2019 September

Change is in the air

How will Amazon and Walmart change healthcare?

With Amazon and Walmart entering the healthcare provider business, it is safe to assume the industry is in for some big changes.

For now Amazon Care will be beta tested with 50,000+ employees living in the Seattle area but you can only imagine that it will be soon available to Haven employees and then Prime members.

Healthcare entrepreneurs and legacy providers have so many questions and likely fears about what’s to come. Your guess is as good as mine.

However, you might get some insights by thinking through some of the questions that will likely surface during the beta test. 

Questions such as:

1/ Is the medical information being shared sufficient to facilitate the continuum of care?

2/ What other types of services do employees need?

3/ What is the best way to deliver those services?

4/ Who is the best provider of those services?

5/ What medical needs are predictable?

6/ Are employees open to health and wellness product recommendations?

7/ What other medical products should be offered on Amazon to enable self-care?

8/ When do employees schedule in-person appointments?

9/ What are the most highly sought after appointments?

10/ Do we have enough contracted providers available to meet demand and service expectations?

Now think about what they do well, what they will likely buy and what they will likely need to complete the marketplace.

Amazon vs. Walmart:

As you likely know, Amazon and Walmart serve different customers and do so in a different way. Amazon operates a marketplace with the same type of product offered at different prices whereas Walmart strives to offer the lowest priced product to their customer. 

Start by thinking about what Amazon offers all consumers:

1/ Consumers see the full marketplace of products relevant to their search.

2/ Results are displayed by most relevant.

3/ Filters can be used to narrow the options.

4/ Recommendations and reviews provide verified consumer feedback.

5/ Consumers can filter for products included in Prime.

Now think about how that translates to healthcare.

1/ Heathcare Consumers would see all licensed providers: contracted or not.

2/ Healthcare Consumers would be able to search and use filters to narrow their search.

3/ Healthcare Consumers would be able to read service details, reviews and recommendations.

4/ Healthcare Consumers could filter for providers included in [……..]


In what?

Amazon could administer other networks [Medicare and Commercial Networks] and/or develop a Prime healthcare network that resolves the confidentiality issues of existing networks.

Pricing + Contracting

With Amazon, it’s not necessarily a race to the bottom for healthcare providers. Prime rates are not always the cheapest but free shipping and the ease of dealing with Amazon customer service makes membership and the added cost worth every penny.

Healthcare providers should be thinking about who they serve and how to differentiate their serves in the marketplace.

Review your data to help answer questions:

1/ Why do patients choose you? Simply asking if they use Amazon or shop at Walmart might give you some good insights too.

2/ What do they say about the experience? Collect feedback about care and service separately.

3/ Do you have unpaid patient balances? Your patients may be underinsured or dissatisfied with your service or maybe your business practices need refining. 

Commercial payers understand that it is not a one size fits all marketplace. If the patient population you serve puts a higher value on your care and services, they do too.

Engineering vs. Design

What’s the difference? 

Both engineering and design start with a problem but the approach to solving the problem is different. 

Engineering is about distilling data and allowing the data to dictate the solution. The problem with an engineering only approach is that there is usually more than one way to solve the problem. Hence the need for design and design thinking.

Design thinking uses brainstorming to surface all the different ideas, rapid prototyping to test the more viable ideas and iteration to apply the lessons from the prototypes.

Design often gets stifled in the healthcare industry. From my experience there are two reasons:

1/ The situation has become dire and something needs to be done quickly.

2/ The executive team is committed to one management philosophy that leaves little room for creativity.

Getting painted into a corner is never good place to start. So how do you get out of it?

Data

Everyone needs quality data to make sounds decisions whether in a clinical or business role. When the data is bad, we end up wasting resources solving problems that don’t exist and overlooking the real issues.

Did you know that only 30% of the analytic results in healthcare organizations are accurate? 

It was one of the stats that I learned from Health Catalyst recently and based on my own experience seems about right.

Part of the issue is the old adage “Garbage In/Garbage Out” and the other part is a lack of consistency in defining and extracting the data elements. 

Good design makes data capture as painless as possible and helps to standardize the dataset to make the data meaningful, actionable and readily accessible to all users. 

Start with why

Lean is good but can be limiting without design thinking. There isn’t much difference between Just In Time inventory and Kanban. Yet when one fails, we try the other without giving enough thought to why.

Just in time inventory in healthcare has never worked all that well because it’s too complex for the endusers to maintain. Implementing Kanban with a client made me realize that the system wasn’t going to work much better if at all for the same reasons.

The user’s needs were never really considered in how the system was implemented and once the implementation was started there was no iteration to refine it. Sound familiar? 

Just in Time inventory and Kanban are good frameworks but there is no one size fits all solution. Design thinking is about considering all the issues underlying the problem, the stakeholders and the patients served to solve the problem.

Leading with Purpose

Some of the richest people in the world made their fortunes by making products and services cheaper.

Jeff Bezos, Founder of Amazon, is the richest man in American. As you likely know, a lot of products on Amazon cost less than the same or similar products at local retailers. Plus you can acquire everything almost as quickly from the comfort of your home. The Walton family members [Walmart] are also in the top 20 of wealthiest.

Running a profitable business takes a lot of work to refine systems and processes but it is possible to do so and to make money. That’s the lesson that the industry should be taking from Amazon and Walmart.

What I hear from entrepreneurs especially those new to the industry is a passion to take on the cost of healthcare challenge. They are taking their inspiration from Amazon and Walmart and thinking about how they can make things cheaper and better for healthcare consumers. 

Healthcare entrepreneurs are thinking about value and leading with purpose.

Fraud + Abuse

There have been some eye popping headlines lately about the use of kickbacks to induce physicians and others to refer patients. Apparently, the FBI has just scratched the surface.

Kickbacks are career ending for healthcare professionals and cause significant issues for the company and investors involved. As someone who has experienced the organizational fallout, it’s a lesson that you don’t easily forget.

I worked for an organization under the first OIG settlement for use of kickbacks and other practices deemed abusive. What I learned is that people cross the line when they are under pressure to meet financial targets. 

Investors expect two things from leaders: growth and/or profitability. So I thought it might be helpful to frame the fraud and abuse risks that way too.

Growth:

A focus on growth increases the risk of kickbacks. To minimize the risk, you should have a process in place to:

1/ Identify all your potential referral sources. 

Potential referral sources are physicians, organizations owned by physicians or a family member and others who can influence patients.

2/ Review all the payments made to the potential referral sources to ensure they are supported by a contract. Contracts need to be reviewed for:

  • The nature of the agreement
  • The payment to ensure it reflects fair market value for the services rendered
  • The documentation requirements

3/ Review the documentation for services provided to ensure the services were actually provided in accordance with the contract.

4/ Educate those contracting with a potential referral source on the risks and requirements.

Profitability:

The shading things some people will do for their own gain is almost limitless. 

To minimize risk you need to be constantly looking at the financials, asking questions and validating the answers when something looks off.

With that said, the most vulnerable numbers are the revenue numbers.

1/ Trend and benchmark the charges

2/ Review the number of changes to the charges and the timing of the changes

3/ Review the methodology for contracted write-offs and discounts 

4/ Watch for deviations from the methodology

Potential issues:

1/ Out-of-network strategy 

2/ Over utilization

3/ Additional outlier payments 

4/ Tucking and smoothing to meet financial targets

All of these issues are problematic. The underlying reason and business practices will tell you how problematic.

The Risk is Real

For me, the most memorable cases is that of Richard Scrushy, Founder of HealthSouth and felon. Yes – felon.

Richard and his inner circle intentionally misstated HealthSouth’s revenue numbers by $2 Billion before the problem was uncovered.

The numbers alone make it memorable. However, the problem surfaced just after we launched our online training programs that focused on all the processes needed to accurately report revenue. The case validated our why.

The government is now using data and AI to catch fraudsters. It’s a good time to make sure your I’s dotted and T’s crossed and that you have a process in place to keep them dotted and crossed.

Evolution vs. Revolution

We’re getting more insight into as to where political and business leaders are looking for ideas to help lower the cost of healthcare in the US. 

LA Care came up this week because it’s a public option currently available on the California exchange that competes for members with insurers offering plans in the same service areas. It is operating similarly to how a Medicare public option would be expected to operate. 

Many leaders see LA Care as evolutionary because since inception the plan has been slowly improving the health and welfare of their members and reducing the cost of healthcare. The biggest issue that remains is healthcare reimbursement.

LA Care utilizes county resources as well as physicians and other healthcare providers contracted with commercial payers. Consequently, the plan hasn’t been able to lower their contracted rates and cost of healthcare enough to make their model truly transformative.

The Medicare public option could be revolutionary but it is unlikely to get industry support given that many of the largest healthcare companies are publicly traded and have a financial responsibility to their shareholders.

Change is going to happen whether you want it or not.

~Ed Catmull, Co-Founder of Pixar

A Radical Challenge

If you subscribe to the Weekly Rush then you know, I have been reading Creativity Inc lately. One of the stories that the author Ed Catmull shares in the book is about giving his creatives at Pixar a radical challenge to lower the cost of their production. No easy task given the talent and complexity of the processes involved.

Ed was surprised by the positive response to the challenge. Reportedly, his creatives took it on and took the challenge to a whole new level once they understood how they fit into the bigger picture.

60% of Americans don’t necessarily want a single payer system but they want to pay less for their healthcare. Rather than fighting against the use of Medicare rates, as an industry we should embrace it as our radical challenge to lower the cost of healthcare.

The opportunity to address a problem is often missed because we don’t get to the root cause and understand all the implications to fix it. Instead we often layer on more solutions and consequently, more cost.

Vendors don’t help matters because they don’t want to address staff reductions as a benefit of their solution. It’s a sensitive issue and often a roadblock to closing a sale.

To embrace the challenge, we need to need to look at everything we do with a fresh lens and question:

  • Does the task still need to be done?
  • Does the process/system work well? If not, what’s the problem?
  • What needs to change or what could be changed to fix the problem or streamline the process to make the task even easier?
  • Could a vendor change the user interface or packaging to make the process easier?
  • If you eliminate the task or make a process easier, how do existing resources get redeployed?
  • What is the impact on total cost and revenue?

If you’re saying there is no way to reduce cost and make money if you only receive Medicare rates. Ask yourself why not? Make a list of all your reasons and challenge every single one.

It’s not about just improving what we do now. Constraints challenge people to think about what they are doing and to create better ways to do it.