Clinical Integration – The Essence

The term is becoming increasingly popular, much like Population Health a year ago ( Journalists are hearing Clinical Integration is necessary for healthcare systems to be successful in value-based payment models (e.g., bundled payments for surgical procedures, Medicare Shared Savings Program for FFS Medicare, or global prepayment in Medicare Advantage). So the next several posts will address various aspects of Clinical Integration.

First, let’s clarify the difference between two similar terms:

Zdenko Zivkovic / Foter / CC BY

Clinical Integration (CI) refers to how geographically separate hospitals, physicians and other healthcare personnel contemporaneously coordinate with each other their separate healthcare activities for the benefit of an individual patient or a cohort of patients.  For example, a middle aged man with acute onset LLQ abdominal pain, fever and constipation is seen by 3 physicians (PCP, Radiologist and General Surgeon) in two locations (rather than three) within a 6 hour period of time (rather than 6 days) that results in a single-stage colon surgery for acute diverticulitis (rather than a two-stage colectomy and colostomy complicated by perforation, sepsis and ICU resuscitation resulting from a 6 day evaluation in a fractionated care system).

Clinically Integrated Network (CIN) refers to financially separate healthcare providers (e.g., hospitals, surgical centers, physician groups, home health agencies) that form a shared legal entity that enables single-source contracting with payors, yet is protected from anti-trust prosecution, in accordance with the 1996 DOJ / FTC rule governing CINs.  The stated purpose of CINs is to facilitate Clinical Integration (CINs do NOT create CI, at best they facilitate its creation). In practice, many just raise local market prices without achieving significant improvement in clinical outcomes (several articles to read for additional information, but here’s something recent

The best litmus test for whether true Clinical Integration is being advanced in a particular conversation is to ask this one question: ‘Will the contemplated operational, informational or cultural change reduce the duration of time that elapses between onset of illness (in the case above, acute diverticulitis) and definitive resolution (in the case above, a curative operation)?’  That’s how value is generated for the patient (avoidance of sepsis, intubation and rehab) and delivery system (lower total cost of care, higher brand).

Population Health – the how

I continue to hear strategy pundits say they either don’t know what population health means or that population health doesn’t exist.

If they are confused by the definition or existence of population health, they’ve been asking the wrong people. Clinicians who have actually delivered Population Health at the bedside or in the exam room, rather than individuals who’ve merely read about it, are the better sources for understanding value-based healthcare.

Here’s my proof:

  1. If we define population health simply as lower total cost plus higher quality, and
  2. If we accept the AHIP / NCQA / Consumer Reports data showing which health systems consistently deliver the highest quality outcomes, and
  3. If we accept years of proprietary Aon-Hewitt data or other observations that Kaiser Permanente (KP) produces a 12-25% lower total cost of care than local competitors when benefit-to-benefit comparison is accomplished, then
  4. We can say not only is KP an excellent example of Population Health, it’s been doing it successfully for 75 years, ever since Dr. Sidney Garfield and Mr. Henry Kaiser began prepaid healthcare (Dr. Garfield received 10-cents per week for each employee to prevent and treat illness and injury, improving the lives of those hardworking men and women).

So the assertion by Nate Kaufman and others that population health is vaporware is not supported by the evidence.

How Kaiser Permanente (KP) does what it does is the real insight, the real question.  The how is clearly not easily transferable; otherwise KP’s local competitors would compete more effectively for top honors.

I also hear assertions that how KP does what it does is due to care protocols, or a single enterprise-wide EMR, or that Permanente physicians are employed. In fact there are many delivery systems in the US that have one or more of those attributes, and some that have all three of those attributes, yet their performance is variable.

Instead, I assert that how Kaiser Permanente does what it does is due to physician practice patterns that differ substantially from fee-for-service (FFS) and that those practice patterns are the result of (1) physician leadership, (2) physician culture and (3) systemic workflows that reduce the duration of time between onset of illness and definitive resolution of its cause.

Improving practice patterns is hard for any health system, and real physician leadership is a requisite.  That’s not easily understood by persons who have not led physicians.

Population Health – the (im)precision of language

hospitalNo phrase has less meaning in our industry right now than “Population Health” – this coming from the guy leading his firm’s practice in … wait for it … Population Health.

Everyone has a different picture in their head when those two words leave their mouth, yet that is the industry-standard term nowadays to convey “what comes after fee-for-service (FFS)”.  Here are merely the Top Ten most common meanings in the industry when those words are spoken:

10. Telephoning patients for the purpose of convincing them to consume preventive services

9. Disease Registries embedded in an EMR

8. Convince patients to modify their personal choices (usually via financial-pain or -pleasure)

7. Financial Bonuses to physicians for achieving a numerical score on quality metrics or for following a more complex coding and documentation process

6. Binding together physician practices for the purpose of negotiating higher professional fees (CIN)

5. A software bridge allowing a modicum of data-transfer between different EMRs

4. Buying or building more bricks and mortar to capture more patient care (revenue)

3. Convince patients to undergo biometric testing (patient engagement anyone?)

2. Enforcing the use of Evidence-Based-Protocols for common disease states

1. Providers assuming financial risk or gain for the cost of care provided

Those snapshots represent a small number of available tactics at best, and entirely miss the true meaning of Pop Health at most.  Here’s my definition of Population Health – “the manner in which healthcare design necessarily changes, once it is no longer paid for by piece.”

If the healthcare in question uses FFS as the mechanism for payment, by definition it AIN’T Population Health. The purpose of Population Health is to create higher quality care at lower or similar cost (better care experience, less harm, and more reliably favorable outcomes). In my experience, those better outcomes rarely occur and are never sustained over time, if paid for by FFS, particularly in the absence of group physician practice.

In order for care redesign to be funded and implemented by hospitals and physicians, those providers must be paid for what doesn’t happen: the ER visit avoided because the doc stayed late in the office to diagnose and treat the patient’s UTI; the cardiac cath avoided in the 22 year old with a pulled pectoralis muscle because a history and exam pays the same as cath; an admission avoided because the ambulatory physician did a great job of organizing the patient’s care, such that decompensation never occurred.  Spending time with patients, thinking about them and with them, and coordinating their care all take time, and as we all know, time is money. FFS can only account for what does happen (the ER visit, the admission, the cardiac cath); it’s non sequitur in the context of Population Health.

So the next time you hear the phrase Population Health, ask two questions: (1) “What the hell do you mean by that?”, and (2) “Before we go on, do we agree FFS payment of any type is NOT involved?”

1994 v 2014: deja vu or brand new day?

It’s a good question that deserves a good answer: “How can it be a good idea in 2014 to organize the provision of healthcare within a unified delivery system, then pre-pay for that care (a.k.a., population health), when that strategy failed in 1994?”

  1. Population Health was NOT Tried in 1994.  The business premises for the two eras are different: in 1994, revenue was considered variable and unlimited (recall, 13% GDP), so all provider interventions of the time focused upon increasing revenue: buy the doctor’s practice in order to raise billable events per encounter (e.g., implement in-office ancillary testing), raise encounters per day (e.g., change office workflow so the doc sees more patients per day, while spending less time with each patient), and raise cash collected per event (e.g., rev cycle in its totality).  In 2014, revenue is more likely fixed (18% GDP, likely limited by US macroeconomics, and millions of debt-laden households are unable to take on more healthcare debt).  The macro-economics of 2014 demand our industry lower expense trends per person, rather than raise revenue per healthcare event (1994), which Population Health can and will do.
  2. The Root Causes of High and Rising Healthcare Costs are Now Known.  In 1994 the prevailing wisdom asserted that doctor’s professional fees were the root cause of unsustainable cost trends, which led to the capitation of professional fees for a cohort of patients (short-lived popularity of HMO plans). But as I’ve written before, our industry and my profession have always been more successful increasing the number of units of care, than public and private payors have been in reducing the payment per unit.  Indeed, pro-fees per office visit have fallen by 30% during the last 20 years (in actual dollars), while the number of units of care per person per year has risen more than that (scripts per year, imaging per year, ER visits per year, surgeries per year, etc). Unless and until an entity (think health-system behaving as a true ACO) is pre-paid for all care (population health 2014), rather than just the professional fees (1994), care transformation won’t occur, and we’ll be forced to resort to “rationing” healthcare in the US. I’ve written previously about the effects of FFS and obesity on the country’s cost trends.

Some health systems mistakenly believe they can create the recipe of Population Health by buying everything said to be on the ingredient list: employ physicians – check; implement an EMR – check; create the legal structure of a Clinically Integrated Network – check.  But prepayment of healthcare can be financially successful ONLY if one addresses how those physicians are organized (salaried, group practice, with a patient-centered culture), how that EMR is used (just-in-time decision-support tool to empower shared-decision-making rather than a poorly searchable repository for documentation), and how care is actually coordinated across the continuum (simple, but comprehensive and reliable, communication channels and workflows that close the knowing-doing gap).  If wide-spread prepayment of healthcare is successful in the second half of this decade, it will be as a result of deeply understanding how healthcare cost is created in the moment of decision between patient and provider, then designing highly-reliable workflows and aligned payment systems that begin to eliminate the 30% of waste and overtreatment buried in that 18% GDP.



The Problem with Pay-for-Performance (P4P)

New York Times journalist Dr. Aaron E Carroll does a nice job in his July 28, 2014 article describing the industry’s disappointment that a seemingly good idea (paying doctors more money for achieving a goal) yields disappointing results (improvements of 4-6% per metric, if at all, rather than 40-60%).  Let’s go deeper … let’s ask why P4P Quality payments in and of themselves fail to achieve the magnitude of improvement in healthcare outcomes our country needs.

#1 First, Determine the Underlying Problem(s) Causing Underperformance of the Clinical Care. Seldom is the problem a failure of physician motivation to do the right thing for the patient.  So adding more “motivation” (in the form of money) is unlikely to produce breakthrough improvements in outcomes between doctor and patient.  The doctor might focus more personal effort upon those clinical goals associated with monetary incentives, but likely at the expense of other equally important outcomes without incentives attached, achieving no net improvement for the practice. And as I’ve written before (What Role, Money”), autonomy, mastery and purpose are more effective than money at producing discretionary effort among physicians.

#2 Next, Formulate Solutions to those Problems. Discretionary effort is indeed an important component for creating improvement in healthcare outcomes, but other components more so.  The dominant reasons for disappointing rates of improvement have to do with lack of (1) systematic improvement infrastructure (systems of measurement, comparison, accountability to colleagues, process improvement), (2) culture of patient safety and team-based care, and (3) blending the promise of medical informatics to the complexities of healthcare delivery.

#3 Finally, Improvement Activities Should be Centrally Coordinated, but Peripherally Empowered.  A hundred points of simultaneous improvement, each using common methods and validated approaches, creates faster tempo of improvement across a healthcare system than a hierarchical top-down approach of control.

Some will undoubtedly assert that P4P’s disappointing results are due to providing inadequate levels of monetary rewards to physicians, but that point of view doesn’t jive with my observations and experiences, nor the research from Daniel Pink and others (see Dr. Carroll’s article for additional information).  We need to think beyond money (P4P) if we are to increase the tempo and magnitude of improvement in healthcare.

What Meaning, Price?

The TV commercial surprised me. Airing repeatedly during the Atlanta Falcon’s football game, Southwest Airlines (SWA) was spending lots of money explaining to consumers why their airfares are lower than competitors (here in Atlanta, that’s Delta Airlines, given SWA acquisition of AirTran). The implication is that without such an explanation for the low fare, Atlantans might be suspicious of an airline offering “$69 fares, one way”. Oh yea, and your bags fly free.

$69 airfares southwest

Southwest Airlines flies more Americans domestically than any other airline in the US.  They have been repeatedly celebrated for their corporate culture, innovation, and efficiency.  They’ve been in business for nearly 50 years, with a great safety record. And yet, they feel the need to explain why they are less expensive!

The reason stated in the commercial has nothing to do with the real reasons SWA has less-expensive fares: (1) SWA flies only 737-800s and 700s, rather than the 14 models of aircraft maintained by Delta (much lower maintenance costs); (2) they pay their captains less ($159K v $205K for 10 years’ experience); (3) they keep their airplanes in the air more (faster turn-around), and (4) they’ve historically had a more successful fuel-hedging strategy than has Delta (see 2005-2007), among others.

winglet physics

The commercial says the presence of “winglets”, upturned wingtips invented by NASA in 1976 to reduce wing-drag from turbulent airflow at the wingtip, is the reason for the low fares, enabling them to “burn 54 million less gallons of fuel each year”, which by the way represented only 3% of Southwest’s fuel burn in CY2012.  Saving 3% of fuel doesn’t equate to 30% lower airfares.  Moreover, at least 80% of the passenger jets I saw this week at Hartsfield-Jackson, Chicago O’Hare, and San Diego’s airport also had winglets, encompassing Delta, United, American, Alaska and US Airways.  So winglets are hardly a competitive advantage.

hidden brain

Whether we admit it or not, we Americans have a deep-seated belief that “you get what you pay for” when buying goods and services.  If an item costs less, our hidden brain (the Limbic system) believes that item is less trustworthy, less desirable, and lower quality.  I see this phenomenon in healthcare too.  The newest (ie, more expensive) antibiotic, implantable, catheter, scanner is immediately believed by doctor and patient alike to be superior to that which is tried and true (less expensive).

KP logo

When comparing health insurance plans with equal benefits, among populations of persons with equal levels of disease burden, Kaiser Permanente’s healthcare is nearly always less-expensive (see AonHewitt’s HVVI Report, for example).  And we deliver much higher quality outcomes and patient satisfaction than do the other companies (see annual NCQA National rankings, for example).  And yet, I hear Atlantans express suspicion regarding our lower costs.  Nevermind 9-years in a row as the quality leader in all of Georgia (see NCQA, Consumer Reports, ACHP).  Never mind we’ve received the JD Power award for customer satisfaction 5 of the last 6 years in Georgia and both Carolinas.

Maybe the Southwest commercial wasn’t about explaining their lower prices …. Maybe it was actually intended to entice the growing demographic of female millennials, who are the Americans most predisposed to changing their buying behavior based upon real or imagined impact to the environment (“54M less gallons of fuel!”).  Nah.  Given how smart their executives are (I’ve met some), they know exactly what they are doing.

A Glass Once Empty, Now Half Full

glass half full #2Twenty years ago I sat with my fee-for-service (FFS) colleagues in the auditorium of St. Joseph’s Hospital (SJH), witnessing an appeal from hospital administration to join the fight to eliminate unwarranted healthcare expense. Revenue was down, expenses up, and the CFO was worried.  Our reply was an incredulous version of “… but we (physicians) control only 20% of the total expense!”, referring to our professional fees. We preferred to blame plaintiff attorneys, pharmaceutical and device manufacturers, and the for-profit insurance companies as the cause of The Cost Problem, rather than take an appropriate portion of ownership. It was then I first heard or thought, “Ah, but 80% of the spend flows from our pens.”

blame game #2In the 20 years elapsed, we physicians traded-in our pens for keyboards and double-clicks, and SJH never did solve their price / cost equation, ultimately having to sell the hospital to Emory, which has so far been better at raising prices than lowering expense.

But what about that physician crowd in the SJH auditorium, now 20 years older? What’s their present-day point of view regarding physician responsibility for America’s Healthcare Cost Crisis?  Mayo Clinic researchers published a study this week in JAMA answering that question (Views of US Physicians About Controlling Health Care Costs, Tilburt JC, et al. JAMA 2013;310(4):380388). Thankfully, we physicians are more insightful and courageous about our role in healthcare costs than 20 years ago.

the buck stops here

Oh sure, we still like blaming the lawyers (60% of physicians), insurance companies (59%), pharma (56%), and even patients (52%), but finally we believe …

  1. We should adhere to clinical guidelines that discourage the use of marginally beneficial care (79% of docs)
  2. We need to take a more prominent role in limiting the use of unnecessary tests (89%)
  3. We have major responsibility for reducing healthcare costs (ok, only 36% of physicians agreed with that one, but that’s a glass no longer empty).

Not unexpectedly, physicians compensated through a salary (rather than FFS) and/or who practiced in a group or government setting had more enthusiasm for cost-consciousness.   Physicians who have the most to gain financially from wasteful practice will be the last to assume responsibility in controlling costs. Alas, we still have far to go before we sleep… 85% of respondents believe “the cost of a test or medication is only important if the patient has to pay for it out of pocket.” For more information, see my prior post, The Morality of Resource Stewardship.

The Triangle of Healthcare Integration

competition, monopoly, economic forcesOversimplification of economic forces can lead to erroneous predictions of market behavior. During the last three years, the mantra within our industry has been “(any) integration of healthcare players will lower healthcare costs and improve clinical and service outcomes.” In fact, we are now seeing the harm that can come from the wrong form of healthcare integration.

monopoly effect upon priceSeveral newspapers (AJC, July 7), consulting firms (personal communication with representatives at Deloitte) and professional societies (ACPE, July 10) are reporting that the craze for physicians to “integrate” with hospitals (typically defined as physicians directly employed by the hospital) is resulting in healthcare prices rising, and substantially so, without value added. This regrettable outcome could have been predicted, and indeed Dr. Michael Doherty, Chief of Staff for our Permanente Medical Group, did so in early 2011. Let’s consider the three ways that physicians, hospitals, and payors can integrate with one another, and the anticipated outcome of each alliance, based upon the interests of the parties involved (modified from Dr. Martin N Gilbert’s insight, June 2013):

#1 Physician & Hospital Integration, without Payor: it’s in both of their economic interests to maximize revenue from the payor(s), who in turn have no choice but to pass on those higher costs to the corporate or public employer.  The physicians and hospital raise prices in the absence of local competition (all physician services and hospital beds are under one geographic, economically-integrated roof). Several examples of this phenomenon exist in Atlanta.

Highmark BCBS#2 Hospital & Payor Integration, without Physicians:  when these two agents team up, unit prices can be driven down (lower prices for hospital beds and professional fees), but physician behavior is unaccounted for, allowing unwarranted high volume of services (overtreatment). One recent example of this type of integration is the Highmark acquisition in western Pennsylvania.

TSPMG logo, standard version, June 2012#3 Payor & Physician Integration, without Hospital:  this form of integration has the most promise to lower costs and improve quality (both players are interested in reducing outpatient overtreatment and improving inpatient efficiencies). This is the KP Georgia model, whereas integrating the Hospital too is the KP California model.

We must create the type of healthcare integration that accounts for the varied economic interests of the various players, if we are to address America’s healthcare crisis in cost and quality. Only integration of payor and physicians, with or without the hospital, will lower costs and raise quality over time.

In Search of The Holy Grail – being successful

beautiful waterfall #1

This post concludes a four part series I’ve written this week about the search for The Holy Grail of the new and future healthcare market … integrated delivery systems (IDSs) such as ours lowering the cost of a unit of care, such as an office visit, rather than relying upon relatively lower hospital and pharmacy costs to subsidize our relatively higher office visit costs.

Certainly our patients have benefited from those higher office costs in the past (more time with the doc, more preventive care, more care coordination), but payors have said they won’t pay extra for those benefits in the future, largely because they believe those desirable attributes should be “included” in the base price of the office visit / unit of care.  They have a point … you and I don’t pay extra for our water to be clean, or our groceries to be fresh, or clothes to last more than one season; whatever we pay, we expect it to cover all basic attributes of the good or service.   Good healthcare is now considered a basic attribute by payors, whether they be individuals, municipalities or corporations.

hbr 3 rules for success

That said we must reconcile that new direction with three overarching business principles that might appear on the surface to be in conflict.  Mr. Michael Raynor and Mumtaz Ahmed, both from Deloitte, recently wrote a book entitled The Three Rules: how exceptional companies think.   They provided a summary of their findings in the April 2013 issue of Harvard Business Review:

#1 Better Before Cheaper – “compete on market differentiators other than price”.  Great brand, an exciting style, or excellent functionality, durability or convenience are business strategies superior to offering a minimally acceptable standard, trying to attract customers solely with lower price.  In the past, our one-stop-shopping convenience has been easier for our members to see and understand than our eight-years-running highest quality outcomes in Georgia.  And companies and individuals in Georgia naïve to us have more often labeled us “less expensive” rather than “superior quality and convenience”.   The “me-too competitors” in the Atlanta area are attempting to  blur our hard-won differentiation on quality and service.  So, getting our office costs from 250% of market to 100% of market, while improving the recognition of our distinctly higher quality and service, should satisfy Rule #1 – outstanding business performance is more often created by greater value than lower price.

#2 Revenue Before Cost – “prioritize increasing revenue before reducing costs”.   In our industry, this rule was translated in the past as “its more important to grow profitable membership than reduce medical costs”.  But in the new economics of US healthcare, the amount of revenue per member is becoming fixed, whether because of sequestration, defined-contributions from companies, or transparent pricing in the Health Insurance Exchange (HIX).   Discretionary medical care, such as cosmetic surgery, will of course remain in the new healthcare world, but accounts for only 0.4% of the overall healthcare market (CNN, March 2010); and anyway, that’s not our mission.  So Rule #2 is satisfied by default … as revenue is now fixed (more or less), the only strategy that will lead to higher margins is that which lowers costs – eliminating waste in the system.

#3 There are no other rules – “so change what you must in order to follow the other rules”.  The authors continue, “the absence of other rules doesn’t give you permission to shut down your thinking.  You (must) still … follow the rules in the face of what may be wrenching competitive change.  It takes enormous creativity to remain true to the first two rules.”

in summary

In summary, here’s what we need to do in anticipation of the coming era of consumerism and disintegration in healthcare:

1.       Reduce the waste of current office resources (people & space) by …

2.       Practicing at maximal scope of practice, matching patient demand to clinician supply every day if not every hour, and increasing visit rates per exam room per unit time, while …

3.       Substantially increasing the patient’s discretionary effort to better manage his / her chronic condition, through more compelling use of “connected care everywhere” and behavioral motivation

In Search of the Holy Grail – the what

monty python and the holy grail

This week I’m writing about the search for the Holy Grail of the new healthcare market … integrated delivery systems (IDSs) such as ours must now lower the cost of a unit of care, while simultaneously improving patient outcomes. This is to be differentiated from the soon-to-be old IDS model in which lowering the number of units (e.g., fewer hospital days needed for a population of patients) paid for the higher cost of an office visit (the cost of systems of integration [e.g., KP HealthConnect], space and personnel). I know what you’re thinking … Which Holy Grail are we talking about here?

But consider this … if we believe our current healthcare operations, efficient as they no doubt are, still have imperfect processes, redundancy of activity, clinician-brain use <100%, inadequate enlistment of patient effort, and inconsistent pairing of physician and nursing staff, then in fact it is possible to further reduce waste and thus cut costs for members. So, imagine a future day in which …

(1) every member of the healthcare team practiced at his/her maximal scope of practice, all the time: surgeons spent more of their time operating; physicians spent more of their time doing diagnostic and therapeutic analysis for individual patients and populations of members (and doing no nursing work); RNs did more patient education and care coordination; LPNs did no MA work … you get the idea.

(2) better match patient demand with clinician supply: all personnel needed for a specific office visit for a specific patient were present 100% of the time, and never present when not needed.

(3) more effectively use each physical asset we have: space costs lost of money to create, maintain, heat and light.  Is every exam room we now own enhancing the health of our members in that area?

(4) more thoroughly motivate the patient / member to act on their behalf; the next billion dollar drug / procedure will be that which changes patient behavior in ways she / he finds specifically beneficial to their health, rather than adherent to prescribed healthcare.

lean five steps

If we could do all four, reliably, we’d solve more patient problems in less time at less cost compared with today’s operational design.    The age of the EMR has a tendency to lower team productivity in unexpected ways – workflows designed to accommodate the latest EMR functionality defaulted to the physician doing more work, even though that new work was below her/his scope of practice, rather than doing the hard engineering work to distribute the new work to the most appropriate member of the team.

The historical difficulty of designing such maximally efficient clinical operations has been due to: (1) our profession’s insufficient ability to anticipate all of the patient’s needs at a future location and time – a manifestation of American healthcare’s decades of reactive care, rather than proactive care, (2) fighting against, rather than planning for, the inherent complexity of the human condition, and (3) our insufficient flexibility in operations to respond to those predictions and uncertainties.

castle ruins in scotland near lock ness

But we should not assume it can never be done; we simply haven’t done it yet.  In the third segment of this series, I’ll take a stab at The How … how we execute upon those four goals by redesigning operations in a manner that is more accommodating, effective and less costly – indeed, less reliant on capital-intensive healthcare, like space and people (see Of Castles and Trebuchets).

Click here to read the next post in the series, “In Search of the Holy Grail – the How”