By Joel French, CEO, SCI Solutions
“There are those who begin revolutions and those who benefit from revolutions.” – Napoleon Bonaparte
As a continuation of the series – Population Health Management is a Verb – we consider two unrelated industries as analogous to the health industry’s transition to value-based reimbursement. Each of these market sectors has been fundamentally disrupted and improved by network technologies and on-demand business models. Nearly all of us have observed the change in the second example, but most are much less familiar with the first.
For decades, the costs of shipping finished goods to market were burdened by terribly inefficient labor and logistics practices, often representing up to 25 percent of the cost of the products themselves. These costs often rendered international trade unprofitable.
On April 26, 1956, ocean-borne container transport was introduced by innovator Malcolm McLean, with the shipment of a Sea-Land container aboard the IDEAL X from Newark, New Jersey to Houston, Texas. In 1966, Sea-Land’s FAIRLAND undertook the first international shipment of containers. Today, Maersk Line (successor to Sea-Land), headquartered in Copenhagen, Denmark, is the world’s largest container shipping company, providing ocean transportation in all parts of the world.
The overwhelming cost, convenience and logistical advantages ushered in by container-based innovations have been the key enabler of today’s global economy. Today, sixty years after McLean’s original innovation, 90 percent of all goods arrive via container shipment.
In an imperfect attempt to identify analogous elements, the ports of call are tantamount to health care facilities – hospitals, clinics, ambulatory surgical centers, etc. Each has within its walls some level of electronic health record that is today’s equivalent to what the old ports once used to do their labor schedule management, shipping manifest tracking, etc. The containers, the container ships and cranes represent the intermodal component – comparable to the care transition tools that can translate orders from referring providers into insurance-approved patient appointments that are clinically appropriate, in network and much faster. Similar to the evolution of the shipping business and its impact on world trade, population health management leverages network-driven practices to scale medicine, industrializing health care by automating mundane practices and empowering practitioners to supply individual demand with more personalized care.
The second analogy is the disruption of the taxi cab and sedan service dispatch that formerly was a control point. Taxi fleet owners would bid for prized medallions that used to be seen as core to creating oligopoly control over markets. These local taxi firms telephonically and electronically managed their capacity (available cabs at any point), demand (inbound calls from passengers or curbside riders hailing) and rate cards in a local information system that was tantamount to an electronic health record. It created convenience for the taxi firm and helped manage drivers. By exposing the capacity (drivers), demand (riders) and rate rules to the Internet, Uber and Lyft have completely disrupted the taxi industry, making information liquid, allowing consumers to buy from their phones and giving control to the lowest common denominators – riders and drivers.
The fee-for-service reimbursement model that has pervaded for decades is in the process of being systematically unwound. It will be replaced over the next 10 years with a series of value-based care or fee-for-value payment models that are better aligned with Triple Aim goals of lowering costs, improving quality and patient satisfaction. The federal government and leading commercial insurers have announced commitments to shift the majority of their provider reimbursements to value-based programs by 2019.
As SCI clients increasingly consider how to profitably manage populations of attributed members with various chronic and co-morbid conditions, they will require proven methods of reducing gaps in care (such as a diabetic that does not get their A1C, foot exam, eye exam) while directing clinically appropriate utilization to low cost, high-quality providers within their network and avoiding unnecessary utilization.
Health systems, providers and payers will continue consolidating and determining how they can become survivors in an environment where hundreds of hospitals will be disadvantaged, sold or replaced by successor entities – and they need a beacon of clarity to help them navigate safely across unchartered waters in dense fog. By any objective measure, their incumbent legacy vendors have failed to deliver on the promise of information technology to enable sustainable process improvements. Industry consultant recommendations and management practices that have been applied in the past have likewise failed to create lasting results and have wasted hundreds of millions in scarce capital. There is growing awareness of the need for something better, using fundamentally different technologies and new business models. Peter Drucker wrote, “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”
The difference between extraordinary and just good is found on the margin. There are 350 million American citizens depending on our health system to improve.