Spare any change?

The Oregon Health Forum sponsored a summit recently and it's subsequent write up started with "The health care industry is outdated because it hasn’t kept pace with change."

I also met with a senior leader at my organization who noted that the health care industry has been just admiring the scope of the problem around our large aging population for about 2 years. However, we haven't moved past admiring the problem.

Both approaches were different ways of describing how health care organizations have not changed in terms of keeping up with trends or addressing chronic problems. Change is hard and someone has to really be motivated to change. The health care industry has had little incentive to change until recently. Everyone usually got pay increases above inflation. No new disruptive forces emerged as concierge medicine or retail clinics didn't really displace any large players. The market kept growing as demand showed no sign of abating. If I got continually rewarded for doing the same thing that I always did, I wouldn't change either. Health care was living in a world where marginal return hasn't change as the 82nd slice of pizza tasted just as good as the first slice.

Now we're fighting for pizza with other countries with medical tourism and realizing that our pizza buffet is no longer being paid for by someone else. Change will be coming and it won't be any easier.

Changing organizational behavior is one of those things that every MBA needs to know how to do but you really can't teach in a class. I've recently had some success in my organization with promoting change. After years of debating on whether or not to enter a new line of business that would change the nature of our health plan model, I pushed us over the edge and we made a decision to go forward with this change. The committee that I led which made the change recommendation celebrated with a bagel fest and I will further the celebration with my blog post of how I created change. We're going to need a lot of it soon.

If you don't get the answer you want first, ask at least 4 more times. Our provider contracting team was a key piece. They had heard about this idea for a while, they didn't see how it would work, and would repeatedly ask for answers to their questions. While their concerns were legitimate, a lot of change efforts have been stalled under the weight of endless questions. I answered all their questions, gave them numerous white papers to share with providers, and kept checking back with them. They realized that I wasn't going to stop asking until we drove the question to its final conclusion about whether or not providers would participate.

I saw answers to the provider contracting concerns. However, answering their concerns once or twice or even three times was not enough to address them and move down the change process. Four times was the magic number. I'll admit that four times was also my limit.

Bring in senior leadership early and involve them. Senior leaders need time to digest change because they will be on the front line if anything goes wrong. They need to be involved to be comfortable and your team needs to see that they are engaged to realize this is important. As I outlined above, they need to hear about it 4 times to be convinced.

Talk to the customer. Nothing trumps any concern like saying, "I talked with our end customer and here's what they said".

Set a schedule for milestones with a hard deadline. Nothing can delay change like having yet another meeting to double check with one more group of stakeholders or gather another piece of information. I made the milestone decision schedule clear and that deciding not to make a decision was in fact a No decision. Inaction was not a part of the process or part of the feasibility but another way of saying no. To help cut off the inactivity route, I answered all questions and also had a deadline for requesting new information.

Change is a humbling experience so this might be the last time that I can happily chronicle a successful change project. For any readers who care to comment, what have been your change success stories and what do you think the key factors were?

Understanding the focus of Health Care Reform

I've learned to be more careful about focusing on the true end goal of health care reform. Often, it's phrased as health insurance for all. However, the end goal should be health care for all and ultimately health for all. Focusing on the wrong end goal doesn't just happen in health care as a Penelope Trunk blog post demonstrated. The post called "High Income women get more oral sex" focused on how income and other characteristics should lead to wealthier women getting down (on) more, so to speak. I felt the post missed the point as it focused on the wrong end goal. With any kind of sex, the goal is to have an orgasm (or is for most I shouldn't generalize). However the orgasm is achieved is really besides the point. Picking oral sex as a goal was picking the means rather than the end.

A Health Affairs article (paid subscription required) article succinctly phrased this framing of the question as "the conflation of health, health care, and health insurance". They are connected but not the same. Health insurance is simply a mechanizing for paying for health care by pooling money upfront and paying it out to those who need health care. The ultimate goal is that everyone can get health care and be healthy. Massachusetts reform demonstrated this as more people had health insurance but there wasn't enough primary care physicians to give everyone health care.

An article by Scott Gottlieb, a former CMS official wrote a recent article that further demonstrated the difference between paying for health insurance and paying for health care. He critiqued the Obama administration's proposed stimulus plan of providing more funding to the states for Medicaid, the health insurance program for the poor. However, outcomes for recipients of Medicaid have been demonstrated through research to be much poorer than the general population due to byzantine rules and reimbursement that didn't reward quality care. With demographic variables controlled, Medicaid bought worse health outcomes than other insurance programs. The following quote summarizes the main point:

"Insurance coverage has become the end itself, with states spreading resources widely but thinly -- without enough attention to the quality of care, accessibility, or whether coverage was actually improving health. States have no obligation to rigorously measure health outcomes in order to qualify for more federal money."

I used to work in the county health department that mostly saw Medicaid recipients so this was a tough article to read. However, the point of not investing more in a program that produces worse health outcomes for the dollar is an important one. Rather than invest in more health insurance, there should be investment in better health care.

Hopefully, we will have a vigorous national health care debate this year so it's important to remember what the end goal is. The focus will be on paying for health care but insurance should be viewed as just a vehicle and not the end goal.

The Business Week Forum: A Community Remembered

I received some good news from my business school clients recently. I worked with 4 clients this year on their essays and this is the 2nd one to be accepted by one of their top choice in this difficult year. A 3rd client got an interview at his top school but I haven't heard the results and the 4th is still waiting for news.

This MBA news got me thinking about my early days as a new MBA. Shortly after graduation, I got involved my the first on-line community and you know how they say that you never forget your first. This on-line community was the rough and tumble world of the Business Week Forum (BWF) that funneled Type A personalities, the unbearable anxiety of the application process due to a lack of direct control, some very smart people, and some very twisted and strong personalities all of whom were in front of computers most of the day and either spilled their worlds into BWF or used BWF to build their own alternative worlds.

BWF was sponsored by BusinessWeek magazine and became the main message boards for MBA applicants, current students, admission consultants, groupies, and alumni. It's peak was probably around 1999-2001 when the Princeton Review's message board was undone by it's donkey powered technology platform. I joined the fun in 2003-2005 as a truth speaking quirky alumni that preached balance, humility, lots of animal husbandry jokes, and a more holistic approach to selecting schools or careers. As someone who had already graduated from a fancy MBA school, I got to be the nicer guy in the fraternity who made it through hazing unscathed enough to try to help the pledges rather than crushing their spirits.

Through about 2005, Business Week Forum had a strong sense of community. Enough of us realized that behind user names like Lawstudly, Maleinrebate, and Classynfun were real people that we would likely meet at school or out in the business world in our overcharged networking enthusiasm. Community norms and rules were set like not to ask people their GMAT scores as though that was the key data point to unlock mysteries of the admission process. New admissions consultants with yahoo or hot email addresses and questionable credentials were virtually poked and prodded (and I'm not talking about a Facebook poke). We also thought that we were really funny and clever. I mean really clever. We'd argue politics, whether Air America radio would survive, or whether Transformers would beat Gobots in a fight or post images of a wholesome 50's style mother preparing fresh vegetables for dinner under the post title "Tossing Salad". We also felt smarter as we learned from other posters what the Indian Institute of Technology (IIT) schools were and we even had a feel of which were the best IIT's or a graduate of those school was an IITian. Would also feel altruistic as occasionally, we would try to help someone weigh the pros and cons of their school choice, whether to take a job in a new field, or if their coworker was really attracted to them or not.

The only draw back of this community is others thought we like Dungeons and Dragon's geeks (of which I played until junior high) when we talked abour on-line friends or bragged about how clever we with our on-line posts. However, on BWF, we also questioned whether we were really a community or just all avoiding reality together.

I did meet quite a few of few of the BWF posters in real life and found that people pretty much are who they say they are on-line. Their on-line personalities might different. For example, Classyfun, who said she modeled, really looked like a model but Lawstudly, who had such an insanely different view of the world that some thought he was a hyperactive 16 year old who drank a gallon of Mountain Dew Code Red before posting, was really a very calm, unassuming guy.

Around 2006, the community notion started to disappear. BWF became more transactional with more posts about tell me what you know and don't waste time speculating where was the best school for late 20's MBA's to hook up with undergrads. Applicants started to spend more time on the school's message boards where they could get more factual information and audition for the admissions committee and school's students. The posters seemed to forget that the other posters were potential classmates or coworkers. There was less interest in anyone's personal life and harsher posts. There was still some banter but it was more about getting through the application process together and less about exploring interests, politics, or favorite childhood toys. The current BWF moderator tries to recreate the community by posting questions and creating discussion but response is very half-hearted.

Around this same time that the sense of community disipated, BWF did an overhaul of the message board's platform. The new version was slower, had no new functionality, and had more space for ads. Reception was comparable to the the New Coke rollout and the moderator tried to serve as a liason for posters between unininterested developers who did their best to avoid answering questions by answering every single request with a "What browser version are you using?" Corrections were slow, feedback was given the corporate equivalent of "Let's put that in the Parking Lot for later", and posting activity dropped. Attitudes were changing already but the technology switched accelerated the process.

BWF was very good to me as I made some real friends and got involved in the admission consultant business. As we search for communities, both physical and on-line, I did miss it and wondered why it declined when technology use was growing as well as interest in MBA programs. I think that the growth of other school message boards gave the outlet for advice on the business school application process and social networking sites gave an outlet for finding friends. A site that somewhat combined both got squeezed out.

I think that I also miss it because I was really really funny and clever on that site. Honest, I really was much funnier there than I am on this blog. I mean- like-people-sprayed-their-sodas-on-their-key-boards-out-of-their-nose funny. Realy, I mean it. Okay no one else who wasn't on the BWF believed me either.

US Health Care Industry: Picturing the Obituary

One safety technique that we use in climbing before deciding on a particular route, crevasse passage, or even whether or to head out at all is to picture your obituary if you had an accident. If it starts with "Completely unprepared climber heads right off a cliff" or "Meteorology-challenged climber decides to ascend despite typhoon-like conditions and horizontal snow fall", than that's generally a sign to save your climb for another day.

The Washington Post put together a very comprehensive article about AIG's near death experience that I found on The Health Care Blog. Not an obituary but definitely a post-postmortem. The story of how the credit default swap business led to AIG negotiating with death contained the following elements that have been a common thread in the recent demise of financial companies.

1. Experts built a computer program that could use decades of data to model financial instruments that were risk-free by hedging these instruments. However, the financial world changed and the existing data (corporate debt) did not account for the new instruments based on consumer debt.
2. These amount of dollars involved in these instruments (credit default swaps) started to resemble the GDP's of nations.
3. The company started to really think that these financial instruments were really risk free.

However, AIG's obituary wasn't the story of rogue employees or the climbing equivalent of deciding to descend a mountain by sledding down an icy glacier with numerous holes. They kept their controls in place but didn't recalibrate their assumptions as conditions changed.

This story led me to think about the postmortem or obituary of the US health care industry as it is streaking to an increasingly unsustainable position. Who are the rogue traders going to be, what assumptions is the industry going to miss, or what is going to be that moment that causes future business school students to giggle about the ineptitude when the case study is read? Is the industry going to look like climbers who got lost in the parking lot or like careful practitioners who just got hit by a surprise weather storm or freak piece of falling ice?

While letting risk or leverage get out of control was the financial firms downfall, the health care industry's downfall will likely be the increasing costs or the prices the industry charges. The obituary will be something like, "Did you really think that people were going to pay that much forever?" Here's the candidates for havnig that inscription on their tombstone.

Health Insurance Companies: Currently, it looks like health insurance companies would have their graves descreated as they are about as popular as a cold sore outbreak. However, the insurance premiums are just the lipstick on the pig as carriers have the data to show that the costs are from health care delivery. A local health reform group, called the Archimedes Movement recently blogged about the how health insurance companies spend 30% of premium dollars on administrative costs and profits, listing Ted Kennedy as a source. I recently pulled the financial filings from the Oregon Insurance Division for all local carriers through 2008 Q3 and saw that only 9.6% of premium dollars was spent on administrative costs. When you add in the total margin in operating dollars for all carriers, it's 0.6%. If you believe Teddy Kennedy's 30%, I've got a bridge for you to drive off.

We need health insurance companies to pay claims, figure out who gets paid what, enroll members, and answer questions that everyone has. While their role will probably be diminished in the afterlife of the US health care industry, they are not the rogue trader. Insurance companies administrative costs are not as exorbitant as claimed, someone needs to be the information intermediary, and they have the best data so they will be able to better tell the story.

Hospitals: The fees that hospitals charge are based on how much money they need to run their facilities not how much the market has valued their services. Since hospitals can't negotiate with government payers like Medicare, they negotiate with private insurance companies based on how much they need. There has been enough consolidation that the hospitals that are left can get paid what they ask for. However, if asked to demonstrate why they need to get paid what they do and why their services are worth the cost, a hospital would have little data. Without any data and costs that are receiving more and more public scrutiny, hospitals are not in a good position.

If some single payer enity, asked all of the hospitals what they should get paid for a service, that entity would get a wide range of prices, limited data to support those prices, and no explanation for the variation other than "we have sicker patients". That is what could make hospitals very vulnerable to an unflattering obituary.

Pharmaceutical Companies: There was a very interesting New York Times article a few months ago about how earlier generation, old school hypertension medication was just as effective as the new fancier, blinged out versions. A government study came to that conclusion and the pharmaceutical companies responded by ramping up their lobbying and marketing might to defend, discredit, and suppress the information. Well, that's according to the New York Times who can really sharpen their talons on any industry to claw out some choice pieces of meat. However, the response from the drug companies does sound logical to me. They are very good at marketing and spreading their message since they have to be in order to get providers and consumers to understand the differences between all the drugs in a various class.

Parmaceutical companies have a difficult cost structure to defend since it cost pennies to make their pills but they price has to pay back all the research and marketing over the life of its patent before revenue drops when drugs reach generic status. This structure makes it very beneficial to retain patent protection and stave off generics for as long as possible which may lead to some questionable practices. I think that there are some skeletons in the closet which would be very hard to defend if they came to light and could really dance around the tombstones of this industry.

Conclusion: I believe that the entities above are the prime candidates to be crucified for the current health care systematic deficiencies, issues, and other break downs. Overall, the hospital industry is the biggest and has the toughest sins around cost to defend which is why they may take fall and have the worst obituary written. Now, all these entities do play an important role in health care, have made some great contributions, and they will continue to play a role in some form. However, from reading the AIG article, when there is a collapse of any industry, an obituary will be written. The grave dancers will outnumber the givers of eulogies. None of us look very good laid out on a medical examiner table.

WHIVP Consulting to Capetown, South Africa: The Final Act and Other Thoughts

For New Year's day we ate nothing but simple carbohydrates and sugar until about 3:00 so 2009 started with a sugar rush and an afternoon nap. As you can tell, I didn't make any resolutions about eating better. In fact, the only New Year resolutions that I have made in the last few years are to back up my files on my computer. That resolution is now happily obsolete as I purchased an external hard drive in 2008.

I also had the most traffic ever (still a modest amount) driven by the fact that my blog had the #1 non-sponsored spot on the Google for the search of "US Health care 2009 predictions". My marketing department is never going to hear the end of my search optimization skills. This more than makes up for the fact that when I search for Deadhedge on Google, I don't appear until the 3rd page. I'm outranked by wizard recipes, stories of bankrupt hedge funds, deaths involving hedge funds, gardening tips, and a story about a male hustler and their relationship with a hedge fund manager.

While I enjoyed my 2009 predictions and apparently others did too, I noticed a trend away from doing predictions by some bloggers. There were proclamations that everyone sick of seeing prediction articles, the whole notion had jumped the shark, it was cliché, blasé, soufflé, creme brule, and best saved for another day. So everyone rebranded their "predictions" into "things that they would like to see happen in 2009". Still sounds like a dessert to me, only without the accountability of being wrong but also without the option to brag if you got one right.

Now that I got the navel gazing out of the way, I'll finish up my series on the work that we did as part of the South African consulting trip. The last Act described the work that my team did but there were 2 other teams who did work on Cost Analysis for a grant and their Information Technology systems. Here are their stories.

Cost Analysis Team: Last year, the Cost team had determined how much it cost to treat the common or treatments in the clinics such as TB, HIV/AIDS, STD's, Immunizations, and others. This information helped immensely with budgeting, resource allocation based on disease prevalence, and defend budgets by equating dollars in terms of conditions that won't be treated. This year that work was expanded for a grant application and general work to show the economic impact of some of these diseases and how to show improvements after treatment. This would frame health care treatment in economic terms (similar to what the Obama administration is doing) by showing how curing a disease could improve economic output. Participants would be tracked with their economic activity pre and post treatment to show improvement after a successful treatment.

Information Technology: Much of the data collection was manual tallies at the end of the month. The health department had identified a computer system as a need and was already contemplating a few systems. However, they didn't know how to assess what system they needed because they hadn't look at their processes, data collection, reporting, or their requirements. This team helped them with the planning process to better understand the requirements of any new computer system and how it would be incorporated into daily work. Some clinics had computers but they were underutilized due to lack of training and the fact that it was not incorporated into daily work flow. The health department better understood how to both assess and deploy a computer system by matching it to their operations rather than primarily looking at features.

End Result: Our workshops and final presentation got great reviews and we were invited back for a third year. We were able to build on the initial work of the first team and show the health department the potential for the project work. There were two follow-up teams after us in 2004 and 2005 before I lost touch with the work. Unfortunately the follow-up teams weren't as strong. There wasn't the same mission-driven culture in the teams or the emphasis on the importance of the development work. That made me realize the uniqueness of our team, our accomplishments, and the relationships that were built. I formed really strong bonds with my fellow students during the second year and with the alumni that still continue.