The Antidote

Over time there are “rules” or collective wisdom which governed organizations in any field of endeavor. Some are universal and beneficial such as treating employees in a fair and consistent manner without regard to national origin, race, gender or sexual orientation. You generally cannot go wrong with the golden rule of treating others as you would like to be treated.

There does develop over time within enterprises in a specific industry a collective wisdom which can be pernicious and with which no one takes exception because that is the way things are or should be. This is the playground for many consultants.

We have in healthcare several harmful beliefs which I believe lead to harmful results to the organization and the people it serves. Trigger warning! This may cause you to have an attack of the vapors, particularly if you make your living by helping health care organizations with these beliefs. Consultants beware!

The first harmful belief is that given the high proportion of patients on Medicare you must find a way to at least break even financially in serving these patients. Failure to do so will, so to speak, result in financial failure. This mantra about breaking even with Medicare has been repeated relentlessly. It is nonsense.

The federal government is a price-fixer when it comes to Medicare payments. Take it or leave it. The rules for reimbursement for Medicare are ever changing and what is paid for services rendered is determined by the needs of the federal budget and the whims of politicians and bureaucrats. That is why under the payment scheme for Medicare inpatients there is a specific payment for care given to people who suffered burns while water skiing. There are ten thousand or so such examples, some even more nonsensical.

Given the absurdity of the Medicare payment system and the political skullduggery which occurs every year, very few organizations will ever break even from Medicare. It is OK to howl now if you are a consultant in this area and I have triggered a deep sense of insecurity. You know I am right. Financially, Medicare is rigged—- heads you lose and tails the Feds win.

The second harmful belief is that the health plans you contract with are your partners in healthcare. Together, you can deliver cost effective care to the masses. Just agree to reducing your compensation by 30 to 40 million dollars and we are partners. Sign here.

For-profit health plans have three month attention spans. They periodically promote the idea of “partnering” with providers as a ploy to reduce what they pay for care rendered to patients. Partnering with for-profit health plans is like swimming with sharks.

The health plans refer to what they pay hospitals and doctors as their “loss ratio”. From the health plans’ perspective, if they must pay you 80 cents out of every dollar of premium revenue they coerce, strike that, I mean collect from employers and individuals, they have a loss ratio of 80 percent. The other 20 per cent covers their costs and profits.

If you look at non-profit health plans, they typically have loss ratios that are 90 percent or higher. They pay more of the premium dollar for actual care and would seem to be more economically efficient than their for-profit brethren who typically have loss ratios in the lower 80 percent range.

I once fell for the contention that healthcare providers and plans should be allies. It took me years to get my organization out of what was a very one sided and financially harmful arrangement. For-profit health plans are short sighted and driven by the need to deliver quarterly reports pleasing to their shareholders. Fine and well but healthcare providers do not need these kind of allies. We have a different mission.

The final harmful belief is that healthcare providers can achieve financial success by reducing costs. The bean counters love this belief and there is a kernel of truth contained in the belief. There are financial norms for some things. If most organizations can do something with just five people and you are doing it with ten people, it is probably worth a look at your processes. This is low hanging fruit and their are many fruit pickers called consultants who can help you.

What is harmful is the belief that all fruit picking is beneficial. Often times in healthcare, you see the cost reductions in areas that are delivering services to people and providing revenue. The services may be part of an array of services, each by itself looking like a financial loser. When you take a look at the total array of such services, you see that the service being cut back makes it possible to operate other services at a positive gain.

I realze I am getting in the weeds here but my experience has been that when you reduce or eliminate a service to cut costs, there are unexpected consequences which hurt the enterprise as a whole. It is a harmful belief that an organization in financial difficulty or anticipating such can find salvation by cutting revenue producing services. Greater attention needs to be given to increasing revenue by developing new services for patients.

These harmful rules have lead many healthcare providers down a path which ends in serious financial difficulty. Cutting costs, whether it is pursuit of a mythical Medicare break even point, partnering with health plan sharks or just doing it without regard to process changes will not result in long term success. You cannot cost cut your way to success. Attention to growing revenues in addition to prudent process improvements is the antidote to these three harmful rules.

A Really Big Boo Boo

When I started this blog a year ago this month, I gave fair warning that I found much of what passed for conventional wisdom in health care to be not very wise at all. Pundits run wild. Consultants develop fixes for problems you did not know existed. Management theories get confused for reality. Desired outcomes get mistaken for assured outcomes. Wistful thinking is no way to run an organization.

A frequent result of this process is that people who have success in one area of endeavor think they can duplicate their genius in health care. Remember Theranos which promised to completely change the paradigm for clinical laboratory tests? The founder’s trial starts next year. I am betting she is good for at least five years at a federal resort.

In “A Big Boo Boo” which appeared in this space on November 27, 2018, I critically questioned the wisdom of peripheral players in health care such as sloppily run drug store chains getting into the health plan and drop-in clinic business. Most of these outfits cannot even keep their stores looking presentable.

Well, at least so far in the case of what I called “boo boo” clinics in ragged looking drug stores, I appear to be correct. Walgreen’s has announced that it will close its 157 in-store boo boo clinics. Truth be told and all modesty aside, I first predicted this outcome when I was writing a blog for NorthBay Healthcare before I hit the beach.

Walgreen’s idea was that by opening these boo boo clinics, access to care would be improved and patients would save money. Also, there would be a handy pharmacy to fill prescriptions next to the clinic and you could buy candy and soft drinks on the way out. In one trip you could get fixed and then start the journey to your next ailment, sort of like a health care perpetual motion machine.

Studies are beginning to show that boo boo clinics and the like do not save money for patients. They are not profit centers in any way for the drug stores. They are losers.

Walgreen’s now hopes to find suckers–oops, I mean other health care providers–to rent the vacated boo boo clinic space so that the new operators can lose money while Walgreen’s happily continues to fill prescriptions and sell candy and soft drinks where the real profits are.

Meanwhile, CVS continues to try to figure out the health plan business while operating boo boo clinics in its stores. A prediction–they too will tire of the losses and will get try to get back to straightening the shelves in their stores and occasionally cleaning their floors.

Some pundits refer to what Walgreen’s and CVS are doing as a “funnel” strategy where a wide net is cast at the top of the funnel and as customers cascade down the funnel the enterprise has multiple opportunities to provide services and goods. The hope is that being many things to a customer will result in efficiencies and cost savings. This is also known as a pipe dream.

In the year or so before I hit the beach, I invited a physician from Silicon Valley to speak to my managers about innovation and disruption in health care. He had very specific ideas about where disruption and innovation would occur but to my surprise he made it clear that operating boo boo clinics and urgent care centers were not disruptive innovations and, because they could not be run efficiently at scale, would not move the needle in terms of health care costs. He said these kinds of clinics could only be effective in solving particularly local problems of hospitals such as decanting demand from overrun emergency services. I wish I could remember his name.

A mistake outfits like the drug store chains and others make is to view the provision of health care through a purely transactional prism. Health care is much more than that. It is an interpersonal transaction based on mutual trust. That is a completely different kind of “business” than peripheral health care companies are in. Their lack of understanding is profound.

Walgreen’s has discovered it made a really big boo boo with these drop-in clinics. They had a similar and costly experience with Theranos’ magic lab test machine. Hubris instead of common sense will do that every time. As the great academician Professor Harold Hill said in “The Music Man”, you have to know the territory.

The Meatball Sandwich Syndrome

It started with a take-out meatball sandwich for dinner. It continued several hours later with a trip to the emergency service with what I was certain was a bad case of heartburn but the pressure on my chest raised concern about a possible serious cardiac problem.

Before I hit the beach, I had heard many cautionary stories from physicians and nurses about not taking any chances when you have chest discomfort. I summoned my inner wuss and asked my wife to drive me to the hospital.

I have been through this clinical protocol before so I knew I would be in the emergency service for at least six hours as various tests were done and repeated. When the final tests were completed, I was told that my results were “perfect”. I asked my wife whether she heard what the doctor had said—I was perfect! Knowing better, she just rolled her eyes. Some support system she is!

This was the first emergency service visit for me since I hit the beach. I have recently accompanied other family members on emergency visits at three other hospitals. There are common threads to all the visits. The staff–doctors, nurses, aides and others–work often under stressful conditions yet in all cases made the patient feel like he or she was the most important person present. These front line staff can make or break a patient’s experience.

Another common thread which I had more time to observe on my visit was the incredible additional demands which are put on emergency service staff. I noticed on my visit that there were several people sleeping on beds in an alcove. They were homeless people who knew that if they presented themselves at a hospital they would have to be evaluated and monitored. That’s the California way. The next morning if they had not left, they were entitled to a social worker visit. Most left.

Hospital emergency services have become the refuge of last resort for the homeless due to feckless politicians requiring hospitals to become a provider of social services as well as medical services. This is yet another unfunded mandate foisted on hospitals.

Homeless people need help, to the extent they desire such assistance, but a busy hospital emergency service is not the place to provide it. It is, though, a place where elected leaders can dump their responsibility for a more comprehensive solution. They are good at that.

Elected leaders would not think of having cots set up at a local fire station or, even better, at the state capitol building. Too messy and far too visible. Better to dump the homeless elsewhere where they are out of sight and out of mind. That way the politicians can work on restoring power to the state.

Hospitals and other healthcare providers are the victims of mission creep mandated by irresponsible elected leaders. Mission creep without conscious purpose can be deadly to any organization. This mandated mission creep comes with a cost that other patients and their health plans have to cover. This cost adds to the total cost of health care in a significant way. It is a different kind of “perfect”–a perfect example of how difficult it will be to reduce the growth rate of health care costs.

Perhaps my meatball sandwich made me too dyspeptic about things. As I write this though, we are once again under the threat of losing power. It is enough to make me want to make another trip to the emergency service to, like the homeless, seek respite. Call it the meatball sandwich syndrome.

Good Thing Hospitals Are Not Power Companies

The great power shutoff here in Northern California is over—for now. PG&E recently instituted a series of rolling power shutoffs, some lasting for days. There were stories of people who live pay check to pay check having their week’s groceries spoiled and people dependent on power to maintain their health suffering.

The announced reason was to prevent the kind of catastrophic wild fires which destroyed or greatly damaged several cities last year. The root cause of those fires was incompetent, shortsighted top management and governance with a dose of political interference thrown in. Unfortunately, PG&E’s front line employees bore the brunt of the public’s outrage as they went about checking power lines and other equipment. They were a convenient target for the sins of management.

When power was finally restored to everyone and the smoke had cleared (pun not intended), PG&E top management began a public relations campaign to explain their incompetence. Full page newspaper ads ran for days and they continue to do so as I write this entry.

One ad proudly proclaimed “When faced with dangerous weather, WE CHOOSE SAFETY”. It explained why it was necessary to inspect power lines in times of threatening weather. It expressed its gratitude to its customers and field crews “who showed great resilience in a difficult time.” As if they had a choice. Nowhere was an acknowledgement of management culpability from years of deferred maintenance and the expenditure of funds on other endeavors that should have been spent on the power lines.

The most recent ad addressed “TO OUR VALUED PG&E CUSTOMERS: The Recent Public Safety Power Shutoff by the Numbers.” We were supposed to be impressed by the fact that the company was doing what it should always be doing–providing power in a safe manner. Except it was providing no power in a safe way. That sounds like it should be the company’s new mission statement— we exist to provide no power in a safe way.

Now, PG&E’s new CEO (poor guy must have really needed the job) is insisting that we can expect periodic power shutoffs for the next ten years. What other company can say it will provide poor service for a prolonged period of time to its valued customers? I would prefer having electricity and not being valued at all.

As all this was occurring, I was thinking about healthcare care providers and specifically hospitals where errors are an issue and safety an overriding concern. Hospitals cannot just shut down for a prolong period of time and ignore the needs of the patients they serve. When a problem of patient care or safety occurs, the root cause needs to be rapidly determined and a solution devised and implemented immediately. You cannot wait ten years.

If a hospital told the public that it would intermittently be closing for safety reasons, it would be reasonable to ask why that facility in its current form is allowed to continue to operate at all. Safety is an expectation in healthcare, not a voluntary condition which only matters after great damage has occurred. Good management and effective governance in hospitals should never allow conditions to deteriorate to such an extent that continued operation means someone will be hurt.

One of the strengths of healthcare and again especially hospitals is that we have professionals (physicians, nurses, therapists and others) who think first of patient needs and who do not hesitate to voice their concerns. They may not always be right but their voices are heard and in effective organizations their concerns seriously considered.

We acknowledge errors and safety concerns in healthcare. We have a long way to go to achieve zero errors but at least we don’t have to run newspaper ads gratuitously patting ourselves on the back for not causing damage by not providing services.

PG&E and similarly situated power companies could learn a great deal about management, governance and accountability by looking at healthcare.

We Don’t Trust Doctors…..Enough

One thing I have noticed since I have been on the beach is that we don’t trust doctors. I reluctantly have come to that conclusion based upon the experiences I have in helping family members as well as myself navigate our healthcare system.

You would think I would have realized that fact a long time ago but things look differently when you are caught up in the day-to-day work of healthcare. You sometimes see the needs of everyone but the patient.

We (whoever “we” is) have constructed an obstacle course which doctors must traverse in order that their professional opinion meets their patients’ needs. Patients must wait for prior authorizations to be granted by health plans and other entities before a doctor’s advice can be followed. There is a whole bureaucracy both within and without the organization devoted to second guessing the patient’s doctor.

My experience is that most requests for prior authorization are granted and those that are not are usually approved after further consideration. What a waste of time and money.

The justification for this process of second guessing has both clinical and financial components. There is concern that needless tests or procedures may lead to clinically dubious results. Too many false positives lead to potentially harmful interventions.

While I recognize the clinical argument for oversight of doctors’ decisions, the cynic in me thinks the bigger motivation for not trusting doctors is the financial component. A test not done is a test not billed. Think of the money saved if each doctor has one MRI order a month denied. Anyone who thinks the clinical argument is the real reason for second guessing physicians’ decisions is displaying a naivety that needs a review in itself.

The problem with this lack of trust in decision making by doctors is that it carries its own risk of leading to poor clinical results and also creates an expensive structure devoted to second guessing. Back when I was in the office and not on the beach, I watched in dismay as we built a staff to manage the interface between doctors, patients and health plans. This expense became significant.

I used to joke that it might make more sense just to take the risk that one or two doctors might order tests excessively in order to avoid the expense of overseeing the decisions of all the rest of our medical group. Now I am not so sure that is a joke.

It may be time for us to begin trusting our doctors again. If there are outlier doctors in terms of inappropriate use of resources, it would be better to deal with them after the fact. It might mean those doctors and their decisions would be subject for a period of time to oversight while the remaining medical group members would be able to use their professional judgment without second guessing. Why punish all doctors and their patients for the sins of a relatively few?

We have the means now through the electronic medical record to gather relevant data and look for the outliers. The money saved could be substantial if we once again began trusting our doctors enough and reducing the nanny bureaucracy. Patient and physician satisfaction would certainly increase and one needless layer of cost would be gone.

Open Season

Where I live you can hear gun fire in the far distance hills at this time of the year. The first time I heard it was years ago when we first moved in. I was told it was open season.

Open what I asked? Open season was again the reply. Hunters were after quail and this was the time of the year when it was permissible. Elsewhere, deer and boars are the targets.

I came to conflate open season with open enrollment for health plans. When you think about it, hunters looking for quail are not a whole lot different than health plans looking for customers. There is only one time of the year when they are easily bagged.

For me, this is the time of the year when I get mail from Medicare Advantage plans seeking to lure me from traditional Medicare Part A and B. They make promises about extra goodies and lower premiums. I prefer to have more control over my healthcare including having a voice in whom my doctor is and what hospital I can utilize. Still, every year it seems the Medicare Advantage health plan hunters bag more prey. Seniors living on a fixed income have to make economic decisions.

For many employees of private enterprises this time of the year also provides an opportunity to make changes in health plans. That decision is often based at least in part by how much will be taken out of the person’s paycheck as a partial contribution to the premium paid by the employer.

A similar dynamic occurs for public employees who often have more health plans to choose from than is typically the case for private sector employees. The public employer will pay only a certain amount for health plan coverage. If a health plan’s premium is greater than that amount, the public employee pays the difference.

In a rational world where employees have an incentive to make decisions based upon economics, this annual dance of health plans should lead to those plans having lower premiums gaining more customers. That is what is happening with Medicare Advantage plans with their lower premiums and extra goodies.

It is not happening, though, for many private employers and most public employers. The reason is that employers don’t like confronting their employees with this kind of economic decision. Often, a floor for what the employer will pay is established based upon union agreements and/or political pressure. I saw this dynamic when I sat on a nonprofit provider owned health plan board which often had the lowest premiums but could not gain as many new members as it should have.

In California, Kaiser has a large marketshare. The inertial you must overcome for an employee to switch his health plan away from Kaiser is immense. I used to joke that Kaiser was like a cult and once an employee was captured that was it. In all fairness, a part of that “stickiness” was due to Kaiser effectively meeting its members’ needs, albeit at a higher premium than other plans.

It helps Kaiser,though, when an employer, particularly public employers, establish the Kaiser premium as what it will pay. Health plans which offer equivalent coverage for a lesser premium don’t gain new members in that scenario. Employees have no financial incentive to change their health plan. And so it goes and has for years in California.

I was recently asked in response to another blog entry what I would do to make health care more affordable. The first thing I would do is to make sure employees have real financial incentives when making health plan choices during open enrollment. I believe you would see health plans begin competing more robustly for members if they felt that lowering premiums would bring in more business. That does not happen now and until it does it will be open season for ever rising premiums.

The Right Answer

A few years before I hit the beach, my wife and I made our first trip to Great Britain. When we were in London and unsure of how to navigate the many historic sites, we did what many tourists did—we took the hop on, hop off bus to get to places. While that was not the most efficient way to get to a given site, we knew sooner or later the bus would reach our desired destination. Sometimes that meant a ninety minute ride to get to a place which was only five miles or so from our hotel.

By our third day, we were getting brave so we decided to try one of the famous black cabs of London. They were expensive as compared to a one day hop on, hop off pass but time is money too. We hailed a cab and with a $8o fare we arrived thirty minutes later at the Tower of London which was actually a combined fortress, royal palace and prison. Centuries ago unfortunates received a haircut of a non-financial sort there. Just a little off the top. Permanently.

That steep $80 dollar cab fare was, though, instructive in another way. The cab driver seemed very sad and I asked him if he was OK. He said that he would not normally be driving that day but his adult daughter had just died from breast cancer and he needed to raise money for her funeral. I felt awful for him.

The cabbie said that at least the family did not have to worry about her medical bills since she had been a patient of the national health service. I asked him how he viewed that health care provider for most citizens and he said it was satisfactory. Most people knew it was not “posh” as he put it, but what it had in long wait times and lack of amenties was more than made up by removing financial worries when one got sick. Still, he recognized that more citizens with means were availing themselves of a private healthcare system which has developed in order to avoid the inconveniences of the public service.

Later on that vacation, we found ourselves on a walking tour of the sites of Glasgow in Scotland. We came upon a particularly large, old and ugly building which our guide said was the Glasgow Royal Infirmary where Dr. Joseph Lister first promoted the idea of techniques to insure sterile surgery. It was located uncomfortably within easy walking distance of the famous Glasgow Necropolis, final resting place of posh Scottish Victorians who may not have had the advantages of sterile surgery.

Glasgow Royal Infirmary

I asked our Scottish guide what he thought about the public National Health Service. Being Scottish and therefore obstinate, he quickly pointed out that the public Scottish Health Service was somewhat different and definitely better than the English version. He too acknowledged that there were deficiencies in the public service but that was more than made up by not having to worry about the financial aspects of being ill. He also liked haggis, a Scottish dish primarily made of lamb entrails, so his judgement may need to be discounted.

I thought about the cabbie and the haggis loving guide as the Democratic candidates for President have been discussing their various health care schemes. In Great Britain, polls both formal and in my case very informal indicate that the public likes the National Health Service, warts and all. So at most, politicians nibble around the edges. No one wants to disrupt that service.

Here in the the United States polls consistently show that while citizens would like to see health care be more affordable, they do not want to lose their private health plans. Yet many of the Democratic candidates seemed to want to replace the private plans with a public scheme, contrary to voters’ desires.

How do you make health care more affordable without replacing existing private health plans? That is a question someone needs to ask. The right answer might make someone President.