Tag: Joe Flower

The Opportunity in Disruption, Part 5: Five Strategies of Cooperation

Oct 8, 2019• 2

By JOE FLOWER

The system is unstable. We are already seeing the precursor waves of massive and multiple disturbances to come. Disruption at key leverage points, new entrants, shifting public awareness and serious political competition cast omens and signs of a highly changed future.

So what’s the frequency? What are the smart bets for a strategic chief financial officer at a payer or provider facing such a bumpy ride? They are radically different from today’s dominant consensus strategies. In this five-part series, Joe Flower lays out the argument, the nature of the instability, and the best-bet strategies.

There are five ways that both healthcare providers and payers can cooperate while they compete to bring the highest value forward to the customer.

Align incentives in the contracts: Healthcare providers must be able to provide performance guarantees that give at least some of the bottom-line risk to them. Work with third-party companies that can actually audit organizations’ abilities to give performance guarantees consistently over time.
Eschew embiggening: Size per se is not a safe harbor from risk. There are few economies of scale in healthcare. Concentration within a given market can be essential to success in offering a true range of services, well supported, at a lower price, customized to the regional population, the provider mix, the state laws, and the local economy. But local concentration is not the same thing as size per se.

And size does not help the customer. There just are no examples in the history of healthcare in which size alone has returned greater value to the patient, the consumer, or the buyer, whether lower cost, greater reliability, or higher quality.
Expand the definition: Widen the “medical services” that you fund and offer to include services such as functional medicine, chiropractic, acupuncture, and various other modalities that have been shown to be highly effective at far lower cost. There absolutely are ways to do this within licensing requirements.
Integrate behavioral health: Find ways to fund behavioral health and addiction treatment. Integrate behavioral health directly into the patient experience, triaging at the door to the Emergency Department and in every primary encounter. Find local innovators that can help pre-empt costly crises. Partner with community health, housing, and nutrition advocates. Helping people change their habits, manage their lives, and get beyond their addictions is far less expensive than fixing them over and over.
Retrain clinicians: Physicians and other clinicians are heavily trained to create and document reimbursable events. If you change the economics so that the system finds ROI in promoting health, preventing disease, managing population health, producing cures and reducing suffering as efficiently as possible, those very same clinicians will need to be retrained. Most of them will be deeply grateful, because they, like you, genuinely want to bring real value to the customer. In fact, if you do this you could end the physician shortage and the nurse shortage. People will flock back to do what they became a doctor or a nurse to do: Help people.

The Opportunity in Disruption, Part 2: The Shape of Today’s System

Sep 16, 2019

By JOE FLOWER

Healthcare CFOs must look at the environment in which their system lives: Since 2007 the actual costs for the average middle-class family for many of the basics of life have decreased in real terms, while their actual costs for healthcare have risen 25%, or even more counting co-pays, deductibles, and out-of-pocket expenses. This long, continuing rise in the costs along with the continuing and increasing unreliability of the healthcare system (“Will it actually be there for me when I need it? Will it bankrupt me?”) create unyielding disruption.

Instability: Omens

I am no fortune teller, but here are some things we can see right now that give us a sense of what’s coming.

Political shift: Public opinion has shifted. When polled about actual policies, healthcare has been cited repeatedly as the top concern of voters across the country. Voters’ top concerns are cost, the risk to patient protections in the ACA, and threats to “reform” Medicare by weakening it. The popularity of “single payer” proposals is a direct result of the cost and uncertainty of healthcare, a simple cry to “Do something!” Under this pressure we are more likely to see drastic solutions proposed and passed at the federal and state level or embodied in regulatory changes and lawsuits against industry practices.
Degradation of American life: With the opioid epidemic, the rise in suicides, the actual regression in life expectancy, and the increasing income and wealth divide, people increasingly feel that the healthcare industry is just not helping. They feel it is in fact part of the problem. The feeling that there is no one there to help us adds to the desperation of many parts of American society and heightens the political cost of the healthcare issue.
Public awareness: Healthcare is intensely personal, visceral. It’s crazy-making. Surprise bills, balance bills, other bills slipped through loopholes in the fine print or even in unwritten industry practices—what the industry considers standard operating procedure, the customers view as shocking, aggressive, and financially crushing.
The rebellion of the buyers: The percentage of buyers—such as employers, unions, and pension plans—telling various polls that healthcare costs represent a major problem for their business has more than doubled in the last five years and is now a majority. Buyers are pushing for choices to control costs and manage quality. They are beginning in greater numbers to demand reference pricing tied to Medicare rates, direct access to competitive bundled prices, and price transparency through centers of excellence, high performance networks and accountable care organizations. Some 65% of employers plan on implementing direct primary care in onsite or near-site clinics by 2020. Buyers are increasingly willing to take their beneficiaries elsewhere if your business can’t meet their demands.

The Opportunity in Disruption, Part 1

Sep 12, 2019• 3

By JOE FLOWER

“It’s a buckdancer’s choice, my friend. Better take my advice. You know all the rules by now, and the fire from the ice.”
— Robert Hunter, “Uncle John’s Band”

Chief Financial Officer: tough gig. Seriously. Whether for a payer or a healthcare provider, the CFO’s job is the exact point where the smiling faces on the billboards meet the double entry, the financing, the payer mix, the debt structure. And it all has to work out in the black. It has to do that sustainably, not only this year but next year and five years from now. Best guess? It’s going to get a lot tougher, with shifting revenue streams, market boundaries, new technologies, growing consumer expectations and uncertain politics.

Raise your hand if you can tell me the significance of these names: Univac, Control Data, Burroughs, Digital, Honeywell, IBM, NCR.

These companies dominated the computer world in 1980. As of 1990, all but IBM were gone, bankrupt, subsumed into some other company, or just out of the computer business. The one that survived, IBM, is the one that said, “Maybe we should at least get a toehold in this new personal computer game, even though it is risky for our main revenue streams.” All the others went “poof.”

A number of factors—radical new technologies with vast potential, ramifying customer frustration, shifting user base—are coming together to put healthcare today at exactly the place the computing world was in 1980.

The Rebellion of the Buyers

Aug 15, 2019• 1

By JOE FLOWER

Did you catch that headline a few weeks back?

An official of a health system in North Carolina sent an email to the entire board of the North Carolina State Health Plan calling them a bunch of “sorry SOBs” who would “burn in hell” after they “bankrupt every hospital in the state.”

Wow. He sounds rather upset. He sounds angry and afraid. He sounds surprised, gobsmacked, face-palming.

Bless his heart. I get it, I really do. Well, I get the fear and pain. Here’s what I don’t get: the surprise, the tone of, “This came out of nowhere! Why didn’t anyone tell us this was coming?”

Brother, we did. We have been. As loudly as we can. For years.

Two things to notice here:

What is he so upset about? Under State Treasurer Dale Folwell’s leadership, the State Health Plan has pegged its payments to hospitals and other medical providers in the state to a range of roughly 200% of Medicare payments (with special help for rural hospitals and other exceptions). In an industry that routinely says that Medicare covers 90% of their costs, this actually sounds rather generous.
What is the State Health Plan? It’s not a payer, that is, an insurer. It’s a buyer. Buyers play under a different set of rules and incentives than an insurer.

Why the Health Care System Is Incapable of Reducing Its Own Costs: A Brief Structural System Analysis

Jul 2, 2019• 8

By JOE FLOWER

Leading lights of the health insurance industry are crying that Medicare For All or any kind of universal health reform would “crash the system” and “destroy healthcare as we know it.”

They say that like it’s a bad thing.

They say we should trust them and their cost-cutting efforts to bring all Americans more affordable health care.

We should not trust them, because the system as it is currently structured economically is incapable of reducing costs.

Why? Let’s do a quick structural analysis. This is how health care actually works.

Health care, in the neatly packaged phrase of Nick Soman, CEO of Decent.com, is a “system designed to create reimbursable events.” For all that we talk of being “patient-centered” and “accountable,” the fee-for-service, incident-oriented system is simply not designed to march toward those lofty goals.

There Are Buoys: The Real Path to Lower cost in the Coming Catastrophic Deformation of Healthcare

Apr 26, 2018• 34

By JOE FLOWER

There are buoys, far out in the ocean, that bob in the waves and signal, through satellites, when the surf will rise at Mavericks on the California coast, or when the tsunami will hit.

Here comes.

Healthcare in the U.S. is a hollow economy, inflated, impossible, all over patches and gimcracks and work-arounds puffed up on clouds of hot air generated by sweaty, dedicated crews of policy panjandrums and podium pundits burning forests of acronyms. True, that’s just looking at the bad side. But this bad side goes all the way around.

Will it pop? Will it undergo catastrophic exothermal deformation? Is it the Hindenburg nearing Lakehurst? This could be.

Look, this is the 21^st Century. Whatever its name, catastrophic deformation, restructuring, “disruption,” or “creative destruction,” this is normal for businesses, industries, entire sectors. We have talked and whined and freaked out about massive change in healthcare since we had a peanut farmer in the Oval Office, and it hasn’t happened. Not really. Trust me, I was there, I watched it not happen. Nothing like the video stores, big-box malls, and Fotomats whose husks litter the landscape like the yonquerías of Baja. Nothing like Eastern Airlines, Western Airlines (“The only way to fly”), Northwest Airlines, Pacific Southwest with its dayglo go-go-booted stews, PanAm, and all the others whose logos adorn the Electras, L-1011s, 727s and Constellations parked wingtip to wingtip in the Mojave.

Healthcare has planetary inertia, gas giant inertia. It snacks on cost-cutting schemes like DRGs and Certificate of Need commissions and just gets bigger. It downs slices of GDP — 12 percent, 15, 18, 19 — and just gets bigger. Right through recessions, reforms, budget cuts. It’s Hungry Mungry. Its extraordinary resistance to deep transformation, compared to other industries and sectors, makes us ask why. What is holding it together? And makes us ask: What would do it? What would puncture this hollow, makeshift gas envelope?

Six Assertions on Knowing the Unknowable Future of Healthcare

Oct 13, 2017• 4

BY JOE FLOWER

Some things never change. Joe Flower is one of those things. Pay attention. Joe was the keynote speaker at Health 2.0 Silicon Valley earlier this month. We’re excited to feature the text of his remarks as a post on the blog today. If you have questions for Joe, you can leave them the comment section. You’ll find a link to a complimentary copy of his report Healthcare 2027: at the end of this post. You should absolutely download and read it. And take notes.

The future. The Future of healthcare.  Here are the seven words at the core. If you take nothing else away from this, take these:

Everything changes.
Everything is connected.
Pay attention.

— Jane Hirshfield

We are gathered here on holy ground, in Silicon Valley, the home of the startup, the temple of everything new, of the Brave New World.

And healthcare? Healthcare is changing — consolidation, new technologies, political chaos, a vast and growing IT overburden, shifting rules, ever-rising costs, new solutions, business model experiments.

So when I say, “The Future of Healthcare,” what are the pictures in your head? Catastrophic system failure? The dawn of a bright new day of better, stronger, cheaper healthcare for everyone, led by tech? Do we have all the confidence of a little girl screaming down a slide? Do we just say in denial about the future and end up in a kind of chaotic muddling along?

Looking Back From 2019: Why the Republicans Nationalized Healthcare

May 7, 2016• 4

By JOE FLOWER

Screen Shot 2016-05-08 at 11.41.21 AM It was the Mother of unintended consequences.

By the time of the 2016 elections, health plans, hospitals and health systems had squeezed and consolidated and trimmed and cut costs under the gun of lower Medicare reimbursements and the new rules of Obamacare — but mostly they had adapted. Most of them had survived.

On November 9, the country woke to find itself with a Republican President-elect, a Republican majority in the House, and a Republican majority of 55 in the Senate. The Grand Old Party was dedicated to repealing #EveryWord of the Affordable Care Act, the hated Obamacare which was, after all, “destroying the country,” “the worst thing to happen to the country since the Civil War,” and “equivalent to slavery.”

The changes to healthcare did not wait until Inauguration Day, much less until the 115th Congress could assemble to gut the law. They began instantly.

November 9, of course, was just nine days into the annual Open Enrollment period for plans under the Affordable Care Act exchanges. Many of the 12.7 million who had signed up for 2016 could see that the subsidies they were getting through the exchanges would likely disappear in the wake of the election, and decided not to sign up. “Why chance it?” as Betty Cornwall of New Rhodes, Kentucky, put it to Fox News’ Megyn Kelly.

Health plan strategists, masters of not getting blindsided by risk, decided that it was a bad idea to sign up millions of people for plans without knowing what would happen to the law. They did not want to get stuck with serving people who did not pay, and did not want to get blamed for dumping people after they had signed up. So most large health plans withdrew immediately from the exchanges, before many more people could sign up, draining the exchanges in many states of any choices at all.

The Healthcare System Link in the San Bernardino Shootings

Dec 2, 2015• 14

By JOE FLOWER

Another day, another mass shooting. At this point the news reports say nearly 30 down, 14 or more dead, multiple perps, at a banquet for the San Bernardino, California, Department of Public Health.

And instantly the argument is all about the guns. I understand that, and I’m not even saying that it’s not about the guns.

And instantly we want to say these folks are crazy and of course that’s true. It doesn’t matter if they frame their reasons around Allah or “no more baby parts” or Obama’s impending takeover of the U.S. using ISIS fascist armies disguised as Syrian refugees pouring over the border from Mexico, doesn’t matter. Anyone who turns a gun on other human beings in a school, a clinic, a public street is we can safely say, nuts, if “nuts” has any real meaning any more.

But there are crazy people in every culture, and we have always had crazy people in ours. The percentage of people who are crazy does not scale across societies and across time with the number of people walking into theaters, malls, and bus stations with guns blazing.

Even the number of guns per capita, or the caliber and size of magazines people can buy, or the rules around buying them do not scale directly with mass violence. There is something else going on here.

Obamacare is failing? Not so fast.

Nov 23, 2015• 14

By JOE FLOWER

“See? Obamacare is failing!” according to industry expert C. Little, citing Wolf Report 712A just filed by Boy W. Cried.

What is the hue and cry about this time? United Healthcare is saying it has lost large bales and wads of money on Obamacare exchange plans, and just may give up on them entirely. Anthem and Aetna allow that they are not making very much either. Some new not-for-profit market entrants have gone belly up, and the others are having a hard time.

Before we perform the Last Rites over Obamacare, perhsp we should think for a moment about the hit ratio of the first 711 Wolf Reports from Boy W. Cried and ask a few questions.

First: Do we trust implicitly the numbers that the health plans are giving out in press releases, citing unacceptably high medical loss ratios? Medical loss ratios (MLRs) are self-reported. Yes, there is a certain amount of accountability. The numbers have to square with expenses given on their corporate tax forms and so on, but there is wiggle room in just what is reported and how. If is a reasonable supposition that if you wanted to look for the professionals with the greatest skill in juggling numbers, you would find them working for insurance companies, especially health plans, because the stakes are so high. These numbers people at the top of their game have huge incentives to report a high MLR, so if there is wiggle room, I am sure they will find it.

Beyond that, MLR is reported by state, by market segment (large group, small group, individual), against what portion of a premium is “earned” within that reporting period, and by calendar year rather than any company’s financial year. To say, “Our MLR is X” is to claim that X the correct aggregate number across their entire multi-state system, from all their subsidiaries, appropriately weighted for the size of each region. We don’t have access to those numbers, just to what they are telling us. There are plenty of reasons for them to want to report the highest MLR they can get away with, plenty of reasons to be skeptical of the numbers they are giving out, and plenty of reasons not to base drastic policy changes on such pronouncements.