(From The Physician Executive, Vol. 35 #1, Jan/Feb 2009, pp 50-53)
Imagine you are an explorer, scouting out new territory, with the help of a local guide – a mathematically-inclined local guide. You come to a river. You ask whether it can be forded: “How deep is it?” He says, “Go ahead. On average, it is only waist deep.” Would you cross the river?
Do you remember the movie “The Matrix?” On the surface just a wild fantasy adventure story, it was in some ways strangely prophetic. Early in the film, our young hero Neo is about to extracted from the Matrix of everyday life and plunged into an entirely different reality. He has taken the “Red Pill.” His guide, Morpheus, tells him, “The pill you took is part of a trace program. It’s designed to interrupt your input-output carrier signal so that we can keep track of your location.” Neo asks, “What’s that mean?” A member of Morpheus’s crew answers, “It means ‘Buckle your seatbelt, Dorothy, because Kansas? It’s going bye-bye.’”
Kansas is indeed going bye-bye, if we take “Kansas” as shorthand for life as we know it, business as usual, our expectations and assumptions about what constitutes “normal.”
The election as U.S. president of a Black man with the strange name – Barack Hussein Obama – is but one reflection, one epi-phenomenon of how deeply things are changing, across what a wide array of fronts, and how quickly, around the world. I have here an electoral map of the United States that shows John McCain winning with 510 electoral votes, and Obama losing with only 28. It’s not a fantasy. It’s a picture of what Americans thought in late 2006. A Survey USA poll of 30,000 Americans, 600 in each of the 50 states (a far larger sampling than most political polls), asked among many other things how they would vote if the 2008 election pitted the respected long-time senator who was a war hero and former POW against the untested black junior senator with the Muslim-sounding name. Obama won Illinois, Hawaii, the District of Columbia – and nothing else.
The U.S. election was largely a referendum on “the way things are going,” and people are finding “the way things are going” increasingly unsettling, in myriad ways that are tied together across the globe, from the rising prices of food and gyrating prices of fuel to the fact that the elk season in Montana must be delayed, because it doesn’t snow on the mountain peaks in October anymore. The global financial crisis was triggered by the failure of the interlinked, brain-dead, single-variant “value at risk” (VaR) models of our chief financial institutions, but its cascading effects across the globe are tightly tied to such disparate vectors as the failure of fisheries, the strength of petro-fueled dictatorships, the rising cost of fertilizer, rapid urbanization, and the loss of farming soil across large swathes of the world. To call it a “tsunami” would be to reach for far too weak a metaphor.
Healthcare is not exempt
There is no safe harbor from this chaos. The received wisdom has long been that healthcare, as an industry, is somewhat insulated from cycles of recession and depression and, in any case, lags the rest of the economy by a year or two. A steel plant or shoe factory might close, but not the hospital. Reimbursements might get cut, but by 10 percent, not by half – and the cut will show up next year, not immediately.
Don’t count on it. Not this time.
Imagine you are an explorer, scouting out new territory, with the help of a local guide – a mathematically-inclined local guide. You come to a river. You ask whether it can be forded: “How deep is it?”
He says, “Go ahead. On average, it is only waist deep.”
Would you cross the river? Do you have enough information? No. You don’t need to know the average, you need to know the deepest part.
So the average of what we might expect financially, in U.S. healthcare, over the next year or so, is something like this: No substantial new money, except maybe an extension of SCHIP funds for children. Freezes, or more likely, unilateral cuts in Medicare and Medicaid reimbursement, followed in near-lockstep by private payers. The end of Medicare Advantage differentials. A decrease in the number of Americans who have no coverage at all, but an increase in the number who has “sort-of, kind-of” coverage, with high deductibles, large co-pays, and weakly-funded or unfunded HSAs.
Other countries will have different details, and will differ sharply depending on the political climate, but no country will escape the pain of sharply constricted budgets.
But what will it look like if the recession turns out to be not short and shallow but long and deep? Here are some of the likely second-order effects:
- Government reimbursement rates take even more draconian cuts.
- Accounts receivable both age and decay – that is, it takes people longer on average to pay, and more accounts end up as bad debt.
- Bond markets stay unresponsive – it is hard to borrow, no matter how sterling your credit rating.
- Any investments you have through your endowment or foundation stay depressed in value over a long period, due not to the skittishness of the market, but because the fundamentals of the companies you have invested in have decayed.
- For the same reasons, donations fall off dramatically.
- Suppliers become less reliable; some fail.
In the U.S. specifically:
- The number of uninsured rise, and therefore so do bad debt and charity care.
- Co-pays rise, and more patients skip treatments or necessary medicines because they have to put gas in the truck to get to work, or pay the rent, or buy heating oil.
- Therefore the number of people showing up in your ED with untreated chronic disease (in diabetic shock, or in asthmatic spasms, or in AMI from untreated high blood pressure) goes up dramatically.
- Health plans become even less reliable payers. Some even fail, while holding millions of dollars of your bills.
- CMS and state governments stretch out Medicare and Medicaid payments, as they eke out straitened budgets.
- Local governments put their hands out for greater payments in lieu of taxes.
- Your profit centers become not-for-profit centers.
- Under the same financial pressures, some of your competitors fail, leaving you to absorb the volume.
Crisis and opportunity
This is a pretty grim picture. On the other hand, we must let no crisis go unharvested of its opportunity. Such desperate times make all parties more malleable, more ready to do what needs to be done, more ready to abandon their “burning platform.” This is true at the political level – the more dire the crisis, the more likely to see true major systemic reform. It is also true at the local, strategic, entrepreneurial level. People will make deals to survive. Whatever your strategic goals – whether you want to bring more doctors on board to form strong clinical teams or to build a strong primary network, or whether you want to align yourself with or go into competition with urgent or retail care networks, or whether you want to absorb another hospital – you will find that difficult economic times cut both ways. You may find your options limited by a reduced ability to raise capital and a degraded balance sheet, but so do your competitors and potential partners. This will be prime time for thoughtful, creative deal-making in service of building better healthcare on the ground.
In particular, such possibilities, from unsettling to horrifying, are likely to have a dramatic effect on physicians and their relationship to hospitals. Part of the received wisdom about physicians is that they have been slow to change – slow to digitize, to work with evidence-based medicine, to streamline their own practices, or to come on board with hospitals trying to build a stronger team-based model. They have lots of good reasons for dragging their feet, but one underlying factor may be somewhat less visible: In countries with a large “Baby Boom” demographic bump (like the United States, Australia, and Canada), a lot of doctors (including especially those who are in leadership positions in group practices) are themselves early Boomers and are not that far from retirement. Looming retirement changes the way people think. As things have become more difficult for them, they have more often come to feel that they are just trying to eke out those few more years and get out of the game. Why invest a lot of time and money and learning capacity in changing your methods when you are done in just a few years?
The financial crisis and the coming changes in healthcare reimbursement, together, are likely to push that retirement farther off into the future (by destroying a lot of value in their retirement funds), at the same time that they make it more difficult to make money in the present. Their practices become less profitable, less valuable, and harder to sell, as do their urgent care centers, surgicenters, and specialty clinics.
But people do not change their habits and practices when some marginally better way shows up. They change when the pain of business as usual becomes too great, or impossible – combined with a solution showing up.
At the very moment that things get really difficult, more hospitals and integrated health networks are bringing doctors on board for a tighter, team-based model of medicine. Such larger, more rationalized, systemic solutions that are more able to drive value to the customer – that is, to produce the outcomes that the customer (patient, employer, government) is looking for at the lowest possible cost – are likely to look a lot better to the physician than going it alone.
Finding buried value
For those who choose to stay independent, tough times will tend to drive the inefficiencies of their practices to the fore. But here, as well, a solution is showing up at the critical moment, in the form of the work on the “Ideal Medical Practice (IMP)” documented in such journals as Family Practice Management, showing that it is possible to use basic, freely available, even low-cost software and hardware to reduce staff, increase the doctor’s time with patients, and increase the quality of the patient’s experience, all at once. The model even includes “Micro IMPs” – solo doctors going “bareback” with no staff at all, or a single outsourced, very part-time person working on billing and bookkeeping.
At the same time, within the hospital structure, management methods that might have seemed like a good idea (or just more buzzwords) a year ago will rapidly become a matter of survival. The pony in this steaming pile is that most healthcare is organized for high inefficiency; most of our processes have never been examined for what works best and cheapest. This means that when you begin to examine these processes systematically, iteratively, formally, at the level that the work is actually done, by the people actually doing it, you will find big piles of value laying around waiting to be reclaimed. The literature on using the Toyota Production System in healthcare is replete with examples of such found value.
To take just one example, St. Joseph’s, a medium-size community hospital in Parkersburg, West Virginia, put a task force to work on freeing up nurse’s time from inefficient tasks. In 4 weeks of meetings and other part-time work mixed with their other duties, the task force freed up 10,139 nurse hours per year – mostly by instituting better systems for making sure that supplies were where the nurses need them, so they don’t have to go “foraging.” The return on the investment of staff time: 1016%. Any way you want to measure it, as productivity, reduced costs, lead time, waiting time, the TPS in healthcare tends to show improvements of 50% or more wherever it is applied vigorously.
And there are other methods for finding value buried in our inefficient practices, such as Peter Pronovost’s work with checklists. In his “Keystone Initiative” in Michigan, a simple five-point checklist for one procedure – putting in a central line – saved 1500 lives and $175 million in Michigan hospitals in 18 months. If that much money (and that many lives) can be saved that quickly using a simple checklist on one procedure, imagine how much value could be found by using checklists in a wide array of common but critical procedures across healthcare.
Tough times are also likely to drive more automation in healthcare. Industries don’t automate because they are in love with flashy gizmos and have more money than sense. They automate because automation drives up productivity and quality at the same time. The Dickensian quality of hand-written medical records and orders, and hand-made lab tests, fails to amuse with its endless tales of mistakes, do-overs, wasted time, and dead patients. The tragic and scandalous story of healthcare’s resistance to automation, especially in the U.S., may turn a corner in the face of increased economic pressure, especially if reform measures include increased funds for the necessary capital outlays.
Almost every motivational and organizational change speaker in the last 20 years will tell you that the Chinese character for “crisis” consists of the characters for “danger” and “opportunity.” This is not true. But the idea that Western thinkers have projected on the Chinese ideogram is indeed true: Every crisis contains within itself great opportunities, if we will seize them. We can seize this day of crisis to make healthcare better, faster, and cheaper.