During the recession, Chicago's Swedish Covenant Hospital chief Mark Newton was unwilling to take draconian measures such as layoffs. Instead, he deployed a tactic from his entrepreneurial background: he challenged his staff to find ways to cut costs themselves. Read Part 1 of the story here.
The first step of Newton's strategy was to communicate frankly with staff. "We decided that if we were candid [with] our 2,200 employees, if they were told the situation, and they realized we were all in the same boat together, they would respond," he explained.
The goal was saving $3 million in a year, which was important in itself, but an additional benefit was in helping staffers internalize a sense of ownership in the institution. As the health of the institution improved, so would the health of their jobs, so to speak. The communications department got involved by setting up a visual aid—a beaker—that would indicate progress toward the goal as the year progressed.
"We reported it out every month and identified stories where people made an impact," Newton explained. "I did not have a consultant, nor did we say people had to ask for permission to use a cost-saving or revenue-generating idea. There was no wasted time in approvals and meetings. If you're doing something that needs the boss's input ask him, then do it. We wanted them to take the risk. It's the ultimate in delegation."
A few of the results:
One person in Dietary had a whole different way of buying milk and other food products. That saved $15,600 a year.
The cafeteria began selling reusable coffee mugs to save on paper and plastic cup costs.
The surgical recovery area reorganized their storeroom and created new par levels, saving $5,700.
Other employees worked on renegotiating contracts with vendors. People got involved in job-sharing ideas, meaning many departments took on tasks that were traditionally outside their boundaries. One department instituted a $20 no-show charge. Another changed how the hospital scheduled surgeries to be more efficient.
"These were things within their work environment that they could control," Newton explained.
He provided details of cost-saving measures enacted by Swedish Covenant Hospital staff:
The emergency department used evidence-based research to determine that a more cost-effective type of irrigation solution would be just as safe and effective, saving an estimated $10,800 a year.
The inpatient pharmacy implemented stewardship efforts for distribution of antibiotics, which saved an estimated $60,000.
Operational changes were implemented to reduce infection rates and improve many other quality measures.
Nursing units stopped printing lab results and other items that could be viewed electronically ;
Radiology continued conversion from film to digital images;
Medication formularies built into the EMR system mean physicians automatically order the most cost-effective, appropriate medications available
Some nursing units placed "turn off the lights" reminders by every light switch to save electricity costs; patient monitors and equipment in rooms were turned off when not in use
The surgical recovery area created a schedule to streamline staffing which saved $24,577 in overtime;
Increase in market share by 1.39% from 2008 to 2009; Volumes were higher – partially thanks to employee efforts:
Employees became active ambassadors for hospital services among family, friends, neighbors as well as physicians;
Testing and rehabilitation services departments made special efforts to encourage patients to attend their appointments, such as reminder phone calls. This ultimately improved patient outcomes and recovery.
It's rare to see this type of effort expended to avoid a few dozen layoffs, but Newton says it shouldn't be.
"I don't know why it's so rare," he says. "It's not that brilliant of an idea. It's a little unconventional. But the bigger picture is that it gets the egos and the formalities out of the way in the workplace. You deal with people respectfully, tell them how they're accountable, and they'll respond."
Although Swedish met its goal, and was able to avoid layoffs, Newton is careful to say that this type of employee engagement becomes ingrained, which is the key benefit of the exercise beyond the $3 million saved. He cautions, however, that the big, easy savings are not easily repeatable.
"You have to be very careful about this," he says. "We had to have a crisis moment, if you will, that everybody felt, and you don't want to keep going back to this well all the time. When we made the beaker goal, it established immense trust with the workforce. Leadership made a promise, and fulfilled it."
Now Newton is trying to build on the success of the beaker by getting employee buy-in on achieving eight organizational goals.
"When I introduced them, I walked through why each one was important, and I also said this is not about holding back merit raises, or layoffs, this is what we need to do for organizational success. We're building on that culture and the importance of being an advocate for the organization. Your livelihood depends on the success of this organization. If you get a paycheck, your job is to advocate and support and help us grow."
"I could be retired in the Hamptons right now," said the Chicago hospital CEO.
He said it in a joking kind of way, but it's clear Mark Newton knows he's given up a lot to be the president and CEO of Swedish Covenant Hospital, a 120-year-old, 206-staffed-bed community facility on Chicago's North Side.
Newton, who's led the hospital since 2000, is a healthcare entrepreneur with the MBA to prove it from the Kellogg School at Northwestern University. He came into hospital leadership after a career in marketing for Baxter Worldwide, an international pharmaceutical and medical device company.
"Initially it was a management challenge, and now that's evolved to a sense of appreciation for the ability to impact people in a positive way. I appreciate the intellectual challenges this provides. I could've gone to work for Goldman and I could be retired in the Hamptons right now, and there are times when I think that was a career choice mistake," he says with a chuckle.
But only rarely does he have those thoughts anymore. Newton sees himself as a healthcare entrepreneur, and says his breed is scarce in hospital leadership. And more important than what he's given up is what he's gained.
"I have so much appreciation for when you solve one of these issues and see how it helps people," he says.
By one of "these issues," Newton is talking about patient volume declines that came with the recession. Other leaders, when faced with similar challenges, enacted layoffs or other draconian cost-cutting measures.
But before we get into how Newton avoided doing that, a little background is necessary. He comes by his entrepreneurship naturally, and his early life prepared him to find unconventional solutions to common problems.
When he was 11, Newton noticed a lot of litter accumulating around the new Glenview McDonald's. He wrote the manager, asking for a job cleaning up the litter in the area. And he got it, even though, he says, "I was technically underage."
He took the $840 he made over the next three years and bought McDonald's stock. That purchase eventually allowed him to pay his way through college, buy a car, spend a summer in Europe and complete graduate school.
"Looking at new ways to solve old problems is part of who I am," he says. "I learned the benefit of that through [the McDonald's] circumstance."
Unconventional leadership is how he describes his style, meaning that he and his lieutenants—as well as the rank and file—see the value of taking risk. There are benefits of taking risks, he says. Leaders and organizations separate themselves from the pack by being able to change quickly.
"In healthcare, people are risk-averse. Complexity is often the excuse for that, and it's there, but you have drive through it. Lean into the change."
In his case, leaning into the change meant he would forego any draconian measures to save money.
"I've been disappointed in many business leaders over the years on layoffs," he says. "They are sometimes necessary, but they're very simple strategies. It doesn't take a smart person to say I'm going to lay off people."
Instead, after a very frank discussion on the challenges Swedish faced, he challenged his staff to find ways to cut costs themselves.
How Swedish Covenant Hospital staff rose to the challenge is a story in and of itself, and we'll tell it next week, in Part 2: How a CEO Empowered Staff to Save $3M and Their Jobs
Numbers have a strong power to influence. In persuasive arguments, either Benjamin Disraeli or Mark Twain once said that there are three types of lies: lies, damned lies, and statistics -- statistics, by Twain's reputation, presumably being the most potentially fraudulent of the three. Statistics, however, can be useful and enlightening nevertheless. The lie is not usually in the statistics themselves, but in how they are used to support or detract from an argument.
In that vein of thinking, I have information from two surveys to share with you this week about hospital CEO turnover rates and job satisfaction, and I'll try not to lie in my interpretation of what they might mean.
First, in a report released by the American College of Healthcare Executives this week, hospital CEO turnover was found to have decreased slightly in 2010, at about 16% nationwide, down from a historically high rate of 18% in 2009.
Before that, according to the report, turnover fluctuated between 14% and 16% between 2001 and 2008. Thomas Dolan, the president and CEO of the organization, calls the 16% number "still too high."
Well, that's a matter of opinion and perspective. Certainly, turnover among the highest ranks of such complex organizations can be disruptive, but that's not necessarily a bad thing. Sometimes, such disruption, especially if the CEO is not effectively leading the organization to growth and higher quality care, can be an exceptionally positive thing.
However you feel about CEO turnover, one metric in our HealthLeaders Media Industry Survey 2011, might better explain part of the story. In short, CEO job satisfaction has shrunk significantly the past three years we've been tracking it. Indeed, since 2009, when our survey was first conducted, the percentage of CEOs who rate themselves as "very satisfied" with their overall job satisfaction has shrunk from 49% in 2009, to 45% in 2010, to 37% in 2011. That's certainly not a good trend line.
What's happening?
A number of factors are conspiring against CEO job satisfaction. Certainly, running a hospital is becoming more complex and demanding, and many pundits say that nonprofit CEOs--about 80% of hospitals are classified as nonprofit—are overpaid. That would be news to many of these people who could earn substantially more in a for-profit setting, but certainly, the job is getting more complicated, not less.
Simple math tells us that the majority of hospital CEOs are heading standalone community hospitals. They face a particularly difficult slog in the coming years as reimbursements are ratcheted back, and as many of the requirements of accountable care seem to favor large institutions with the infrastructure, expertise and, let's face it, investable capital to make a margin on what many see as a declining overall revenue base for hospitals in the foreseeable future.
Many of those hospitals might be squarely in the crosshairs of an acquisition or merger with a larger, multi-hospital system. If job security is a big part of job satisfaction, that's certainly a reason for the pessimism.
My point is that leadership is needed, and it's a frustrating time to be a leader of an organization that is in the midst of perhaps the biggest transformation in history—the movement from volume-based growth to growth based on quality and value. It's a necessary transformation, but it's got to be difficult to digest, especially for proud executives of proud institutions that might be on the eve of disappearance as independent entities.
A turnover rate of 16% might indeed be too high, as the ACHE president opines. But if the numbers from our survey are to be believed, we might see a 16% turnover rate as a pretty low number in years to come.
Methodist Charlton Medical Center in south Dallas is staffed for 225 beds but its emergency department volume is equal to hospitals two and three times larger, says its president, Jonathan Davis. That's why when the ED is having problems, the rest of the hospital's problems are even bigger.
The process challenges at Charlton's ED were numerous, but they all boiled down to a left-without-being-seen rate of 8-10% when Davis arrived 16 months ago.
Since 1975, when Charlton was established as a "feeder" hospital, says Davis, it's seen more than its share of ED visits. That's a challenge in itself. The ED is a magnet for the uninsured, who know they can get care there even if they can't anywhere else.
"We were effectively turning away 5,000-7,000 people a year," he says. "Everyone who left told 10 more people that you can't get in here."
In the past, hospital leaders perhaps didn't recognize the ED's central role as the single biggest source of admissions for the hospital. At Charlton, 65% of its admissions come from the ED. It's not that ED processes and efficiency were intentionally ignored in the past, but it's hard to get motivation for change when the perception is that of the people who are leaving perhaps half of them aren't going to generate any revenue. In the past several years though, that faulty reasoning has been turned on its head.
"The ER is the driver for operations," says Davis. Even without considering the patient care implications of a LWOBS rate at 10%, he says, "we were doing ourselves harm by not having efficient processes. So when I came in, that was the biggest priority."
It was probably the biggest priority for his predecessors too, but they couldn't get it fixed, despite the fact that prior to the latest re-engineering exercise led by Davis and Charlton leaders themselves, three separate consultants hired to fix the problem failed.
It wasn't because they weren't competent, says Davis, who, of course, wasn't around when they did their work. Rather, it was that no one knows the reasons why an ED isn't working properly better than the people who work there and elsewhere in the hospital.
"We placed so much focus on the ER, but we couldn't fix the problem because it was really an organizational issue," Davis says. "We had to get everyone involved."
He found new leadership for the ED. He formed a committee to recommend process changes that included nurse directors, all the administrative leadership, the case management employees and two key physicians. He sent all members of the administrative staff to work in the ED at various times in order to observe and understand the problems faced by the people working in moving their patient load through the ED efficiently. One lesson learned meant that they added a physician in triage to deal with the 30% of cases in the ED that were non-emergent.
"You've already seen the patient and ruled out the emergency, so treat them and let them go rather than sending them back to the waiting room," he says. "If we send them to the waiting room, that's a failure on our part."
The team also looked at occupancy challenges in its inpatient tower. Some were getting outpatient treatment, but using inpatient beds, he says. "We found a new space to meet those patients' needs and not interfere with occupancy."
By pulling reams of data, they noticed that a number of patients could be directly admitted to the hospital not through the ER but from a physicians' office.
Local physicians had complained about the ER being overcrowded, says Davis, whose team decided to create an express admission unit in daytime for physician offices. Today, the outside physician can call a hospitalist and then send the patient directly to the express admission unit, which unburdens floor nurses and gives patients a bed.
Finally, Davis and his team found a way to reduce the volume of non-emergent patients coming to the ED by opening—just last week—a QuickCare clinic on site that's staffed by a physician, a nurse practitioner, and a nurse, 11 hours a day and 12 hours over the weekend.
And he and his staff did it all without outside help. Not bad for a hospital CEO who 20 years ago was a physiologist in Jonesboro, AR. Davis explains his philosophy on solving problems internally when possible.
"I think we as administrators and operators sometimes fail to spend enough time getting to know the business, so we hire good consultants. But sometimes when they leave no one owns the solution," he says. "If we solve the problem, we all understand the issues and figure it out collectively, we never have to get reoriented. It's a process we all have grown through together."
This year, Charlton is seeing many more patients in the ED, and the all-important LWOBS rate is much decreased, although the true impact won't fully be known until the end of the fiscal year, Davis says. Having spent time as CEO at small hospitals in Arkansas, Kansas, and Texas before coming to Charlton, Davis says the ED is the perception-driver in every community in which he's worked.
"Our lesson here is we're not spending money on a facility when we can't improve the process within it," he says. "Operators today really have to understand the business from a grass roots level. Listen to your staff, your community and support it with data."
Once upon a time, physicians, as a group, resisted attempts by private payers and others, to force them to practice safer, more efficient medicine by standardizing patient interventions and the timing of those interventions based on disease states.
Why? Something was lacking. Make that a lot of somethings. The ability to crunch outcomes data from many sites of care was a critical unmet need in previous efforts to standardize care and eliminate duplicative and inefficient medical decisions that cost the health system billions. It was simply impossible to collect this data and draw conclusions from it to recommend changes in care pathways.
At the time, physicians were on solid ground in refusing to follow so-called evidence-based guidelines. They were able to successfully argue that the practice of medicine is largely an art, with wide variations in outcomes more dependent on patients' differences than on their common disease states.
Sometimes, these rules and regulations limited the physician's ability--based on his or her medical education--to treat the patient as he or she saw fit. But most importantly, the evidence for some of the rules was incomplete, flawed, and, they argued, it was being forced upon them by health plans. Some argued that such rules were based more on saving costs than on the improving the welfare of the patient. It was impossible to standardize treatments for patients with certain maladies because each patient reacted differently to the types of care prescribed, they said.
That critical contention was wrong, and now that reams of data from thousands of patients with similar disease states can be sliced and diced, it's becoming evident (no pun intended) that best practices, should they be followed, are better not only for patient outcomes, but for costs as well.
You won't find too many physicians who will debate that point anymore. According to results of the HealthLeaders Media Industry Survey 2011, senior healthcare executives ranked quality and patient safety among their top three priorities. But it's still difficult to gather the large amounts of information necessary for best practices to be developed. At least it has been.
Paul Grundy, MD, is hoping that will change quickly. He leads a massive effort by his employer, IBM, and the Premier Healthcare Alliance, to integrate healthcare data from hospital and non-hospital care sites to measure performance and improve population health.
Grundy, who is IBM's director of health care transformation, says the effort will involve more than 2,400 hospitals and thousands of other sites of care (physician practices, outpatient clinics, etc.) Those participants will share their data about outcomes to gain insight, measure performance and improve population health. The project, they say, will support hospitals, doctors and other health providers in working together to enhance patient safety while reducing the overuse of procedures, readmissions, unnecessary ER visits and hospital-acquired conditions.
"We're moving to a place where we'll have data—and actionable information--for the first time," he says. "This is beginning to help build the tools and solutions to make use of that data."
The key, though, outside of the data, is physician direction and accountability, he says. In addition to the data component, the effort is meant to provide this information to physicians so that they set standards for themselves by which they will be held accountable. Contrast that with the old-time utilization reviews that HMOs used to employ and it's a quantum leap forward.
Regarding the purchase or use of clinical technology, healthcare leaders rated high quality care and physician alignment as their top priorities, according to the 2011 HealthLeaders Media Industry Survey.
By using cloud computing, the system is aimed at providing physicians clinical decision support, analytics, data, and a quickly accessible dashboard, so that they have much more information about the patient.
"They'll know whether their patients have had that last blood test, whether they're taking their prescriptions," says Grundy. "The system knows whether or not you're actually doing the right thing and can see which docs are managing disease and which ones aren't."
By putting these powerful tools in the hands of physicians, who have developed the standards by which they'll be judged, and you have a very powerful set of tools for better outcomes and lower costs.
"You have the docs tell you what they want to monitor," he says. "They decide how they want to judge themselves. And when they do that they are very competitive."
Of course, this isn't the only pilot or demonstration project going on with the objective of providing better patient care at a lower cost. But it might be the biggest. Challenges remain, and Grundy expects to learn much more that will change the system as it matures.
"If docs are determining the stuff they want to monitor, how do you keep from reinventing the wheel every time you add a new facility or physician practice?" he says.
Or, how do you deal with natural language ability, massive amounts of information, and structuring it so the human mind will understand.
"It comes down to playing a game of Jeopardy!," he says.
Interesting interjection, because speaking of Jeopardy!, which is involved in another IBM project that's getting a lot more media attention than this one, I hear that a human, (a Congressman, no less) has finally beaten Watson.
Something tells me IBM didn't develop this computer with an idea that it would confine its talents to wining at a game show many more times than it loses. Maybe Watson is seeking a new challenge.
For as long as I've covered healthcare, I've heard both policymakers and big-time health system CEOs complain about the problems the uninsured cause—not in a blaming sort of way—rather, in a way that bemoans the system and the costs.
What they're really saying is that it's a problem that should be easier to solve than it is. Government insists these people be treated, at least in emergency situations, but seems less concerned that they run up huge bills that no one is willing to pay for.
Don't misunderstand me. I'm not even close to saying that the vast majority of the uninsured are going around without health insurance because they just want to stick it to the man. And to its credit, government is trying to do something about it by covering a huge percentage of them under the reform law.
But in a sense, the uninsured is a problem created by the government. Less than a hundred years ago, after all, just about everyone was uninsured. So what's my point? At least one doctor believes that health insurance, as we've created it today to pay for just about everything health-related, is not really insuring against catastrophe, which is the definition of most forms of insurance.
We've all been through that argument before, comparing health insurance to homeowner's insurance or auto insurance. And this is not that argument. But this physician is backing up his talk by going uninsured. That is, the medical group he runs doesn't take it, file for it or get paid by it. His patients pay cash, but they don't fit the wealthy profile you may assume.
Boutique medical practices aren't new, and in a sense, Garrison Bliss's practice is as much a boutique as any of them. But to take a look at what it costs his patients to come there, and the first word that comes to mind to describe it most definitely wouldn't be "boutique."
Bliss, a 60-year-old MD, and president of Qliance Medical Group in the Seattle area, hasn't "taken a nickel of insurance money since 1997," he says. Forming a practice that would survive and thrive under that model, he says, has been an "intentional effort to create an ecosystem for healthcare beginning at the foundation, which is primary care. Healthcare here is designed to get better and cheaper rather and worse and more expensive."
In short, Bliss believes in the power of shopping and the free market to cut prices for medical care, and remove the complexity—at least from the primary care system. It all began about 15 years ago, when two of his then-partners began the first monthly fee practice in the US. Patients paid a monthly fee and then were allowed to contact their doctors as much as they wanted, and see them whenever they wanted, for a flat retainer fee.
"That seemed crazy at $1000 a month," he says.
It probably was. It was also prime shooting gallery material, with detractors rightly claiming monthly fee practices were only for the rich.
So Bliss refined the offering for himself and his practice.
"I decided to do something just like that but I would do it at the lowest effective price," he says. The highest price for any of the practice's patients (usually the oldest) was $65 a month. It was $30 for children and teenagers. In return, patients got all their primary care free, including 24-hour access to physicians, clinics open 12 hours a day, and needed x-rays and lab work—and sometimes prescription drugs--is included. Further, their docs would admit them to hospital if needed.
The price has risen since then, to between $44 and $84 a month, but the services remain. That allowed his patients to obtain insurance for truly catastrophic events—at much lower rates, in most cases.
"This is a great front end for a health plan," Bliss says. "If you're offering high-deductible health plan, and making employees pay a big deductible, they're very invested in not getting into co-pays or deductibles, and you're highly invested as an employer too."
Such a system allows employers to self insure in the small-dollar arena, says Bliss, "where most insurance companies are making their money right now."
It's also better in that doctors are incented to do the right things, says Bliss.
"We don't get paid for doing stuff. We don't get paid to refer to the hospital. We don't get paid if the insurance company makes more."
Bliss is highly interested in the national appeal and scale of the idea. In fact, he's banking on it. Bliss has partnered to start up a company called Qliance, which includes Qliance Medical Group as well as Qliance Medical Management. The latter assists other practices in setting up similar insurance-free business models.
"We will provide tech infrastructure and access to patient sources we've developed. We'll also measure quality and performance, and provide access to a medical record system," he says.
Who's interested? You might be surprised.
"Anyone who now wants the price of healthcare to go down," says Bliss. "Insurance companies used to have no vested interest in lowering costs. But there are places where insurance commissioners are now saying they can't raise rates to levels they would like. When that stuff happens, insurance companies become very interested in controlling costs when they have previously looked the other way."
Bliss calls the Qliance system a "power tool for them," adding that his practice has demonstrated reduced ER use by 62%. Hospitals too, are now getting interested, he claims.
"They are in an uncontrolled cost rise environment and the ACO animal is knocking at their door. They're realizing that all of their centers of excellence, which I call centers of income, will start to be cost centers in this new world."
Put simply, they're looking for a model that can produce healthier patients at a lower cost.
Don't think Qliance is the only game in town for this kind of medical care. Deep in the health reform law is a reference to "direct practice." That's the preferred name Bliss calls his idea. And it's an option in how the insurance exchanges are allowed to be designed. Stay tuned.
It's only February, but I nominate the acronym "ACO" as the most popular yet least understood shorthand of 2011.
We're not even completely sure what an accountable care organization is (they're still the domain of demonstration projects), yet that doesn't keep healthcare CEOs from saying overwhelmingly that they plan action to bring their organization up to the standards. In fact, 74% of hospital chief executives surveyed say they either already have the components in place to be considered an accountable care organization or that they will within the next five years.
Clearly, they're using the guidelines in the demonstration projects as their measuring stick. That's just one of the interesting nuggets of information available in our annual HealthLeaders Media Industry Survey.
While the concept is top of mind for today's hospital and health system chief executives, the rules need to be well understood before embarking on an undertaking this big. And a lot of those rules are still up in the air. So how do you prepare for something that's just at the experimental stage at this point?
Good question. It's worthwhile to note how the 74% mentioned above breaks down. Turns out, only 16% believe they have the necessary components now, while 60% expect to have them within five years. That seems to reflect the uncertainty of the venture. And make no mistake, it will be a venture in addition to being an ad-venture, for most of these leaders. By that, I mean significant investments must be made at most hospitals and health systems to achieve ACO status, even by the extremely limited information available at this point about how best to form one.
Most of them boil down to the significant investment required for an uncertain return. While many hospitals and health systems are used to that kind of backwards engineering thanks to the fact that somewhere near half their revenue comes from government sources, this time making those calls about spending and culture change can be especially risky.
Risk. Isn't that what ACOs are ultimately going to be about? Who's going to step up and take the risk involved in capitating spending for certain diagnoses in the hopes that the actuaries have actually gotten it right, and that a margin can be made? Health plans have failed at this trick. Are healthcare provider organizations going to figure out how to get it right?
The jury's still out on this question and a host of other difficult managerial challenges outlined our survey this year. But you can get a great sense of what the decision-makers of the industry are thinking regarding a multitude of challenges.
To wit:
58% believe that healthcare reform legislation has weakened their organization's financial position, while 53% believe it has weakened morale
Only 15% say their organization is likely to be acquired, despite the fact that we've seen heightened acquisition and joint venture activity since the legislation has passed. 31% believe they're likely to acquire others.
24% of service line leaders have zero authority to make strategic and purchasing decisions correlated with their service line.
67% believe the percentage of employed physicians at their organizations will grow in the next three years.
These are only a few of the nuggets of information chief executives took time out of their busy schedules to inform us—and you—about. Take a couple of hours to pore over the information.
100% of me assures you it will be time well spent.
We all recognize that healthcare has lots of problems. To name a few, it's too expensive, it often harms patients rather than heals them, and it's highly inefficient.
So what? Lots of people think they have solutions and lots of others feel like many of healthcare's problems are unsolvable. But I disagree. People once thought that circumnavigating the globe was impossible. They also thought that about transatlantic solo flight and putting a man on the moon. Yet all of these things happened.
In some cases, the process of achieving these high-profile goals was helped along by either massive government spending or prize competitions. We've got the massive government spending in healthcare, and so far, it hasn't achieved the goal of a safe, quick, efficient healthcare system. So why not go the prize route?
Perhaps you've heard of the X Prize. That's a brand name, but such prizes for being the first to achieve big, audacious goals such as Charles Lindbergh's transatlantic jaunt have been commonplace for more than a century. More recently, the Ansari X Prize was awarded for Burt Rutan's development of a vehicle that can carry three individuals to 100 kilometers above the earth's surface, twice within two weeks. He won $10 million for the effort.
What about funding innovation in healthcare this way? It's not a big leap to consider a healthcare X Prize. First off, the X Prize Foundation has multiple prizes in play at any given time. Secondly, there already are X Prizes for healthcare—sort of. But they're really all about technological improvements in clinical products or healthcare research.
For instance, one of the more fascinating X Prizes available for Life Sciences is the Archon X Prize for Genomics. It will award $10 million to the first entity that can map 100 human genomes in 10 days. The prize is based on the idea that cheap and quick genomic analysis will allow physicians and other healthcare workers to quickly identify diseases for which a particular patient is susceptible, as well as treatments that might work better for those people than others.
The obstacles to this reality are currently the cost of mapping and the time necessary to do so. Thus, the 100 genomes in 10 days stipulation. This, and many other X Prizes, are valuable incentives to get people working on very difficult problems that currently have no solution.
However, and this is my point, there's not really anything available for those who would improve healthcare administration. We know that's where the waste is. But it's difficult to determine simple quantum leap-style criteria on which such an award would be based.
What would such a prize seek to reward? How would it be structured such that it is a sort of a race? How could such a prize garner the national spotlight the same way a race to orbit might?
I don't know. I don't have a clue as to how to structure a prize that would improve quality and lower cost in healthcare such that it could be objectively judged. Smarter people than me need to figure out the goals. All I know is that healthcare is drastically in need of innovation in this area, and perhaps an X-prize would lead to quicker progress on these fronts.
As I mentioned, X-prizes are for specific improvements. And having struck out on ideas myself, I'm looking for some interesting ideas from my readers. So please, if you have any, I'd be interested in getting this conversation off the ground. Please email me with any suggestions, and please keep out of the life sciences realm. As I mentioned, they already have several prizes there.
I'll share any ideas that seem interesting in a future column.
Amazing what you'll find when you spend a few minutes each day cleaning out your email box. Doing so was one of my New Year's resolutions, and one I've actually been able to stick to for more than a month. Anyway, while doing this mundane and hated task, I ran into a survey that I found pretty interesting, given this week's developments with health reform in the court system.
Here's what was interesting about one press release I stumbled across: Almost two years ago today, public support for the individual mandate included in healthcare reform legislation, which came to be known as the Patient Protection and Affordable Care Act, was actually pretty strong, if a scientific survey from the influential journal Health Affairs is to be believed.
The survey focused on the public support for the mandate. In short, in a telephone survey of 1,704 adults age 18 and older, conducted between Feb. 14 and Feb. 24, 2008, half of the respondents were asked about a standalone mandate. The other half were asked about a shared-responsibility plan containing an individual mandate. Support was somewhat tepid for the standalone mandate, at 48%. However, 59% of those surveyed supported an individual mandate when it was part of a shared responsibility among government, employers, insurers, and individuals.
That kind of mandate is what eventually made it into the legislation. Beginning in 2014, among other requirements, insurers are no longer allowed to exclude individuals based on pre-existing conditions. They're also prohibited from capping benefits for their insured population in a lifetime maximum methodology. Government is doing its part by covering many of the previously uninsured. Employers (at least those who employ at least 50) are being forced to either provide a certain level of insurance coverage for their employees, or pay a schedule of penalties based upon their coverage levels. Individuals, well, they'll be required to carry health insurance, or pay a penalty themselves, albeit a very small one.
Yet it seems fairly likely, based on developments this week, that despite that support, the mandate is in serious trouble—not from the public, but from the courts. And if the individual mandate is in trouble, so is the entire law.
Just read what Senior U.S. District Judge Roger Vinson wrote in a 78-page ruling. "This case is not about whether the Act is wise or unwise legislation. It is about the Constitutional role of the federal government. Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void."
The ruling will likely be appealed by the federal government at the U.S. Court of Appeals in Atlanta, and the case is expected to be heard eventually by the U.S. Supreme Court. It'll make it that far, bet on it.
Speaking of betting, I don't know whether they're taking bets on this in Britain, where the off-track betting parlors will take a wager on just about anything, but I'll be the odds are against the law surviving, given the Court's current 5-4 split, Republican to Democrat.
So does that put us all back to square one if the law is struck down on Constitutional grounds? In some ways, yes. The uninsured would remain uninsured, I suppose. Insurers could go back to their old way of doing things. And hospitals' bad debt expense (as a result of those uninsured seeking care without any means of paying for it) wouldn't be cured anytime soon either.
In other ways, no.
Much of the focus on cost and quality doesn't depend on the legislation's survival. In fact, despite its huge scope, cost control and quality were two big items that left a noticeable hole in that many feel they received short shrift in the legislation. Commercial payers, and even CMS, will move forward on many of these efforts regardless of what happens to PPACA. Many of the more innovative hospitals and health systems are re-engineering to meet these new standards. So stay tuned. If you thought last year's progression toward the legislation's actual passage was turbulent, you've seen nothing yet.
Venture capital has lost a little bit of its swagger from the wild Internet speculation frenzy that fueled such unforgettable dot-com disasters as Webvan (a home deliverer of groceries), and Pets.com. But apparently, not in healthcare, which positively screams for innovation.
Apparently, some health systems don't feel like they can do that effectively in-house, as several have seeded venture capital startups through funds set up to innovate healthcare delivery.
Most recently (in fact, this week) a group of for-profit and nonprofit hospital chains joined forces to form a strategic venture fund called Heritage Healthcare Innovation Fund LP. To borrow a line from Bill Murray's character in Ghostbusters, what's next? Human sacrifice? Dogs and cats living together? Mass hysteria?
Community Health Systems, Vanguard Health Systems, and Lifepoint Hospitals, all based right here in my backyard in the Nashville area, will join two other nonprofit health systems in investing $10 million each to fund startup or early-stage companies focused on healthcare innovation. Is it strange? A little. Is it a good idea? Probably.
They're not the first to do this, after all.
I wrote a story a couple of years ago about a similar fundowned and managed by the nation's largest Catholic nonprofit health systems, Ascension Health. Ascension not only funded the group, but the group of former Wall Streeters even opened and staffed an office at the St. Louis-based system's headquarters to fund innovative healthcare companies.
Now called Ascension Health Ventures, the fund dwarfs the new $50 million fund announced earlier this week, and it should. It's been around a long time, and has an impressive portfolio of companies you may have heard of, including Accretive Health, a revenue cycle management company; Augmenix, a medical device company; and Emageon, a now-Nasdaq-listed archiving and workflow software company. In fact, they started the whole thing about the time of the implosion of those dot-com companies—in 2001.
Joining the three for-profits in the Heritage startup will be nonprofits Iowa Health System and Trinity Health of Novi, MI. Both are big, successful players and are seeking to take advantage of the significant dollars available to companies that can help hospitals become safer, more efficient, and more innovative.
When you think beyond the immediate incongruity of nonprofit hospitals investing directly in for-profit companies, this kind of investment vehicle makes perfect sense. Nearly all nonprofit hospitals and systems have an investment portfolio to smooth out the financial highs and lows inherent in a business that depends on as much as 50% government reimbursement (which often doesn't even cover the cost of the treatment provided).
Those hospitals and systems have wide latitude to invest that big pot of money as they see fit. And as Ascension CEO Anthony Tersigni suggested when we talked about Ascension Health Ventures a couple of years ago, it makes a lot more sense than buying a basket of stocks or a fund of funds filled with companies unrelated to healthcare.
"Why shouldn't we take a portion of our investment portfolio and invest in companies that not only will give us an investment return but also the potential to transform the healthcare industry and significantly enhance quality patient care?" Tersigni said back in 2008.
