical hospital ER seeing patients. The key driving force behind urgent care is convenience.

Freestanding Emergency Rooms

A thoroughly researched Health Affairs article by Harvard researchers estimated that there were 400 freestanding ERs operating in 32 states by December 2015. However, more recent industry assessments put the number at over 500. The Harvard researchers identified 21 states with regulations that allowed freestanding emergency rooms while 29 states did not have regulations that applied specifically to such EDs. Only one of those states, California, specifically precludes such

Texas, Colorado, Ohio, Minnesota and Arizona are the states with the most freestanding emergency rooms per capita. Harvard researchers estimated that if the rate of penetration of these early adopter states is emulated in areas where regulations provide for them, there could be as many as 2,000 of these facilities in the near future.

There are two basic types of freestanding emergency rooms: those affiliated with hospitals that are recognized by CMS as being part of a hospital billing number and therefore can be reimbursed for a facility fee under Medicare, and those that are independent and not recognized by CMS. The latter also tend not to accept Medicaid patients because they cannot bill for the facility fee.

Nationally, according to researchers, 54 percent of all freestanding emergency rooms are hospital affiliated while 37 percent are independent. However, in Texas only 22 percent are hospital affiliated, and a full 71 percent are for profit. In Ohio virtually all the freestanding emergency rooms are hospital based. In Colorado the split is 60 percent hospital and 40 percent independent.

Dr. Ghurabi told me that, from his perspective, freestanding emergency department are fundamentally different from urgent care in that they are open 24/7, 365 days a year. And while some have no beds (as in Texas), other states require a small number (typically two to four beds) to qualify for hospital-based charges.

Most freestanding emergency departments charge standard ER rates, and payers presently pay those emergency department rates. Physicians bill a professional fee, and a facility fee is collected (usually three times the professional fee). The facility fee can be collected by the owner, which can be a professional group, a sponsoring hospital or an investor group depending who is providing the technical services. In some states, new locations require certificate of need clearance where nearby hospitals can veto freestanding emergency departments by challenging the need.

Again, as with urgent care centers, the desired location is a high-traffic area because it is episodic care. But research has shown that these freestanding emergency departments are disproportionately located in affluent communities where a high percent of privately insured patients either live or work. Because the charges are so high, they don’t need high volume and depend more on high acuity. The break-even point is a remarkably low eight to 10 patients per day. Typically they offer more advanced diagnostic equipment, including X-ray, lab and CT scanner, which can be either inside or outside the building.

Freestanding emergency departments are much more complex to license compared with urgent care, requiring medical practice committees like a hospital. Referrals from freestanding emergency departments, though again relatively infrequent compared with typical hospital ERs, are extremely attractive to the hospital since almost every admission will be a commercially insured patient. Freestanding emergency departments require staff with formal training in emergency medicine.

Texas is the hotbed of freestanding emergency rooms. Adeptus, a for-profit publicly traded corporation, is the oldest and largest provider in the freestanding emergency department business. Under its First Choice Emergency Room brand, the company has nearly 100 locations (according to its website) in Texas alone, with 52 in metro Dallas (20 of which are in partnership with Dallas health system powerhouse Texas Health Resources) and 30 in Houston, seven in San Antonio, and five in Austin. Parent company Adeptus indicates in its latest 10 Q filing with the SEC that it also has active partnerships with HCA, Concentra, Dignity Health, University of Colorado Health System and Trinity Health in addition to their joint venture with Texas Health Resources. The 10 Q filing also reveals that over 90 percent of its revenue comes from commercial patients, with Medicare and Medicaid being a tiny sliver of revenues.

These data seem to support the critique that Dr. Ghurabi and many other ER professionals make of this freestanding emergency room phenomenon: While it is obviously a business that satisfies consumers (particularly commercially insured consumers) and seems to be incredibly profitable for investors and physicians participating in such practices, it is clearly an example of cherry picking through location.

A Question of Mission

This raises some fundamental questions about the future of American health care delivery. On one hand, we want to encourage innovation in health care payment and delivery that serves consumers and patients more conveniently and makes the health care system better, faster and cheaper overall. And we should encourage and celebrate that.

But if we are developing only consumer-friendly solutions targeted at affluent consumers with good health insurance, what are the consequences for those institutions serving less affluent areas, or for those institutions with complex, quaternary care, or for research and teaching missions, or for those essential community providers who deliver trauma care, burn units, transplantation, and complex chronic disease and behavioral health services?

I think we should be careful that freestanding emergency rooms do not become a metaphor for the health system more broadly. Namely, if the best way to survive and flourish economically and to serve most consumers with convenience and high quality is to avoid the poor, the sick, the vulnerable and the infirm, such practices challenge the mission of many health systems across the country and will heighten in stark relief the tension between market forces and mission-oriented health care.


In Search of Simplicity

Tuesday, September 13th, 2016

It’s complicated. Health care that is. American health care may be the most complex, technologically advanced and administratively intricate of any health system in the world. The rise of complexity of health care is driven by a number of interrelated factors:

Clinical Complexity

Clinical complexity is increasing at an exponential rate driven by continuous advancements in science and technology. In particular, the exciting progress in customized, genomic medicine creates more targeted clinical interventions but also increases the complexity of care. Every year more than a million articles are published in medicine and related disciplines, and experts estimate that scientific knowledge doubles every nine years.

At a recent University of California–San Francisco conference for hospitalists that I spoke at, my host and friend Dr. Bob Wachter invited me to stay after my little talk to hear a real doctor lecture on recent advances in the treatment of complex cardiac patients in the intensive care unit who have experienced heart failure. Of course I understood none of it.

The visiting Stanford professor giving the lecture reviewed the science and gave periodic pop quizzes challenging the group with clinical vignettes. As I recall, in many cases, a majority of attendees got the answers wrong, not because they weren’t smart, but because the amount of knowledge that any one human can store has become unknowable.

I asked the good Dr. Wachter if that was pretty typical, and he reminded me that this was just one of the hundreds (if not thousands) of diagnoses that a hospitalist may have to treat, each with its own emerging science, new therapies and new evidence. It seemed to me impossible to keep up without sophisticated support from information technology. It would be hard to make it all simple.

Yet, much effort is being made to standardize clinical processes and provide sophisticated decision support to aid clinicians with this rising scientific complexity. It may seem like an uphill battle, but it is an important counterbalance to the rising tide of clinical complexity driven by scientific advances.


Older, Sicker Patients with Co-Morbidities

Not only is there increasing scientific complexity, but patients are older and sicker with more comorbidities. It is interesting to compare the United States with other countries. In surveys conducted by the Commonwealth Fund, patients are asked how many conditions they suffer from. A full 68 percent of American elderly patients claim to have two or more chronic conditions while only a third of British elderly patients responded that way.

(It is hard for me to believe that Americans are actually more unhealthy than the British. I grew up in Glasgow where the local delicacy was deep-fried Mars bars and where pie, beans and chips is known affectionately as the Glasgow salad. So it is incomprehensible to me that Americans could actually be that much sicker. More likely it reflects the great quote from my old mentor Bob Evans that “good health is a state of incomplete diagnosis.” In the United States we actually find out about how many illnesses we have, while in the United Kingdom they don’t bother finding out and they just live longer.)

Nevertheless, whether rising morbidity is real or imagined or discovered through more thorough and complete diagnosis, the typical American hospital is experiencing rising levels of acuity and complexity of the patients who are being admitted for inpatient care. Obviously this is partly a result of the least severe cases being handled now in the ambulatory environment. But the fact remains that inpatient care is becoming increasingly complicated from a clinical perspective.

This is further amplified by the move toward sub-specialization in medicine and the expanding base of science. As a result, in all medical specialties care is becoming more complex.


Coverage Complexity

Obamacare was a good thing for the nation’s uninsured. Twenty million people got covered, half through Medicaid expansion and half through exchanges. Most of those folks are low income and they cycle in and out of eligibility for Medicaid and exchange subsidies as life happens: They get a job, they lose a job; they marry, they divorce. A full 40 percent of exchange enrollees churn in a year, about 25 percent in Medicaid. Similar rates of churn exist in the small group and individual market because of the considerable volatility in employment and economic circumstances. Tying health insurance coverage to employment and income is asking for volatility and complexity.

Medicare is more stable. Once you turn 65 you are in it forever, because you are unlikely to ever turn 63 again.


Administrative complexity

It is well known that America health care spends considerably more on administrative costs than any other country. This shows up in multiple ways. Comparisons with other countries on the net cost of insurance reveal that America spends approximately 7 percent to 10 percent of all health expenditures, while countries with single payer systems or (just simpler payer systems) spend 2 percent to 3 percent.

The complexity of payment systems and the administrative burden of regulatory oversight can be seen when comparing administrative costs of hospitals with other countries, the United States has the highest administrative costs of countries studied at 25.3 percent with Canada and Scotland the lowest at 12.4 percent and 11.6 percent respectively. (By the way, this is where Donald Trump got his idea that Canada and Scotland had great health care. He saw this finding on a show.)


Multiple Payers

The primary underlying cause of administrative complexity is the multiple payers in American health care both public and private. Medicare, Medicaid, TRICARE, Department of Defense, Veterans Administration, and state and local governments, along with a myriad of insurers in the private sector, all have different programs with multiple insurance offerings. Many countries, such as the UK and Australia, have a mix of public and private sector components to the payment stream; some, like the Netherlands and Switzerland, have multiple competing insurers, with higher administrative costs as a result. But no other country has the intricately involved set of financial relationships to deliver money to health care that we have in the United States.

(Some years ago, Humphrey Taylor and I published a similar blog on this increasing complexity on the eve of Obamacare implementation. It has become even more complex than we forewarned.)


Multiple Methods of Payment

Not only do we have multiple payers, but the methods of payment are many and complex and are becoming more so. While capitation may seem like a simple and pure form of payment, it is a tiny sliver of American health care financing. Most of the health care system is paid on the basis of what I call fee for service with tricks (simple FFS with small inducements at the margin to encourage quality, outcome or customer responsiveness). Whether it be bundles or value-based payment or risk adjustment or severity-based payments, all the new models add complexity. Don’t get me wrong — I’m in favor of the move away from unfettered fee for service toward paying for value — but it probably doesn’t make the health care system any simpler.

The Medicare Access and CHIP Reauthorization Act of 2015 is a perfect example of this well-intentioned trend having unintended consequences of increasing administrative complexity. In recent surveys of physicians conducted by Deloitte and by my colleagues at Nielsen, the vast majority of physicians had either never heard of MACRA or didn’t really know what it was. MACRA affects how most doctors are paid by Medicare, which is kinda important, given old people often use the health care system, no? Many doctors have thrown up their hands and thrown in the towel. In the Nielsen survey of physicians, the top response of what MACRA would do to physicians was to drive them toward being employees of health systems.


Organizational Complexity of Accountable Care

The accountable care organization movement has galvanized many providers of all types to explore new organizational arrangements under the rubric of accountable care. Leavitt Partners estimated recently that 28.3 million people are covered by an accountable care arrangement, either public or private.

While the impact of ACOs on costs and quality are under some debate, the most authoritative academic studies show modest costs savings and minor effects on quality, but after administrative costs are factored in, it seems much ado about nothing. What is undeniable is that these new arrangements make the system more complicated for providers and patients.


Risk and Population Health

To cap it off, some brave health systems (maybe as many as 20 percent) are taking insurance risk by offering policies in the market to individuals and groups, contracting directly with employers, or taking Medicare Advantage patients. Population health management is similarly well intentioned but makes the work of health care systems much more complex.

So, while risk and population health may all work out well (if these health systems can actually pull it off), it makes life more complicated.


Consumer-Directed Health Care

Rising deductibles and co-payments over the last two decades have fulfilled the dream of many economists who long advocated for patients to have more skin in the game. Well, they got their wish. Nearly half of Americans with employment-based insurance have a deductible of $1,000 or more, and 29 percent have a deductible of $2,000 or more. And here’s the kicker: Most of the bottom half of the income distribution (households with incomes less than $53,000 per year) can’t come up with those deductibles because they live paycheck to paycheck. So for them, paying for health care is not only complicated (involving loans, credit card debt or pharmaceutical patient assistance programs), it’s also downright painful.

There is little or no meaningful transparency on cost and quality that is actionable by real consumers. Providers challenge the validity of measures on hospital and physician performance, while consumers rarely use the information to select providers and default to convenience, proximity and the recommendations of their physicians when making choices. It’s all too complicated, and consumers have inadequate information at the time of choosing.


Revenue Cycle Management

All this administrative and clinical complexity explains why revenue cycle management is the hot new thing. There is money in complexity. At the big industry trade shows there are acres of revenue cycle management vendors. I have gone out on a limb to forecast that within five years the revenue of the revenue cycle management industry will finally exceed the entire revenue of the health care system in a health financial management equivalent of the Rapture.


Impact on Costs, Quality, Access and Provider Morale

All this complexity is taking its toll. It drives up the total costs of health care as more and more administrative responsibility is added to providers and payers alike. It impedes quality and access by increasing the time and financial burden on patients and providers. And it undermines provider morale. In recent surveys by Mayo and Nielsen, a majority of physicians report they are suffering from burnout, suicide rates are at all time highs in the medical profession, and there is a widespread improvement fatigue among physicians that I have written about in this column before (


Signs of Simplicity

Forget health care for a moment and think about other service experiences in your life. How much time do you spend on your phone? Is it the vehicle for your life? Is it your primary gateway to your family, friends, travel reservations, recipes, dates and data?

How simple is it to use?

The complexity of health care is being judged against a backdrop of other service industries that seem to effortlessly deliver service in a way that is simple and easy to use. And it is not just smartphone-enabled apps.

Think Southwest Airlines. It flies the same planes on all routes so crews are interchangeable. Southwest keeps it simple: no bag fees, no tricks. And they still give you peanuts.

Or think Netflix. It knows what you like and makes it easy to binge watch House of Cards without leaving your couch.

Or Amazon. It will get you absolutely anything on your front door step within a day or two. Maybe an hour or two when they get the drone thing down.

Or Uber. You press a button and a Stanford graduate student picks you up in his Prius in three minutes and you don’t have to tip him or fumble for cash.

These businesses are backed by enormously complex technology and logistics. They use sophisticated algorithms to customize the user experience. It is immensely difficult to design and execute these services, but to the customer it appears simple.

We need to learn from them. And we can find signs of simplicity in health care:

Kaiser Permanente. Kaiser delivers health care and acts as an insurer. While it is experiencing all the complexity described here, it has simplicity in its business model. It accepts pre-payment and it organizes care delivery to minimize unnecessary use of expensive resources like hospitals. It uses a pure and simple model that aligns incentives. It has also maximized use of digital delivery models with over half of all patient encounters at Kaiser occurring digitally whether through tele-health, portals, e-mail or secure clinical messaging. Kaiser members are fiercely loyal. While Kaiser has had to abandon first dollar coverage and embrace consumer cost-sharing to be market relevant, it still strives to make the consumer experience simple and easy to understand.

Covered California. California is an active purchaser state and it has used that power to simplify and standardize offerings on the exchange. In 2016 Covered California narrowed down the available options at the silver level to eight options in Los Angeles; this is in contrast with Seattle where a bewildering 50 options were available, or New York with 46.

Concierge medicine. A private equity investor (himself a physician) explained to me recently that the only group of happy doctors he has run into in the last year was a group of concierge doctors, who have converted to a fixed monthly fee for membership for their patients. They drastically reduce their panel size with the subscription making up the bulk of their income. Most of their patients are on Medicare and many of the doctors bill Medicare in addition, but they are not dependent on it. Not all doctors can be concierge doctors because there are not enough rich people to go around. But some can. And many of the more affluent patients value the enhanced connection and connectivity to caregivers and are willing to pay a subscription for the service. One Medical offers a similar experience targeting affluent, tech-savvy millennials.

Book MD. Book MD has targeted self-insured employers and provides a customized bundled payment platform for “shoppable services” such as mammography. It has negotiated a preferred rate and in return provides prompt payment to providers; it has also engineered its consumer facing app and integrated it with participating providers’ scheduling systems to provide same-day access to services. Users like Disney have seen dramatic results in improving busy executives’ adherence to screening guidelines such as mammography. It’s simple, convenient and fast.

These signs of simplicity teach us a few principles.

It’s complex to be simple. The user experience may be simple and easy but there is immense complexity behind the scenes. It’s hard work and requires sophisticated technology.

We need win-wins for providers and consumers. Simple, successful services make life better for consumers and make economic sense for the vendor. Successful business models are simple and aligned.

Software and algorithms, not bricks and mortar. To date, health care innovation has been too much about buildings and big clinical iron. Simple health care will depend increasingly on software and algorithms.

Put the user at the center. Great service businesses design simple solutions from the perspective of the user. As we strive to improve the patient experience we need to make it simple for the user. Too often, even with good intentions, we make it more complicated.

Population Health and Income Inequality

Wednesday, July 13th, 2016

Two of the big stories for 2016 have been income inequality as a key issue in the presidential election debates and the increasing focus on population health in the U.S. health care system. These two are strongly connected. Indeed, if you believe the classic definitions of population health, income inequality is the primary driver of disparities in health status. But, in the contemporary United States context, “population health” tends to mean doing a better job at managing the care of patients along the continuum, keeping them healthy by focusing more on prevention and by targeting social and medical interventions for those folk that we are at highest financial risk for.

In contrast, scholars outside the United States view population health as much closer to the classic notions of social determinants of health. International (non-U.S.) researchers and policymakers attempt to isolate the contribution that socioeconomic factors make to health status and intervene accordingly, politics willing. In the United States, however, population health is more about the health and health care of those people we are at financial risk for, rather than factors affecting the health status of the entire population such as housing, education and income.

This distinction matters. Are we talking everyone in the population or just the crowd we are responsible for? And are we really going to pull policy and program levers like income redistribution, education, early childhood development, housing, transportation and social policy to improve health and health care, or do we limit ourselves to factors we are more comfortable with, like giving wellness the old college try and doing a better job with diabetic registries?


Defining Population Health

My cynical definition of population health is it’s the phrase CEOs use during a lull in the conversation at a hospital board meeting when they really don’t have a strategy. As Monty Python said in the famous Piranha Brothers sketch in reference to a gangster: “Cruel but fair.”

Part of the confusion about population health is mixing terms between classical views of population health (mainly from outside the United States) and the emerging contemporary trends in population health management, here in the United States. Both are valid and indeed are connected.


The View from Outside the United States

Wikipedia, whence all true knowledge comes (actually this definition is from scholars David Kindig and Greg Soddardt) defines population health as “the health outcomes of a group of individuals, including the distribution of such outcomes within the group.” It is an approach to health that aims to improve the health of an entire human population.

In my view, the seminal works of classic population health are the Whitehall studies in the 1960s and 1970s and the work of the Canadian Institute of Advanced Research Determinants of Health Group led by my old colleague and mentor, Canadian health economist Bob Evans, in the 1990s.

The Whitehall studies of health status and death rates in the British Civil Service showed that despite the fact that all civil servants in England have the same access to health care, there was a strong correlation between social status and health even after adjusting and controlling for health-affecting factors such as obesity, exercise, smoking and drinking.

In the 1990s Evans brought together multiple researchers from disciplines as diverse as medicine, economics, political science, animal biology and sociology to distill the knowledge about health disparities. The group produced the classic work “Why are some people healthy and others not?”

Key connections were made in that research between socioeconomic status and health. It produced important insights linking the brain chemistry of individuals and populations and found that psychosocial stress was a key variable of health and longevity. As Robert Sapolsky of Stanford has shown in the field and the laboratory: If you’re going to be a baboon it’s better to be a leader than a follower. It’s healthier to be at the top of the hierarchy than at the bottom.

I recently reconnected with all of the members of the group at a reunion to celebrate Bob Evans’ retirement from the University of British Columbia in Vancouver. Over a couple of days in conference we heard from many of the key thinkers in that group and other notable researchers who have picked up the mantle of population health research. What struck me was the enduring resilience of the conclusions that Evans and his group identified, namely that there was a strong, if not dominant, role that income inequality and socioeconomic status played in determining the health of individuals and populations. And that role persisted even after accounting for risky personal behaviors such as overeating, indolence, smoking and imbibing.

One particularly poignant presentation for me was by Canadian physician John Frank, policy scholar and epidemiologist who now leads a health policy research unit at the University of Edinburgh (also my alma mater). John’s presentation highlighted the uncomfortable truth of how residents of public housing estates on the fringe of my native Glasgow had life expectancy 15 years less than the populations in the leafy suburbs where I grew up. John described how despite Scotland’s progressive health policies, the sad truth of disparity persisted. Growing up in an awful place with drunken parents who have no job and no hope is not the best way to live a long, healthy life. Being poor will kill you.


Population Health in the United States

In practice, most hospitals and health systems in the United States have a more “hopey-changey” definition of population health, to misquote Sarah Palin. In the contemporary context, population health leaders such as my pal Dr. David Nash, dean of the nation’s first college of population health at Thomas Jefferson University in Philadelphia, is leading us to focus the field at a more practical level on a set of initiatives that can be pursued to deliver Don Berwick’s noble Triple Aim: better health of the population, better patient care and lower per capita costs.


As leaders of the population health management movement, Nash and others are exhorting us (appropriately, in my view) to:

Segment high-risk populations. Identify those 5 percent of patients who account for 50 percent of costs and mange their care aggressively.

Harness advanced analytics. Use big data to identify heavy utilizers, monitor populations, and target and measure performance.

Use patient registries and medical homes. Effective registry strategies, coupled with high-performing teams in medical home models, can improve health and reduce spending.

“No outcome, no income.” Nash’s famous quote captures the essence of a change toward value-based payment in a population health world.

Go upstream. More and more we learn that the solutions look more like social work than medical care.

Eat your own cooking. Health systems employees are normally self-insured, so starting your population health journey with your own employees can be both a learning and a financial opportunity if you can improve performance.

Focus on the whole population. Medical care isn’t everything, and traditional public health and classic social determinants are important where policy and program levers exist.

Meet people in their lives. Socioeconomic context matters: What works for affluent suburbs may not work in the projects.

Emphasize wellness and prevention. There is a thirst for health reflected in popular culture —harness and help this.

Think outside the box. Some of the solutions may be weird, unfamiliar and counterintuitive, but try them anyway.

Partner, partner, partner. Whether it be health plans or skilled nursing facilities, schools or landlords, retail clinics or barber shops, we have to learn to partner with any and all who can advance the Triple Aim.

Nash and other leaders are fully cognizant of the role that the classic social determinants of health play in creating health disparities. But most American practitioners of population health management are focusing much more on these health care–related activities than on addressing the fundamental causal drivers such as socioeconomic status. And this is maybe as it should be in the U.S. context given how squeamish we Americans all are about anything that smells too much like socialism, right, Bernie?

Income Inequality

Mitt Romney may have started it with his comments about the 47 percent who don’t pay tax. He may have lost the 2012 election because he alienated hard-working people who actually do pay FICA taxes but don’t pay income taxes. (And by the way pay a higher share of their income to such taxes than did Romney, just sayin’.)

Angst about the gap between the high-rollin’ top 1 percent versus the growing discontent, dismay and disillusionment of the rapidly shrinking and sinking middle-class has been the backdrop of this presidential campaign season.

Bernie unabashedly wants to redistribute income, get money out of politics, make college free, make health care free and pay for it all through higher taxation on the very wealthy. Hillary is being dragged every day in that direction.

Trump uses the economic angst of displaced factory workers to whip up support for a xenophobic fantasy of good jobs at good wages being returned to the United States because the CEO will receive a threatening phone call from the new president. Or because deported Mexican factory workers will not be able to climb over a 20-foot-high wall to return to their families in the United States.

It is undeniable that income inequality is increasing. The causes are globalization and technology. Neither can be stopped easily. But as the social determinants of health literature tells us, their effects can and should be ameliorated by massive investments in human capital to lift all to achieve their human potential, starting particularly in early childhood. This may come too late, and likely will not help, many of the angriest who are unlikely to be retrained as Ruby on Rails programmers and who want to remain mining coal in narrow seams that are never going to be reopened.

Public support for Addressing Income Inequality

I have had a research partnership with Bob Blendon and his colleagues at the Harvard School of Public Health for 30 years, and I continue to learn so much from Blendon about public opinion, politics and policy.

Blendon and longtime collaborator John Benson recently published a seminal systematic review of all the available polls (national and international) on the public’s interest in and willingness to address income inequality. Let me paraphrase what they found:

Everyone sees the inequality. Overall, two-thirds of the public believe that the gap between the rich and poor is getting larger. This includes about three-fourths of Democrats as well as a majority (56 percent) of Republicans.

Democrats rate it more important. Seven in 10 Democrat registered voters described economic inequality as very important compared with just 42 percent of Republicans.

Countries vary in their concern. In terms of how concerned they are about the rich versus poor gap, overall just 46 percent of American adults described it as a very big problem in the United States or ninth among 13 industrialized nations. By contrast 84 percent of Greeks, 74 percent of Spaniards and 73 percent of Italians deemed it so in their countries.

Democrats look a lot like Europeans. The partisan difference in the United States is striking: Nearly 60 percent of Democrats consider the income gap to be a very big problem compared with 49 percent of independents and only 19 percent of Republicans. (Democrats are like the French, Republicans are from another planet — my words not Blendon’s.)

Self-reliance versus government to blame. The two reasons (out of six offered) American cited most often for income inequality were “people working harder than others” (24 percent) and “the government’s economic policies” (24 percent) with worker pay, the educational system and the tax system also receiving some credit for the inequality of the six variables asked about.

Government deemed responsible outside the United States. Other countries have a greater consensus that governments are to blame for income inequality.

Democrats say government should act; Republicans don’t. A full 81 percent of Democrats believe government should do more to reduce the gap between rich and poor compared with just 34 percent of Republicans. When asked how much the government should do to reduce the gap between the rich and everyone else, 62 percent of Democrats said “do a lot” compared with just 23 percent of Republicans.

Tax the rich. Finally, three-quarters of Democrats believe that the government should redistribute wealth by placing heavy taxes on the rich compared with only 29 percent of Republicans.

That’s the election right there, whether it is income inequality or Obamacare. The question is, Are rich people going to write a check for poor people?

Obamacare has actually been one of the principal vehicles of income redistribution in the last 12 years. Expanding Medicaid and providing highly subsidized coverage to low-income folk has on balance effectively increased the minimum wage by as much as $2 an hour for those who receive the benefits.

If Democrats are elected, this trend will likely continue in the form of greater subsidies for the low-income to purchase health insurance and limit co-payments and deductibles, further expansions of coverage under Medicaid (including the undocumented), increases in the minimum wage, and redistributive taxation from the rich toward lower- and middle-income household groups.

If Republicans prevail, it is less likely that the income distribution will become more equal and it is much more likely that it will become more unequal.

But with Trump, who knows? He still hasn’t released his tax returns at this time of writing so that probably means either he doesn’t make as much money or he hasn’t paid as much tax as he should have. Trump might actually take on the hedge fund managers and their carried interest. Especially if he doesn’t have as big a carried interest as he bragged about.

Elections matter for all kinds of reasons. But this time, people, it’s really serious. Good luck with that.


Income Inequality and Population Health

The income inequality debate and the population health debate collided in the last few months with the release of several blockbuster studies linking income to health.

The Princeton economist and Nobel laureate Angus Deagan and colleagues released a startling report that documented declining life expectancy of low-income white males in the United States in contrast with rising life expectancy for all other ethnic and income groups in the United States and in almost all developed countries. They attributed the alarming statistics to the rise of drug, alcohol and opioid use, and much higher rates of depression and suicide. These are the combined health effects of an economy that cannot provide decent jobs to sustain lower-income households.

More recently, a massive data study (not big data, massive data) by Stanford and Harvard researchers led by Raj Chetty documented similar trends in life expectancy and highlighted that the core variation across time and across the country could be correlated to a number of socioeconomic characteristics.

The Chetty study confirmed what we knew: Life expectancy correlates with income. It is a gradient; the richer you are, the longer you live. And the gap is widening over time.

But most interestingly, the most recent study documents that there is significant variation in life expectancy among low-income groups in particular cities. For example, life expectancy for the bottom quartile of income was as much as 4.5 years higher in San Francisco and New York than in Dallas and Detroit. The correlates of income distribution on mortality were surprising. For example, having a high percentage of immigrants had a very strong positive effect on life expectancy for low-income groups. The conclusion I draw is that liberals have coat tails and that if you’re going to be poor it’s better to be poor in a place where there is interest in social policies that are more progressive than in a place where social policies are more Darwinian.

Support for this hypothesis also comes from the work of Elizabeth Bradley and colleagues at Yale. Professor Bradley was the first person I know to pull together health spending and social spending by country to show that we spend way more on health than most developed nations but way less on social spending than most other countries, putting us in the middle of the pack on the combined measure of social and health spending. The French lead the way in such combined spending, quelle surprise.

Bradley’s most recent study with colleagues at Yale showed that in the United States context, states that spent more proportionately on social spending than on health had better outcomes in particular:

“We find that states with a higher ratio of social to health spending (calculated as the sum of social service spending on public health spending divided by the sum of Medicare and Medicaid spending) had significantly better subsequent health outcomes for the following seven measures: adult obesity; asthma; mentally unhealthy days; days or with activity limitations; and mortality rates for lung cancer, acute myocardial infarction, and type II diabetes. Our study suggests that broadening the debate beyond what should be spent on health care to include what should be invested in health — not only in health care but also in social services and public health — is warranted.”


Better Opportunities mean Better Health

The message from all of these studies is clear. It’s what I tell my kids: Be in the top 1 percent and you’ll do just fine.

But that doesn’t help typical American households who have seen incomes decline over the last 20 years in real terms and indeed, as I’ve hammered in this column over and over again, any increment in compensation that lower income folk may have received has gone to health care benefits.

They probably would have been better off (and much healthier) with the money, or jobs, or housing, or education, or social services. But, that is not what was on offer. We should all think about that.


Innovation at Scale: Lessons from Providence

Friday, May 13th, 2016

Providence Health and Services, a powerhouse in the Western states, has entered an agreement to merge with St. Joseph Health, creating a $20 billion-plus health care system with more than 50 hospitals in seven states. These organizations share a common Catholic heritage but they also share a focus on innovation. Providence, in particular, has been a pioneer, drawing in talent and leadership from companies like Amazon and Salesforce to help transform both the consumer experience and core clinical operations. Leaders from both Providence and St. Joseph highlight a health system committed to innovation at scale.

Innovation Prowess

Professor George Day of the Wharton Business School is a leading authority on innovation prowess, which he defines as the “discipline times ability” to innovate. Day has identified through a lifetime of research the key traits of companies (in all industries) that consistently out-innovate the competition. Leading innovators distinguish themselves by:

  • demonstrating leadership commitment to innovation talent;
  • adopting an “outside in” mindset;
  • encouraging risk-taking; and
  • aligning innovation metrics and incentives.

At a recent HX360 conference in Las Vegas (sponsored by HIMSS and AVIA, a leading technology accelerator), Day explained the lessons learned to an audience of more than 200 health care system leaders.

In a series of panels with system CEOs and their innovation leaders these lessons were apparent. In a panel I moderated, I remarked to Providence CEO Dr. Rod Hochman that those traits sounded a lot like the Providence game plan. He agreed.

Providence is not alone in its commitment to innovation. Many leaders at the HX360 meeting share the passion for innovation from Cedars-Sinai and Dignity Health in California, to Memorial Hermann in Texas, to OSF Healthcare in Illinois, to Northwell in New York. All have important stories to tell, but I have had an opportunity to interact with Providence’s leaders several times over the last few months and have become convinced that Providence is a system to watch because of its deep commitment to innovation at scale.

Innovation at Scale

The merger between Providence and St. Joseph Health would give the new system a strong position in many markets in the West, including Washington, Oregon and Southern California. The combined entity would be the third largest system in the United States behind Kaiser and Ascension, a major force in health care transformation in the West, and a key competitor to the other West Coast giant, Kaiser Permanente.

The two systems’ focus on innovation was part of the rationale for the intended merger. As my old friend Bill Noce, board chair of St. Joseph Health told me in an interview: “The forward looking innovation culture at Providence was an attraction to us.” The St. Joseph’s innovation initiatives are very complementary to those of Providence, with many new development opportunities ahead in care innovation, patient experience and life sciences, Noce told me.

Why Innovate?

The HX360 conference highlighted that leading health care systems are pursuing innovation at scale, aimed at meaningful targets to improve patient care, patient and provider experience, and population health.

That statement is almost the verbatim description of how Providence CEO Rod Hochman, M.D., described the rationale for Providence’s innovation program to the HX360 audience.

In particular Hochman highlighted initiatives in three key aspects:

  • developing population health innovations aimed at the broader community (such as supportive housing) as well as large self-insured employers such as Boeing through their accountable care organization arrangements;
  • creating a digital platform for providers and consumers; and
  • simultaneously strengthening core operations (clinical and non-clinical) through innovation.

Providence is not alone. AVIA research found that many health care systems are focusing digital innovations on patient as consumer, chronic care and behavioral health applications, post–acute care transitions, population health initiatives and core clinical system (what they term operations 2.0). But while Providence is not unique in its interest in innovation, it is impressive in its strategic commitment to innovation and to following Day’s principles of innovation prowess.

In my travels through American health care I have observed what I call the Scout Badge Problem when it comes to innovation. Like proud young boy scouts, almost every hospital can point to the merit badges it has accumulated: ACOs, telehealth, patient portals, electronic disease registries and so on. But when you ask the CEOs what percent of patients get this routinely, the answer is the square root of zero. Sure it is happening, but a lot of this stuff is pilots. Scout badges you can brag to the board about.

Not so for Providence. “Innovation is not a hobby for us,” Hochman said.

Hochman is committed to not only match or exceed performance of tough regional competitors like Kaiser in terms of innovation, but perhaps even more importantly believes “we need to disrupt ourselves or have it done to us by someone outside of the health care industry.”

A key rationale for Providence’s innovation agenda is purposeful “customer acquisition” of loyal consumers who will sustain the mission of the enterprise. Like many faith-based systems, service to the whole population is a fundamental goal at Providence. But Hochman frames the Providence strategy of customer acquisition (including millennial consumers and self-insured employers) as a counter balance to the inevitable growth in Medicaid and Medicare that all hospitals are experiencing.

The purposeful focus on customer growth and retention helps explain why Providence has reached out to bring in talent from the ultimate customer-focused retailer (and Seattle neighbor): Amazon.


The Guy from Amazon and the Providence Innovation Team

Providence has intentionally recruited about 30 percent of its current management team from outside of health care. One of them is Aaron Martin, senior vice president of innovation at Providence. Prior to joining Providence he was on the Kindle team and led self-publishing at Amazon.

Aaron is a former Amazonian with a self-deprecating sense of humor. In describing some of his early experiences at Providence in trying to develop innovations at scale and at speed (just like at Amazon) he was initially told by some older health care hands: “OK Amazon guy, but it doesn’t work that way in health care.”

With Hochman’s unwavering support, Martin’s team (including many former Amazonians and some hot shots from Salesforce) brings to Providence the sensibilities of the world’s largest online retailer, including the ability to observe and learn from online experiences with big data and to run sophisticated customer and provider facing online pilots and experiments in real time. They launched a new member website for their Boeing ACO in weeks, not millennia, as we normally do in health care.

Martin’s team follows many of the principles he learned at Amazon. For example, he told an HX360 audience: “We write the press release first.” This means they get very clear on what they are trying to achieve and what would constitute success, then they specify how it will be achieved. Afterward, they write an internal “working backward press release” which explains to customers or clinicians why the product will be valuable to them.

Another Martin aphorism: “There are no extra points for originality.” Martin described his innovation teams as the “pay attention team,” a group who look for solutions and actually work within the many ministries and regions inside the Providence system, identifying those worth diffusing. This is such a key insight about successful innovators: Innovation is about solving meaningful problems, not novelty. Great innovators understand that.

Way too much health care innovation is about pride of novelty rather than successful problem solving. (That applies to much clinical innovation, too: It may be novel and have statistically significant effects, but it really doesn’t make much of a difference that is detectible to human beings. Some, but not all, of the new crop of specialty pharmaceuticals are pricey exceptions to that rule.)

Innovation Focus

While the overall strategic focus for innovation at Providence is on population health, digital health and core clinical operations, there are a number of specific initiatives that are worth highlighting:

Platform strategy.

Martin described three platform strategies that have topped their agenda this year:

  • clinical collaboration platform and internal network among Providence clinicians via secure telehealth and an internal social network, allowing them to treat patients at a distance, provide expert consults and trade best clinical practices;
  • on-demand health care platform to help consumers access information (such as e-mail and telehealth) as well as support consumers receiving home care, retail care or care in alternate sites; and
  • consumer engagement platform to enable communication and connection between episodes of care such as Providence’s Mom and Well Baby app.

Patient experience. Amazon sensibilities are being brought to bear across Providence as they innovate to enhance the consumer experience — whether for patients, healthy people or health plan members. A key challenge is to make the health system simpler and easy to use and relevant in their daily lives by focusing on health. All of us who use Amazon, Uber or OpenTable yearn for that simplicity in health care. 

The Boeing accountable care organization. Providence, along with Presbyterian in New Mexico, is an early pioneer in direct contact ACOs with employers. Boeing and Intel are tough, sophisticated, data-driven and demanding enterprises that expect extremely high performance from their suppliers, and health care is no different. Providence is winning the business and trust of Boeing employees in part through its digital innovation agenda.

“We own a high school…We can learn from them.” With a wry smile, Hochman pointed to the fact that Providence owns and runs a Catholic high school in Burbank, California, and suggested there is no better way to understand the behavior of future patients and health care workers than to understand the digital behavior of teenagers.

Walgreen’s partnership. Recognizing the retail revolution in health care, Providence has partnered with Walgreen’s and in a first for the retailer, will allow the health system to own and operate the clinics in Oregon and Washington with plans to open 25 stores in the Pacific Northwest over the next 18 months.

Migration to risk. Providence has operated a health plan in Oregon for nearly 30 years. With more than half a million at risk lives, currently mostly in Oregon, Providence can use its expanded geographic footprint through its merger with St. Joseph to offer ACO and direct health contracting to many more self-insured employers in the West. Providence’s commitment to migrating toward risk was evident when Hochman told HX360 attendees that Providence tries to “disconnect reimbursement from delivery” and endeavor with “PCPs and clinics to create compensation models as if we are under risk.”

Genomics, too. Providence just announced that the Institute for Systems Biology is joining Providence and that noted genomics researcher Dr. Lee Hood who leads the Institute will become the Providence system’s chief scientific officer. Hood’s pioneering focus on scientific wellness based on personalized medicine using genomics and big data will provide Providence and St. Joseph with exciting new avenues for their innovation agenda.


Looking Ahead

There are a few key health systems in the country that are market makers, not market takers. They shape the future through their strategy and the big bets they make. You know who you are. When it comes to innovation at scale, Providence is a system to watch, especially as it enters its proposed new partnership with St. Joseph. The Seattle-based system will be a major and growing force in the health care market and will teach us all how to bring in fresh, innovative thinking from outside the health system. We need innovation at scale.