Transforming Healthcare Delivery to a Service Industry

1
Transforming Healthcare Delivery to a Service
Industry

• Jerome H. Grossman, MD
• Director, Health Care Delivery Policy Program
• American Re Healthcare
• March 29, 2004

2
Economic and Societal Changes

• Zuboff (1988) In the Age of the Smart Machine
• Giddens (1988) The Third Way The Renewal of
  Social Democracy
• Rabin (1998) Psychology and Economics
  (Behavioral Economics)
• Rivlin (2002) Challenges of Modern Capitalism
• Christiansen (2003) The Innovators Solution
• Zuboff (2003) The Support Economy

3
Elements of Healthcare Delivery

• Starr (1982) The Social Transformation of
  Medicine
• Fuchs (1996) Individual and Social
  Responsibility
• Institute of Medicine (2000/01) To Err is
  Human, Crossing the Quality Chasm

4
Future Hopes Existing Trends
Financing Purchasing
Regulating Providing
HEALTH FEDERAL RESERVE
Catastrophic Account Cash Account
HSA (Consumer Defined Plans)
Health Value Added Tax
Universal Health Plan Voucher
Behavioral Economics
Based on Clinical Condition Monitoring
SEPARATE FEDERAL AGENCY
Productivity
Systems Management
Safety/Safety Improvement License and Monitoring
Vocab/Reporting Transparency
Licensure Arbitration Malpractice
Network Creation
5
Financing
HEALTH FEDERAL RESERVE
Health Value Added Tax
Universal Health Plan Voucher
Based on Clinical Condition Monitoring
FDA
Productivity
Clinical Conditions
6
Regulation
SEPARATE FEDERAL AGENCY
Safety/Safety Improvement License and Monitoring
Vocabulary and Reporting Transparency
Licensure Arbitration Malpractice
METAPHORS
FAA/NTSB
FASB
SEC/NASD Federal Reserve
RESEARCH

• Performance Based Regulations
• Management Based Regulations
• Risk Based Regulations

7
Providing Complex Interdependent Systems
Data Exchange 7 x 24 x 365 The Patient
Customized Protocol Front Line Team
Flexible Management Organization
Post Introduction Surveillance Bioterrorism Regulation Environment
Productivity
Reengineering Human Factors Job
Redesign Organization
8
Scanning the Environment - Costs

• Increasing at a steep rate
• Increased uninsured increased middle class
  concern
• Employers pass increasing cost to employees
• Employers pass increase onto retirees not new
  employees
• Government passes increase onto retirees and
  states (Medicaid)
• Medicare Bill includes medical savings account
• The beginning of 401(k)
• Employers/govt. decreasing responsibility for
  health insurance

9
Quality

• Quality focus dominates media and legislation
• However progress stays neutral
• Scattered successes balanced by new revelations
  of error
• Strategy shifting from projects to systems
  thinking
• Lack of transparency and safety oversight
  becoming larger issue
• Finance has SEC
• Civil Air Transport has FAA
• Health has JCAHO malpractice (mainly
  self-regulation)

10
What Hasnt Happened
Medical Injuries Cost Billions Every Year
Researchers studying health-care quality have
concluded that medical injuries caused during
hospital stay kill tens of thousands of patients
annually, requiring at least 2.4 billion extra
hospital days resulting in potential medical
charges of 9.3 billion. The work underscores
both the scope of the problem and the relative
lack of action in solving it. In 1999, for
instance, the Institute of Medicine recommended
the creation of a nationwide mandatory reporting
system for medical errors. That hasnt
happened. Very little progress has been made.
Source Wall Street Journal
Very little progress has been made.
11
A Perfect Market

• Large numbers of consumers and firms
• Free entry and exit
• Marketability of all goods and services
  including risk
• Symmetric information with zero search costs

• Key Failures in Health
• Asymmetric information/costly search
• Marketability of risk

12
Bearing More of the Burden
Employees annual healthcare costs, paid by . . .
In 2004, healthcare costs are projected to rise
to about 8,000 per employee.
Source New York Times, Hewitt Associates
Employers Costs Rising Too Between 1998 to 2003,
annual healthcare costs paid by employers rose
from about 3,000 to over 5,000 per employee.
13
The New 401(HEALTH)
401(HEALTH) Corporation Government
Self Defined Contribution
Risk Tolerance Auto Insurance Points for
healthy behavior for preventive tests for
chronic disease compliance Result Lower rates
next year
Must buy catastrophic insurance Medical Savings
Account Rollover Portable
14
Distribution of Costs
1998 1999
Medical Expense Category in 1998 Average Per Capita Expenses, Total Enrollment, Total Expenditures, Average Per Capita Expenses, Total Expenditures,
Low (lt2000) 324 87 23 1191 58
Medium (2000-24999) 5658 12 56 5385 35
High (gt24999) 49032 1 21 15800 7
Source Dove, HG, et al, A Prediction Model for
Targeting Low-Cost, High-Risk Members of Managed
Care Organizations. The American Journal of
Managed Care, May 2003.
15
Catastrophic Insurance

• x 1,000,000 lives
• Epidemiologic (Incidence Prevalence)
• x
• Predictive Risk Modeling (Disease Severity and
  Comorbidity)
• x
• Normative Resources (From Productivity)
• Outcomes (Outputs)
• Technical
• Functional
• Trust
• Service

16
Keeping Patients Connected
17
Every Home an ICU
Source Boston Globe
18
Sequential Information Experiments
Data Analysis Hypothesis Validation