Jan 27 2013 | Thought Leadership | By

ADSI Blog: Has Health Care Industry Transformation Reached its Tipping Point?

Quickly out of the gate for 2013, Health Affairs featured the theme of Transforming the Delivery of Health Care in its January edition, Arnold Milstein MD’s Code Red & Blue – Safely Limiting Health Care’s GDP Footprint headlined the New England Journal of Medicine, and CMS announced a new wave of 106 additional ACOs to their program. These three significant events occurred in the backdrop at year’s end by several leading health policy related bloggers advocating one side or the other in terms of the impact of accountable care driven programs and associated contracts on the overall industry. In parallel we have had extensive in-depth discussions with health system and payer executive teams visiting us at the Accountable Delivery System Institute, indicating risk-based contracting conversations have dramatically accelerated from exploration to actually signing and executing the strategies and tactics to support them. The nexus of these types of significant market signals and topic noise level by trusted market observers in previous non-health care industries transformations have, in reflective analysis, identified the point in time where a tipping point occurred.

Moving the health care industry from a highly imperfect to a measured imperfect market

Why is the health care industry the last major industry to reach a transformation tipping point? The above accountable care related activity is symptomatic and a reflection of a much broader and systemic problem: health care up to now has been what economists call a highly imperfect market. The historic market structure did not respond to normal incentives and successful obstructed many of the efficient market penalties. For a variety of policy and economic pressures that are well documented, the health care industry has been moving (pushed?) slowly closer to a more perfect market where value and efficiency rule (no market is theoretically perfect but the ideal economic model is closer to it). Given this context, it is important to evaluate the existence of a tipping point not just at the ACO and accountable delivery system level but at the broader health care market view as well. Accountable health and health care models are vehicles used to respond to the broader movement towards a more perfect industry.

It has been a long-held belief in this industry that the health care industry is ‘special’ and requires that it be looked at differently than other industries – that you can’t apply the same time tested process improvement and information technology enabling approaches (translation: the same business discipline and accountability) that have been successfully deployed in all major industries outside of health care due to the life, death and personal nature of health care.

Applying broad application of outside-of-health-care-industry approaches, including value chain analysis and customer-centered evidence-based and data-driven analytics, a growing number of experts believe that the ‘special’ component of the health industry can be identified and quantified (e.g. 20% of the 80-20 rule), treated differently – as it should be – with the remainder subject to the same efficient market approaches that are used in other industries. ‘Health care is special’ concerns are clearly valid but only to a point – We can no longer afford the cost, quality and safety impacts when this is used as an excuse to not apply sound business principles to the vast majority of health and health care related outcomes and associated processes.

Has health industry transformation reached its tipping point?

The country has finally come to the point where it recognizes it has a health care problem – the first step of  most recovery programs. Two complementary sources provide clear identification of the issues and proposed paths forward: 1) the comprehensive follow-up to the landmark Institute of Medicine (IOM) Crossing the Chasm report, Best Care at Lower Cost: The Path to Continuously Learning Health Care in America, and 2) Denis Cortese MD’s Healthcare Transformation Institute.

In assessing the occurrence of a health and health care industry transformation tipping point, a variety of market behaviors can be ‘inspected’ for evidence, including:

  1. Industry definition change. There is a growing realization that we are in a health and health care industry, not just a health care/sick industry. Savvy providers have begun to explore coordinating more closely with employer wellness initiatives, as well as tapping into the billions of dollars in discretionary consumer health spending as two emerging potential pathways to help offset reduced government program and insurance-related reimbursements.
  2. Stakeholder rhetoric vs. actual action.
    • Purchasers: Consumer/patients are beginning to assert themselves as an active decision-making participants as an informed member of the care team; Government has created unprecedented systemic policy changes (with teeth) which are beginning to show a major impact on behavior; Employers have historically low level of propensity to aggressively support health care industry change because they frankly didn’t understand how to impact a market that behaves in their mind so irrationally, but that is changing quickly as the market becomes more perfect, accelerated by the realization to accept ACA and move on.
    • Clinicians & provider organizations: What gets measured with consequences gets done. Despite the pressure to change varying widely by region and sub-market, there has been a dramatic ACO contract participation increase, especially in the second half of 2012. The renewed professionalism testimonials from experienced virtual accountable delivery systems such as those contracted with the Medicare Advantage plan Essence Health in Saint Louis remind nurses and others why they chose medicine as their profession.
    • Payers: Significant investment and strategic changes being made to provide a different value proposition to providers and direct to consumers through the health insurance exchanges
    • All stakeholders: Investments in value creation and efficiency are being made through the deployment of health information technology, the application of outside-of-health industry proven process and outcome improvement techniques and by beginning to embrace transformational concepts like the continuous Learning Health System (IOM).
  3. Alignment with societal norms. American consumers generally want their products/services when, where and how they want it and are increasingly becoming impatient with our industry’s widening gap between their needs and what is offered in areas such as mobile and self-service that have become commonplace in the rest of their lives. Although traditional organizations have been slow to respond, innovative organizations are emerging to address this untapped need vacuum.

Industry transformation challenges remain

Although the above list is only a portion of the dramatic changes as you look back over the past 20 years, significant barriers of all types exist to a successful transition to a more perfect health and health care industry. Some of these were highlighted by Don Berwick MD during his keynote address at the close of the 2012 IHI Annual conference.

Concluding thoughts

Unfortunately industry transformation stakeholder behavior change and actions are on different time and intensity cycles, creating a messy ‘sausage factory’ that is sometimes hard to look at, let alone be a part of. ACOs and accountable health delivery systems are fundamental changes in the models of care that require much more than a contract – a commitment to shifting one’s practicing paradigm (a future blog post will address the 9 C’s of successful accountable primary care delivery), as well as recognition that it takes next-generation health information solutions to be successful in a market that is rapidly requiring the same rigor as is in all other major industries that have previously passed the tipping point on their transformation journey.

Despite all the encouraging signs, only time will tell whether we are in fact currently at or past the health and health care industry transformation tipping point. An increasingly repeated quote from Winston Churchill in health policy and accountable care circles these days perhaps provides a clue: “You can always count on Americans to do the right thing—after they’ve tried everything else.”

Accountable Delivery System Institute

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