HMPI

Provider Satisfaction with Telehealth: Exploring Variation Across Structural and Demographic Factors

Sumate Permwonguswa, Assumption University, Thailand; Chadi Hajar, Paul Cook, Breanna Wong, Megan Mccarthy, Jiban Khuntia, Errol Biggs, University of Colorado Denver

Contact: Sumate Permwonguswa, Sumateprm@msme.au.edu

Abstract

What is the message?

Empowerment and satisfaction of physicians are two key challenges to telehealth adoption. The survey found that telehealth is most empowering and satisfying for hospital-based providers, particularly in urban settings. Satisfaction varies with several demographic factors including gender, structural distance, and age.

What is the evidence?

Survey of 31 respondents from hospitals, providers, clinics, and physician offices in the Denver area.

Submitted: December 18, 2017. Accepted after review: March 6, 2018

Cite as: Sumate Permwonguswa, Chadi Hajar, Paul Cook, Breanna Wong, Megan Mccarthy, Jiban Khuntia, Errol Biggs. Provider Empowerment and Satisfaction with Telehealth: Exploring Variation across Structural and Demographic Factors. Health Management Policy and Innovation, Volume 3, Issue 1.

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Introduction

The lack of timely access to care is a constant criticism of healthcare in the United States and other countries.1, 2 For example, often a patient may be admitted to an emergency unit and needs to be seen by his or her primary care physician but the physician may not be available. Similarly, a psychiatrist may be too busy to attend to a patient when he or she has had a traumatic experience or a panic attack. Beyond these examples, there are significant populations living in rural areas which lack convenient access to healthcare.

Critically, in the current healthcare models, doctors often do not feel that they are participative or a key element of the patient’s treatment process, unless it is invoked through the institutional models. 3, 4 For instance, a patient may be seen by any doctor in a hospital or any specialist in a clinic, as needed by the common procedure terminology based diagnosis or a disease identification process. The concept of doctors who wish to “treat my own patient”, or patients to feel as though “I need to see my own doctor” is often diluted in current healthcare institutional models.

Telehealth is emerging as a plausible solution to some of the access issues in the current healthcare system. Telehealth refers to remote clinical services provided to patients by physicians or health providers through telecommunication technology (i.e., video chat, telephone), which may or may not involve medical intervention. 5 Telehealth gives health care providers the capability to assess, diagnose, and treat patients in remote locations.

Market wise, significant growth in the telehealth industry is predicted in the next few years. The use of telecommunication technology enables patients in remote locations to receive care and medical expertise efficiently, in real time, and without travel. Broadly, telehealth is evolving as a critical component of the healthcare crisis solution, and has the potential to remarkably impact various problems within our current healthcare system: access to care, cost-effective delivery, and distribution of limited providers.

Irrespective of the perceived potential for telehealth in healthcare delivery, widespread adoption is still lacking. Only 42% of hospitals in the United States have adopted telehealth; most of them are teaching hospitals and are members of a larger health system. 6 Some suggest that factors such as reimbursement and license issues are reasons for lack of adoption, while others allude to the issues relevant to providers use, expected results, and social influence. 7, 8 Amongst other challenges, clinicians’ acceptance and promoting engagement in health maintenance and health care in a telehealth-enabled environment have been touted as major challenges for widespread adoption of telehealth by providers. 9, 10

Understanding when clinicians accept or do not accept telehealth is a particularly important issue. It is important to explore whether providers believe that telehealth is helping them in any significant manner. Motivated providers can lead and influence others to use telehealth.

This study considers provider empowerment and satisfaction in order to explore telehealth adoption, and explores how these two factors vary across structural context (e.g., hospital vs. non-hospital including clinics and office), hospital settings (urban vs. rural), the structural distance of the doctor/provider in the organization, and the providers’ demographics (e.g., age and gender). Section 2 provides the theoretical approach to the study.  Section 3 provides details on the survey conducted. Section 4 provides the results; the core finding is that telehealth is most empowering and satisfying for hospital-based providers, particularly in urban settings, while satisfaction varies with several demographic factors including gender, structural distance, and age. Section 5 concludes with insights from the study.

Provider Empowerment and Satisfaction in Telehealth Context

Empowerment, as a broad concept, refers to a process by which individuals, groups, or organizations gain control over matters that are of interest to them. 11 Researchers have suggested that empowerment is effective in dealing with job- or work-related outcomes,12 improving employee satisfaction, 13 and providing discretion over work for those who feel powerless. 14 Hence, doctor empowerment is a capacity-building process either in the self-practice or in the practicing hospital.  Empowered doctors would take more responsibilities, and would have greater influence and control over their patients’ health management process.

Studies suggest that doctor satisfaction is related to quality of care 15, 16 and patient satisfaction. 17 Doctor satisfaction refers to the physician’s feeling in terms of satisfaction in their practice. 16 When a doctor is dissatisfied with the practice, the quality of care from that doctor can deteriorate and he or she is likely to miss appointments and affect patient satisfaction. 18

The relevance of provider empowerment and satisfaction in the telehealth context stems from two sources. First, telehealth helps healthcare providers reduce costs while increasing quality of care. 5 Patients can be taken care of more efficiently using telehealth. For example, patients can stay home, avoiding the waste of time spent on a long-distance commute. Second, if providers do not feel satisfied, they are less comfortable using telehealth to diagnose and treat their patients.15 Thus, provider empowerment is an essential point in the loop of patient care through telehealth.

We expect that the feeling of empowerment and satisfaction will vary across different contextual and demographic factors. We noted key contextual factors above. We focus on the issues of hospital and non-hospital (clinic, office) setting, urban and rural setting, the structural distance of the doctor/provider in the organization, and the providers’ demographics (age and gender).

Telehealth demand and support in the hospital vs. non-hospital setting vary. Use of telehealth in a hospital itself may be supported by a set of staff, and may have other support services. Such support may not be available in a physician’s office or independent clinic. However, hospitals may have other criteria such as scheduling the equipment beforehand, or dependency on other departments to use the telehealth equipment. A physician’s office or clinic may be more independent while making telehealth use decisions. A doctor may have to be in a situation to simply switch on the equipment and begin talking to a patient in the office. However, in an office environment, the use of telehealth may not be warranted, unless the office or clinic is operating with a set of other providers as a part of the network.

A widely discussed value proposition for telehealth use is for remote settings in rural areas.  However, contrary to this foreseen opportunity, telehealth is not being adopted as rapidly as anticipated in rural areas. 19 Possible reasons may be the sustenance of the telehealth equipment, support, or availability of required bandwidth. On the contrary, these issues are well taken care of in an urban setting. In addition, telehealth has high potential to reduce patient travel, bridging the care gap across two urban locations and availability of resources to remote locations in odd hours (e.g., a psychiatrist connecting to a remote location from a main hospital during the night for a suicidal case). Thus, it is imperative to explore the differences in empowerment and satisfaction across urban and rural areas.

A third factor we explore is the position of the doctor in the organization, and we coin this as the ‘structural distance’. Existing literature suggests that structural distance influences decision-making and independence in practice. 20, 21 Higher distance might suggest lack of  support or lack of team work; but it also suggests that the doctor’s position in the care delivery setting is quite unique and independent. 20 Decisions taken in an independent and unique position in care delivery influences the feeling of ‘ownership’ or ‘responsibility’ for the patients. In other words, higher structural distance and subsequent independence in care delivery is an aspect of feeling that ‘I am treating my own patient’—and thus, is expected to influence empowerment and satisfaction better than doctors with lower structural distance in their respective organizations.

Finally, as suggested in literature, the scope of self-efficacy regarding any health information technology use is dependent on the demographic factors. We expect this to be consistent regarding empowerment and satisfaction with telemedicine, and thus, explore how it varies across male and female providers, and across different age groups.

Survey and Analysis

We used a primary data collection method, and existing construct operationalization from prior studies. The items were adapted to the context of this study. In the questionnaire, all the items are measured on a seven-point Likert scale, except the age, gender, and contextual questions.

The key variables–empowerment and satisfaction–were measured using three and five measurement items respectively. These measurement items were used in prior literature and have been proven for reliability and construct validity.22, 23, 24, 25 Similarly, the structural distance orientation was measured using five items that were used and verified for reliability and validity in prior literature. 20

We developed our sample frame by exploring hospitals, providers, clinics and physician offices in the Denver area. Usable data was collected from 31 respondents using telehealth in their healthcare organizations.

The analysis mainly consists of t-test comparisons and ANOVA for empowerment and satisfaction measures across other variables. We present the results both empirically and graphically in figures 1 and 2. Our key findings are summarized and discussed in the next section.

Figure 1: Comparisons of Empowerment and Satisfaction with Telehealth amongst Different Factors


Figure 2: Empowerment and Satisfaction of Telehealth Providers Differentiated by Age

 

Discussion

First, we found that hospital-based use of telehealth is highly empowering and satisfying for providers (Figure 1 exhibit a). Plausibly, providers and doctors in a hospital setting do not have to pull the equipment and plug it in. They have a support system and other infrastructure which lead to a better appreciation of the utility of telehealth compared to non-hospital based providers in an office or clinic setting.

Second, by urban-rural setting differentiation, we found that urban area users have higher empowerment and satisfaction scores than rural providers (Figure 1 exhibit b). Possibly, as noted earlier, rural providers are still not leveraging much from telehealth, regardless of the widely-hyped potential in telehealth for rural populations. In addition, rural providers may have concerns, issues and challenges such as bandwidth and internet access round the clock for telehealth use. However, urban providers can better appreciate the value proposition of telehealth, leading to higher empowerment and satisfaction scores. Undoubtedly, more than the ‘remote access’ value proposition of the telehealth, the ‘just-in-time’ or ‘just-in-place’ care delivery provisions through telehealth are becoming highly beneficial to urban doctors.

Several demographic factors are relevant. Males feel better about telehealth use (Figure 1 exhibit c).  This may be related to the self-efficacy variations with technology use suggested in early literature. 22 Providers with higher structural distance are more empowered and satisfied with telehealth (Figure 1 exhibit d). Finally, the age group of 41-50 is more empowered and satisfied with telehealth use (Figure 2).  This could be explained by differences that come with age and years of experience such as an increased satisfaction and desire to treat patients just-in-time or increased independence. Overall, providers with more independence are enjoying telehealth more.

An explanation for the age effect could be that with higher age and experience, perhaps the satisfaction or feeling to treat a patient just-in-time is higher.  This means lone-wolves are enjoying telehealth more. Obviously, independence and uniqueness in practice is a solid explanation for this finding.

In conclusion, empowerment and satisfaction are two key challenges to telehealth adoption.  Variance across these two dimensions may help explain the variance in telehealth adoption. Our study establishes and demonstrated this variance across hospital settings, demographics and structural distance of providers. Future studies may explore the nuanced impact of these variations on telehealth adoption and performance.

References

  1. Currie, W. L. 2009. Integrating Healthcare. W.L. Currie and D. Finnegan (eds.). Integrating Healthcare with Information and Communications Technology. Oxford: Radcliffe Publishing; 2009:3-34.
  2. Mays GP, Smith SA, Ingram RC, Racster LJ, Lamberth CD, Lovely ES. Public Health Delivery Systems: Evidence, Uncertainty, and Emerging Research Needs. American Journal of Preventive Medicine. 2009;36(3):256-265.
  3. Marmor T, Oberlander J, White J. The Obama Administration’s Options for Health Care Cost Control: Hope Versus Reality. Annals of Internal Medicine 2009;150(7):485-489.
  4. Romanow D, Cho S, Straub DW. Riding the Wave: Past Trends and Future Directions for Health It Research. MIS Quarterly. 2012;36(3):iii-x.
  5. McLean S, Protti D, Sheikh A. Telehealthcare for Long Term Conditions. British Medical Journal. 2011;342:d120.
  6. Kahn JM. 2015. Virtual visits—confronting the challenges of telemedicine. New England Journal of Medicine. 2015;372(18):1684-1685.
  7. Kruse CS, Karem P, Shifflett K, Vegi L, Ravi K, Brooks M. Evaluating Barriers to Adopting Telemedicine Worldwide: A Systematic Review. Journal of Telemedicine and Telecare. 2016;24(1):4-12.
  8. Lim JH, Stratopoulos TC, Wirjanto TS. Sustainability of a Firm’s Reputation for Information Technology Capability: The Role of Senior It Executives. Journal of Management Information Systems. 2013;30(1):57-96.
  9. Bartz CC, Hardiker N. Promoting Engagement in Health Maintenance and Health Care in a Telehealth-Enabled Environment. W. O’Donohue, L. James and C. Snipes (eds.). Practical Strategies and Tools to Promote Treatment Engagement. Cham: Springer International Publishing; 2017:91-104.
  10. Wade VA, Eliott JA, Hiller JE. Clinician Acceptance Is the Key Factor for Sustainable Telehealth Services. Qualitative Health Research. 2014;24(5):682-694.
  11. Zimmerman, M. Psychological Empowerment: Issues and Illustrations. American Journal of Community Psychology. 1995;23(5):581-599.
  12. Liao H, Toya K, Lepak DP, Hong Y. Do They See Eye to Eye? Management and Employee Perspectives of High-Performance Work Systems and Influence Processes on Service Quality. Journal of Applied Psychology. 2009;94(2):371.
  13. Hui MK, Au K, Fock H. Empowerment Effects across Cultures. Journal of International Business Studies. 2004;35(1):46-60.
  14. Kelley SW, Longfellow T, Malehorn J. Organizational Determinants of Service Employees’ Exercise of Routine, Creative, and Deviant Discretion. Journal of Retailing. 1996;72(2):135-157.
  15. Allen T, Whittaker W, Sutton M. Does the Proportion of Pay Linked to Performance Affect the Job Satisfaction of General Practitioners?. Social Science & Medicine. 2017;173:9-17.
  16. Richardson JE, Kern LM, Silver M, Jung HY, Kaushal R. Physician Satisfaction in Practices That Transformed into Patient-Centered Medical Homes: A Statewide Study in New York. American Journal of Medical Quality. 2016;31(4):331-336.
  17. Haas JS, Cook EF, Puopolo AL, Burstin HR, Cleary PD, Brennan TA. Is the Professional Satisfaction of General Internists Associated with Patient Satisfaction?. Journal of General Internal Medicine. 2000;15(2):122-128.
  18. DiMatteo MR, Sherbourne CD, Hays RD, Ordway L, Kravitz RL, McGlynn EA, et al. Physicians’ Characteristics Influence Patients’ Adherence to Medical Treatment: Results from the Medical Outcomes Study. Health Psychology 1993;12(2):93.
  19. Martin AB, Probst JC, Shah K, Chen Z, Garr D. Differences in Readiness between Rural Hospitals and Primary Care Providers for Telemedicine Adoption and Implementation: Findings from a Statewide Telemedicine Survey. The Journal of Rural Health. 2012;28(1):8-15.
  20. Avolio BJ, Zhu W, Koh W, Bhatia P. Transformational Leadership and Organizational Commitment: Mediating Role of Psychological Empowerment and Moderating Role of Structural Distance. Journal of Organizational Behavior. 2004;25(8):951-968.
  21. Liu SM, Liao JQ. Transformational Leadership and Speaking Up: Power Distance and Structural Distance as Moderators. Social Behavior and Personality: An International Journal. 2013;41(10):1747-1756.
  22. Deng X, Khuntia J, Ghosh K. Psychological Empowerment of Patients with Chronic Diseases: The Role of Digital Integration. Paper presented at: The 34th International Conference on Information Systems; 2013; Milan, Italy. http://aisel.aisnet.org/cgi/viewcontent.cgi?article=1051&context=icis2013. Accessed September 15, 2017.
  23. Estrada CA, Isen AM, Young MJ. Positive Affect Improves Creative Problem Solving and Influences Reported Source of Practice Satisfaction in Physicians. Motivation and Emotion. 1994;18(4):285-299.
  24. Hadley J, Mitchell JM, Sulmasy DP, Bloche MG. Perceived Financial Incentives, HMO Market Penetration, and Physicians’ Practice Styles and Satisfaction. Health Services Research. 1999;34(1):307-321.
  25. Linzer M, Konrad TR, Douglas J, McMurray JE, Pathman DE, Williams ES, et al. Managed Care, Time Pressure, and Physician Job Satisfaction: Results from the Physician Worklife Study. Journal of General Internal Medicine 2000;15(7):441-450.

 

 

 

 

 

 

 

 

 

 

 

A Case for Marketing in Medicine: Using Consumer Theory to Understand Patient Choice and Improve Patient Care

Stacy Wood, Langdon Distinguished University Professor in Marketing; Executive Director, Consumer Innovation Collaborative; North Carolina State University

Contact: Stacy Wood, swking@ncsu.edu

Abstract

What is the message?

Three key concepts from consumer theory can aid in patient-centric care: Decision heuristics (how patients choose in uncertain environments); quality signals & priming (how patients judge the quality of healthcare); value propositions (how patients perceive value in considering their options)

What is the evidence?

Author’s experience in teaching and practicing marketing

Submitted: January 10, 2018. Accepted after review: March 6, 2018

Cite as: Stacy Wood, A Case for Marketing in Medicine: Using Consumer Theory to Understand Patient Choice and Improve Patient Care. Health Management Policy and Innovation, Volume 3, Issue 1.

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Introduction

The healthcare landscape is increasingly impacted by technologies, institutional trends, and cultural shifts that put the individual patient and his/her decision-making process squarely in the spotlight.  Those in healthcare are urged—ad nauseum—to consider how:

  • Patients have agency in their treatment choices
  • Patients must buy-in to facilitate treatment adherence
  • Patients have choices in providers
  • Patients have choices in healthcare modality
  • Patients have power through rating systems of providers and experiences
  • Patients have individual perceptions that impact their choices of providers
  • Patients have individual histories that color their experiences

And, yet, the real challenge is that this same movement of individual choice and experience is operating at the same time as the growing need to create systems of healthcare and to think of populations in the design of these new systems.  In the same breath that we want to talk about the individual patient in patient-centric care, we are forced to scale our insights into a consideration of how we can deliver the best in patient-centric care efficiently and consistently to large groups.  It’s a dizzying task.

Fortunately, a body of knowledge exists that speaks directly to this conundrum and offers many solutions.  Unfortunately, that body of knowledge is marketing theory.  Marketing, as both an academic field and a practitioner pursuit, is not well respected or well understood outside of the business school.  Many hear “marketing” and assume its purpose is to trick the unsuspecting into drinking more sugary soda or buying more expensive frivolities.

And, yet, that is not the case—the domains we study in marketing, especially in consumer theory, cover a gamut of diverse topics (from how people perceive and process risk to how people build relationships through their consumption practices), using diverse methodologies (from psychology-based experiments, to economic models, to anthropology-based ethnographies, to physiological measures like brain imaging and salivary assays), for diverse purposes (from consumer protection and well-being to corporate innovation success).  If anybody can tell you how to deeply understand an individual’s choice process and unique experience in order to design a system to successfully deliver a complex product or service to a massive population, it’s a marketer.

Given that, here are three key concepts from consumer theory that can be put into practice in aid of patient-centric care:

  1. Decision heuristics—How patients choose in uncertain environments
  2. Quality signals & priming—How patients judge the quality of healthcare
  3. Value propositions—How patients perceive value in considering their options

Patient Choice in Uncertainty: The Compromise Effect

Consumers must often make choices when part of the decision context is uncertain.  In a product choice (say a first-time parent considering the purchase of a mini-van), consumers may not be sure what attributes are important, how different brands perform on those attributes, whether the product or its technology might change and make new models more desirable, whether they will continue to need the product in the future, or whether their preferences may simply change over time.  Car purchases are uncertain enough to engender anxiety in many buyers, but almost any healthcare decision involves this level of uncertainty and more—how will I respond to a treatment, will it really work, are the side-effects manageable or not, is there a better option, should I get a second opinion.

Consumer theory outlines many ways that people cope with making decisions under uncertainty.  One way is to use decision heuristics—“rules of thumb” that guide choice based on abstract theories (1).  One everyday example in marketing is the price-quality heuristic which holds that, within any given product category, the price of a particular brand and its quality are positively correlated (2).

I believe that there is one decision heuristic in marketing that has a surprisingly strong impact in healthcare: the compromise effect.  The compromise effect is, simply stated, the human tendency to choose middle options in any given choice range (3).  For example, the middle-sized cup of soda may seem like a good choice at a movie when you aren’t sure how much you’ll want to drink over the next two hours…or the mid-range health insurance plan (not the most expensive bells-and-whistles option or the least expensive bare-bones option) may seem like the right choice when you don’t know how much health care you’ll need over the next year.

The compromise effect is rooted in our intuition of a normal distribution (i.e., the Bell curve) and the belief that middle options are the most “normal” or the most common option of the “normal person” and that the options at the extreme ends of the choice range are atypical and for more extreme circumstances. Because of this, the middle option often feels right and is the option that gives decision-makers the most confidence that they’ve chosen wisely.

But, doctors and other providers often—in an attempt to give patients agency—offer two choices.  The doctor might say, “I see the bump that you are describing and I really believe that it is likely nothing to worry about.  But, we have two choices.  We can do an invasive and expensive test with its own possibility of complications OR we can simply do “watchful waiting” where we don’t do anything now but we keep an eye on it.”  Faced with this choice, the patient is torn by the two extremes…should I do what may be too much or what may be too little?  This is a difficult place for the patient.

Now, instead, consider the impact of a simple shift to three options.  Imagine that the doctor explained three options as (A) an invasive, expensive test, (B) “watchful waiting” where an appointment is made in two months time and the patient notes any changes, and, finally, (C) doing nothing and assuming that it really isn’t anything worrisome.  Now, watchful waiting is the middle option and seems more like the rational “normal” choice to the patient.  In this way, doctors may be able to allow more patient agency in decision-making and nudge them more effectively toward whatever option is the empirically-based standard of care.

But the compromise effect has far-reaching effects beyond simply choice of therapy.  Expecting first-time parents may see their choice for delivery as two options—their regional “home-town” hospital or traveling to their state’s premier teaching/university hospital.  In this case, one option may seem too convenient (“What if our baby needs special care?!”) and the other too inconvenient (“What everything goes smoothly and we get teased for being over-anxious first-time parents?!”).  If a new option emerges in their town that is even more convenient than the current two—say a new service is heavily marketed promoting a doula-assisted home-birth service—then the regional hospital becomes the middle option and may subsequently become more popular.

How Patients Judge Healthcare Quality: Signals and Priming:

One robust tenet of marketing theory is that, when quality is hard to observe – such as the difficulty of looking at a car engine and knowing whether it will be reliable – consumers use more observable or superficial cues to make evaluations of quality (4).  In fact, marketers categorize goods into three types based on the observability of quality: search goods are those whose quality can be objectively searched for and found prior to purchase (e.g., an art poster), experience goods are those whose quality can only be assessed after purchase and use (e.g., a cookie), and credence goods are those whose quality is not even fully knowable after purchase and use, but rather only knowable after long experience (5).

Examples include things like higher education, car repairs, and, most certainly, medical treatment.  How can a patient assess the quality of their vitamin supplements, their physical therapy exercises, or their cardiologist’s recommendation?  Only over time and imperfectly, at best.  In such cases, decision-makers rely on quality cues.  These cues can be signals – deliberately sent by the seller and noted by the buyer – or primes that impact consumers without their awareness.

Signals

Consider the role of signals in healthcare.  In any market, the sellers or providers of goods and services may attempt to send signals about their quality.  Common signals include price, packaging, the service environment, the appearance and action of front-line personnel, advertising, endorsements, and even technology.  For example, in the “glass house era” of technology in the 1960’s and 70’s, many firms kept their mainframe computers in glass rooms located in the lobby of their headquarters in order to signal the innovativeness of their company (6).  Visitors to the firm were supposed to take note and be impressed.  Today, many firms outfit their sales reps and other outwardly-facing personnel with high-tech mobile devices with similar effect.

In healthcare, what signals reinforce the quality of the care provided?  For patients, it may be mundane details—the décor of the waiting room, the technology they see in use, the confidence or warmth in the doctor’s manner, the age or experience of the doctor, the number of people “on their team,” the connection to well-known hospitals or universities, or even the cleanliness of the ceiling tiles (while one is lying on a hospital bed or examining table).

To the overworked provider, the impact of interpersonal details may feel unfair or overwhelming and, yet, to the patient, it is very easy to draw the conclusion that the doctor who can’t pronounce your name either isn’t very smart or simply doesn’t care.  To cash-strapped medical facilities or hospitals, the impact of the office’s appearance may feel superficial or frivolous, and yet to the patient, it is very easy to draw the conclusion that a stained carpet or dusty corner in the waiting room doesn’t speak well to the cleanliness of the surgery.

Priming

The influence of details in evaluating quality also goes beyond those elements that the consumer consciously notes and deliberately uses to draw inferences.  Priming is a process by which peripheral or unnoted details in the environment activate conceptual schemas in the consumer that are subsequently influential in their evaluations and behaviors (7).  For example, exposure to images of guns can make people more negative and aggressive in subsequent interactions and, in one study, exposure to images of bikinis increased risk-seeking and generalized impatience in men (8, 9).

One might reasonably assert that medical facilities would never prime patients with images of guns or bikinis.  Yet, I’ve observed both – many hospitals have images of guns on their doors (as part of a notice of carry-conceal laws such as “No Concealed Weapons”) and many have waiting room TVs set to news stations that report on war, crime, and other gun-related stories.  In waiting rooms, magazines frequently have covers or ads that feature bathing suits or similar deshabile. It is important to ask how these primes may influence patients’ perceptions of the quality of their experience, but also how they may impact the patients’ own choices of therapy or other medical decisions.

Value Propositions: How Patients Perceive Value in Considering the Options

Finally, it is increasingly true that patients have more options in choice of provider, therapy, insurance, and technology than ever before.  How do patients judge comparative value and make choices between competing options?  To answer this, there is value for healthcare professionals in thinking about an often-abused marketing concept—the value proposition.

Many organizations think of value propositions as a generic part of their work in crafting a mission statement.  In doing so, an unfortunate phenomenon occurs.  By trying to equate one’s value proposition to a mission statement, the resulting proposition is often so abstract and superlative that it loses any concrete meaning.  For example, in working with universities writing their value propositions, I’ve noticed that every place describes their institution as providing excellence in education, research, and external outreach.  If all places promise it, does “excellence” have any meaning to consumers?

An effective value proposition should be a practical “work-a-day” statement that is crafted from careful research on the key decision-maker. The statement should clearly show why the decision-maker should, all else equal, choose you or your organization over other options.

There are three types of value propositions: (a) the “All Benefits” proposition, (b) the “Favorable Points of Difference” proposition, and (c) the “Resonating Focus” proposition (10).  In the first, the value proposition is a laundry-list of all possible benefits that come from the product or service.  This type of proposition seems good (“I’m telling you so many wonderful things about me or my product!”) but is often ineffective because it is too long and unfocused.

The second type, the Favorable Points of Difference proposition only mentions those benefits that are different or better than competitors’ benefits, thus creating a somewhat shorter and more focused list.  This type of value proposition is better than the first, but the gold standard proposition is the last—the Resonating Focus proposition.

In the Resonating Focus proposition, the list of benefits that favorably compare to the competition is winnowed down to the one benefit that is most important to the decision-maker.  Because of this specificity, a firm often has several different value propositions for different consumer segments (or different types of decision-maker) that they are trying to influence.

It’s interesting to see how this type of Resonating Focus proposition plays out in the promotion of pharmaceutical products.  Imagine that a pharmaceutical company is going to market with a new extended-release form of one of their drugs.  The general benefit of this new product might be that it regulates the level of drug in the bloodstream creating more even perception of relief, longer perceived effectiveness, and reduced nausea.  But, effective value propositions in this case would differ for three key decision-makers: the patient taking the drug, the doctor prescribing it, and the insurer deciding whether to put it on formulary.

For the patient, research might show that the resonating benefit is about nausea and identity, specifically that “This product significantly reduces the number of days that you feel nausea and, in doing so, gives you more days when you don’t feel defined by your illness (i.e., a ___ patient).”  For the prescribing physician, the firm’s research might show that the resonating benefit is less stress because of greater patient adherence or, specifically, “This product increases patient adherence—which means less time for you in appointments having the stressful “you really need to stick to your medications” talk with patients.”  For the insurance administrator, the resonating focus may well be the cost-savings or, specifically that “This product, while marginally more expensive than alternative formulations, lowers re-hospitalization rates by 32% which in 2016 would have saved $14.82 million in hospital costs alone.”  It is easy to see how the concreteness of these propositions creates a more powerful persuasive statement of value for each distinct group.

The Bigger Picture

Ultimately, these are just a few concepts from marketing and consumer theory.  There is much more in the science of marketing that could be used to improve the well-being of both sides of the healthcare equation—the people who get the care and the ones who provide it.  It is important to remember that marketing is a holistic pursuit that examines everything from the design and development of new products/services to the experience (both objective and subjective) of the end-user—marketing is not just about brochures and advertising!

Good marketing is consumer-centric and seeks the “triple bottom line” in which the buyer, the seller, and society all benefit from a well-designed enterprise.  Nowhere is this more important than in modern healthcare.

What are options to better integrate the knowledge that exists in consumer theory into medical practice?  Below are just a few options that range from the individual to the systemic:

  • Practical consumer theory: Encourage practitioners and administrators to read popular press consumer theory books or listen to related podcasts. (Examples include Dan Ariely’s book, Predictably Irrational, or Wharton’s weekly broadcast of Marketing Matters)
  • Expert talks: Invite marketing academics to give talks at medical conferences or universities
  • Academic translations: Seek translations of existing academic work on consumer theory specifically in health-oriented domains of interest. (Examples include Journal of Consumer Research curations on Food Decision-Making, https://academic.oup.com/jcr/pages/food_decision_making, or the Psychology of Innovation, https://academic.oup.com/jcr/pages/the_psychology_of_innovation)
  • Courses: Hire a marketing professor at major medical universities or a consumer researcher at large medical facilities/organizations to lead specialty courses and initiatives.
  • Partnerships: Build integrated partnerships between medical universities and their affiliated business schools to create a specific curriculum of business classes for doctors and other practitioners (i.e., make curricula available in many current Healthcare MBAs more accessible to all medical and nursing school students).

References

  1. Hastie R, Dawes RM. Rational Choice in an Uncertain World: The Psychology of Judgment and Decision Making. Thousand Oaks, CA: SAGE Publications; 2009.
  2. Rao AR. The Quality of Price as a Quality Cue. Journal of Marketing Research. 2005;42(4):401-405.
  3. Simonson I. Choice Based on Reasons: The Case of Attraction and Compromise Effects. Journal of Consumer Research. 1989;16(2):158–174.
  4. Kirmani A, Rao AR. No Pain, No Gain: A Critical Review of the Literature on Signaling Unobservable Product Quality. Journal of Marketing. 2000;64(2):66-79.
  5. Ford, GT, Smith DB, Swasy JL. An Empirical Test of the Search, Experience and Credence Attributes Framework. NA – Advances in Consumer Research. 1998:15;239-244.
  6. Wood S, Hoeffler S. Looking Innovative: Exploring the Role of Impression Management in High-Tech Product Adoption and Use. Journal of Productive Innovation Management. 2013;30:1254–1270.
  7. Bargh JA. Losing Consciousness: Automatic Influences on Consumer Judgment, Behavior, and Motivation. Journal of Consumer Research. 2000;29(2):280–285.
  8. Benjamin AJ, Kepes S, Bushman BJ. Effects of weapons on aggressive thoughts, angry feelings, hostile appraisals, and aggressive behavior: A meta-analytic review of the weapons effect literature. Personality and Social Psychology Review. (in press).
  9. Van den Bergh B, Dewitte S, Warlop L. Bikinis Instigate Generalized Impatience in Intertemporal Choice, Journal of Consumer Research. 2008;35(1):85–97.
  10. Anderson JC, Carpenter GS. A Framework for Creating Value Propositions. Wiley. https://doi.org/10.1002/9781444316568.wiem01059. Published December 15, 2010. Accessed October 30, 2017.

Technological Innovations for Aging Populations: What Are the Opportunities for Learning across Low- and High-Income Countries?

Onil Bhattacharyya and Kathryn Mossman, University of Toronto

Contact: Onil Bhattacharyya, onil.bhattacharyya@wchospital.ca

Abstract

What is the message?

The rapid growth in aging populations is a challenge faced by both high-income countries (HICs) and low- and middle-income countries (LMICs). This study offers examples of ways that HICs and LMICs can learn from each other, especially in the areas of technology and service design. LMICs, in particular, should focus on leveraging tools that are patient facing and facilitate self-management, monitoring, and care planning to address the needs of an aging population.

What is the evidence?

Review of programs documented by the Center for Healthcare Management Innovation.
Submitted: December 24, 2017. Accepted after review: March 6, 2018

Cite as: Onil Bhattacharyya, Kathryn Mossman. 2018. Technological innovations for aging populations: What are the opportunities for learning across low- and high-income countries? Health Management Policy and Innovation, Volume 3, Issue 1.

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Introduction

Aging populations challenge current models of health service delivery, presenting an opportunity to enhance health systems in low- and middle-income countries (LMICs) and high-income countries (HICs). The number of people 65 years of age or older will triple by 2050, with most of the increase realized in developing countries.1. This growth will be accompanied by a rise in complex chronic conditions, which require strong self-management and coordination between different levels of care to achieve good outcomes.2–4 An increase in complex chronic conditions has been associated with a rise in costs historically; however leveraging technologies to redesign health services has the potential to offset increased costs, and provides an opportunity for LMICs and HICs to learn from each other as they experiment with different approaches to provide affordable care.5

What can LMICs learn from HICs?

HICs have shown that key features of care models for aging populations with complex needs include careful targeting of patients most likely to benefit; comprehensive assessment of patient needs; care planning and remote monitoring; supporting self-care by patients and families; and coordination of care between providers and families.6 LMIC health systems can learn from HICs by devising low-cost models of care that incorporate these key features, emphasizing the development of patient-facing technologies that enable these functions,7–9 rather than expensive electronic medical records built for administrative purposes.10 The dearth of medical staff and training programs in care of the elderly in these settings suggests that self-management is a more feasible approach to improving care.

What can HICs learn from LMICs?

The mix of resource constraints, poor performance of existing systems, and a lack of regulation that characterizes LMICs can inspire novel approaches that can be instructive for HICs,5 including innovations for elderly populations.11 However, organizations in LMICs are in the early stages of developing innovations focused on the elderly, as shown by a search of the Center for Health Market Innovations (CHMI) database. The CHMI online resource, which catalogues over 1300 innovative programs in LMICs, shows only 35 health programs targeting the elderly.12

Despite the low numbers, several key features stand out, particularly in the use of information and communications technology (ICT). Among the CHMI example, 12 use ICTs, often for remote consultations involving online video, phone, or text communications. For example, DoctorFromHome is a program based in India that provides patients with online video consultations with doctors and specialists 24/7 using a web-based platform compatible with desktops, laptops, and mobile devices. Both patients and medical providers can sign up to use this tool, making it easier to add new users and new types of services than if they were based in a specific hospital or clinic.13

In another example, Caring Palms Health Care in Nigeria developed a mobile application and website patients can use to schedule medical appointments and home visits, and upload prescriptions for home delivery. They have also designed a subscription plan specifically for the elderly.14

Another program, Agewell Global, uses ICTs and a peer support network to monitor health outcomes to support the elderly in their homes. Elderly companions visit seniors in their homes and are trained to use the Agewell mobile screening tool to collect information on health and wellbeing. The tool’s algorithms will review collected data, which triggers tailored referral recommendations for medical and social services.15 A pilot of the program took place in South Africa in 2014 and several additional pilots have launched in the US and Ireland, suggesting that this technology can be deployed in a wide range of contexts.16 While these approaches are promising, there is much more to be done to address the needs of a rapidly growing global population.

How can technology help redesign health services for the elderly?

There are many new patient- facing technologies, but few target the specific needs of the elderly in either high-income or low-income contexts.17 High rates of concurrent health conditions4 and progressive physical and cognitive decline should be considered in the design of digital tools for this group.18

A recent study explored the needs of frail elderly and their caregivers that could be addressed by a digital health advisor.19,20  Four key needs emerged, including the need to manage day-to-day tasks; preserve dignity and connections while adjusting to changes in health status; access accurate and easy-to-understand information on their health; and feel understood by their healthcare providers, family, and friends. Participants suggested features such as a metrics dashboard that collects and displays information on symptoms and signs, tools to connect patients remotely to medical practitioners, a care journal, and a shared calendar and task manager to facilitate coordination between patients and their care team.

A similar study for LMICs could highlight a different set of constraints for the frail elderly, but the desire for dignity, connection, and autonomy is common and not actively supported in most care settings. Digital tools that are inexpensive, durable, use voice and visual interfaces for those with low literacy, and support self-care and engage caregivers are likely to have huge benefit in low resource settings.

Many of the necessary features have been developed, but are found across a range of different tools that only address a subset of a person’s needs.17 Technological innovations in HICs include a mobile device to improve primary health care for patients with complex chronic disease and disabilities,9 a fall-detection sensor for older adults that is linked to a smartphone application,21 and a tablet-based tool for waiting rooms that enables complex patients to set priorities for their primary care visit.22 In LMICs, the Chinese Aged Diabetic Assistant is a smartphone application that helps older adults with diabetes self-management, self-monitoring and health education.23 The majority of chronic disease apps are downloadable for free, so cost may not be a major barrier going forward.17

Conclusion

Technological innovations provide an opportunity to tailor services to an elderly person’s unique pathophysiology, their social circumstances, and their preferences. They can help manage complex information to support decisions by patients, caregivers, and providers. HICs have provided large subsidies to purchase expensive digital solutions to support administrative functions in large institutions, and are only now adapting them to meet the needs of providers and patients.24,25

LMICs can skip this phase and support either the development or distribution of digital tools to support patients and caregivers first, and then link them with providers. New models of care could emerge that leverage communities and families more extensively, since the social determinants of health and independence in the elderly extend well beyond health services.26 Digitally enhanced services should prioritize what makes life worth living, facilitate communication with providers, and provide decision-support for people who either cannot access or afford specialized services. The technical capability exists, and tools could be built affordably; however governments will need to support the new models of care delivery that are needed to integrate an elderly person’s system of health with the broader health system.

References

  1. World Health Organization. Global Health and Aging.
  2. Schäfer I, Hansen H, Schön G, Höfels S, Altiner A, Dahlhaus A, et al. The influence of age, gender and socio-economic status on multimorbidity patterns in primary care. first results from the multicare cohort study. BioMed Central Health Services Research. 2012;12(1):89.
  3. Uijen AA, Lisdonk EH. Multimorbidity in primary care: prevalence and trend over the last 20 years. European Journal of General Practice. 2008;14(Suppl 1):28-32.
  4. Koné Pefoyo AJ, Bronskill SE, Gruneir A, Calzavara A, Thavorn K, Petrosyan Y, et al. The increasing burden and complexity of multimorbidity. BioMed Central Public Health. 2015;15(1):415.
  5. Bhattacharyya O, Wu D, Mossman K, Hayden L, Gill P, et al. Criteria to assess potential reverse innovations: Opportunities for shared learning between high- and low-income countries. Globalization and Health. 2017;13(4).
  6. McCarthy D, Ryan J, Klein S. Models of Care for High-Need, High-Cost Patients: An Evidence Synthesis. Issue Brief. The Commonwealth Fund. http://www.commonwealthfund.org/publications/issue-briefs/2015/oct/care-high-need-high-cost-patients. Published October 29, 2015. Accessed September 15, 2017.
  7. Hong CS, Siegel AL, Ferris TG. Caring for high-need, high-cost patients: what makes for a successful care management program? Issue Brief. The Commonwealth Fund.
  8. Bickmore TW, Pfeifer LM, Byron D, Forsythe S, Henault LE, Jack BW, et al. Usability of Conversational Agents by Patients with Inadequate Health Literacy: Evidence from Two Clinical Trials. Journal of Health Communication. 2010;15(sup2):197-210.
  9. Steele Gray C, Khan AI, Kuluski K, McKillop I, Sharpe S, Bierman AS, et al. Improving Patient Experience and Primary Care Quality for Patients With Complex Chronic Disease Using the Electronic Patient-Reported Outcomes Tool: Adopting Qualitative Methods Into a User-Centered Design Approach. Journal of Medical Internet Research Research Protocols. 2016;5(1):e28.
  10. Qiang CZ, Hausman V, Yamamichi M, Miller R. Mobile Applications for the Health Sector. Washington, D.C.: World Bank. http://documents.worldbank.org/curated/en/751411468157784302/Mobile-applications-for-the-health-sector. Published September 17, 2012. Accessed September 15, 2017.
  11. Rosenberg P, Ross A, Garcon L. Report of the First WHO Global Forum on Innovations for Ageing Populations. Geneva: World Health Organization. http://www.who.int/kobe_centre/publications/GFIAP_report.pdf. Published December 2013. Accessed September 15, 2017.
  12. CHMI. Center for Health Market Innovations. 2017. healthmarketinnovations.org. Accessed October 10, 2017.
  13. CHMI. DoctorFromHome. 2017. http://healthmarketinnovations.org/program/doctor-home-india. Accessed October 23, 2017.
  14. CHMI. Caring palms health care. 2017. http://healthmarketinnovations.org/program/caring-palms-health-care. Accessed October 10, 2017.
  15. CHMI. Agewell Global. 2017. http://healthmarketinnovations.org/program/agewell-global. Accessed October 10, 2017.
  16. Agewell Global. Agewell Global. www.agewellglobal.com. Accessed October 10, 2017.
  17. Singh K, Drouin K, Newmark LP, Lee J, Faxvaag A, Rozenblum R, et al. Many Mobile Health Apps Target High-Need, High-Cost Populations, But Gaps Remain. Health Affairs. 2016;35(12):2310-2318.
  18. Pan S, Jordan-Marsh M. Internet use intention and adoption among Chinese older adults: From the expanded technology acceptance model perspective. Computers in Human Behaviour. 2010;26(5):1111-1119.
  19. Shah A, Gustafsson L, Bhattacharyya O, Schneider EC. How a Digital Health Advisor Could Help High-Need, High-Cost Patients and Their Caregivers. To the Point. New York: The Commonwealth Fund. http://www.commonwealthfund.org/publications/blog/2016/dec/digital-health-advisor. Published December 1, 2016. Accessed September 15, 2017.
  20. Bhattacharyya O, Shah A, Schneider E, Kang S. Developing a Digital Health Advisor for High-Need, High-Cost Patients. In: AcademyHealth Annual Research Meeting. Academy Health. Published August 24, 2017. Accessed September 15, 2017.
  21. Thilo FJ, Bilger S, Halfens RJ, Schols JM, Hahn S. Involvement of the end user: exploration of older people’s needs and preferences for a wearable fall detection device – a qualitative descriptive study. Patient Preference and Adherence. 2017;11:11-22.
  22. Lyles CR, Altschuler A, Chawla N, Kowalski C, McQuillan D, Bayliss E, et al. User-Centered Design of a Tablet Waiting Room Tool for Complex Patients to Prioritize Discussion Topics for Primary Care Visits. Journal of Medical Internet Research mHealth and uHealth. 2016;4(3):e108.
  23. LeRouge C, Ma J, Sneha S, Tolle K. User profiles and personas in the design and development of consumer health technologies. Internatonal Journal Medical Informatics. 2013;82(11):e251-e268.
  24. Blumenthal D. Implementation of the Federal Health Information Technology Initiative. New England Journal of Medicine. 2011;365(25):2426-2431.
  25. Sheikh A, Cornford T, Barber N, et al. Implementation and adoption of nationwide electronic health records in secondary care in England: final qualitative results from prospective national evaluation in "early adopter" hospitals. British Medical Journal. 2011;343:d6054. doi:10.1136/BMJ.D6054.
  26. Vassilev I, Rogers A, Sanders C, Kennedy A, Blickem C, Protheroe J, et al. Social networks, social capital and chronic illness self-management: a realist review. Chronic Illness. 2011;7(1):60-86.

Word from the Editors

On behalf of the editorial team – Regina Herzlinger (Harvard), Kristiana Raube (UC Berkeley), Kevin Schulman (Duke), Lawrence Van Horn (Vanderbilt), and myself (University of Toronto)  – I am delighted to welcome you to Issue 2 of the relaunch of HMPI. We are continuing to publish articles that are central to HMPI’s core goal: To draw from the research and experience of scholars and practicing leaders to provide relevant insights for public and private organizations in the international health sector.

Issue 2 has an exciting set of articles – directed at the transformation of health care systems in the U.S. and around the world. The authors of these articles draw from a deep base of experience and research to identify both high-level patterns of systemic changes and focal level changes for actors within healthcare systems, including hospital emergency departments, innovative healthcare providers, supply chain managers, and others in the public, for-profit, and NGO sectors.

The health sector in many countries makes up more than 10% of GNP, while facing extensive management challenges to provide affordable services, high quality, and broad access. Scholars and experienced executives in management, policy, and innovation have insights that can help improve the health care sector, but their contributions often fail to reach the right audience of practicing leaders. Quite simply, scholarly journals are typically narrowly targeted toward technical experts, while health services research and medical journals rarely pay sufficient attention to managerial issues.

HMPI seeks to fill this void, building on work from the initial launch of the journal by an editorial team led by Professor David Dranove. HMPI contains short essays and research pieces on current issues in health sector management and public policy around the world. The articles are written for an audience of well-informed non-specialists. To ensure both high quality and accessibility, the articles are curated by the editors and the journal’s editorial board.

We welcome your comments about the ideas that the article spark. There are three ways you can weigh in. The BAHM Forum on LinkedIn provides an ongoing location for discussions, as does Twitter @HMPI_Journal. In addition, we are opening Issue 2 to comments from readers. We welcome your thoughtful insights.

We also welcome ideas for potential articles. If you have an idea that you would like to explore for HMPI, please send an outline of your article to our editorial team. And, of course, we welcome your comments and suggestions.

Will Mitchell
Professor of Strategic Management
Anthony S. Fell Chair in New Technologies and Commercialization
Rotman School of Management, University of Toronto

Regi’s ‘Innovating in Health Care’ Cases – Innovations in Retail Medicine

This issue of Regi’s Case Corner highlights the challenges of health care innovation. Two related cases illustrate attempts to innovate in retail medicine, focusing on the Health Stop Retail Medical Centers.

The following note provides an overview of successful and dead end routes to innovations. The cases, which include a teaching note, are available from the HBS case distribution site.

Abstract

Cases and health care innovation framework

 

Background: Why Do All-Too-Many Health Care Innovations Fail? The Example of Retail Medical Clinics

Regina Herzlinger, Harvard Business School
Samyukta Mullangi, MD, Michigan Medicine

Overview

Although the 2010 health reform law has had a significant effect on reducing the numbers of uninsured, its impact on cost control and quality enhancement has been more temperate. Partly this may be because while there is increasing recognition that ameliorating the dysfunction of our health care marketplaces requires encouraging competitiveness and innovation, there has been less attention paid to the fact that health care ventures, no matter how innovative, must also have clear purpose, alignment with their environments, and business plan elements to be successful.

For example, the need for solutions led the Center for Medicare and Medicaid Innovation to review pilots of new payment and delivery models on an accelerated basis, including Accountable Care Organizations (ACOs), Medicare’s most ambitious experiments in health care delivery. ACO providers agree to manage care for a patient population at a variant of a fixed price, based on either historical or regional benchmarks. And yet, despite the plausibility of the idea, most ACOs have to date, yielded only tepid results in costs averted and outcomes achieved. Why?

Perhaps it is because we too frequently misidentify the fundamental drivers of success of any health care innovation. For instance, although the mergers central to ACO strategy are notoriously difficult to achieve, its architects paid less attention to these managerial issues than they did to performance measurement and characterization. Success requires consideration of questions such as: Did executive teams have the ‘roll up’ skill sets and experiences needed to achieve key economies of scale? How aligned was the ACO with its allies and adversaries within the structural environment? Did it have a well-thought-out business model?

Materials

To illustrate the importance of such considerations in shepherding health care innovations to success, we  isolate one field – retail medicine – and examine several of both failed and successful business models that have proliferated over the years. To calibrate this field, in 2016, total United States retail medical clinic (RMC) sales were estimated at more than $1.4 billion, with as many as 2,400 RMCs offering ambulatory care, variously owned and operated by physician and non-physician investors.

The first lesson from the RMC experience is that failure often occurs when the organization targets goals that are impossible-to-achieve simultaneously, particularly in labor-intensive service organizations, such as cost control and extreme consumer-friendliness.

Failure – Health Stop

Health Stop, the subject of this issue of Regi’s Case Corner, a failed New England chain of RMCs, promised both, but the thin staffing model needed to achieve the former obviated a consumer-friendly strategy.6 In contrast, One Medical Group, based in San Francisco, adapted a strictly consumer-friendly model for primary care, funded by a $199 per year buy-in in return for customer-service trained office staff, stylish waiting rooms and relaxed physicians who could both spend more time with each patient and be available for same-day appointments. In 2015, this privately-held firm crossed the rare ‘unicorn’ billion-dollar valuation threshold.7 Meanwhile, ChenMed, founded in 1985 by Dr. James Chen and his sons, had a different goal: cost-effective services for elderly patients with multiple chronic diseases through a focused clinic model that controlled costs by catering to their particular needs. Key aspects of ChenMed’s model to achieve cost containment included rapid expansion to achieve scale, heavy emphasis on preventative care, and investment in technology to improve coordination of care.

Innovators sometimes fail to consider their alignment with factors that shape their environment, such as local competition and consumer characteristics. Again the RMC experience is illustrative: Health Stop’s strategy hinged on locating clinics in attractive wealthy suburban markets, despite these areas already being populated by entrenched local physician offices that actively opposed their new rival. The firm’s internal breakeven projections required achieving almost 40% of market share, an ambitious goal considering the competitive precincts that they chose to enter. In contrast, Iora Health, founded by Rushika Fernandopulle and Chris McKown, works with captive populations in the form of workers unions to test a new per-patient-per-month model of subscription primary care. This alignment allows Iora to stress-test its model in cooperative and diverse communities – casino workers in Atlantic City, culinary workers in Las Vegas, freelancers in Brooklyn, among others. The different experiences of Health Stop and Iora Health illustrate the importance of taking the structural environment into consideration to ensure financial solvency.

Last, innovators can fail to consider simple operational issues. Health Stop’s clinic staffing ratios of a few physicians supported by other mid-level providers virtually guaranteed hour-long waits. But instead of delegating more tasks to its support staff, Health Stop tried to plug this operational hurdle by hiring more physicians, an expensive endeavor that further compromised its cost control goal. Additionally, Health Stop courted both patients who needed quick visits for acute care needs and those with chronic illnesses who could generate sustainable revenue through cross-selling of related services. But this mixture led to unpredictable variability in length of clinic visits, compounding the problem of efficient scheduling to mitigate the long waits. Finally, although Health Stop leadership included a seasoned business person and clinician, the managerial leadership lacked health care experience, while its clinical leadership lacked the relevant managerial experience.

Success – CVS MinuteClinic

In contrast, CVS’s MinuteClinic could leverage existing, convenient pharmacy locations that already carried significant brand recognition. By positioning itself as a limited care provider, it effectively targeted low-risk patients with specific needs. These included younger patients who lacked a regular physician as well as employed professionals who needed after-work access to health care. It marshaled a powerful ally – insurers attracted by its ready accessibility to consumers – to counter inevitable complaints from local providers that it was stealing valuable customers. With its limited care goals, MinuteClinic developed relatively simple but effective informational technology to track adherence to its care protocols.

Relentlessly rising costs, erratic quality, and massive spending that yet leaves millions without a safety net make health care a field ripe for innovation. The opportunity figures in the trillions of dollars, and the urgency calls for a multitude of possible solutions. But an “if you build it, they will come” perspective that minimizes consideration of key business model success factors causes all too many important innovations to falter.

Strategies to Improve Care in the Emergency Department — the De Facto Multispecialty Clinic of the 21st Century

Erika Lynn-Green; Arjun Venkatesh, MD, MBA, MHS; Howard P. Forman, MD, MBA, Yale University

Contact: Howard P. Forman, howard.forman@yale.edu

Abstract

What is the message?

Emergency departments no longer just simply sew up wounds or triage patients for more acute care. Screening, diagnostic, and therapeutic services occur in and around the ED, resulting in faster care and major improvements in patient outcomes. Yet, operationally, hospitals are struggling to provide emergency and trauma care effectively. Strategies need to improve admissions, discharges, and patient throughput. In parallel, insurance and other payment policies need to reinforce the new service strategies.

What is the evidence?

Relevant literature, together with experience in high-level emergency department care.

Submitted: June 1, 2017; Accepted after review: June 29, 2017.

Cite as: Erika Lynn-Green, Arjun Venkatesh, and Howard P. Forman. 2017. Strategies to Improve Care in the Emergency Department—the De Facto Multispecialty Clinic of the 21st Century. Health Management Policy and Innovation, Volume 2, Issue 2.

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The Rise of the Modern Emergency Department

After World War II, a series of major pieces of legislation facilitated the rapid growth of community hospitals in the United States (1). At their peak in 1975, hospitals across the country contained 1.5 million beds (2). The most recent estimates, by contrast, show fewer than 900,000 hospital beds, even though the nation’s population has grown by 120 percent since the 1940s (3, 4). Better care delivery and changing financial incentives have driven much of this decrease. Hospitals continue to downsize their staff and operations, and even as demand increases, the total number of U.S. Emergency Departments (EDs) continues to fall (5).

The ED has become the de facto multispecialty clinic of this century. The modern ED no longer just serves as the place to sew up wounds or triage and admit patients for more acute care. Sophisticated screening, diagnostic, and therapeutic services occur in and around the ED, resulting in major improvements in stroke, cardiac, and trauma outcomes (6–8). Care that previously would take weeks to deliver can be accomplished within the ED in mere hours. Emergency physicians, clinicians trained in a specialty that is relatively new to medicine, can provide immediate attention to a multitude of traumatic, surgical, medical, and mental health emergencies (9).

In addition to the expansion of services, the ED has become the medical provider of last resort in most communities, serving patients either uninsured or underinsured, as well as insured patients when their personal physicians are unavailable. These patterns of usage have led to a significant increase in demand for ED space, exemplified by the proliferation of “free-standing” Emergency Departments (FSEDs), which are not attached to hospitals (10). The vast majority of FSED patients walk in, rather than arriving by ambulance, and fewer than 5 percent require admission to a hospital, whereas hospital-based EDs admit between 15 and 35 percent of patients (10). The growing popularity of the FSED model indicates a demand not just for emergent care but also for 24/7 availability of many acute and urgent hospital services at the level of an ED.

Overcrowding and Boarding

Even as acute care techniques improve and the expertise of Emergency Medicine providers advances, the modern ED faces persistent operational challenges. Over 90 percent of Emergency Departments report overcrowding at some point during the day, and wait times and lengths of stay are now the preferred, patient-centered metric to evaluate ED care (1). Rather than arising from an insurmountable increase in patients presenting with non-emergent complaints, solvable workflow and structural issues at the hospital level cause most ED overcrowding (1).

The trend toward downsizing hospital staff and operations has led to less effective and often inefficient bed management, which in turn creates logistical complications that can harm patients. Boarding, for example, occurs when a patient lingers on a stretcher in the ED, often in the hallway, despite having been admitted to the hospital (a confirmation of true emergencies) (11). Often a patient is boarded due to a lack of available beds or to processing delays even if a bed is available. Patients who are boarded have longer overall lengths of stay compared with comparable admitted inpatients and, unsurprisingly, report lower overall satisfaction (12, 13).

The health of boarded patients also suffers. In addition to the discomfort of lying on a stretcher for long periods, boarding results in worse patient outcomes, since inpatient nurses and staff often miss these patients even though they have been determined by a physician to need hospital care (1). Studies show that mortality increases along with the duration of ED boarding (14). Moreover, boarding increases the length of stay for all patients, even those in inpatient beds (1). Stroke patients, in particular, have poorer management and outcomes when EDs are crowded, even though overall stroke care and outcomes have improved through the expansion of ED services (15). Without operational and logistical solutions, the biomedical and technological improvements of the 21st century cannot achieve their full potential, and Emergency Medicine providers cannot practice at the height of their training.

In many other industries, such experiences would lead to rapid operational redesign and surge management to minimize harm. Airlines know how to move hundreds of thousands of travelers after major storms; utility companies, too, know how to manage disasters due to weather events (16, 17). In each of these cases, there is a short-term impairment of services that effective leaders resolve. In healthcare, however, boarding and overcrowding are as bad as ever, becoming part of the day-to-day functioning of EDs and the patients that need their services. This phenomenon is treated as just another inconvenience of being sick, rather than a problem to be solved. That is the puzzle we need to solve in Emergency Department care.

Emergencies, Non-Emergencies, and the Link to Primary Care

ED operational challenges require systemic hospital-level solutions, including the effective parsing of emergencies from non-emergencies to improve the experience of patients and providers, and to reduce cost. In particular, expanded primary care access and the proliferation of alternative unscheduled care settings such as urgent care are potential solutions for excess ED usage and crowding. Quite simply, we need to divert non-emergent complaints to an outpatient provider.

As the ED has grown in response to the acute care needs of the population, outpatient medicine often has become less accessible. Because of the immense range of care available at the ED, primary care and specialty physicians feel more comfortable curtailing their after-hours clinical availability and allowing unscheduled and partially worked-up patients to go to the ED (18, 19). One study found that fewer than half of people with a regular source of care reported that their primary care provider (PCP) offered extended hours at night or on weekends. In contrast, people report significantly fewer ED visits and lower unmet medical need rates when they have access to extended PCP hours (20).

A significant amount of non-emergent and less urgent care is provided in the modern Emergency Department (21). The shift from outpatient care to ED care costs more money, distracts highly valued resources to less critical needs, and disrupts the coordination of care that is better delivered by primary care physicians. The current system, however, frequently pushes patients to the ED or expects them to wait days or weeks for an appointment with their PCP.

This mix of non-emergent care in emergent settings is a long recognized problem. For decades, insurance companies have tried demand-side strategies to reduce unnecessary Emergency Department visits. ED copays are common, though in many cases the copay is waived if the patient is admitted to the hospital (22). Most recently, Blue Cross Blue Shield of Georgia announced that it would stop paying for non-emergent ED care, assessed after the fact by the insurance plan (23).

To the casual eye, this strategy makes sense: if the complaint is not an emergency, the patient should wait to seek outpatient care, typically at a lower cost. It seems logical to align member incentives of lower cost to the patient with the desired behavior of avoiding the ED and obtaining care on an outpatient basis from your PCP or specialist. The problem is that patients cannot always be expected to assess their own state of emergency at home.

This is not any easy problem to solve. In many cases, patients evaluated in the ED and triaged to “primary care” treatable diagnoses were later found to have required emergency management (24). For instance, at an initial stage, physicians often struggle to tell the difference between gastrointestinal tract discomfort and more serious and even fatal conditions. If physicians cannot presciently tell who will and will not require life-saving interventions from the complaint, patients should not be expected to evaluate themselves. Financially punishing patients after the fact for not having a heart attack, stroke, or appendicitis only encourages other patients to avoid emergent care until too late.

Operational Solutions and Workflow Interventions

Operational innovations

Despite the challenges, real solutions are possible. Supply-side strategies on the part of the health system can drive improvements to Emergency Department effectiveness and cost reduction. ED workflow solutions break into three potential categories: decreased patient intake, increased patient dismissal, and improved throughput (1).

In strict terms, hospitals could reduce lucrative elective admissions until they achieve a more manageable equilibrium. However, this strategy would have enormous financial consequences for hospitals, which already operate on low single-digit margins and often depend on ED revenue to break even. Hospitals need a financially viable approach.

Decreasing admissions or increasing discharges per se will also not improve crowding. EDs show considerable variation in their rates of admission and lengths of stay, as patients have a wide variety of needs (25, 26). However, increased efforts to reduce hospital crowding by increasing ED discharges may have a paradoxical effect and exacerbate ED crowding. With reduced admissions, patients require more intensive testing and treatments in the ED itself, which results in longer ED stays and worsened ED throughput (25–28). Hospitals need well-designed systems to streamline care and direct patients appropriately, rather than just treating patients who should be admitted in the ED or rushing patients out of inpatient beds.

Insurance innovations are beginning to recognize this potential. For frail or elderly people at the end of their acute-care hospital stay, a “flipped discharge” where therapists in an active recovery team assessed the patient at home saved 40,000 bed days in a year and reduced readmissions via the ED at a UK hospital system (29). The flipped discharge also frees inpatient beds and relieves ED overcrowding while improving patient satisfaction. Health plans are evolving to recognize this opportunity, and integrated delivery systems such as Kaiser Permanente are reliably lower-cost due to their attention to patient-centered care delivery.

The third strategy, improved throughput, offers the greatest opportunities. For an immediate and financially viable change, inpatient boarding, where admitted patients wait for beds in inpatient hallways instead of the ED, presents a safer alternative to ED boarding (30). Patients overwhelmingly prefer inpatient boarding, which increases overall patient satisfaction scores and thus potentially a hospital’s ranking and reimbursement (31, 32). The primary obstacle to throughput innovations such as this comes from the lack of alignment between ED quality measures and overall hospital quality measures. Just as EDs measure left-without-being-seen rates and prolonged wait room times as safety risks and failures in care, inpatient hospitals units should measure ED boarding or delays in patients arriving on floor as latent safety risks created by poor inpatient flow (28, 33).

The more challenging long-term solutions involve streamlining care delivery in the ED (27). Posted wait times and ED appointments could reduce stress for patients with less-emergent complaints and facilitate their arrival at lower-demand times. Front-end redesign in the ED, including bedside registration, centralized patient tracking, “zone nursing,” where nurses control a defined area, and non-emergent “fast tracks,” has contributed to operational and patient outcome improvements in EDs that have implemented these strategies (34). Better bed management strategies at the inpatient hospital level, such as hiring a dedicated bed czar, also help alleviate the bottleneck effect that translates to ED crowding, as a crowded hospital cannot help to absorb ED traffic (35).

Other throughput innovations are possible. Providing telephone consultation services, more accessible primary care services (including extended and urgent care hours), and integrated delivery of health care can also reduce the demand for emergency care while meeting the immediate needs of the population (36). Early evidence suggests that telemedicine can decrease costs, including by reducing ED visits (37). For the truly non-emergent patient, the reassurance from knowing that there is an available consultant may be enough peace of mind (38).

Payment innovations

Throughput innovations such as these will require changes in payment procedures. Current primary care reimbursement schemes do not incentivize these supply-side innovations. ED solutions must include re-crafting the way we pay for primary care, rather than asking physicians and their staff to perform unpaid labor for the good of the system. Public and private insurance plans are beginning to change their models of reimbursement to physicians and hospitals to incentivize higher value care.

These new reimbursement schemes, in turn, are changing practice patterns and care delivery strategies. Emergency clinicians did not go into this field to take care of non-urgent patients—it distracts from their mission to provide immediate attention to acute emergencies. They, too, would prefer that integrated care delivery models are in place to best care for every patient in a timely, high-quality and accessible way. Punitive demand-side strategies could delay life-saving care and harm patients. Instead, supply-side innovation must lead the charge for better and more responsive care delivery, coupled with demand-side strategies that create payment incentives for the operational improvements.

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A Vision of the Future: Organization and Delivery of Healthcare in the Digital Age

M. Chris Gibbons MD, MPH, and Yahya Shaikh MD, MPH, Johns Hopkins Medical Institutions, The Federal Communication Commission, The Greystone Group, Inc.

To listen to a related webinar led by Chris Gibbons and Yahya Shaikh, click here.

 

Contact: Chris Gibbons, mcg@greystonehit.com. 

Abstract

What is the message?

Eight realities are rapidly creating opportunities for health system transformation. The authors outline a vision in which a minority of healthcare remains in hospitals, being surpassed by home-based care, geographic ecosystems, and technology-enabled Smart Care. Only those health organizations that take advantage of these realities will survive.

What is the evidence?

Assessment of current societal and healthcare sector trends, based on the experience of the authors.

Submitted: July 28, 2017; accepted after review: August 3, 2017.

Gibbons CM, Shaikh Y.  2017. A Vision of the Future: Organization and Delivery of Healthcare in the Digital Age. Health Management Policy and Innovation,  Volume 2, Issue 2.

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Eight Realities

Much has been said about the impact of emerging technologies on modern healthcare. Many entrepreneurs and investors alike are intent on developing disruptive innovations that significantly improve clinical workflows, enable predictive analytics, or enable wide-scale interoperability. While any of these would represent a significant medical advance, several factors suggest that healthcare may be about to experience an even more far-reaching disruption.

Consider the following eight realities.

  1. Shorter length of stay. It is widely understood that lengths of stay have dropped significantly for many conditions that previously required longer hospitalization (1, 2). The reasons for these declines are complex—related to economic factors, policy and regulatory forces, disease epidemiology, and practice changes. The key result is that, for many conditions, there has been a decline over the past two decades in care being provided in the hospital, and more care has been provided in home and community settings.
  2. Retail healthcare: Retail healthcare outlets are rapidly growing in popularity (3). They exhibit higher patient satisfaction, shorter waiting times, lower costs, and care quality that is on par or better than similar care provided in traditional healthcare settings (4). There is even some evidence that they do a better job than historic outlets of reaching medically underserved populations (5).
  3. Hospitals are dangerous. Hospitals are dangerous places! It has been well documented that many people who go to the hospital get sick from medical errors and illnesses they did not bring to the hospital (6). A recent study found that such hospital-acquired problems are so common that they are actually the third leading cause of death (7). Obviously, a tremendous amount of good is done within the current healthcare system, yet for most individuals these findings are hugely troubling.
  4. Mobile devices. Advances in the computer sciences and broadband networks are fueling a revolution in medical device innovation that is enabling large bedside and hospital-confined medical devices to become miniaturized, handheld, ingestible, wearable, mobile, and operable anywhere there is a broadband connection (8–13). In fact, some people who 20 years ago required stays in the intensive care unit (ICU) followed by lengthy hospitalizations prior to discharge are now are able to go home with small portable devices that do the work the ICU-based machines did just two decades ago (14, 15)! While development and use of these devices is still growing, these devices undoubtedly will reduce hospitalizations and lengths of stay.
  5. Robotics. Advances in robotics are now enabling surgeons based in one place to operate on patients located across town or across the globe (16–18). The spectrum of surgeries performed this way will increase in the future. Given the early results and global need for providers and medical assistants, these systems will continue to advance and be used.
  6. Telehealth. Telemedicine and telehealth have advanced rapidly. Innovations are enabling physicians to see, talk to, examine, and monitor their patients remotely, lowering the need for inconvenient visits to the doctor’s office or unnecessary visits to the ER or hospital (19–22, 22–27).
  7. Cost structure. Hospitals were in part developed to centralize resources in order to gain scale economies and scope opportunities (28). In the future, however, hospitals may not be able to reduce costs below that of ambulatory care delivery. Also, because of technological advances built on broadband networks, there may no longer be significant scope opportunities arising from centralization of medical infrastructure.
  8. Artificial intelligence. Finally, the emergence of artificial intelligence and cognitive computing is providing unprecedented levels of data tracking and analytic capacity. These innovations are generating insights that are instantly available to medical providers, patients, and caregivers (29–31).

So, Why Would Anyone Stay in a Hospital or Pay for Hospital Services?

These realities raise two questions. Why would patients, in the future, ever choose to stay in a hospital? Why would payers insist that covered beneficiaries obtain care in high-risk hospitals when lower-risk and lower-cost options with (at least) comparable outcomes and higher patient satisfaction levels are available? Healthcare systems and hospitals, as they currently exist, will face threats to their existence.

If hospitals, as we know them, do not survive, what will the hospitals and healthcare systems of the future look like? While predicting the future is fraught with challenges, it is becoming increasingly clear that those hospital systems that proactively embrace the opportunities of these realities, and innovate on the very notion of the structure and functions of a hospital, will be best able to overcome the challenges, provide value to patients, and remain financially viable.

A Vision of the Future

Several experts have described possible future organization and delivery of healthcare systems that provide useful thoughts and perspectives (32–36), but none provides a comprehensive vision that accounts for realities we have described and for the national trends that are shaping healthcare today. Key trends include, at a minimum, a recent national population surge, an increasingly aged and diverse national demographic, significant and growing healthcare provider shortages and maldistribution, a focus on both social and medical/genetic determinants of health, rising costs of care, and the role of technology. This is a daunting list of challenges.

We briefly assess future healthcare delivery in an attempt to provide a more comprehensive vision. We do not believe this or any other model is perfect, yet it provides a valuable base for discussion.

Figure 1 summarizes the major components of this vision. Briefly, there will be a continuing contraction in the volume of inpatient hospital services. This contraction is likely to be so significant that its impact will be fatal to many currently existing hospitals and result in so significant a restructuring of other hospitals that the majority that survive may bear so little resemblance to the hospitals of today, they may no longer be called hospitals.

  1. Critical care remaining in hospitals: 10 percent to 15 percent

Surviving institutions will focus on patients who are of the highest acuity, critically ill, and medically complex. These patients need procedures and therapies that cannot be provided in a less controlled setting. Nonetheless, given the fact that many conditions that years ago could only be treated in intensive care units today are managed in part with technology in ambulatory and home settings, this type of hospital-based critical care will have declining demand.

Care in these facilities will be driven by physician providers, as it often is today. Unlike the healthcare systems of today, though, this type of care will likely represent the smallest proportion of the volume of care provided nationally. This volume of care at any time might be 10 to 15 percent.

  1. Hospital at home: 15 percent to 25 percent

There will be other patients who could benefit from inpatient care services but otherwise do not need to be in a hospital. Due to advances in telemedicine and telehealth; mobile, wearable, embeddable, and cloud computing; plus advances in artificial intelligence and cognitive computing, lower-acuity patients will increasingly receive ambulatory care in the community or at home. Advances in broadband-enabled health technologies will further contribute to the value and cost effectiveness of ambulatory models of care. This trend is rapidly increasing.

Indeed, multiple studies are demonstrating the value and role of so-called “Hospital at Home” models of care delivery (37–42). The share of total volume for the hospital at home model of care may comprise as much as 15 to 25 percent.

  1. Geographic ecosystems: 30 percent

Several companies from beyond healthcare are beginning to innovate in the healthcare sector. Examples include IBM, Microsoft, Google, Apple, and Amazon, to name a few from the tech sector. Industries as varied as automobiles (43) and residential buildings (44–45) are also exploring opportunities in the health sector. While not yet a reality, in the near future, whole residential communities, including automobiles in transit, could be sites for effective health and low-acuity medical care. Such a model of care could easily become part or even supplant the current notion of Accountable Care Organizations, in which virtual health systems are responsible for the care of people living within a region.

The new geographic ecosystems could be optimized for post-acute care and chronic disease self-management. To help keep costs down, they may be primarily directed by nurse practitioners and nurses, who oversee larger numbers of enabling services staff including patient navigators, community health workers, and Promatoras (46–50). In the future, the regional model of healthcare delivery may account for as much as 30 percent of volume.

 

Figure 1. The Future Organization of Healthcare Delivery

  1. Smart Care: 40 percent to 50 percent

Digital health and consumer health informatics are continuing to grow and evolve in society. Indeed, care delivery that is mediated at least in part through these mechanisms may well become the largest model of care delivery. This could account for as much as 40 to 50 percent of the volume of care.

We call this model Smart Care. The Smart Care term highlights the fact that advances in computer processing, data storage, and miniaturization are pushing computing power to the edges of the network. As a result, consumer devices are rapidly becoming smarter.

By becoming smarter, consumer devices will operate autonomously to detect, decide, and react to needs based on predetermined algorithms, without direct human input of a healthcare provider. Many of these solutions will not be individual hardware products, but rather be built into the walls of buildings and under the hoods of cars. Ultimately, they will be woven into the fabric of society in a way that does not require a patient’s active choice in order to capture needed information or respond appropriately. Such passive interventions have been recognized by public health and medical experts as among the most powerful health interventions possible.

Consider the health benefits of water fluoridation, iodination of salt, and airbags. In parallel, homes and automobiles could themselves become smart and integral components of a broader consumer health ecosystem that is always on, following people wherever they are. In doing so, SmartCare innovations could help individuals live independently, safely, focus on wellness and prevention, and help manage minor health issues and low-acuity medical complaints.

Who might lead the SmartCare revolution? Tech companies already see this as the next frontier. Retail healthcare organizations might also become major players in exploring and advancing this model of care delivery. So might virtual reality and augmented reality designers and innovators.

And as this model of care delivery grows there will be needs for health technology “air traffic controllers” and “control centers.” These individuals and organizations would have key responsibilities for optimizing data and information flows. They will also need to coordinate the use of human resources in the community setting.

This coordinating role is a potential opportunity for current health systems to embrace the disruptive innovations. Some large health systems are already thinking about these possibilities and preparing to act. For instance, Mercy Hospital system in St. Louis, Missouri, has developed the first operational “Hospital without beds”—focusing on optimizing care via technology at a distance to patients within its network (51).

  1. Broadband: Making it all work together

Full-scale broadband connectivity—both institutionally and in the home—is central to this vision of healthcare delivery. As the two arrows at the bottom of the graphic illustrate, if we focus only on institutional connectivity, some consumers may have little or no access to services. If, instead, we also prioritize consumer access to broadband connectivity, all consumers will have access to at least some forms of effective healthcare goods and services.

Conclusions

We have presented a vision of future healthcare organization and delivery that considers major forces bringing change not only to medical systems, but to society. This model envisions both a restructuring of the traditional healthcare system and a transformation in what is defined as healthcare. The new definition includes traditional forms of in-person healthcare, but in addition also includes many types of technologically mediated health interactions, some of which do not involve a human provider, plus other forms of technology-based care that focuses on patient behaviorism, wellness, and prevention. These shifts will inevitably broaden the definition of what is considered “healthcare.” With large tech companies making serious forays into healthcare, and the technological components and data derived from their devices becoming ever more powerful at the point of need both for patients and their providers, the lines of distinction between healthcare organizations and at least some technology companies will blur. This will have tremendous implications on healthcare costs, payments, reimbursement, and even insurance.

The changes will likely also mean there will be a shift in who is defined as a “provider.” As technologies evolve to enable increasing degrees of support for consumers and their families, formal and informal out-of-hospital caregivers will assume greater importance in providing solutions. The solutions themselves will increasingly be tailored to both patients and their caregivers.

Finally, where healthcare happens likely will undergo the most significant change. While important aspects of healthcare will still be provided in the institutional setting, considerably more care will be provided in the ambulatory, community, and home settings. In addition, with the coming advances in 5G broadband and its widespread availability, at least some forms of healthcare will increasingly happen on demand, day or night, whenever the patient wants or needs it, wherever the patient is located.

Of course, there are many barriers to achieving this vision. However, we believe that the cat is already out of the proverbial bag. Already, we are well on our way to a transformation that, in whole or in part, will reflect the vision we describe.

Like it or not, the future of healthcare will not likely be controlled by the current healthcare sector, insurance providers, or the federal government. Given the traditional incremental nature of change that is common in medical care and policy, the role of these entities will increasingly be ancillary and reactive. Instead, consumer demands, market realities, and business opportunities will likely profoundly shape the future healthcare delivery system. Ultimately, only those health organizations that recognize and take advantage of these realities will survive.

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Disseminating and Diffusing Internal Innovations: Lessons from Large Innovative Healthcare Organizations

Regina Herzlinger, Harvard Business School, and Clay Wiske, MD, NYU School of Medicine

Contact: Regina E. Herzlinger, rherzlinger@hbs.edu

Abstract

What is the message?

Top-down models of innovation need to be complemented with management policies that promote the diffusion of small-scale, front-line innovations. Innovation programs at large healthcare organizations focus on removing structural barriers and developing human capital.

What is the evidence?

Insights and examples from 33 innovative healthcare organizations in the United States and the European Union.

Links: Methods appendix

Submitted: June 23, 2017; accepted after review: July 1, 2017.

Cite as: Herzlinger R, Wiske C. 2017. Disseminating and Diffusing Internal Innovations: Lessons from Large Innovative Healthcare Organizations. Health Management Policy and Innovation, Volume 2, Issue 2.

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Introduction

Large organizations in all industries need to innovate. This is especially pressing in healthcare, where spiraling costs, unequal access, and technology changes make innovation crucial. Often, people working at the front lines are first to identify innovative solutions to an existing problem, but if there is no organizational mechanism for development and spread, good ideas do not come to fruition, become lost, or both. Other times, organizations mandate top-down innovations that fail to take hold or prove ineffective. Whether generated at the top or the front lines, how can organizations spark, support, spread, and sustain innovation?

To help answer this question, we interviewed 32 leaders of large, innovative healthcare organizations in the United States, the European Union, and the UK, including insurance companies, provider networks, medical technology organizations, and public institutions (see the Methods Appendix). Nearly every organization we studied blended bottom-up diffusion that enabled front-line staff to experiment with top-down dissemination processes that removed structural barriers, supported innovation, and actively spread the most successful ideas. The top-down approaches were often structural, while the bottom-up ones focused on the development of human capital through, for example, innovation awards; dedicated promotion tracks for innovation; online repositories for ideas; and mentorship programs.

This article highlights practical techniques that large, innovative healthcare organizations have used to disseminate and diffuse internal innovations. They are described in generalizable terms that are broadly applicable. Though our focus here is the healthcare industry, we hope that companies in other industries will take these broad lessons to heart.

Needs for and Challenges of Healthcare Innovation: Examples from the NHS

To illustrate the need for successful and robust innovation, as well as the challenges to doing so, consider the National Health Service (NHS) in the U.K., which currently serves over 54.3 million people with 1.5 million employees. It has been left creaking at the seams by increasing demand for services, largely driven by an aging population. To cite only one example of the strain on the NHS, during a three-week period in 2015, ambulances were forced to sit idle for more than 30 minutes 30,000 times due to dispatch challenges. More broadly, workforce morale had dipped, and many NHS hospitals continued to miss a wide range of key performance indicator targets, such as cancer mortality and access to primary care.

To address these issues, the NHS initially adopted a dissemination strategy. Top-down innovation activities often have champions and mechanisms in place for dissemination; at the NHS, Chief Executive Simon Stevens played this the role when he announced a systematic restructuring in an “NHS Five Year Forward View,” which focused on initiatives such as integrating out-of-hospital services into Multispecialty Community Provider groups, combining hospital and outpatient services, and re-designing urgent care services across geographies.

Although these top-down plans were laudable, the NHS faced an uphill battle to actually implement the plans. Past NHS dissemination innovation initiatives had not produced meaningful results. For example, only about 38 percent of general practitioner clinics in the country that potentially could offer online booking, and only about 1 percent of practices that potentially could provide patients access to their records had done so.

The NHS subsequently adopted bottom-up diffusion activities, evolving out of experimentation at the front lines, to influence both operations and strategy at the organizational level. Initiatives included community-based models of Alzheimer’s care, algorithms to increase emergency department efficiency, and new suicide-prevention programs.

But diffusions can be difficult to implement. The NHS’s Diabetes Appointment via Webcam in Newham (DAWN) pilot program, launched at a clinic outside London, illustrates the difficulty of diffusing relatively small, but successful innovations. The pilot program, which offered patient appointments via Skype, reduced “do not shows” and costs, demonstrated significantly improved patient glucose control, decreased Accident & Emergency department utilization, and improved patient satisfaction. But the pilot program has yet to be meaningfully diffused to other NHS diabetes clinics.

How to Make Innovation Happen

Nearly every organization we studied had mechanisms for both bottom-up diffusion that enabled front-line staff to experiment, and for top-down dissemination, such as formal processes to fund pilot programs at the discretion of senior management. We found that astute innovative organizations blended top-down removal of structural barriers to facilitate front-line priority setting and experimentation.

Prioritize Innovation

Large organizations often feel a tension between prescribing innovation and giving employees free rein to innovate. Some managers hesitate to circumscribe innovation initiatives in fear that they will constrain productivity, or indeed, innovation itself. Explicitly stating quantifiable goals is often the best way to focus efforts without constraining solutions. A central body needs to define innovation priorities and quantitative metrics for success, leaving the specific solutions to the front lines. One hospital made it a priority to reduce the number of six-month hospital readmission rates for congestive heart failure by 5 percent. Because of its quantitative nature, these aspirational goals are easily tied to compensation and yet give latitude for experimentation.

If you do not prioritize innovation, procedural and political barriers too often prevent innovators from experimenting and scaling. Enlist experienced innovators to mentor new innovators in navigating the practical challenges of ensuring adoption across systems. To be effective, organizations need to choose qualified and motivated candidates for the mentorship role. Once assigned, the mentorship should be accompanied by dedicated time to devote to developing or scaling a particular program. Creating dedicated time and providing one-on-one contact with someone who is familiar with innovation processes can often give the boost needed to bring about meaningful diffusion.

Train Leaders to Innovate

Investing in human capital to lead innovation within your organization is a key requirement. A leading pharmaceutical company we studied offered innovation leadership training to empower managers to take personal and proactive responsibility. The training program was intended to diffuse innovation culture company-wide; innovation was emphasized as something done by everyone in the organization rather than by a select few.

Talented senior managers in organizations with a track record of innovation can be deliberately shuffled to other institutions in either temporary or permanent capacities. In some cases, this will take the form of an extended full-time role; in others, this will simply involve sitting in on management meetings or board meetings at neighboring facilities. Senior management rotations encourage two-way exchanges of ideas and facilitate professional development.

Gentherm: For example, when automotive cooling and heating company Gentherm bought medical device firm Cincinnati Sub Zero (CSZ), their innovation diffusion pipeline was initially hindered due to traditional senior leadership’s inexperience in the medical arena. Likewise, the medical device experts did not understand the technology and expertise available within the Gentherm community.

Gentherm responded to this innovation challenge by innovating a new, hybrid approach to laterally spread innovation, one that required inter-industry collaboration. Key healthcare opinion leaders who were conversant in patient thermal management were consulted to identify problems that had the most clinical value and effect on patient outcomes. Commercial and regulatory teams provided input on what was reimbursable and certifiable, as well as an estimate of the overall market value. This information was then collated and used to set priorities for the product development organization.

Gentherm promoted diffusion by making company experts available to the CSZ medical product development staff and by providing training on basic thermal management technologies. These efforts were intended to give CSZ staff a broad understanding of the available technologies that could apply to future problems, as well as the organizational knowledge and contact necessary to leverage relationships when opportunities did arise. An early innovation that emerged from the lateral diffusion process involved using the automotive team’s prototype facilities and technology to create a new type of operating room heating pad.

Anthem Healthcare: Anthem, the largest insurer in the U.S., used a version of an innovation scorecard when they sought to persuade independent physicians and hospitals to adopt an innovative payment model that reimbursed a bundle of care rather than every separate element of the care delivery process. Anthem placed physicians from 20 specialties and primary care at the front of decision-making, emphasizing a focus on outcomes that could best re-orient the doctor-patient relationship. The physicians rotated the meeting location to different practice facilities and shared best practices among practice management staff. These practice walk-throughs led to specific changes in waiting room protocols, staff priorities, and other consumer-centric items that impacted the efficacy of treatment. From this, Anthem moved to the dissemination tactic of allocating per member-per month capitated premium to each specialty, to further motivate physicians. After twelve months, Anthem’s independent physician organizations completely re-contracted the majority of the company’s doctors, with most of them joining capitated panels that took risk as partners with Anthem in healthcare delivery.

To reduce the fear of failure, errors were reframed as learning opportunities that occur inevitably as part of the innovation process. Rather than trying to micromanage the innovation process, one training program posited that the future goal of innovation leaders was to become a “vanishing leader;” i.e., a leader who inspires others to innovate via self-determination and self-motivation.

Innovation Portal 

Innovation occurs as part of the natural workflow for many front-line workers. Yet the potential gains from diffusing a particular innovation are often lost, especially in work environments where resources and time are constrained. Online innovation portals, which document and share front-line innovations within an organization, are one response to this challenge. All providers, staff, and managers can access such portals to upload information about local initiatives. The portal is easily searchable and can connect individuals interested in a particular program. The portal is often teamed with an award or sponsorship program to encourage use, as user engagement is typically a challenge.

Innovation zones: Innovation zones foster collaboration based on proximity. Innovation zones, which simply provide a shared physical space, have been effectively employed across industries and resulted in the freer exchange of ideas and greater facilitation of cross-functional work. Tax breaks are often offered to create these zones and regulatory requirements may be relaxed. Innovation zones often self-perpetuate by spinning out new companies, attracting entrepreneurs, and creating a critical mass of talented employees.

Scorecards: Scorecards have become popular throughout many industries to prioritize activities and structure self-evaluation. Two organizations we studied adapted scorecards to analyze innovation. Such scorecards require units within organization to evaluate their ability to innovate around specific initiatives and, at times, incorporated objective data, such as rate of surgical site infections. One organization found that the major benefit of scorecards was the competition that they brought about.

Scorecards not only facilitated peer-to-peer benchmarking, but also encouraged diffusion by demonstrating the value of an innovation and promoting discussion about it. Within our sample, the scorecards were never linked to funding or compensation.

Funding Innovation

Finding that career and financial disincentives often deter talented individuals from pursuing innovations, some organizations have created a promotion track for both professionals and administrators to enable career advancement based on innovation work. Including innovation as a criterion for promotions both legitimizes work on innovations and encourages development of new models. At Gentherm, the leaders of strategy, business, and product development teams were incentivized to innovate using both short-term rewards, such as patent awards and bonuses, and long-term rewards, such as company equity.

Proof-of-Concept Sponsorship: Some organizations created a central body for overseeing innovation, often led by a Chief Innovation Officer. Clinicians and front-line workers applied to a central body for both financial support and human resources to help trial an innovative initiative. Criteria for investment were separate from normal budgeting decisions, as benefit realization for innovations will likely take longer than other expenditures.

For example, the diffusion process for MyCOPD, a patient IT self-management system for pulmonary rehabilitation (https://mymhealth.com/), was led by a physician-innovator in England’s National Health Service who applied for and was awarded a public grant, enabling him to reduce his clinical time to focus on the innovation. Once the self-management innovation system was nearing completion, the physician-innovator was matched to a high-level innovation mentor, provided advisory support for writing contracts and bids to appropriate funders, and supported in evaluation of the innovation for its cost-efficiency.

Early-Stage Venture Funding: Early-stage venture funding can provide access to capital for innovators in organizations that otherwise invest for efficiency or fast returns. Proof-of-concept and venture funding look at the same stage of funding: early, untested ideas. But venture funding draws in more of the investment industry practices, including (1) focusing on the entrepreneur and a belief in the person, rather than the institution, (2) taking a formal board seat, (3) making equity investments rather than awarding grants, and (4) looking at the organization as well as the idea.

Conclusion

Small-scale front-line delivery innovations can be easily overlooked, but in aggregate, if appropriately diffused, they can have a transformative effect on even the largest organizations. Dissemination of top-down models alone is unlikely to meet the innovation needs of large organizations. Instead, deliberate management policies to promote the diffusion of small-scale, front-line innovations are essential. The programs used by large healthcare organizations to enable top-down dissemination and the diffusion of grassroots innovation focus on removing structural barriers and developing human capital, and include the movement of key personnel, astute human resource management, and effective priority setting.

Scenario Planning Tools for Organizations Struggling with Healthcare Reform Uncertainty – The Case of Oscar Health Insurance

Michael Lefferts, Tina Liu, and Jonathan Friedlander, Harvard Business School

This article is based on the winning presentation of the Business Alliance of Healthcare Management MBA Case Competition in Berkeley, California, March 2017.

Abstract

What is the message?

Oscar Health Insurance, a 2012 medical insurance start-up in the U.S., faces an uncertain future due to ambiguity in national healthcare reform. Scenario planning tools help create road-maps to deal with multiple futures.

What is the evidence?

Analysis based on scenario planning tools.

Links: Exhibits

Submitted: July 10, 2017; Accepted after review: August 8, 2017

Cite as: Michael Lefferts, Tina Liu, and Jonathan Friedlander. 2017. Scenario Planning Tools For Organizations Struggling With Healthcare Reform Uncertainty – The Case Of Oscar Health Insurance. Health Management Policy and Innovation, Volume 2, Issue 2.

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Uncertainty Is Ubiquitous

“The only certainty is that nothing is certain.”
                                                   -Pliny the Elder

Strategic planning for organizations is always a challenge. Without knowing how the future will unfold, committing limited resources can spell disaster. At the moment, strategic planning for healthcare organizations may seem impossible. As the Republican caucuses in Congress have undertaken the task of healthcare reform, many healthcare organizations fear the outcome could pose an existential threat. In fact, the uncertainty itself has been paralyzing for health insurers that have been reluctant to bid on exchange plans because they cannot accurately price premiums without more foresight into how regulations will evolve or have raised rates precipitously because they fear the future.

Scenario planning is a strategic tool that has been developed specifically to address these moments of paralyzing uncertainty. Unlike forecasting, which focuses primarily on projecting trends into the future with reasonable tolerance, scenario planning focuses on the most critical uncertainties an organization faces (see Figure A). The process of scenario planning was developed for military and corporate applications—most notably by Royal Dutch/Shell in the 1970s, one of the only oil companies that was able to anticipate and respond strategically to the oil embargo of 1973 (1). While scenario planning will not be able to predict the outcome of healthcare reform, it is a tool to help consider a wide range of possible futures and allow healthcare organizations to begin preparing now for whatever the future actually holds.

Figure A: Forecast Planning vs Scenario Planning (2)

In March 2017, the authors of this article prepared a case on Oscar Health Insurance, a medical insurance start-up founded in 2012, for the 2016-2017 Business School Alliance for Health Management (BAHM) case competition at the Haas School of Business at the University of California Berkeley. The competition’s challenge was to provide recommendations for a major healthcare organization in light of the uncertainty of health reform. We undertook a scenarios-based strategic planning approach from the perspective of Oscar’s management team in order to understand the implications of healthcare reform for Oscar and to develop recommendations for how Oscar could begin preparing to respond to the potentially existential threat that a repeal of the Affordable Care Act (ACA) posed.

The scenario process starts by evaluating what is known – such as current regulations, proposals from both houses of Congress, and the President – and then introducing different potential outcomes for various things that are still uncertain, such as the form of insurance subsidies / tax credits, and timing of reforms. This approach provided us with several scenarios that organizations could encounter in coming months and years.

The following discussion describes the scenarios we developed in March 2017 based on the events around health reform at the time. While more recent developments since then are not reflected, the arc of these scenarios is still valid and useful as an illustration of the scenario planning approach for developing corporate strategy.

Case Study (March 2017): Scenario Planning For Oscar Health Insurance

Overview

The 2010 Affordable Care Act (ACA) spurred the launch of state-run Health Insurance Exchanges (HIX) and with them several new innovative insurers. Oscar Health Insurance is among the most visible—founded in 2012, Oscar quickly captured the imagination of the industry and reached a $2.7 billion valuation in its latest round of venture funding in early 2016 (3). Despite the headwinds facing the individual HIX market, including fewer-than-expected enrollees, fewer-than-expected employers dropping coverage, and difficulties in pricing risk, Oscar has enrolled over 145,000 individuals across New York, California, and Texas and has captured over 20% market share on the New York City exchange (4). With a simple user-interface, free access to staff physicians by phone, a concierge team assigned to each member, and wearable-enabled monetary incentives, Oscar has changed the way individuals perceive their health plan.

Despite success “delighting” its members, Oscar has struggled to become profitable and has been forced to exit two markets (Dallas and New Jersey) (4). Now, with the ACA under assault by the new Republican administration, Oscar’s very raison d’être could disappear. Oscar itself has recognized that healthcare reform represents an existential threat to the individual marketplace and has already taken one defensive step by entering the small-group market in New York this February. While some industry observers question whether this will be enough to help Oscar survive the repeal-and-replace efforts should they re-emerge in Congress, there are many scenarios for legislation that could present opportunities for Oscar if it is agile enough to capitalize on them.

Given the continuing uncertainty surrounding reform efforts – Figure B summarizes the critical policy uncertainties relevant for Oscar – we have mapped out a range of possible scenarios and evaluated the implications for Oscar across this spectrum of potential futures. Figure C outlines the four scenarios, which exist on a continuum spanning moderate incremental “repairs” to wholesale repeal-and-replace legislation that moves the U.S. to a market-driven individual insurance marketplace. In every scenario, Oscar would benefit from limiting its geographic expansion and instead driving scale by further penetrating existing markets. In three out of four scenarios, we find that Oscar can and should supplement its deepening strategy by entering the employer-based coverage market by focusing on mid-size companies.

Oscar Health Background

Oscar Health was founded in 2012 by Harvard Business School classmates Mario Schlosser, Kevin Nazemi, and Josh Kushner to take advantage of the new opportunities anticipated to be created by the ACA.  The company focused on offering individual plans, both directly and through health insurance marketplaces. It branded itself as a modern-era company offering a far simpler, more consumer-friendly experience to plan members. Exhibit 1 summarizes  Oscar’s value proposition to customers. For example, members are assigned a four-person concierge team consisting of a nurse and three aides trained in navigating the health care system, who have access to the patient’s medical history and who can locate an in-network specialist and even set up the appointment. Members also have free access to video-conference consultations with Oscar-employed doctors who can provide medical advice, write prescriptions, or triage to an in-person visit (Exhibit 2 summarizes Oscar’s telemedicine services. Consumer marketing campaigns on platforms like the NYC subway and on TV have reinforced Oscar’s brand image among its target audience – Exhibit 3 provides an example of Oscar ads.

Oscar was inspired by personal frustration with an explanation of benefits received from a health insurance company. The new company subsequently launched its insurance business in New York City in 2014, hoping to ride the new market created by the ACA health insurance exchanges. In its first year, Oscar attracted 16,000 members and generated revenue of $72 million (5). In the following year, Oscar expanded coverage to New Jersey and grew to 40,000 members, with revenue of $180 million and the average subscriber paying annual fees of $4,500. In 2016, the company expanded further into Southern California (Los Angeles, Orange County) and Texas (San Antonio, Dallas), rising to 135,000 members with about half in New York. In 2017, consistent with other exchange participants, Oscar raised its exchange rates by about 20%; in that same year, the company entered Northern California while exiting New Jersey and Dallas (6). According to Schlosser, a quarter Oscar members have been sourced through exchanges, while three-quarters purchased plans directly through Oscar’s website, with one third of members hearing of Oscar via word-of-mouth. Oscar currently commands about 20% market share in New York City on the individual exchange (4).

Oscar’s premium price point ($50-$60 per member per month (PMPM) above the cheapest plan in the New York market) and tech-focused benefits attract a younger, millennial-heavy member population –average age of 39, with the highest-volume age bracket being 26-35 (4). According to traditional insurer wisdom, this customer segment is attractive, as they are less likely to be sick and thus less expensive to insure than older, more chronically ill patients.

Nevertheless, Oscar’s business is highly capital intensive. Health insurance companies compete on scale, as large customer bases allow insurers to negotiate lower provider rates and/or offer a wide provider network, which helps attract yet more customers in a reinforcing cycle. To start the flywheel of attracting customers, Oscar must suffer large losses for years before it is able to attain sustainable scale. In 2015, Oscar reportedly lost about $100 million (7); its 2016 minimum-loss-ratio (the portion of premiums that it spends on providing medical care) was 115%, indicating significant unprofitability (4).

Additionally, beyond the traditional struggles of a new insurer, Oscar has suffered pains similar to other participants on the newly created and less-than-ideally-oiled individual exchanges: fewer-than-expected enrollees (12 million sign-ups in 2016) and fewer-than-expected employers dropping coverage. According to Schlosser, the government owes the company about $200M for backstop insurance that the government had promised to exchange participants to entice initial entry (4).

Despite the market challenges, Oscar has continued to invest in developing its business operations. The company initially rented its New York provider network from MagnaCare, but has transitioned over time to its own narrow networks (8). Beginning 2017, Oscar members were restricted to only the providers that Oscar has negotiated to participate in its limited network; in New York, that includes Mt. Sinai Health System, Montefiore, and Long Island Health Network (5). Schlosser has indicated that these providers were particularly strong partners for Oscar’s data-driven, highly integrated care management approach and are typically at risk, thus aligning incentives between insurer and provider (4).

Oscar has also begun experimenting with its business model, diverging from the classic insurer in December 2016 through opening its own dedicated clinic in New York, in collaboration with Mount Sinai Health System, offering primary care and wellness to members(5). Beginning in February 2017, Oscar expanded beyond the individual market into small groups (companies with fewer than 100 employees) in New York(5). Their stated goal is to eventually serve medium-sized companies(5).

The company maintains that while it took advantage of the ACA exchanges to enable lift-off, it can now power ahead regardless of exchange developments. The company is still significantly funded, having raised $750 million in total from Thrive Capital, General Catalyst, Khosla Ventures, and others. Oscar’s most recent round of investments in 2016 valued the company at $2.7 billion (3).

Critical Uncertainties: Many Different Proposed Policies

While President Trump proposed seven planks to reform healthcare legislation in a policy brief during his campaign (summary list provided in Exhibit 4)(9), he and his chief healthcare deputy Tom Price went “all in on” the House Republican’s February 16th plan (10). The plan has elements of all the major Republican plans proposed to date but differs from both Paul Ryan and Tom Price’s previous plans in important ways. For example, the House’s proposal suggests repealing the individual mandate, something neither Ryan nor Price’s plans proposed (see Exhibit 5 for a summary of all major Republican proposals). The Senate Republicans subsequently released multiple proposals – those proposals failed in July 2017, though may yet reemerge in some uncertain form, whether as legislation or executive action outside the legislative system.

Rather than predicting the exact outcome of every proposal, we have outlined key policies that have been put on the table and outlined the two ends of the range of possible outcomes based on recent proposals. We’ve further narrowed the list of uncertainties that are most critical for Oscar Health. For example, while there is uncertainty around the health savings account (HSA) contribution limit and what new items may be covered, this uncertainty is more “incremental” than “critical” for Oscar in particular. To be considered “critical”, the uncertainty would have to pose a major (perhaps existential) threat or opportunity for Oscar (see Figure B for a complete list).

The timing of the possible reform is among the most important uncertainty facing Oscar and other stakeholders in the industry. Timing is particularly important for state governments that will have to undertake their budget planning process in the coming months and insurers on the government exchanges that had to bid for plans starting in March. Without more clarity on the form and timing of policy, state governments may not be prepared for the budgetary consequences of reforms (e.g., maintaining exchanges and subsidies, reforming Medicaid under capitated model) and insurers may not submit bids on the exchanges due to inability to underwrite lives without understanding how the individual insurance marketplace will change (e.g., rules for rating premiums, pre-existing condition coverage guarantee, individual mandate). Already many larger insurers, including Humana, Aetna, Anthem, Cigna and Humana, have publicly stated they will likely retreat from individual exchanges. (11,12)

While larger insurers currently have a limited presence on the exchange, a shift to universal tax deductibility and capping tax benefits to employers that offer group coverage could cause these large plans to re-evaluate the need to participate in the individual markets. Likewise, smaller insurers such as Oscar may have to take a major bet on how to best underwrite risk that will cost them significant profits if their predictions turn out wrong. Notably, smaller insurers have the fewest financial resources to weather an actuarial miss.

As such, even without additional certainty around the timing and form of legislation, it is possible that the individual exchanges and state-run Medicaid programs in their current form may collapse regardless of the eventual form of policy changes. Through the Internal Revenue Serices and Health and Human Services department, the administration attempted to project some certainty before reforms were implemented but it is still unclear whether it will be enough to keep the exchanges from collapsing (13). That said, some of the certainty they are suggesting—for example, not enforcing penalties that the ACA imposed on people who did not purchase coverage—could ultimately destabilize the exchanges.

Together, timing and other policy changes pose an existential threat to individual exchanges such as Oscar. That said, there are potential opportunities for Oscar to do well depending on the outcome of regulations if the individual market were to expand and the role of employers in sponsoring group coverage were to diminish. A potential move to age-based universal tax credits and away from means-tested exchange subsidies potentially broadens the pool of individuals shopping for insurance as does capping the tax benefits that employers receive for providing group coverage. Likewise, providing Medicaid enrollees more freedom to choose commercial individual coverage could present an opportunity to enroll more lives for Oscar. The outcomes of premium rating rules could also allow Oscar to price plans more cheaply for its target demographic—young, healthy millennials.

Figure B summarizes the critical uncertainties and their range of outcomes. Combining outcomes from these uncertainties will help us construct a range of scenarios Oscar may face.

Figure B: Critical Policy Uncertainties for Oscar Healthcare (14)

Scenarios: The Spectrum of Possible Futures Confronting Oscar

Using the critical uncertainties detailed above, we conducted a half-day scenarios workshop to create a range of possible scenarios that represent the full spectrum of possible outcomes given the degree of uncertainty surrounding reform (see Figure C below). The scenarios represent narratives on how policy could evolve beyond the conventional wisdom (if there is any at this time).

Figure C: Summary of Scenarios[1]

[1] Result of half-day scenarios workshop.

Common Strategies

While Oscar’s operating environment varies significantly across the four scenarios described above, four recommendations hold true.

Focus on key geographies: First, since a health insurer’s ability to reach profitability depends in large part on its ability to reach scale, we would advise Oscar to focus on only a few key geographies and continue going deep within them, as opposed to rapidly expanding across several geographies. The latter may be attractive given the relative newness of the individual insurance markets and thus the first-mover advantages that would seem to exist. However, several factors test the wisdom of this rapid geographical expansion. Plans must re-bid for participation and members must re-select their plans every year, reducing the stickiness of any given plan. Additionally, since provider dynamics and regulatory requirements vary significantly across states, Oscar’s experience in any given state may not be relevant for entry into other states, thus reducing the ease of geographical expansion. Most importantly, since scale is the lifeblood of an insurer, Oscar’s survival depends on achieving it in its existing homes; this needs to be the company’s first priority.

Employer market: Our second universal recommendation to Oscar is to develop a product in the employer market to widen the funnel of members it can feed into its provider network. Although we believe Oscar’s vision that all Americans will eventually live on individual exchanges may prove true in the far future, the vast majority of private health insurance today is still offered through employers. Oscar needs to tap this reservoir of members if it will achieve the scale it needs to survive to the day where individual markets rule.

The company is just beginning to penetrate employers through the small group insurance market, which we view as wise given its adjacency to the individual market. If this market were to go away under future reform, however, we think Oscar’s best approach to serving medium and large employers will have to be through partnering with existing administrative services only organizations (ASOs) that already offer the broad provider network these employers require. Oscar will need to leverage its high-tech, service-oriented front-end as the asset of value to trade in this relationship. Understanding the partner’s willingness to integrate and truly collaborate will be critical to Oscar’s success in this approach. As such, we recommend a joint-venture structure to help align incentives. Health Care Service Corporation may be a willing first partner as it is fragmented by state and small-scale pilots could be conducted selectively. Likewise, there is the opportunity in some geographies to be a value-added partner and maintain a visible brand.

Another possible point of entry into the employer-sponsored space, could be through participation on private health exchanges such as Liazon or Aon Hewitt that offer group plans. Oscar is already sold through private exchanges serving individuals like Health Sherpa so has some experience in this channel but would need to adapt its offering for the group-plan space. The biggest challenge may be identifying an exchange that serves employers that are geographically limited to the markets where Oscar already has a provider network.

Medicaid: Third, Medicaid is the most likely insurance program to see significant changes in the next round of healthcare reform and many of the scenarios envision a future in which Medicaid beneficiaries are given a subsidy to purchase insurance on individual exchanges. Individual states will potentially have substantial discretion with Medicaid and Oscar’s current home base of New York will be among the states most likely to maintain current benefits and program administration. That said, as Oscar gains scale, it should consider how it might be able to use its data-driven narrow networks and high-touch concierge team to profitably insure Medicaid beneficiaries. While many insurers avoid this market because the spend is high and reimbursement is low, the high-touch concierge model is successfully being innovated in low-income communities by providers like Oak Street Health that manage Medicare beneficiaries and dual-eligibles (15).

Exit options: Our fourth recommendation for Oscar is to consider the worst case world of exit options. Starting a new health insurance company was always a high risk, asset intensive endeavor. If the regulatory environment truly turns hostile, Oscar’s survival as a full health insurance company is under certain threat. Its alternatives may consist of selling to a larger company or pivoting to an ASO model so the company is no longer at risk. While not the original vision of the founders, the continued availability of Oscar’s services to members still represents a lot of value created.

Conclusion

“Plans are nothing; Planning is everything.”
                                                   -Dwight D. Eisenhower

While these scenarios were developed before March 2017 (well before the House bill passed and before the failure of the Senate’s proposed legislation in July), they are still very much relevant for Oscar and provide, at a high level, a broad range of possible outcomes for continuing reform. The implications of “The Art of the Deal” and “The Death Spiral” scenarios both stand in large part, even if some of the underlying uncertainties have shifted (e.g., repeal of the individual mandate seems unlikely). While scenario planning should be an iterative process, robust scenarios should provide a wide enough range of likely futures that they provide lasting insights. More than anything, the scenarios-based process demonstrates that organizations, even faced with paralyzing uncertainty, can take steps to begin preparing for the future. In fact, merely understanding the implications in various scenarios will allow an organization to more proactively respond than had they made an incorrect forecast or done nothing at all.

In the case of Oscar, we discovered that healthcare reform offered as many opportunities as threats. Major changes to undermine the individual markets could pose an existential threat; however, in all scenarios the HIXs in Oscar’s select home markets should survive and may even expand. This continues to be true even now. More recent discussions of bipartisan legislation to repair elements of the ACA was even accounted for as a possibility in the “The Art of the Deal.” Repairs could ultimately help Oscar’s profitability by changing the competitive dynamics in the marketplace or allowing Oscar to make small changes to capture more profitable, risk-adjusted members. Any substantive changes to employer-sponsored care through reform of tax policy could also prove a boon to the individual market that Oscar would be well-positioned to capture.

Healthcare organizations would do well to embrace scenario planning in the current context of critical uncertainty. For many, it could mean the difference between survival and extinction and for others it could help them spot opportunities that propel them to future success. For Oscar, it is too soon to tell how it will fare, but there are steps they can begin taking now to prepare for an uncertain future.

 References

  1. Scearce D, Fulton K. What If? The Art of Scenario Thinking for Nonprofits. Global Business Network. 2004.
  2. Global Business Network.
  3. Bertoni S. Oscar Health Gets $400 Million and A $2.7 Billion Valuation from Fidelity. Forbes. 2016 Feb 22.
  4. Schlosser M. Presentation at Harvard Business School. 2017.
  5. Levy S. Oscar Is Disrupting Health Care in a Hurricane. Backchannel. 2017 Jan 5.
  6. Abelson R. Health Insurer Hoped to Disrupt the Industry, but Struggles in State Marketplaces. The New York Times. 2016 Jun 19.
  7. Kosoff M. Josh Kushner’s Health-Insurance Start-Up Is Still Bleeding Money. Vanity Fair. 2016 Nov 16.
  8. Marone V, Dafny L. Oscar Health Insurance: What Lies Ahead for a Unicorn Insurance Entrant? Harvard Business School. 2016.
  9. Donald J Trump – Healthcare Reform Policy Paper. DonaldJTrump.com. 2016.
  10. Pear R, Kaplan T. House G.O.P. Leaders Outline Plan to Replace Obama Health Care Act. The New York Times. 2017 Feb 17.
  11. Keane A. US Health Insurers Give Notice on Obamacare Marketplace. Financial Times. 2017 Feb 6.
  12. Abelson R. Humana Plans to Pull Out of Obamacare’s Insurance Exchanges. The New York Times. 2017 Feb 14.
  13. Goldstein A. IRS Won’t Withhold Tax Refunds if Americans Ignore ACA Insurance Requirement. The Washington Post. 2017 Feb 15.
  14. Kalogeropoulos G. 6 Republican plans to replace Obamacare — an overview. Mediumcom. 2017 Feb 7.
  15. Porter M. Oak Street Health: A New Model of Primary Care. Harvard Business School. 2017 Feb 24.

 

How Much Do U.S. Hospitals Spend on Medical Supplies?

Yousef Abdulsalam, PhD, Kuwait University, and Eugene Schneller, PhD, Arizona State University

Contact: Gene Schneller, gene.schneller@asu.edu‎

Cite as: Abdulsalam, Y., and E.S. Schneller. 2017. Hospital supply expenses: An important ingredient in health services research. Medical Care Research and Review, 1–13, published online, July 24, 2017. http://journals.sagepub.com/doi/10.1177/1077558717719928

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Abstract

What will you learn?

This note summarizes a recent published article by Yousef Abdulsalam and Eugene Schneller (2017). Supply expense is a substantial category of hospital costs, particularly for hospitals with complicated case mixes.[1]

What is the evidence?

Statistical study based on recent AHA data.

[1] Article summary prepared by Will Mitchell, University of Toronto.

Submitted: July 24, 2017; accepted after review: August 2, 2017

Cite as: Abdulsalam Y, Schneller ES. Hospital supply expenses: An important ingredient in health services research. Medical Care Research and Review. 2017; 1–13. https://doi.org/10.1177/1077558717719928. Published online July 24, 2017. Health Management Policy and Innovation. 2017; 2(2).

How Much Do U.S. Hospitals Spend on Hospital Supplies?

We know intuitively that hospitals spend a lot of money on supplies. But just how much is “a lot”? A recent publication by Yousef Abdulsalam and Eugene Schneller (2017) set out to answer this question. The results are important.

What Are Hospital Supplies?

The authors focus on tangible supplies, separate from labor and services required to manage supply chains. They use data from the American Hospital Association (AHA) Annual Survey for 2013. The data encompass all tangible expenses for goods and services, including freight, distribution costs, and sales tax. This measure covers all supplies, including medical supplies (about 60% of total supply expenses), plus pharmaceuticals, physician preference items, nonclinical supplies, and other relevant items. The authors also gathered data from supply chain executives at three large health systems to validate the measures, finding a very high correlation between the AHA survey and the hospitals’ internal numbers.

How Much Do Hospitals Spend on Supply Expenses?

The study found that, indeed, supply expenses are substantial, both in magnitude and in share of total costs. In 2013, U.S. hospitals on average spent $3.8 million on supply expenses, with a median of $9.1 million. Supply expenses averaged 15 percent of total hospital expenses, with the middle 50 percent of hospitals ranging from 9 to 19 percent. The average patient admission required $4,470 of supply expenses. These are highly relevant costs.

The numbers ranged substantially by hospital specialty, correlating strongly with the case mix index. Children’s psychiatric and Rehabilitation specialties were at the low end, with 5 percent ($1,095 per admission) and 6 percent shares of total expenses. Surgical and Orthopedic specialties were at the other end, with 36 percent ($17,566 per admission) and 34 percent shares. General medical and surgical, Children’s general and surgery, and Obstetrics and gynecology were in the middle, with 11 to 16 percent shares. For 8 of 11 measured specialties, supply expenses reached at least 10 percent of total expenses. The authors’ full article provides tables with more detail. Again, in almost all cases, the supply expense numbers are substantial.

Why Does This Matter?

Clearly, managing such a large and diverse category of expenses is important for hospitals. Yet supply chains in health care are both complex and fragmented and complex, commonly lagging well behind other industries in how effectively they are managed (Schneller and Smeltzer, 2006; Landry, Beaulieu, and Roy, 2016). The scale of the expenses—and the strong pressure that hospitals face to control costs—underlines the need to seek improvements in managing hospital supply chains. With many hospitals having operating margins in the low single digits (Ellison, 2015), even a 10 percent reduction in hospital supply expense could significantly impact total net revenues.

References

Abdulsalam Y, Schneller ES. Hospital supply expenses: An important ingredient in health services research. Medical Care Research and Review. 2017; 1–13.  https://doi.org/10.1177/1077558717719928.  Published online July 24, 2017.

Ellison A. 200 Hospital benchmarks. Becker’s Hospital Review. http://www.beckershospitalreview.com/lists/200-hospital-benchmarks-2015.html. Published Online September 29, 2015. Accessed Online March 3, 2017.

Landry S, Beaulieu M, Roy J. Strategy deployment in healthcare services: A case study approach. Technological Forecasting & Social Change. 2016; 113(Pt B):429–437. doi:10.1016/j.techfore.2016.09.006

Schneller ES, Smeltzer LR. Strategic Management of the Health Care Supply Chain (1st ed.). San Francisco, CA: Jossey-Bass; 2006.

[1] Article summary prepared by Will Mitchell, University of Toronto.