Lessons from the nation's top intelligence bureau can help healthcare CEOs and other senior leaders prepare their organizations for the day when value replaces volume.
Michael Leavitt learned about weak signals from his time as Secretary of Health and Human Services from 2004 to 2009.
It's a cabinet position, of course, but what many people don't know is that it is in the succession line for president.
"It's kind of like telling the eighth-string quarterback to pay attention," because he might end up going in the game, Leavitt jokes. He delivered the keynote address at the Malcolm T. MacEachern Memorial Lecture and luncheon at the American College of Healthcare Executives' 2016 Congress on Healthcare Leadership in Chicago this week.
Actually, the secretary of Health and Human Services is 11th in line, but who's counting?
Regardless, we are all in pretty serious trouble if the Health and Human Services secretary is taking the presidential oath of office, but one of the responsibilities of people in the presidential line of succession is understanding current conditions in relation to domestic and international security.
This select group of people receives a version of the president's daily briefing—a top-secret document prepared by the director of national intelligence daily, and culled from the work of analysts from CIA, FBI, the Defense Intelligence Agency, and the National Security Agency.
A CIA colleague explained to Leavitt that the daily briefing was an attempt to make sense and some predictions based on what he called "weak signals."
Read the Signals; Find the Links
The idea behind the daily briefing is that if analysts can effectively synthesize information from events going on around the world from disparate sources and give them shape, they can heighten focus for the president and help avert many negative situations. The analysis an also provide clues on how to develop contingency plans should certain events take place.
"This is a very important part of the way we stay safe," says Leavitt.
Had the daily briefing existed in 1941 (it debuted 20 years later), the attack by the Japanese that sunk the majority of the U.S. Pacific fleet in the first battle involving the United States in World War II, might not have been such a surprise. There were plenty of weak signals—and even some strong ones—that were missed by many people prior to that attack. Partially, that's because no one linked the weak signals.
But as Secretary of Health and Human Services, Leavitt never found these daily briefings of much use, until he mentioned to a CIA colleague how much time he felt was wasted in going through them each day. The man responded that Leavitt just wasn't using the tool correctly.
Give tasks to these CIA operatives, he was told. If you give them questions to answer that are relevant to you and your priorities, they'll give you information that is relevant.
The CIA colleague said something else that stuck with Leavitt, and it applies just as well to executives who are trying to make the critical determination of how quickly value-based reimbursement is coming to their organization's market (there are 316 distinct medical markets in the U.S., according to Leavitt).
The CIA operative told Leavitt that major intelligence failures are usually caused by failures of analysis, not failures of collection. In other words, the signals are there. It's up to you and your executive team (the analog to CIA analysts) to accurately interpret them.
Three Questions
So Leavitt asked the executives in the room to task themselves and other organizational leaders with answering three questions on the volume/value transition as it applies to their local market:
1.Will value actually replace volume?
No weak signals here anymore. The answer is yes. Last week Medicare issued a proposed rule for part B (drugs administered in hospital outpatient departments and physician offices) that will incorporate outcomes and value analysis, which will dramatically change how drugs are reimbursed in hospitals. It's also already announced that 50% of CMS payment will come through alternative payment models by 2018. The number of lives in ACOs, about 25 million now, according to Leavitt, is tripling every two years. Value based purchasing has bipartisan support.
"Some say take a wait and see attitude," says Leavitt. "Do it at your peril."
2.If value does replace volume, how quickly will it occur in my market?
The trend is happening at different rates in all markets. Misperceiving how quickly it's happening is dangerous, says Leavitt. This is vital to success and monitoring it is of great importance.
Leavitt, who is founder and chairman of Leavitt Partners, a healthcare consulting company, says his firm has been working on trying to predict the speed of the shift from volume to value, and while it has not yet reached the point of being predictive, it has identified a series of factors that will increase or decrease the speed of the transition locally.
"If I was reporting to a board and my career was dependent on how quickly the shift was coming, I would be gathering the weak signals and watching them closely," he says. Factors such as the presidential election winner, whether interest rates normalize (which would increase the cost of borrowing), whether your state has expanded Medicaid and the speed and extent of commercial insurer adoption of value-based contracting are just a few factors that will affect the transition.
"Making sense of the weak signals will provide opportunity for you to be right, but not all weak signals are created equal. You need to weight them by what's most important," he says.
3.Do my organization and its partners possess the competencies to succeed in a value world?
The readiness of organizations to assume risk is not fully mature, in most cases, says Leavitt. In that collision there will be tension, so being able to ascertain your own readiness and that of your partners is a key competency, and requires monitoring and frequent assessment.
The signals are there. Like the signals that presaged the Pearl Harbor attack, in healthcare, they're often misinterpreted, ignored, or overlooked because they fail to fit into the predominant mindset, says Leavitt. Geopolitics is not only place where missing weak signals has serious consequences. It's also true in business and economics.
Blockbuster Video missed the weak signals. Kodak owned digital technology but missed the weak signals that may have helped them determine where it was going. Blackberry also missed weak signals. Look what happened to them, Leavitt says.
Don't be next.
Philip Betbeze is the senior leadership editor at HealthLeaders.