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April 2012ACODatabase.comConnecting the Accountable Care CommunityAmerican Healthcare Industrial RevolutionThe Future of H...
Why did this happen? In a word, scale. More specifically, economies of scale ushered in a world ofabundant and affordable ...
the value added processes (e.g., diagnosing, intervening, etc) and the supporting infrastructure (e.g.,knowledge developme...
Table 1 - Missing economy of scale elements from existing care delivery system. This table provides               us with ...
   Experience leads to performance improvement – Both providers and consumers need ways to        learn from the past exp...
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The Future of Health IT and Health Analytics in the Accountable Care Organization (ACO)

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Momentum behind health reform and accountable care is accelerating; many players, both small and large, are making considerable investments in this sector which will result in a host of new products and services making their way to the market in the next few years. Health information technology (Health IT) including health analytics, clinical decision support, workflow systems, and expert systems will play a crucial role in the future of healthcare. In this article we leverage the framework we developed in the previous article to support our prediction of which areas of information technology will become the hot areas for growth and investment. Here’s what you should know regarding opportunities and future developments in this area.

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Transcript of "The Future of Health IT and Health Analytics in the Accountable Care Organization (ACO)"

  1. 1. April 2012ACODatabase.comConnecting the Accountable Care CommunityAmerican Healthcare Industrial RevolutionThe Future of Health IT and HealthAnalytics in the Accountable CareOrganization (ACO)by Robert BondMomentum behind health reform and accountable care is accelerating; many players, both small andlarge, are making considerable investments in this sector which will result in a host of new products andservices making their way to the market in the next few years. Health information technology (HealthIT) including health analytics, clinical decision support, workflow systems, and expert systems will play acrucial role in the future of healthcare. In this article we leverage the framework we developed in theprevious article to support our prediction of which areas of information technology will become the hotareas for growth and investment. Here’s what you should know regarding opportunities and futuredevelopments in this area.Forward – Mapping out our journeyEvery article in this series fits inside a framework. We examine the elements underpinning the successof the modern economy with a particular focus on the principles of economies of scale. We then brieflyreview the current state of healthcare delivery system to understand which elements are missing. Thenwe use the gap between the current state and the framework to create a forecast of which innovationsin information technology will have the most impact in the transformed healthcare environment.The Magic of Economies of ScaleIn 1888, Henry Ford was 25 years old and made a living farming and operating a sawmill. He and hiswife Clara had one son Edsel. The young Ford probably did not imagine that he play a pivotal role inchanging the world. Between 1888 and the time of Ford’s death in 1947, the life of the averageAmerican would change forever. Americans were living longer. They were moving from work on farmsto work in offices and factories. Finally, they were earning more than ever before. Statistics tell thestory of this rapidly changing world. Between 1888 and 1947, life expectancy for the average Americanwould soar from 49 years to 68 years. In 1888 approximately 42% of the US labor force was employed inthe agriculture industry; by 1947, this number had decreased to 17%. Between 1888 and 1947, annualGDP per capita income would more than double from approximately $5,300 to approximately $13,000.Robert Bond | ACODatabase.com 1|P age
  2. 2. Why did this happen? In a word, scale. More specifically, economies of scale ushered in a world ofabundant and affordable goods. Productivity soared. The average American was living a life ofpreviously unimaginable abundance. An economist would tell you that economies of scale is thecondition that exists when the per unit cost of output decreases as the total number of units producedincreases. Without going into too much detail, we know that production of any good or service requiresa combination of capital, labor, and/or land. Process setup, research & development, and intellectualcapital development are all examples of activities whose costs factor into the price that consumers payfor the final product. Henry Ford was a master of the principles of economies of scale. Ford’sinnovation, the assembly line method of production, made it possible for millions of Americans toaffordably own a car. The essential element of the economies of scale principle is the ability to spreadout costs over a large number of manufactured units. It is this principle which makes it possible for themany people to own a car, for example. The manufacturer may have invested millions of dollars intothe design of the car and the process to produce the car; however, each buyer pays only a fraction ofthat investment cost.The healthcare industry does not effectively leverage the economy of scale principle. We believe that ahistoric shift in how this industry is fundamentally structured is currently under way. Furthermore, webelieve that future of this industry will more closely resemble other industries in how they leverage theeconomy of scale principle. The remainder of this article is focused on discovering the gaps between thecurrent state and future state thereby informing our prediction of which areas in health informationtechnology will experience growth.Cats And Mice – The Dynamics Of Large Healthcare Providers And PayorsRocks and hard places aside, life as a large provider is challenging. For the past several decades, marketand regulatory forces have shaped the behavior of large providers, particularly healthcare systems, touse scale as principally a negotiation strategy with payors. Providers have merged and acquiredthemselves into mammoth sized entities in order to generate bargaining leverage – the larger yourhealthcare system, the more leverage you have to negotiate reimbursement rates and capture marketshare. In economic terms, the market suppliers (aka providers) are incentivized to eliminatecompetition and offer the broadest set of services to capture market share. As business strategies goes,offering everything to everyone is not an effective strategy; it generally results in neither excellence norefficiency for anyone. In addition, consolidation of market suppliers generally results in higher prices forconsumers and lower levels of innovation.Healthcare Economies of Scale – Small Healthcare ProvidersSmall providers, those not affiliated with a healthcare system, account for a significant portion of theoutpatient care delivered in the United States. These types of providers range in size from one manshops to multi-practitioner practices. In general, it has been difficult for the small provider to leverageeconomies of scale as they have lacked the volume and incentives to make the investment which wouldlead to quality improvements or cost performance enhancements. Let’s consider the value added bythe physician in the course of treating a patient (see diagram below)1. In this diagram, we demonstrate1 Adapted from Porter, Michael. Redefining Healthcare. p204.Robert Bond | ACODatabase.com 2|P age
  3. 3. the value added processes (e.g., diagnosing, intervening, etc) and the supporting infrastructure (e.g.,knowledge development, informing, etc). Figure 1 - Value chain of care delivery processes for small provider demonstrates numerous areas for application of economy of scale principlesWhat’s missing?We can use the observations above to develop a set of economy of scale elements which are missingfrom healthcare. The table below details key missing elements.Robert Bond | ACODatabase.com 3|P age
  4. 4. Table 1 - Missing economy of scale elements from existing care delivery system. This table provides us with areas to explore for investment in health information technologyIn summary, key takeaways from the table are the following:  Metrics are a critical missing element – The axiom, you can’t manage what you don’t measure, is extremely vital especially as providers develop new care delivery processes and consumers seek to understand the value of the service they are purchasing  Decision support is vital – In an era where data is everywhere, providers will need support in making sense of it all. Decision support comes in many forms including pattern identification, diagnostic decision support, prospective alerting, trending, benchmarking, risk adjustment, risk identification, alerting, and point of care decision support.  Providers operate on top of too many business models – Businesses which operate using more than one business model often leads to poor performance, both financially and operationally. Providers are attempting to provide service on top of a business model infrastructure which doesn’t support the objectives of quality and cost performance.Robert Bond | ACODatabase.com 4|P age
  5. 5.  Experience leads to performance improvement – Both providers and consumers need ways to learn from the past experience of and the experience of others. A crucial missing element is the “experience curve effect” or the ability to learn from previous experience.Key Predictions for Health Information TechnologyWe use our framework and observations from the sections above to make the following predictions:Metrics will be everywhere – Meaningful use is the just the beginning of the “metrics movement.”Providers will need to measure and benchmark in ways that are just being explored.Health analytics will be a huge growth area – The world is experiencing a flood of data from mobiledevices (e.g., smart phones, portable biometric devices), home based devices (e.g., scales, bloodpressure meters), and office based devices (e.g., patient monitoring equipment). This data combinedwith the availability of electronic health records, private datasets, and public datasets representtremendous opportunities to leverage economy of scale principles to reduce health costs and improvequalityDecision support systems will support patients, providers, and administrators – A flood of data,expanding biomedical knowledge, and the advent of inexpensive and flexible cloud-based computingmakes it necessary and possible for expertise to be available to a greater array of health system players.These decision support systems will enable new business models, process innovations, and accelerate“experience curve learning.”About the authorRobert Bond is the co-founder of www.acodatabase.com which is the premier database and discussionforum focused on the accountable care and health reform industry. In addition, Robert is a healthcareand information technology consultant, thought leader, and speaker. He has worked with many leadingindividuals and organizations in the healthcare industry including Dr. David Brailer (White House HealthIT Czar), Duke University Medical Center, Sg2 Healthcare Intelligence, CMS, Merck & Co, and Booz AllenHamilton.Robert is an expert in healthcare informatics and health IT strategy. In addition, he has extensiveknowledge of health reform related trends and understands how organizations can leverage the value oftheir data assets to improve quality and reduce costs.Robert earned his MBA with a certificate in healthcare management from Duke University. Hisbachelor’s degree in engineering was awarded at the University of Pennsylvania.Contact Robert email: robert@acoadvantage.com | mobile: 484.431.3015Copyright © 2012 ACOAdvantage.com. All rights reserveRobert Bond | ACODatabase.com 5|P age

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