“Disruptive Change” in Healthcare: Better care will result in lower costs

I was reading (with amusement) an article written by Chuck Lauer, the former publisher of Modern Healthcare, from February 6th, 2014, titled How Disruptive Change is Blurring the Lines between Providers and Payers.

His opening salvo was:

“Extinction”? Really Chuck? I respectfully object.

Bad customer service will continue to exist as long as there isn’t adequate time to care for patients in the proper manner. The more overwhelmed healthcare workers are, the more robotic they will become. Robots aren’t usually programmed or hard-wired for warm and fuzzy. They are programmed for functionality.  Payers and the providers who align with them into ACOs and other functional organizations may have to become more focused on function, just to keep up the pace with the demand of the massive system it is designed to serve.  I’ve seen it in  Nigeria, India, China, Mexico, Colombia, Peru, Spain, Thailand, Greece, Turkey, and Brazil and many other places throughout the world.

The stand-alone hospital will evolve the way of personalized and concierge medicine and into a concierge or boutique hospital, where people pay to buy the level of service they want. Don’t believe me? Take your cue from the hotel industry: Marriott, Sheraton, Hyatt, Hilton, Holiday Inn, Days Inn, Ramada, Rodeway and Red Carpet Inns. Compare these chain hotel brands to Little Palm Island in the Florida Keys, Rusty Parrot in Jackson Hole, Westhouse in New York, The Pillars in Fort Lauderdale, Greenbrier in West Virginia, Castle Hotel & Spa in Tarrytown, or The Huntington Hotel in San Francisco. I guess my perspective comes from the benefit of having traveled to more than 100 countries for my work in medical tourism to view healthcare delivery models outside of the USA and healthcare consumer buying habits around the world.  I just don’t see luxury and patient preference headed for distinction or all packed in the same “box”.  For examples, check out Fortis’ La Femme product in India for an example, or Crossroads in Antigua for rehab. See what people are willing to pay out-of-pocket cash for, when they care about service, quality, access, and freedom of healthcare choice.

The solo doctor is actually on its way back in. In fact the word I’d use to describe it is “bourgeoning”. When 40% of the Manhattan cardiologists are said to be announcing a switch to concierge medicine, and the media is interviewing me on specialty concierge practice options and where I see the market headed, there’s reform alright, but the evolution is not headed for the same genus and species you are describing. One is regulation-driven, the other, very clearly market-driven. I expect to see independent physicians of similar-ilk grouping up into a new breed of independent practice associations or IPAs, the purpose of which will be to realize economies of scale, provide coverage and travel reciprocity to subscriber patients, shop with collective buying power, brand with the image similar to that of “Leading Boutique Hotels of the World” and never look back on managed care as the critical feeder source of referrals.

Fee-for-service medicine is alive and well.  Actually, the way I see it, the more disgruntled people become with the basic “insurance plan” options on offer, the deeper they will reach into their pocket to purchase what they view as valuable.  No everyone makes the weekly pilgrimage to Walmart each Wednesday when the sale ads are published in the paper. Yes, we know it’s there if we need to run in really quick for cat litter or toilet paper in a pinch, but it is not the level of service, quality, or even access to the brands we normally buy when we need something.

Ignorance of evidence-based medicine. Hmm, to which body of evidence to you refer? There isn’t only one book or library. There’s the one insurers pay for and then there’s the ones that have different cost-effective and therapeutic approaches from other cultures, other systems.  The curative mud and brine treatments from the Lakes of Crimea in Ukraine are documented to be effective in medical rehabilitation. Medicinal Marijuana and the properties of tetrahydrocannabinol (THC) are not at the top of many insurance-paid evidentiary libraries, but it grows in the backyard and can be made into brownies and lollipops and salad dressings and salves for pain management and other treatments that don’t produce massive revenues for big pharma. While the actual size of the market for anti-nausea related drugs and preparations is difficult to estimate, it is suggested to be over half a billion dollars annually. Will the evidence continue to evolve? And will insurers and employers keep pace in their formularies and approved treatment lists?

Apathy about medical errors. That one really troubles me, Chuck. You see, I’ve not met too many physicians that were apathetic about medical errors. On the other hand, I have seen a few suicides from those who couldn’t continue to live with the errors they committed. I’ve not met too many nurses that were apathetic about medical errors, either.  Perhaps as former publisher of Modern Healthcare, I’m just guessing, but perhaps your perspective was that of a publisher that needed to sensationalize the one-offs to make news and sell media.  The majority of those drawn to healthcare are compassionate people. Compassion people aren’t generally “apathetic” about medical errors.  It goes against their DNA. Having worked on the inside of HMOs and insurance companies one quickly notices that a it is not healthcare, it is insurance – characterized by a different persona and a different industry where risk mitigation is king; not compassion. Claims risk cost is the bane of every insurance company investors’ existence because for every dollar spent on paying a claim, that is less return to shareholders. Apathy about medical errors was not about the error itself, but referred to the financial cost of those errors. If the errors cost nothing, payers wouldn’t have launched such an outcry about paying for them and their remediation, because the errors would be inconsequential to them.  Once payers no longer pay for medical errors, will the apathy by the payers and regulators increase again?

When I read the title of the article, I expected to read something much different.  I approach most articles about Disruption in Healthcare with fervor because in disruption lies opportunity, revitalization, re-engineering, and innovation.

You wrapped up the article with talk of ACOs, and payers and cohesive systems and other contemporary reform-speak.  From where I sit, I see disruption of the market colored by different crayons in the box.  As we move to single system (and probably not single-payer) there will be an insurance mechanism that provides indemnification for life’s catastrophic medical curve balls, and has a basic, functional level of coverage for certain services. Those who choose to use only that system will get what they can from it.

Disruptors find niches where market demands are for other treatment options, approaches, and care settings that displace the previous product with a different one by designing for a different set of consumers, in a new market and then lowering prices and increasing access as compared with those in the existing market.

What you described in the article, Chuck, is probably better described as “sustaining innovation” which does not create new markets or value networks, but instead evolves existing ones allowing the firms to compete against each other’s sustaining improvements.  That’s not reform. That’s mudslide theory. When insurers and physicians start acting like climbers scrambling upward on crumbling footing, and where it takes constant upward-climbing effort just to stay still, and any break from the effort (such as complacency born of profitability) causes a rapid downhill slide, you don’t have disruption or reform. You have sheep, competing for blades of grass in the pasture.

Disruptors on the other hand, start out lean, patient, and focused on developing the different value network, and then invade the older, tired value network that is fighting to survive, rather than thrive in the old system. Better care will result in lower costs overall of healthcare; not lower fee schedules and unnatural integration efforts set forth in regulation and driven by insurers owned by governments or shareholders.