Managed Care - January 2009 - (Page 27)

A core driver behind many of the problems with today’s health care system is the seemingly haphazard integration of very distinct business models under the same roof. For example, a general hospital creates complex treatment plans, deals with routine injuries, and catalyzes interactions between patients and caregivers. This state of affairs evolved for explicable, historical reasons. Unfortunately, combining the business models needed to deliver these propositions invites dysfunction, as each business model makes money in a distinct way, needs different resources and processes, and has different success factors. The result is high overhead, inefficiency, and frustrated physicians, administrators, and patients. Future business models in health care When the different business models function independently, the picture is very different. National Jewish Medical and Research Center in Denver is focused on pulmonary disease. The Center brings together a cross-functional team of physicians to diagnose and treat disease that has not responded to previous therapy. It achieves outstanding medical outcomes at reasonable average cost. In contrast, Minute Clinic also achieves first-class outcomes at excellent cost, but only if the patient has one of a small list of very common, easily diagnosed, and straightforwardly treated conditions. DLife.com brings together diabetics and the organizations that serve them at low cost and with high user loyalty. Each of these organizations is able to organize a profit model, set of resources, and internal processes in such a way as to deliver its customer value proposition effectively and efficiently. Separating out business models in today’s health care system requires scale and market authority. It is easier to get married than to get divorced. Managed care organizations will need to disentangle activities into distinct providers with separate delivery models, according to the type of value proposition required. There are very few businesses in which an organization succeeds by being everything to everybody. Forcing change will require integrating with physicians, and in this respect, the more integrated organizations such as Kaiser Permanente are in a stronger position vs. the more traditional insurers such as the Blues. Payers need not employ physicians directly, but will need to strongly align incentives through payfor-performance, capitation, or other mechanisms. Integration has enabled organizations like Kaiser Permanente to invest heavily in innovations such as electronic medical records (EMRs), telemedicine, and preventive care. It has lengthened the tenure of subscribers in health plans because patients are less likely to change physicians than they are to change employers. Longer tenure has made many interventions cost-effective for Kaiser Permanente while they remain prohibitive for traditional insurers. Payers will also need to construct business models tailored to emerging value propositions. In particular, the potential decline of employer-based insurance — because of laws that enable insurance portability or economic pressures forcing employers to drop benefits — may require payers to be far more solicitous of the subscriber than in the past. While payers have long serviced subscribers, few have become expert at selling to them or trying to earn their long-term loyalty through customer service. A new, subscriber-facing value proposition re- Executives can unwittingly transplant the unwritten rules governing decision-making in the core business to new ventures that must break rules to survive. quires a distinct profit system — one that makes money by having subscribers with much longer tenure than before — and a set of resources and processes that may be unfamiliar to many payers. A vast expansion of EMRs, as proposed by President-elect Obama as part of the fiscal stimulus, would have profound implications on the business model of payers. Widespread use of EMR technology would enable payers to exert much more realtime power over clinical decisions, much as the National Health Service is able to conform medical practice in the United Kingdom to accepted standards to a far greater degree than in the United States. Payers could adjudicate more claims at the point of care, reducing conflict with physicians. They could implement pay-for-performance criteria more effectively than at present, and they could steer patients to physicians with the best treatment JANUARY 2009 / MANAGED CARE 27 http://www.DLife.com

Table of Contents Feed for the Digital Edition of Managed Care - January 2009

Managed Care - January 2009 Editor's Memo Contents Legislation & Regulation News and Commentary Medication Management Compensation Monitor Health Care's Disruptive Innovations Q&A With Clayton Christensen 'Disruption' May Be Plans' Best Bet Avoid the PBM Rebate Trap HealthPartners Puts Diabetes on Notice Formulary Files Plan Watch Tomorrow's Medicine Ad Index Outlook Unmet Needs in the Management of Plaque Psoriasis Impact of RSV: Implications for Managed Care

Managed Care - January 2009

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