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The Engine of Choice.doc

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  • 1. By J. Daniel Beckham The Engine of Choice New traffic-control systems have begun to elbow aside the traditional patient-physician relationship. This is a very big deal. While policy makers have been making policy, health systems have been busy integrating and primary care physicians and specialists have been arguing over who will come out on top, a quiet revolution has been underway. Through the use of computers, telephones and standardized triage protocols, new relationships are being forged with health care consumers. New traffic control systems have begun to elbow aside the traditional patient-physician relationship. This is a big deal -- a very big deal. Healthcare, more than almost any other enterprise, is about relationships. The Clinton health plan was DOA. It may have been ponderous and politically inept. But that’s not what led to its demise. The policy makers and politicians missed their diagnosis. Americans want choice. Slowly, a handful of organizations have gone to work on that simple reality, dissecting it into its vital parts. Choice of what? Choice first and foremost of doctors. The essence of the American health care system dwells in the relationship between a doctor and a patient. When it’s at its best, it’s an intimate relationship. Generally, it’s a relationship that is at its weakest when patients are young and grows in importance with the onset of age related disease. The more intimate the relationship, the less vulnerable it is to dissipation. A patient with heart disease or cancer is likely to have a much more fundamental relationship with her doctor than a 25-year-old that hasn’t seen his internist in four years. The strength of the physician-patient relationship is highly correlated to age and severity of illness. Sex and parenthood can also play an important role. Nothing Personal Americans are increasingly concerned about the potentially ruinous financial effect a catastrophic illness or injury might have. Which, of course, is why most of them feel it’s important to have health insurance. Do they care about their insurer though? Is there a meaningful relationship there? Up until recently, there hasn’t been. The relationship with a health insurer was as personal as the relationship with a property insurer or an auto insurer. Americans felt the insurer was there to cover the odds on life’s crap table. And they felt it reasonable to pay for that coverage. Unlike the relationship with a doctor, the relationship with the insurer has historically amounted to nothing more personal than a bill and a check. When the rising cost of care lit a fire under the concept of managed care, attitudes toward insurers started to change. The insurers began to intrude on the relationship between the doctor and the patient as they sought to influence the behavior of both. The instrument of influence was a blunt one. It was a direct attack on the wallets of both doctors and patients. It worked. For awhile. And then a year or so ago, the first trickle of backlash started to appear in the popular press. Money Magazine carried an early negative article. In recent months, Time and Business Week have jumped in. Even the Wall Street newspaper, Baron’s, warned investors to watch any eggs they might have in an HMO or health insurer basket. What was the catalyst? Quality was beginning to rear its head. There was growing concern that aggressive managed care schemes were beginning to impact the quality of care or at least held the potential to do so. But these emergent quality concerns were really only the surface ripples and eddies that signaled a much more powerful undercurrent. What was actually beginning to rear its head was the reality of choice -- genuine choice informed by data on both quality and cost. What was shaking up providers and managed care plans was the prospect that the anecdotes of quality, (and the presumption that quality was more or less equal), were about to be washed away by quality quantified. There was a growing realization that once price was married with demonstrated quality, consumer choice could bloom in force. Those whose quality fell short could find themselves quickly, and perhaps permanently, out of the game. And that consequence was likely to befall health plans with subpar performance as well as underperforming physicians and hospitals. Copyright © The Beckham Company The Engine of Choice 1
  • 2. By J. Daniel Beckham Evidence of the voracity and perversity of the looming battle to influence consumer choice can be found in the current struggles over “gag rules” incorporated into managed care contracts. Such rules bar physicians from discussing with patients treatments not covered by the health plan. They also often bar doctors from telling patients the details of their payment arrangements with the insurer. And there are broad “non-disparagement clauses” which bar physicians from speaking negatively about an insurance plan. In many states and at the federal level legislations have found such provisions repugnant and have moved to ban them. Even so, the very institutions of such rules signal the depth of the struggle to influence patient choice. The opportunities to exercise choice may prove to be much more numerous than insurers and providers are now willing to admit. Epidemiologist, John Wennberg, at Dartmouth Medical School has recently published a high profile study called the Dartmouth Atlas of Health. It summarizes broad variation in the cost and quality of care. It profiles differences in rate of coronary bypass surgeries of 8.5 procedures per 1,000 Medicare beneficiaries in Joliet, Ill. more than four times the rate in Grand Junction, Colo. Balloon angioplasty procedures ranged from 1.6 per 1,000 enrollees in Buffalo to 12.8 per 1,000 in Stockton, Calif. In Miami, Medicare paid $5,966 for medical services per beneficiary and only $2,729 in Lincoln, Neb. In no market analyzed by Wennberg was there any evidence that patients were sicker than in other markets. Bad News for Providers Although it is choice of a relationship with a physician that consumers seek most, physicians remain remarkably vulnerable in this revolution. They have not invested in relationships with their patients despite the overwhelming power such an investment could yield. They have done little to deliver the enriched relationship that could bulletproof their natural positions of influence. Some organizations have begun to make such investments. The bad news for providers is this. The folks making the largest investments appear to be the health plans. At Colorado-based QualMed, high tech nurses are being put into play at the interface between the patient and the physician. QualMed nurses are being equipped to assess an enrollee’s complete electronic medical record and to apply clinical pathways over the phone. The nurse will work through a series of detailed questions to determine where the patient should be directed. And these QualMed nurses will not hesitate to bypass a primary care physician and direct a patient directly to a specialist, scheduling the appointment while the patient is on the line. The nurse will be linked not only to clinical pathways designed around expert systems but will have access to the HMO’s complete provider data base. And QualMed providers will be granted access to the patient’s complete medical record (presumably on the condition they play by QualMed’s rules.) Oxford Health Plan is continuing to develop a similar system. In addition to nurse telephone triage, Oxford is mining its database of existing enrollees and spots asthma sufferers. Then it targets mailings of self-care educational materials and inexpensive monitoring meters to the asthma patients. Reinforced with visits from field educators, hospitalization of Medicaid asthma patients has fallen by a third. In addition, Oxford is getting ready to employ more nurses and start giving patients direct referrals to specialists. The cost savings associated with such a service can be powerful. In Denver, a children’s after hours service staffed by nurses provides telephone triage and advice for all the patients of 175 private pediatric practices in Colorado who contract with it for call coverage. An in-house study suggested that among three cohorts of 100 pediatric patients each, those patients offered no medical guidance cost $13,875 and those with access to a hospital nurse advice line cost $12,250. The cohort managed by the pediatric triage/advice system cost $3,875. Marketing professor R. Scott MacStravic, Ph.D. describes a ten-year prospective diabetes trial of intensive treatment interventions that reduced eye disease by 76%, reduced nerve damage by 60% and reduced kidney damage by 56%, producing overall cost reduction of 15 to 35% and savings of $1,200 to $2,000 per diabetic. According to a study by Minnesota researchers published in the New England Journal of Medicine, annual flu vaccines that cost $10 each reduce costs by $46.80 per patient per year. Copyright © The Beckham Company The Engine of Choice 2
  • 3. By J. Daniel Beckham Services like the one being implemented by QualMed, Oxford and the pediatric program described above fall within a new class of capability called “demand management systems.” MacStravic describes demand management as “. . . providing the right service at the right time by the right provider.” A handful of for- profit companies already have several years of experience under their belts when it comes to implementing and managing such systems. Notable in the field are Access Systems and National Health Enhancement Systems. Some providers are beginning to develop similar systems. Many of these programs reflect a fundamental shift from reactive call-in services where patients would call with questions but would not be directed by the call center toward any action to proactive care management. Access Systems was founded on the revenue from Ask-a-Nurse, an Adventist Health System startup that was eventually spun off and taken public. Like many reactive call-in services, Access and many of the provider-based services have made a slow evolution to proactive systems designed to actively manage the behavior of callers, many of them enrollees in health plans. One Household at a Time In addition to having potentially dramatic impacts on the cost of care, demand management systems also hold the promise of the following benefits: • The ability to generate and capture consumer feedback to improve services. • An interface for increasing customer satisfaction. • An avenue to maximizing the utility of electronic patient records. • A mechanism for automating and centralizing schedules, appointments and billing. • Leverage for creating multidiscipline multispecialty team management of care. • An opportunity to use both inbound and outbound calls for quality assurance and marketing. Rick Klein, Vice President of Business Development for St. Luke’s Medical Center in Milwaukee, emphasizes the marketing potential of demand management systems to proactively reach out and cultivate relationships with consumers. He feels such systems will prove much more effective in moving market share through building targeted relationships than through the current heavy expenditures in mass media to build brand image. “Massive advertising campaigns are comparable to carpet bombing,” says Klein, “maybe you hit your target, maybe you don’t. We’re much more dedicated to moving market share a Zip code at a time -- even a household at a time. Demand management systems are just part of the larger program to build market share through targeted relationships at the household level. By combining demographic data, patient usage information and direct survey data, a healthcare system can build a system of communicating directly to consumers at the household level. Most healthcare systems have learned that contracts come and go. Physician groups will change loyalty, and advertising campaigns don’t have much impact on market share. The outbound telemarketing systems of the 1980s have been replaced with a research-driven information database that puts the health system directly in contact with the household on a regular basis. Weaving together all of the attitudinal, demographic, geographic and usage information quickly develops a rich profile of the household. This interactive system becomes the core of a health management program and is the bedrock of market share change in the future. Consumers are concerned and confused with the changes in their healthcare coverages, doctors and providers. If developed appropriately, this system gets the right information to the right household at the right time. For example, matching open enrollment periods to employees can be a valuable migration tool for a system looking to influence consumer selection of insurance plans. Migrating consumers from one physician group to another impacts market share almost immediately. Copyright © The Beckham Company The Engine of Choice 3
  • 4. By J. Daniel Beckham The key is to develop the system as part of an ongoing system of targeted marketplace management rather than a tool for just telemarketing in a crisis. The real value to this type of system is the research expended upfront to understand as much about the household as possible.” Many of the demand management systems operating in healthcare (or under development) are borrowing technologies and methods from other industries that depend on heavy telephone contact with consumers including travel, banking and telemarketing including interactive voice response (IVR) systems and automatic call distributors (ACDs). Combined with powerful new databases on consumers, these technologies enable demand management systems to reach out and engage the market in ways never before imagined. Klein adds another ingredient to MacStravic’s definition of demand management -- the ability to create and shift consumer choice. Displacing the Doctor-Patient Relationship? More important than the specific composition and uses of such systems are their implications. They are designed to interject themselves at the interface between the physician and the patient and impact the behavior of both. Is it possible that a highly responsive, value rich service designed to answer patient questions and get them to competitively priced, high quality care quickly may prove to be regarded as a valuable enough resource that it could displace, or at least disrupt, the patient-physician relationship? Maybe not among the patients with the most acute conditions and the longest standing relationships. But among those who have weaker relationships, such systems could prove very effective, and the reason many physicians will be particularly vulnerable is because they have been particularly ineffective at being highly responsive, answering questions and getting patients to competitively priced, high quality care. To properly judge how powerful such systems might become, stack them up against the experience many patients get today when they call a doctor’s office to make an appointment or ask a simple question without incurring a $50 office visit. Indeed, demand management systems are providing a service physicians’ practices should have provided themselves all along and could have easily gotten paid for. Physician reluctance to regard telephone consults and telephone follow-up as potential sources of revenue (by billing for them) has made them vulnerable to organizations with no such reluctance. It should be telling to physicians that an attorney’s best friend is the billing system that tracks billable time spent with clients on the telephone. Perhaps if doctors had viewed telephone services as a significant potential source of revenues, they would have invested in doing them effectively. For primary care physicians, the explicitly stated intent of the operators of demand management systems to bypass them should send up red flags. An article in the April 8 issue of Business Week by Keith Pammonds suggests that Oxford Health Plan’s motivation in direct referral to specialists is to “save members a trip to the gatekeeper, freeing up primary care doctors for other patients and getting rid of a lot of paperwork.” Maybe. But what may be most compelling for Oxford is eliminating what it probably views as an expensive middleman, the primary care physician. Operators of demand management systems have already begun to talk of replacing the “gatekeeper” model (based on primary care physicians) with a “gateway” model (based on nurses and other physician alternatives). The success of demand management systems could prove troubling for hospitals, hospital-based health systems and multispecialty group practices, particularly those organizations that have already made huge investments in owning primary care practices. Such investments, already generating losses of a million dollars a month or more for some systems, could be further marginalized by demand management systems that bypass the primary care physicians. Audible Snickering It shouldn’t be surprising that there is already some audible snickering going on among specialists who have grimaced as they have watched some of their primary care physician colleagues put their hands more firmly on the referral sluice gate. It will not be surprising if specialists move front and center in the development of demand management systems, both as advocates and potentially as investors in such enterprises. Copyright © The Beckham Company The Engine of Choice 4
  • 5. By J. Daniel Beckham Already, specialists have moved some of their take home pay to investments in the ownership of primary care practices. (Indiana and Kansas are good examples where cardiologists already own scores of primary care practices.) Further investments in controlling referral flow make powerful economic and political sense for specialists. If all of this is potentially good news for specialists, it may be particularly good news for nurses who are likely to continue to find their ranks thinned in acute care settings. For many nurses, demand management systems and “doctor lean” care centers will provide an opportunity to deliver care with the authority and responsiveness they’ve long sought but could never achieve in the stiff hierarchies of the hospital. In such enterprises, they are likely to find new management challenges and perhaps even entrepreneurial incentives they’ve never had access to before. For those who view the evolution of the health care industry as a footrace between the provider organizations and the insurers, then investment in demand management systems may represent a last ditch, do-or-die strategy for health plans to move securely into a value added role. Stung by growing criticism of both their commitment to quality and their profits, health plans are feeling highly motivated to demonstrate that they do, indeed, add value. The development of successful demand management systems at the interface of the physician-patient relationship could secure the balance of power for insurers and health plans in the struggle for influence over the flow of the premium dollar. Lately, providers have begun to recover from a shocking loss of power and influence to insurers. If the health plans reallocate even a small portion of their deep cash reserves to investments in demand management systems, providers could find themselves looking up from the mat again. Unlike most hospitals and systems, the health plans have made only limited forays into the acquisition of physician practices. As a result, they have a lot of flexibility in allocating their investments. The hospitals and systems that have already dedicated themselves to aggressive acquisition of practices and to development of capital intensive new satellite facilities already face intense pressure on their capital reserves and may find they have limited flexibility to match the health plans through creation of their own demand management systems. Delivering the message about the need for such investments to primary care physicians who are supposed to play the demand management role themselves could prove politically difficult to say the least, (specialists cheering on the sidelines will only make the situation even more difficult for hospitals and systems with heavy investment in primary care gatekeepers). If telephone-based demand management systems staffed by nurses can carve out a meaningful relationship with healthcare consumers, then it doesn’t take much imagination to envision the next phase in their evolution -- the creation of doctorless (or doctor lean) care centers staffed by nurses and physician assistants. (Indeed, in many rural areas this has been the prevalent model in many hospital emergency rooms for years.) What physicians bring to patient care in the form of their training and credentials, these care centers could arguably offset with customer centered responsiveness, standardized protocols and pathways and rich integrated data bases. It could be argued that laws will limit the utility of such centers because nurses and PAs are restricted from practicing medicine. But the same argument should have limited the growth in the use of clinical pathways by nurses on the telephone and apparently hasn’t. At any rate, the solution to such legal restrictions is simple enough -- have all nonphysician staff technically under the direction of a physician. Of course, one physician directing the activities of 20 physician substitutes is a much different organizational animal than 6 physicians supported by 12 nurses. The Message is Simple For providers and consumers alike, the message about demand management systems is simple. Put them into your strategic plan and be prepared to invest in their effectiveness. Hospital sponsored MSOs and PHOs may provide comfortable homes for provider-based demand management systems. For physicians, both primary care and specialist, there is a clear imperative to get to the table and exercise influence by participating in the design and management of such systems. At the same time, physicians should reengineer there own practices to limit their vulnerability to such systems. Copyright © The Beckham Company The Engine of Choice 5
  • 6. By J. Daniel Beckham Of course, there exists the prospect that demand management systems may not become encapsulated in either the provider organization or in the insurer organizations. Instead they may evolve as freestanding entities playing an increasingly powerful role of their own, unbeholden to either the providers or the insurers. Such a neutral position provides strong marketing appeal when it comes to employers who are often suspicious of the “fox in the hen house” role of providers and insurers who promise lower cost and higher quality and provide little evidence of either. A demand management company could derive a rich stream of revenue from the savings it generates. Take the example of the flu shot. If a demand management organization could take 20% of the $46 savings created by getting 100,000 enrollees to get a flu shot, then it would have generated a revenue stream of nearly a million dollars. The arithmetic is compelling. Of course, neither providers nor insurers are likely to easily hand off such influence and profit generating capacity. But if employers begin to push demand management and consumers accept it, the prospects for a distinct new class of healthcare enterprise may be very bright. Some will smugly discount the potential power of demand management systems. They would do well to examine the recent evolution of the banking industry which has been characterized by an explosion in ATMs, rapid closure of bank branch offices, and movement toward seemingly impersonal options like Internet banking systems. Already, a software company, Intuit, through its popular financial program, Quicken, is linking customers to selected banks. It has announced it will be providing an Internet banking system by the middle of 1996. According to an article by Dwight Crane and Zvi Borlie in the March/April 1996 issue of the Harvard Business Review, “Some might argue that Intuit is only providing a ’front end’ to existing institutions but at some point the interface with the customer becomes the institution . . . The winners of the future will be those who best package functions to meet customer’s needs, not those who cling to old ‘institutional arrangements.’” A healthcare industry that fails to invest sufficiently in fortifying its “interfaces with the customer” may find its old institutional arrangements equally at risk. Originally published in Health Forum Journal Copyright © The Beckham Company The Engine of Choice 6

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