by Elizabeth Boehm
At the heart of every healthcare expenditure is a consumer. This consumer determines whether and where to seek diagnosis, undergo tests, and follow up on the advice and treatment suggestions of medical professionals. Thus consumers have an enormous influence over medical costs. This fact is not lost on health plans, technology vendors, or even policy makers, all of whom have been seeking to enable "consumerism" by giving consumers tools to take more control over their healthcare decisions. But somehow these tools — which include tax-advantaged health savings accounts (HSAs), personal health records (PHRs), and even health coaching and behavior change support programs — never seem to unleash the consumer-driven revolution that proponents promise. For example, Forrester's research shows a decline in consumer engagement in the "consumer-directed health plan" market, even as adoption of health savings accounts increases. And despite pushes by both Google and Microsoft, only about 3% of US online consumers report having an Internet-based PHR.
Why is this? Are consumers incapable of taking charge of their healthcare decisions? Are they still shackled to the legacy of the Marcus Welby-era passive patient paradigm? Not likely. Successful campaigns by patient groups to accelerate market availability of treatments in the AIDS market suggest that motivated and empowered healthcare consumers can and do exist. And they can move mountains.
The real damper on consumerism in healthcare is lack of information. This is the paradox of the healthcare information age — consumers have more access to more medical information than they have ever had before. More than many other industries, the Internet has democratized access to information about health trends, medical data, and information about traditional and alternative health resources. But consumers still lack the basic information they need to make informed health decisions.
Consumer-directed health depends on consumers making cost-benefit decisions and trade-offs regarding their healthcare consumption. That's a difficult proposition. First, determining the benefits of tests and treatments depends on many factors, including evidence of efficacy, consumer preference, and the level of invasiveness or side effects of the treatment. As much as we know about medicine today, what we don't know is at least as vast. Emerging science in genomics, proteomics, and even our basic understanding of disease mechanisms and their comorbid interactions means that clinical knowledge doubles roughly every 18 months.
Surely the benefit side of cost-benefit trade-off decisions are complex enough. The cost side should be easy. But costs are obfuscated by insurers who want to protect their proprietary negotiating tactics and providers who want to be able to make up insurance shortfalls with their cash-paying patients. Try calling up a radiology center to find out what an MRI will cost you versus an x-ray. Most can't tell you until after they've prepared your bill. Similarly with health insurers, ask for your portion of the cost of a course of treatment or piece of durable medical equipment and you'll likely get a series of ranges and contingencies in response.
If the US wants to get serious about consumer-directed healthcare, we have some changes to make:
1. We have to mandate that insurers and medical providers make their costs available to consumers. This isn't impossible. Pioneering efforts by Maine and New Hampshire have made comparative payment data available to consumers online.
2. We have to teach consumers about the consequences of their choices—and make those consequences immediate and personal. Choosing more expensive care has to cost consumers more—especially if its cost can't be justified by a measurable difference in quality.
3. We have to boost consumers' health and health-finance literacy—and hold stakeholders accountable for clear, plain language communication. Credit cards now have to clearly inform consumers of costs and charges, both short and long term. Health insurers should have to do the same.
Ultimately solving the US healthcare crisis is a complex and many-faceted problem. Consumerism can and should be a part of it.
Tuesday, April 27, 2010
Sunday, April 25, 2010
The Intersection of Retail and Healthcare
by Michael Howe
Whatever comes of the reform efforts in Washington, D.C., the focus of the U.S. health care system has already shifted toward a patient-controlled (not just patient-centered) delivery system. WebMD, DestinationRx, and other online resources are creating informed, intelligent, and empowered consumers who are focused on prevention more so than treatment, and who want their providers' practices to reflect that shift.
Of course, people of different generations have vastly different needs, expectations, preferences, and influencers. Members of the Greatest Generation for instance, are focused on compliance, and they expect their health care system to be directive — "What do I need to do, which meds should I take, to get well?" By contrast, members of Generation X want education and would rather take health matters into their own hands — "Give me an otoscope, show me how to use it, and I'll monitor my child's ear infection."
It's not news that consumers are assuming greater control over their own health. But what may be novel to health care companies is their need to take the service principles from consumer-focused organizations — managing customers' expectations and experiences, for instance, and conducting consumer research — and apply them to their operations.
Some consumer companies such as CVS, Procter & Gamble, Cerner, Wal-Mart, and Walgreens are already influencing the way people make their health care decisions — that is, based on the quality of the experience and the providers' efforts to engage them meaningfully. P&G, for example, will begin providing health care services for the first time when it assumes ownership of MDVIP, a concierge network of 350 physicians. Meanwhile, when IT provider Cerner acquires IMC HealthCare, expected mid-year, it will become the operator of 23 workplace clinics for 15 different corporations.
Retail clinics like CVS MinuteClinic, the company I led from 2005 to 2008, are taking over many of the traditional tasks of the private physician's practice, and new technologies (like glucose monitors and other wireless monitors) are facilitating patient mobility and comfort, enabling continuity of care, but requiring far less direct interaction with physicians.
With the complexity of the U.S. health care system, even the most seasoned consumer-focused executives can have a hard time seeing these sorts of opportunities. When I first interviewed to lead CVS MinuteClinic in 2005, I was coming directly from a career in the consumer space with assignments at P&G and PepsiCo. And so while leading MinuteClinic, I applied the critical lessons I learned from my experiences in another service-oriented organization — Arby's. As CEO there, I led a brand turnaround where we focused on improving the quality of the food and customers' in-store experiences. I applied these same principles of "continuous improvement" and "customer engagement" at MinuteClinic, which in three years grew from 19 clinics in two states to 530 clinics in 27 states; and 81 employees to nearly 3,000. We used consumer research to determine people's expectations, and we built our unique delivery platform accordingly.
It all sounds logical, right? Megatrends demand this sort of change. But it's not necessarily an easy leap for health care providers (doctors, employers, and payers) and regulators to make. They don't quite get that patients are moving toward providers that can offer them higher quality of care, better customer service, and innovative ways to receive the health services they need.
Physicians have data in hand suggesting that the quality of their bedside manner is directly correlated to patient outcomes, but still they can't always wrap their heads around the importance of service principles. Payers don't grasp it either. One BC/BS group flat out refused to do business with MinuteClinic until we took unorthodox actions — we provided health care services to BC/BS subscribers at their normal copay levels, and we collected and sent 3,200 postcards from those consumers, proving the power and benefits of this sort of consumer-focused model. Within two weeks of receiving the postcard delivery, BC/BS asked us to become a network provider accepting the mandate of their membership.
Established health care leaders must look outside the industry to understand how to adapt to this new reality. Physicians will no longer be able to act as simple compliance officers — diagnosing diseases, assigning treatments and making sure patients stick to their regimens. Instead, they must become educators, coaches and advisers who cater their services to the unique circumstances and demands of individual patients.
Regulatory reform is also vital to rid the system of reimbursement incentives that prevent providers from using their teams most efficiently. To gain the greatest benefit from health care reform, leaders must eliminate other practices that thwart the delivery of "anytime, anywhere" service, such as the insurance limitations imposed by the individual states, state medical licensure practices, and HIPAA sensitivity around information sharing.
As more and more providers adapt their methods of delivering care to better reflect consumer values and expectations, it will result in the effective, convenient and affordable health care system that we all envision and hope will one day be reality.
Whatever comes of the reform efforts in Washington, D.C., the focus of the U.S. health care system has already shifted toward a patient-controlled (not just patient-centered) delivery system. WebMD, DestinationRx, and other online resources are creating informed, intelligent, and empowered consumers who are focused on prevention more so than treatment, and who want their providers' practices to reflect that shift.
Of course, people of different generations have vastly different needs, expectations, preferences, and influencers. Members of the Greatest Generation for instance, are focused on compliance, and they expect their health care system to be directive — "What do I need to do, which meds should I take, to get well?" By contrast, members of Generation X want education and would rather take health matters into their own hands — "Give me an otoscope, show me how to use it, and I'll monitor my child's ear infection."
It's not news that consumers are assuming greater control over their own health. But what may be novel to health care companies is their need to take the service principles from consumer-focused organizations — managing customers' expectations and experiences, for instance, and conducting consumer research — and apply them to their operations.
Some consumer companies such as CVS, Procter & Gamble, Cerner, Wal-Mart, and Walgreens are already influencing the way people make their health care decisions — that is, based on the quality of the experience and the providers' efforts to engage them meaningfully. P&G, for example, will begin providing health care services for the first time when it assumes ownership of MDVIP, a concierge network of 350 physicians. Meanwhile, when IT provider Cerner acquires IMC HealthCare, expected mid-year, it will become the operator of 23 workplace clinics for 15 different corporations.
Retail clinics like CVS MinuteClinic, the company I led from 2005 to 2008, are taking over many of the traditional tasks of the private physician's practice, and new technologies (like glucose monitors and other wireless monitors) are facilitating patient mobility and comfort, enabling continuity of care, but requiring far less direct interaction with physicians.
With the complexity of the U.S. health care system, even the most seasoned consumer-focused executives can have a hard time seeing these sorts of opportunities. When I first interviewed to lead CVS MinuteClinic in 2005, I was coming directly from a career in the consumer space with assignments at P&G and PepsiCo. And so while leading MinuteClinic, I applied the critical lessons I learned from my experiences in another service-oriented organization — Arby's. As CEO there, I led a brand turnaround where we focused on improving the quality of the food and customers' in-store experiences. I applied these same principles of "continuous improvement" and "customer engagement" at MinuteClinic, which in three years grew from 19 clinics in two states to 530 clinics in 27 states; and 81 employees to nearly 3,000. We used consumer research to determine people's expectations, and we built our unique delivery platform accordingly.
It all sounds logical, right? Megatrends demand this sort of change. But it's not necessarily an easy leap for health care providers (doctors, employers, and payers) and regulators to make. They don't quite get that patients are moving toward providers that can offer them higher quality of care, better customer service, and innovative ways to receive the health services they need.
Physicians have data in hand suggesting that the quality of their bedside manner is directly correlated to patient outcomes, but still they can't always wrap their heads around the importance of service principles. Payers don't grasp it either. One BC/BS group flat out refused to do business with MinuteClinic until we took unorthodox actions — we provided health care services to BC/BS subscribers at their normal copay levels, and we collected and sent 3,200 postcards from those consumers, proving the power and benefits of this sort of consumer-focused model. Within two weeks of receiving the postcard delivery, BC/BS asked us to become a network provider accepting the mandate of their membership.
Established health care leaders must look outside the industry to understand how to adapt to this new reality. Physicians will no longer be able to act as simple compliance officers — diagnosing diseases, assigning treatments and making sure patients stick to their regimens. Instead, they must become educators, coaches and advisers who cater their services to the unique circumstances and demands of individual patients.
Regulatory reform is also vital to rid the system of reimbursement incentives that prevent providers from using their teams most efficiently. To gain the greatest benefit from health care reform, leaders must eliminate other practices that thwart the delivery of "anytime, anywhere" service, such as the insurance limitations imposed by the individual states, state medical licensure practices, and HIPAA sensitivity around information sharing.
As more and more providers adapt their methods of delivering care to better reflect consumer values and expectations, it will result in the effective, convenient and affordable health care system that we all envision and hope will one day be reality.
Monday, April 19, 2010
A Brief History of Health Insurance and Perspectives on Recent Reform Attempts
By Gregory VandenBosch
Health reform is on the front of nearly every newspaper and the lead on most every newscast. But, based on their coverage so far, all I really know is that the Democrats in Congress are rejoicing and the Republicans are vowing to fight it. So, in an effort to better understand what’s going on today, I thought it would be helpful to get a better idea of what happened in the past. Here’s what I found:
Health insurance in the United States is a relatively new phenomenon. The first insurance plans began during the Civil War (1861-1865). The earliest ones only offered coverage against accidents related from travel by rail or steamboat. However, the plans did pave the way more comprehensive plans covering all illnesses and injuries.
The Massachusetts Health Insurance Company offered the first group health policy selling comprehensive benefits in 1847. In 1929, the first modern group health insurance plan was formed. A group of teachers in Dallas, Texas, contracted with Baylor Hospital for room, board, and medical services in exchange for a monthly fee. Several large life insurance companies entered the health insurance field in the 1930’s and 1940’s as the popularity of health insurance increased. In 1932 non-profit Blue Cross Blue Shield offered the first group health plans. Blue Cross Blue Shield plans were successful because they involved discounted contracts negotiated with doctors and hospitals. In return for promises of increased volume and prompt payment, providers gave discounts to the Blue Cross Blue Shield plans.
The Blues, in their early days, charged everyone the same premium, regardless of age, sex, or pre-existing conditions. This was partly because the Blues were quasi-philanthropic organizations and because the Blues were created by hospitals. Therefore, they were mainly interested in signing up potential hospital patients. They were sufficiently benevolent that when Harry Truman proposed a national health-care plan, opponents were able to defeat it by arguing that the nonprofit sector had the problem well in hand. However, as private insurers entered the market they reconfigured premiums by calculating relative risk, and some avoided the riskiest potential customers altogether.
Employee benefit plans proliferated in the 1940’s and 1950’s. Strong unions bargained for better benefit packages, including tax-free, employer-sponsored health insurance. Wartime (1939-1945) wage freezes imposed by the government actually accelerated the spread of group health care. Unable by law to attract workers by paying more, employers instead improved their benefit packages, adding health care.
Government programs to cover health care costs began to expand during the 1950s and 1960s. Disability benefits were included in social security coverage for the first time in 1954. When the government created Medicare and Medicaid programs in 1965, private sources still paid 75 percent of all of the health care costs.
As health-insurance costs rose during the 1970s and 1980s—driven both by improving medical technology and by the growing inefficiencies of the health-care system—health maintenance organizations, which had been around since the beginning, began to proliferate. Like the Blues, HMOs became victims of their own success. Initially they were mainly non-profit, but as the business opportunities grew, many for-profit HMO competitors were created and, eventually they displaced many of the nonprofit HMOs. (12 percent of the market was served by for-profits in 1981; by 1997 that figure was nearly 65 percent.)
Managed care kept cost increases in check for a while during the 1990s, but eventually costs started to rise again. Today most employers are reducing or, in some cases, eliminating health-care benefits for employees
Health care reform was a major concern of the Clinton administration; however, the 1993 Clinton health care plan, developed by a group headed by First Lady Hillary Clinton, was not enacted into law. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) made it easier for workers to keep health insurance coverage when they change jobs or lose a job, and also made use of national data standards for tracking, reporting and protecting personal health information.
During the 2004 presidential election, both the George W. Bush and John Kerry campaigns offered health care proposals. As president, Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act, which included a prescription drug plan for elderly and disabled Americans.
In February 2009, President Barack Obama signed a re-authorization of the State Children's Health Insurance Program, which extended coverage to millions of additional children, and the American Recovery and Reinvestment Act which included funding for computerized medical records and preventive services.
On March 21, 2010, the U.S. House of Representatives passed the Senate version of its health care reform bill. On the 23rd, President Obama signed it into law.
Perspective on Recent Reform Attempts:
The Affordable Care Act—otherwise known as ObamaCare—isn't the first attempt to expand health insurance coverage in America. Before Washington passed the law, a number of states took smaller-scale attempts at the job - each of which proved far more expensive than planned.
As spectacular failures go, it's hard to do worse than Tennessee. This early state attempt to dramatically increase health coverage, dubbed TennCare, started off promisingly. In 1994, the first year of its operation, the system added half a million new individuals to its rolls. Premiums were cheap—just $2.74 per month for people right above the poverty line—and policy makers loved it. The Urban Institute, for example, gave it good marks for "improving coverage of the uninsurable or high-risk individuals with very limited access to private coverage." At its peak, the program covered 1.4 million individuals—nearly a quarter of the state's population and more than any other state's Medicaid program—leaving just 6 percent of the state's population uninsured. But those benefits came at a high price. By 2001, the system's costs were growing faster than the state budget. The drive to increase coverage had not been matched by the drive to control costs. Spending on drug coverage, in particular, had gone out of control: The state topped the nation in prescription drug use, and the program put no cap on how many prescription drugs a patient could receive. The result was that, by 2004, TennCare's drug benefits cost the state more than its entire higher education program. Meanwhile, in 1998, the program was opened to individuals at twice the poverty level, even if they had access to employer-provided insurance. In short, the program's costs were uncontrolled and unsustainable. By 2004, the budget had jumped from $2.6 billion to $6.9 billion, and it accounted for a quarter of the state's appropriations. A McKinsey report projected that the program's costs could hit $12.8 billion by 2008, consuming 36 percent of state appropriations and 91 percent of new state tax revenues. On the question of the system's fiscal sustainability, the report concluded that, even if a number of planned reforms were implemented, the program would simply "not be financially viable." Democratic Gov. Phil Bredesen declared the report "sobering," and, rather than allow the state to face bankruptcy, quickly scaled the state back to a traditional Medicaid model, dropping about 200,000 from the program in a period of about four months. Though the state still calls its Medicaid program TennCare, Bredesen's decision to scale back effectively shut the program down. In 2007, he told the journal Health Affairs, "The idea of TennCare, as it was implemented, failed."
Maine took a different route to expanding coverage, but it also resulted in failure. In 2003, the state started Dirigo Care, which, it was promised, would cover each and every one of the state's 128,000 uninsured by 2009. The program was given a one-time $53 million grant to get things started, but was intended to be eventually self-sustaining. It wasn't. In 2009, the year in which the program was to have successfully covered all of the uninsured, the uninsured rate still hovered around 10 percent—effectively unchanged from when the program began. Taxpayers and insurers, however, had picked up an additional $155 million in unexpected costs—all while the state was wading deeper into massive budget shortfalls and increased debt. The program has not been shut down, but because expected cost-savings did not materialize, it's been all but abandoned. As of September 2009, only 9,600 individuals remained covered through the plan.
Then there is the Massachusetts plan, the model for ObamaCare. The state's health care program has successfully expanded coverage to about 97 percent of the state's population, but the price tag may be more than the state can bear. When the program was signed into law, estimates indicated that the cost of its health insurance subsidies would be about $725 million per year. But by 2008, those projections had been revised. New estimates indicated that the plan was to cost $869 million in 2009 and $880 million in 2010. More recently, the governor's office announced a $294 million shortfall on health care funds, and state health insurance commissioners have warned that, on its current course, the program may be headed for bankruptcy. According to an analysis by the Rand Corporation, "in the absence of policy change, health care spending in Massachusetts is projected to nearly double to $123 billion in 2020, increasing 8 percent faster than the state’s gross domestic product (GDP)." The state's treasurer, a former Democrat who recently split with his party, says that the program has survived only because of federal assistance. Defenders of the program argue that it's not really a budget buster because the state's budget was already in trouble. But for those worried about ObamaCare's potential effects on the federal budget, that's hardly comforting. The Congressional Budget Office (CBO) has warned that, without significant change, the U.S. fiscal situation is "unsustainable," with publicly held debt likely to reach a potentially destabilizing 90 percent of GDP by 2020. The CBO scored ObamaCare as a net reduction in the deficit, but those projections are tremendously uncertain at best. As Alan Greenspan warned last month, if the CBO's estimates are wrong, the consequences could be "severe".
Health reform is on the front of nearly every newspaper and the lead on most every newscast. But, based on their coverage so far, all I really know is that the Democrats in Congress are rejoicing and the Republicans are vowing to fight it. So, in an effort to better understand what’s going on today, I thought it would be helpful to get a better idea of what happened in the past. Here’s what I found:
Health insurance in the United States is a relatively new phenomenon. The first insurance plans began during the Civil War (1861-1865). The earliest ones only offered coverage against accidents related from travel by rail or steamboat. However, the plans did pave the way more comprehensive plans covering all illnesses and injuries.
The Massachusetts Health Insurance Company offered the first group health policy selling comprehensive benefits in 1847. In 1929, the first modern group health insurance plan was formed. A group of teachers in Dallas, Texas, contracted with Baylor Hospital for room, board, and medical services in exchange for a monthly fee. Several large life insurance companies entered the health insurance field in the 1930’s and 1940’s as the popularity of health insurance increased. In 1932 non-profit Blue Cross Blue Shield offered the first group health plans. Blue Cross Blue Shield plans were successful because they involved discounted contracts negotiated with doctors and hospitals. In return for promises of increased volume and prompt payment, providers gave discounts to the Blue Cross Blue Shield plans.
The Blues, in their early days, charged everyone the same premium, regardless of age, sex, or pre-existing conditions. This was partly because the Blues were quasi-philanthropic organizations and because the Blues were created by hospitals. Therefore, they were mainly interested in signing up potential hospital patients. They were sufficiently benevolent that when Harry Truman proposed a national health-care plan, opponents were able to defeat it by arguing that the nonprofit sector had the problem well in hand. However, as private insurers entered the market they reconfigured premiums by calculating relative risk, and some avoided the riskiest potential customers altogether.
Employee benefit plans proliferated in the 1940’s and 1950’s. Strong unions bargained for better benefit packages, including tax-free, employer-sponsored health insurance. Wartime (1939-1945) wage freezes imposed by the government actually accelerated the spread of group health care. Unable by law to attract workers by paying more, employers instead improved their benefit packages, adding health care.
Government programs to cover health care costs began to expand during the 1950s and 1960s. Disability benefits were included in social security coverage for the first time in 1954. When the government created Medicare and Medicaid programs in 1965, private sources still paid 75 percent of all of the health care costs.
As health-insurance costs rose during the 1970s and 1980s—driven both by improving medical technology and by the growing inefficiencies of the health-care system—health maintenance organizations, which had been around since the beginning, began to proliferate. Like the Blues, HMOs became victims of their own success. Initially they were mainly non-profit, but as the business opportunities grew, many for-profit HMO competitors were created and, eventually they displaced many of the nonprofit HMOs. (12 percent of the market was served by for-profits in 1981; by 1997 that figure was nearly 65 percent.)
Managed care kept cost increases in check for a while during the 1990s, but eventually costs started to rise again. Today most employers are reducing or, in some cases, eliminating health-care benefits for employees
Health care reform was a major concern of the Clinton administration; however, the 1993 Clinton health care plan, developed by a group headed by First Lady Hillary Clinton, was not enacted into law. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) made it easier for workers to keep health insurance coverage when they change jobs or lose a job, and also made use of national data standards for tracking, reporting and protecting personal health information.
During the 2004 presidential election, both the George W. Bush and John Kerry campaigns offered health care proposals. As president, Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act, which included a prescription drug plan for elderly and disabled Americans.
In February 2009, President Barack Obama signed a re-authorization of the State Children's Health Insurance Program, which extended coverage to millions of additional children, and the American Recovery and Reinvestment Act which included funding for computerized medical records and preventive services.
On March 21, 2010, the U.S. House of Representatives passed the Senate version of its health care reform bill. On the 23rd, President Obama signed it into law.
Perspective on Recent Reform Attempts:
The Affordable Care Act—otherwise known as ObamaCare—isn't the first attempt to expand health insurance coverage in America. Before Washington passed the law, a number of states took smaller-scale attempts at the job - each of which proved far more expensive than planned.
As spectacular failures go, it's hard to do worse than Tennessee. This early state attempt to dramatically increase health coverage, dubbed TennCare, started off promisingly. In 1994, the first year of its operation, the system added half a million new individuals to its rolls. Premiums were cheap—just $2.74 per month for people right above the poverty line—and policy makers loved it. The Urban Institute, for example, gave it good marks for "improving coverage of the uninsurable or high-risk individuals with very limited access to private coverage." At its peak, the program covered 1.4 million individuals—nearly a quarter of the state's population and more than any other state's Medicaid program—leaving just 6 percent of the state's population uninsured. But those benefits came at a high price. By 2001, the system's costs were growing faster than the state budget. The drive to increase coverage had not been matched by the drive to control costs. Spending on drug coverage, in particular, had gone out of control: The state topped the nation in prescription drug use, and the program put no cap on how many prescription drugs a patient could receive. The result was that, by 2004, TennCare's drug benefits cost the state more than its entire higher education program. Meanwhile, in 1998, the program was opened to individuals at twice the poverty level, even if they had access to employer-provided insurance. In short, the program's costs were uncontrolled and unsustainable. By 2004, the budget had jumped from $2.6 billion to $6.9 billion, and it accounted for a quarter of the state's appropriations. A McKinsey report projected that the program's costs could hit $12.8 billion by 2008, consuming 36 percent of state appropriations and 91 percent of new state tax revenues. On the question of the system's fiscal sustainability, the report concluded that, even if a number of planned reforms were implemented, the program would simply "not be financially viable." Democratic Gov. Phil Bredesen declared the report "sobering," and, rather than allow the state to face bankruptcy, quickly scaled the state back to a traditional Medicaid model, dropping about 200,000 from the program in a period of about four months. Though the state still calls its Medicaid program TennCare, Bredesen's decision to scale back effectively shut the program down. In 2007, he told the journal Health Affairs, "The idea of TennCare, as it was implemented, failed."
Maine took a different route to expanding coverage, but it also resulted in failure. In 2003, the state started Dirigo Care, which, it was promised, would cover each and every one of the state's 128,000 uninsured by 2009. The program was given a one-time $53 million grant to get things started, but was intended to be eventually self-sustaining. It wasn't. In 2009, the year in which the program was to have successfully covered all of the uninsured, the uninsured rate still hovered around 10 percent—effectively unchanged from when the program began. Taxpayers and insurers, however, had picked up an additional $155 million in unexpected costs—all while the state was wading deeper into massive budget shortfalls and increased debt. The program has not been shut down, but because expected cost-savings did not materialize, it's been all but abandoned. As of September 2009, only 9,600 individuals remained covered through the plan.
Then there is the Massachusetts plan, the model for ObamaCare. The state's health care program has successfully expanded coverage to about 97 percent of the state's population, but the price tag may be more than the state can bear. When the program was signed into law, estimates indicated that the cost of its health insurance subsidies would be about $725 million per year. But by 2008, those projections had been revised. New estimates indicated that the plan was to cost $869 million in 2009 and $880 million in 2010. More recently, the governor's office announced a $294 million shortfall on health care funds, and state health insurance commissioners have warned that, on its current course, the program may be headed for bankruptcy. According to an analysis by the Rand Corporation, "in the absence of policy change, health care spending in Massachusetts is projected to nearly double to $123 billion in 2020, increasing 8 percent faster than the state’s gross domestic product (GDP)." The state's treasurer, a former Democrat who recently split with his party, says that the program has survived only because of federal assistance. Defenders of the program argue that it's not really a budget buster because the state's budget was already in trouble. But for those worried about ObamaCare's potential effects on the federal budget, that's hardly comforting. The Congressional Budget Office (CBO) has warned that, without significant change, the U.S. fiscal situation is "unsustainable," with publicly held debt likely to reach a potentially destabilizing 90 percent of GDP by 2020. The CBO scored ObamaCare as a net reduction in the deficit, but those projections are tremendously uncertain at best. As Alan Greenspan warned last month, if the CBO's estimates are wrong, the consequences could be "severe".
Friday, April 16, 2010
Strategy by Any Other Name
by Walter Kiechel
A friend who books speakers for business events tells me strategy experts aren't much in demand these days; indeed, they haven't been for years. (Except in Japan.) Until recently audiences still sought out thinker/talkers on innovation or leadership. Of late, though, the rabble has ears only for economists or the occasional journalist who can shed light on the Global Financial Crisis (and perhaps wave a pitchfork in Wall Street's direction).
So much for us who wear the big "S" on our sandwich-boards. You may, if you're so inclined, shed a tear for us wallflowers, but weep not for our underlying subject. While I'm thoroughly biased, it strikes me that strategy shows up all over the place in contemporary management literature, albeit sometimes under different cover. It's not exactly a case, per Jerry Lee Lewis, of "He's walking in my tracks, but he can't fill my shoes." More that the latest marching bands are parading down strategy's road, and lengthening it, but under banners bearing new devices, not the tattered regimental colors of old.
Take Mark Johnson's Seizing the White Space or the precursor, McKinsey-Award-winning article in HBR, "Reinventing Your Business Model," by Johnson, Clay Christensen, and Henning Kagermann. Johnson's four-box framework for a business model contains all the key elements of a strategy — customers, costs, and competitors — plus some features that look like a recapitulation of strategy's history.
The "customer value proposition" analyzes the job your product or service will be doing for your customers. Johnson's "profit formula" squarely addresses your "cost structure" but also has, in its "revenue model" subcomponent, a nod to market share, which means thinking about your competition. To any student of strategy's history, Johnson's "key resources" quadrant will immediately recall Birger Wernerfelt's resource-based view of the firm, and maybe its more popularized incarnation, core competences, courtesy of Gary Hamel and C.K. Prahalad. And if those weren't flashbacks enough, the fourth box in Johnson's framework, core processes, should evoke lots of memories of the late 1980s and early 1990s when strategy seemed all about competing on capabilities.
None of this is to take away from the originality of Johnson's work, but only to say that he and his HBR co-authors are building on the original paradigm of strategy. Which is what you're supposed to do with a paradigm. In a few pages of his book, Johnson invokes the glorious history of strategy, including Alfred Chandler's famous observation that strategy follows structure. And this in service to reminding us of an ever-important piece of wisdom, namely, not to confuse a mechanical strategic-planning process with the actual creation of strategy. Modern strategy has always been disruptive; its partisans will applaud the ambition to reinvent one's business model.
Some of us believe that almost as important as the invention of strategy was the accompanying creation of Greater Taylorism, the sharp-penciled approach to every aspect of a company's operations. For our small, slightly squirrely band of brothers and sisters, Competing on Analytics provides an almost pornographic thrill, as in "beyond one's wildest dreams." Or maybe the thrill an online gamer would get making the hyperspace leap from, say, Donkey Kong to Halo 3 or God of War.
Co-authors Tom Davenport and Jeanne G. Harris define analytics as "the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions." They recount how companies ranging from Harrah's to BestBuy to Procter & Gamble put such magic to work deriving deeper and deeper insights into their costs, customers, and competitive situation.
Somewhere in heaven, Bruce Henderson, founder of the Boston Consulting Group, is cheering. Analytics represents the latest version of precisely what he and the other original lords of strategy were trying to do: gather and interpret facts in a way that helps clients achieve a competitive advantage. The pioneers, who used slide rules and, when they became available, early electronic calculators, would drool with envy at the information technology their successors can command, not just the hardware but the computerized spreadsheets and statistical software.
The protean Tom Davenport knows from strategy, as they say in the greater New York area; he had major speaking parts in its unfolding history. As he and his co-author note, "Analytics themselves don't constitute a strategy, but using them to optimize a distinctive business capability" (that would be your competitive advantage) "certainly constitutes a strategy."
Earlier this week I sat in an audience listening to John Hagel and John Seely Brown discuss their new book, The Power of Pull. The luminaries' basic idea — I'm probably oversimplifying horribly — is that the old, now disappearing economy was based on "push," forecasting what would be needed or what would sell and then mustering resources to fulfill that demand.
The new world is one of "pull" — find people and resources exactly when you need them, attract them to you even before you know they exist, and then pull the best from within them, and yourself, to achieve your potential. Celestial music to those of us who harp on the power of the Maslovian hierarchy, the idea that, as we become more affluent, we can pay more attention to ever-higher things, like the need for self-actualization.
Hagel, Brown, and their co-author Lang Davison dismiss strategy-classic concepts like the experience curve as outdated relics of the push world. But they also emphasize that their pullish way of thinking is essential if companies today are to forge growth strategies.
Particularly resonant for this strategy-besotted listener was the Hagel-Brown idea that companies needed to find ways to pull talented people from the core of their operations to get them onto the corporate periphery, where new markets, opportunities, and challenges lie. This sounds remarkably like what Martin Reeves, head of BCG's Strategy Institute, stresses when he talks about making strategy more "adaptive." Stand by for further harmonic convergence as new waves of thinking set strategy's old armada sailing into the future.
A friend who books speakers for business events tells me strategy experts aren't much in demand these days; indeed, they haven't been for years. (Except in Japan.) Until recently audiences still sought out thinker/talkers on innovation or leadership. Of late, though, the rabble has ears only for economists or the occasional journalist who can shed light on the Global Financial Crisis (and perhaps wave a pitchfork in Wall Street's direction).
So much for us who wear the big "S" on our sandwich-boards. You may, if you're so inclined, shed a tear for us wallflowers, but weep not for our underlying subject. While I'm thoroughly biased, it strikes me that strategy shows up all over the place in contemporary management literature, albeit sometimes under different cover. It's not exactly a case, per Jerry Lee Lewis, of "He's walking in my tracks, but he can't fill my shoes." More that the latest marching bands are parading down strategy's road, and lengthening it, but under banners bearing new devices, not the tattered regimental colors of old.
Take Mark Johnson's Seizing the White Space or the precursor, McKinsey-Award-winning article in HBR, "Reinventing Your Business Model," by Johnson, Clay Christensen, and Henning Kagermann. Johnson's four-box framework for a business model contains all the key elements of a strategy — customers, costs, and competitors — plus some features that look like a recapitulation of strategy's history.
The "customer value proposition" analyzes the job your product or service will be doing for your customers. Johnson's "profit formula" squarely addresses your "cost structure" but also has, in its "revenue model" subcomponent, a nod to market share, which means thinking about your competition. To any student of strategy's history, Johnson's "key resources" quadrant will immediately recall Birger Wernerfelt's resource-based view of the firm, and maybe its more popularized incarnation, core competences, courtesy of Gary Hamel and C.K. Prahalad. And if those weren't flashbacks enough, the fourth box in Johnson's framework, core processes, should evoke lots of memories of the late 1980s and early 1990s when strategy seemed all about competing on capabilities.
None of this is to take away from the originality of Johnson's work, but only to say that he and his HBR co-authors are building on the original paradigm of strategy. Which is what you're supposed to do with a paradigm. In a few pages of his book, Johnson invokes the glorious history of strategy, including Alfred Chandler's famous observation that strategy follows structure. And this in service to reminding us of an ever-important piece of wisdom, namely, not to confuse a mechanical strategic-planning process with the actual creation of strategy. Modern strategy has always been disruptive; its partisans will applaud the ambition to reinvent one's business model.
Some of us believe that almost as important as the invention of strategy was the accompanying creation of Greater Taylorism, the sharp-penciled approach to every aspect of a company's operations. For our small, slightly squirrely band of brothers and sisters, Competing on Analytics provides an almost pornographic thrill, as in "beyond one's wildest dreams." Or maybe the thrill an online gamer would get making the hyperspace leap from, say, Donkey Kong to Halo 3 or God of War.
Co-authors Tom Davenport and Jeanne G. Harris define analytics as "the extensive use of data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive decisions and actions." They recount how companies ranging from Harrah's to BestBuy to Procter & Gamble put such magic to work deriving deeper and deeper insights into their costs, customers, and competitive situation.
Somewhere in heaven, Bruce Henderson, founder of the Boston Consulting Group, is cheering. Analytics represents the latest version of precisely what he and the other original lords of strategy were trying to do: gather and interpret facts in a way that helps clients achieve a competitive advantage. The pioneers, who used slide rules and, when they became available, early electronic calculators, would drool with envy at the information technology their successors can command, not just the hardware but the computerized spreadsheets and statistical software.
The protean Tom Davenport knows from strategy, as they say in the greater New York area; he had major speaking parts in its unfolding history. As he and his co-author note, "Analytics themselves don't constitute a strategy, but using them to optimize a distinctive business capability" (that would be your competitive advantage) "certainly constitutes a strategy."
Earlier this week I sat in an audience listening to John Hagel and John Seely Brown discuss their new book, The Power of Pull. The luminaries' basic idea — I'm probably oversimplifying horribly — is that the old, now disappearing economy was based on "push," forecasting what would be needed or what would sell and then mustering resources to fulfill that demand.
The new world is one of "pull" — find people and resources exactly when you need them, attract them to you even before you know they exist, and then pull the best from within them, and yourself, to achieve your potential. Celestial music to those of us who harp on the power of the Maslovian hierarchy, the idea that, as we become more affluent, we can pay more attention to ever-higher things, like the need for self-actualization.
Hagel, Brown, and their co-author Lang Davison dismiss strategy-classic concepts like the experience curve as outdated relics of the push world. But they also emphasize that their pullish way of thinking is essential if companies today are to forge growth strategies.
Particularly resonant for this strategy-besotted listener was the Hagel-Brown idea that companies needed to find ways to pull talented people from the core of their operations to get them onto the corporate periphery, where new markets, opportunities, and challenges lie. This sounds remarkably like what Martin Reeves, head of BCG's Strategy Institute, stresses when he talks about making strategy more "adaptive." Stand by for further harmonic convergence as new waves of thinking set strategy's old armada sailing into the future.
Thursday, April 15, 2010
Is Technology a Cost Driver or a Cost Saver in Health Care?
by Stephen C. Schimpff
Pharmaceutical, biotechnology, and medical-device and equipment companies have been extremely effective at producing innovations that have created major benefits for medical care. But the cost of new patented drugs and devices (pacemakers, defibrillators, stents, ventricular assist devices, insulin pumps, laparoscopic surgical instruments, etc.) are high. As a result, many argue that these advances are driving up the costs of health care. This is a distorted view.
In many cases, the cause of rising health-care costs are not the technologies per se; it is a flawed payment system.
Here is an example.
Stomach ulcers are common, mostly caused by a bacterium called Helicobacter pylori, or H. pylori. Discovered about 30 years ago, it lives in the stomach with all of its acid and invades the wall of the stomach. Now we can cure ulcers with antibiotics. A common therapy is clarithromycin and amoxicillin combined with a proton pump inhibitor (i.e., acid suppressor) like Prilosec, Nexium, Protonix, or Prevacid. It is essential to take the three drugs twice a day without fail for 14 days; anything less and the cure rate goes down substantially.
So the makers of Prevacid have come out with a nicely designed package called Prevpac, which contains the two antibiotics and the proton pump inhibitor and clearly labels the morning and evening doses. Frankly, it is a good idea. It cost about $350 at the pharmacy. Not an unreasonable price to pay to eliminate a disease that in the past had been chronic and impossible to cure, a disease that often reduced quality of life and frequently necessitated surgery, right?
Here's the catch: Until recently, Prevacid, one of the drugs in the Prevpac package, was on patent and its price was very high. If one bought the three drugs individually, the price was about $250. (Go figure.) And if one substituted Prilosec (about $30 over the counter) for the Prevacid along with the clarithromycin and amoxicillin, it would bring the price down to under $100. Multiply this by the number of individuals who are found to have stomach ulcerations caused by H. Pylori and you would save some big money nationally.
But that is not the way it works. Your insurance probably has a $15 deductible. So you only pay $15 of the $350, a good bargain for you. If you go the route of buying the three drugs separately for $250, you have to pay $45 ($15 X 3). And if you opt for the Prilosec substitution, the price to you is $60 ($15 X 2 plus $30.)
The point is that our insurance system is full of perverse incentives. So you will choose the Prevpac or your doctor will do so for you to help you save some money. It would be much better if we paid, say, the first $1,000 of our medical bills out of pocket each year and then had insurance kick in. Insurance would be much cheaper and we would become aware of the cost implications, ask our doctor for assistance, and go with the cheaper yet equally effective approach.
The U.S. payment system also impedes the adoption of innovative technologies that could reduce the cost of health care.
For example, distance medicine like telemedicine, teleconsults, telediagnosis, and simple e-mails can reduce the need for visiting the doctor's office and emergency rooms and can prevent unnecessary hospitalizations. These all will obviously reduce overall costs, but currently there is no reimbursement for telemedicine, teleconsults, and the time it takes for physicians to do e-mails. Similarly, there is no reimbursement for tele-diagnostic devices such as the electronic home scale that reports daily weight to the physician's office.
Reimbursement will be necessary if these valuable, cost-saving techniques are to become widely utilized. Or, if you had a high deductible policy, you would save real money by e-mailing your doctor and paying a minimal fee rather than coming into the office.
We can also harness technologies that reduce expenditures by improving safety and quality. Prescribing drugs via e-mail in the office or via the hospital computer (known as computer physician order entry or CPOE) can eliminate illegible handwriting, prevent prescribing to someone who is allergic to a drug, avoid adverse drug interactions, and assist the physician in prescribing the correct dose, number of doses per day, and route of administration (e.g., oral, intravenous, intramuscular injection, rectal, etc).
Other important technologies that can help reduce costs are simulators, robots, and identification devices. Indeed, simulation will profoundly impact the safety and quality of operative procedures, cardiac catheterization, colonoscopy, and many other procedures and, in turn, drastically affect cost management. It can shorten the time it takes to become proficient thereby reducing training time and costs.
These are but a few of the ways technology can actually lead to lower costs.
Questions we need to consider are:
* How can we maximize the value of technologies to reduce costs while improving quality and safety?
* How can we advance the needed evidence to assure that we only select truly useful technologies?
* How can we stimulate physicians to only recommend cost-effective drugs or devices for their patients?
* How can we encourage individuals to select high-deductible health plans and then take an active role in making medical decisions?
Pharmaceutical, biotechnology, and medical-device and equipment companies have been extremely effective at producing innovations that have created major benefits for medical care. But the cost of new patented drugs and devices (pacemakers, defibrillators, stents, ventricular assist devices, insulin pumps, laparoscopic surgical instruments, etc.) are high. As a result, many argue that these advances are driving up the costs of health care. This is a distorted view.
In many cases, the cause of rising health-care costs are not the technologies per se; it is a flawed payment system.
Here is an example.
Stomach ulcers are common, mostly caused by a bacterium called Helicobacter pylori, or H. pylori. Discovered about 30 years ago, it lives in the stomach with all of its acid and invades the wall of the stomach. Now we can cure ulcers with antibiotics. A common therapy is clarithromycin and amoxicillin combined with a proton pump inhibitor (i.e., acid suppressor) like Prilosec, Nexium, Protonix, or Prevacid. It is essential to take the three drugs twice a day without fail for 14 days; anything less and the cure rate goes down substantially.
So the makers of Prevacid have come out with a nicely designed package called Prevpac, which contains the two antibiotics and the proton pump inhibitor and clearly labels the morning and evening doses. Frankly, it is a good idea. It cost about $350 at the pharmacy. Not an unreasonable price to pay to eliminate a disease that in the past had been chronic and impossible to cure, a disease that often reduced quality of life and frequently necessitated surgery, right?
Here's the catch: Until recently, Prevacid, one of the drugs in the Prevpac package, was on patent and its price was very high. If one bought the three drugs individually, the price was about $250. (Go figure.) And if one substituted Prilosec (about $30 over the counter) for the Prevacid along with the clarithromycin and amoxicillin, it would bring the price down to under $100. Multiply this by the number of individuals who are found to have stomach ulcerations caused by H. Pylori and you would save some big money nationally.
But that is not the way it works. Your insurance probably has a $15 deductible. So you only pay $15 of the $350, a good bargain for you. If you go the route of buying the three drugs separately for $250, you have to pay $45 ($15 X 3). And if you opt for the Prilosec substitution, the price to you is $60 ($15 X 2 plus $30.)
The point is that our insurance system is full of perverse incentives. So you will choose the Prevpac or your doctor will do so for you to help you save some money. It would be much better if we paid, say, the first $1,000 of our medical bills out of pocket each year and then had insurance kick in. Insurance would be much cheaper and we would become aware of the cost implications, ask our doctor for assistance, and go with the cheaper yet equally effective approach.
The U.S. payment system also impedes the adoption of innovative technologies that could reduce the cost of health care.
For example, distance medicine like telemedicine, teleconsults, telediagnosis, and simple e-mails can reduce the need for visiting the doctor's office and emergency rooms and can prevent unnecessary hospitalizations. These all will obviously reduce overall costs, but currently there is no reimbursement for telemedicine, teleconsults, and the time it takes for physicians to do e-mails. Similarly, there is no reimbursement for tele-diagnostic devices such as the electronic home scale that reports daily weight to the physician's office.
Reimbursement will be necessary if these valuable, cost-saving techniques are to become widely utilized. Or, if you had a high deductible policy, you would save real money by e-mailing your doctor and paying a minimal fee rather than coming into the office.
We can also harness technologies that reduce expenditures by improving safety and quality. Prescribing drugs via e-mail in the office or via the hospital computer (known as computer physician order entry or CPOE) can eliminate illegible handwriting, prevent prescribing to someone who is allergic to a drug, avoid adverse drug interactions, and assist the physician in prescribing the correct dose, number of doses per day, and route of administration (e.g., oral, intravenous, intramuscular injection, rectal, etc).
Other important technologies that can help reduce costs are simulators, robots, and identification devices. Indeed, simulation will profoundly impact the safety and quality of operative procedures, cardiac catheterization, colonoscopy, and many other procedures and, in turn, drastically affect cost management. It can shorten the time it takes to become proficient thereby reducing training time and costs.
These are but a few of the ways technology can actually lead to lower costs.
Questions we need to consider are:
* How can we maximize the value of technologies to reduce costs while improving quality and safety?
* How can we advance the needed evidence to assure that we only select truly useful technologies?
* How can we stimulate physicians to only recommend cost-effective drugs or devices for their patients?
* How can we encourage individuals to select high-deductible health plans and then take an active role in making medical decisions?
Wednesday, April 14, 2010
Where is Your White Space?
by Mark Johnson
"We see local as the big white space."
That's America Online (AOL) CEO Tim Armstrong recently explaining to a group of investors how AOL's "digitizing towns" initiative (to offer one-stop website-management services to municipalities all across the U.S.) would position the company to compete against the likes of Google, Yelp, and CitySearch as the company looks for a clear path away from the disappearing dial-up subscription market.
In this context, white space basically means "a place where a company might have room to maneuver in a crowded playing field."
As a metaphor, white space is at once ubiquitous and frustratingly ambiguous. There may be as many definitions circulating as there are business thinkers. Some people define it as a place where there's no competition. Others as an entirely new market. Still others use it, as Tim Armstrong has, to refer to gaps in existing markets or product lines.
For all its ambiguity, though, white space is undoubtedly a metaphor about opportunity; different thinkers define it differently because they take varying approaches to capturing opportunity. In that spirit, let me offer up another way to look at white space — a very specific meaning I think would be particularly useful to Tim Armstrong and to any other top executive engaged in strategy formulation.
Rather than think of white space as external — as some indistinct but desirable land outside your company's walls — I suggest that it's more productive to view it as an internal signpost — as a way to map your company's ability to address new opportunities or threats. So by white space, I mean "market opportunities your company may wish — or need — to pursue that it cannot address unless it develops a new business model."
These might be opportunities to bring your own innovations to market — Apple's iPod is a great example and so were the mouse and laser printer (albeit ones their inventor, Xerox, failed to develop). Alternatively, they might be imperatives to address a competitive threat or a radically altered market landscape — like the one AOL faces as it watches its dial-up subscription market melt away or the one I suspect many, many companies will face this spring as they contemplate a world devoid of credit-induced demand.
Defining white space in this way is important to strategy formation for three reasons.
First, many companies have drawn too broad a conclusion from failed efforts to enter their white space — not that those opportunities couldn't be captured without changing their business model, but that those opportunities could never be captured at all. As a result, they've retreated to their core operations and adjacencies — and unnecessarily limited their options to only those strategic moves that they can execute with their current models. Too many companies act like Xerox in this situation and not like Apple.
Second, if viewed in this way it becomes clear that one company's white space may be another company's core competence. This may well be so for AOL as it tries to switch from a profit formula based on subscriptions to one funded through advertising, something very far from its core but very familiar to its born-on-the-Web competitors (though perhaps the fact that Armstrong is a former Google executive will carry the day).
But ultimately what this definition allows you to do is map a new opportunity or impending threat against your company's current ability to meet it, rather than assuming that the odds of success depend mainly on how near or far it is from other competitors. If white space really were just a place where no competitors lurked, companies would have little trouble bringing their most innovative ideas to market, since they'd be, practically by definition, the ones least subject to competition. But we all know how often that turns out to be true.
Mark W. Johnson is chairman of Innosight, a strategic innovation consulting and investing company with offices in Massachusetts, Singapore, and India, which he co-founded with Harvard Business School professor Clayton M. Christensen. Mark's book is Seizing the White Space: Business Model Innovation for Growth and Renewal.
"We see local as the big white space."
That's America Online (AOL) CEO Tim Armstrong recently explaining to a group of investors how AOL's "digitizing towns" initiative (to offer one-stop website-management services to municipalities all across the U.S.) would position the company to compete against the likes of Google, Yelp, and CitySearch as the company looks for a clear path away from the disappearing dial-up subscription market.
In this context, white space basically means "a place where a company might have room to maneuver in a crowded playing field."
As a metaphor, white space is at once ubiquitous and frustratingly ambiguous. There may be as many definitions circulating as there are business thinkers. Some people define it as a place where there's no competition. Others as an entirely new market. Still others use it, as Tim Armstrong has, to refer to gaps in existing markets or product lines.
For all its ambiguity, though, white space is undoubtedly a metaphor about opportunity; different thinkers define it differently because they take varying approaches to capturing opportunity. In that spirit, let me offer up another way to look at white space — a very specific meaning I think would be particularly useful to Tim Armstrong and to any other top executive engaged in strategy formulation.
Rather than think of white space as external — as some indistinct but desirable land outside your company's walls — I suggest that it's more productive to view it as an internal signpost — as a way to map your company's ability to address new opportunities or threats. So by white space, I mean "market opportunities your company may wish — or need — to pursue that it cannot address unless it develops a new business model."
These might be opportunities to bring your own innovations to market — Apple's iPod is a great example and so were the mouse and laser printer (albeit ones their inventor, Xerox, failed to develop). Alternatively, they might be imperatives to address a competitive threat or a radically altered market landscape — like the one AOL faces as it watches its dial-up subscription market melt away or the one I suspect many, many companies will face this spring as they contemplate a world devoid of credit-induced demand.
Defining white space in this way is important to strategy formation for three reasons.
First, many companies have drawn too broad a conclusion from failed efforts to enter their white space — not that those opportunities couldn't be captured without changing their business model, but that those opportunities could never be captured at all. As a result, they've retreated to their core operations and adjacencies — and unnecessarily limited their options to only those strategic moves that they can execute with their current models. Too many companies act like Xerox in this situation and not like Apple.
Second, if viewed in this way it becomes clear that one company's white space may be another company's core competence. This may well be so for AOL as it tries to switch from a profit formula based on subscriptions to one funded through advertising, something very far from its core but very familiar to its born-on-the-Web competitors (though perhaps the fact that Armstrong is a former Google executive will carry the day).
But ultimately what this definition allows you to do is map a new opportunity or impending threat against your company's current ability to meet it, rather than assuming that the odds of success depend mainly on how near or far it is from other competitors. If white space really were just a place where no competitors lurked, companies would have little trouble bringing their most innovative ideas to market, since they'd be, practically by definition, the ones least subject to competition. But we all know how often that turns out to be true.
Mark W. Johnson is chairman of Innosight, a strategic innovation consulting and investing company with offices in Massachusetts, Singapore, and India, which he co-founded with Harvard Business School professor Clayton M. Christensen. Mark's book is Seizing the White Space: Business Model Innovation for Growth and Renewal.
Four Things VCs Do That I Don't Like
by Ben Horowitz
Some VCs do things that I really don’t like. This post is for them.
1. They are fake casual
A lot of VCs dress casually, speak casually and encourage the companies in which they invest to have casual board meetings and casual discussions with investors. They say things like, “We’re part of the team with you and we’re building this together, so no need for formal behavior, formal thinking, or unnecessary preparation.” This would all be terrific—if it were actually true.
In reality, the entrepreneur is building the company, and I’ve yet to see a VC who shows up in the company’s office at 8 am and works until 11 pm 7 days/week, so no: they are not “part of the team”. More importantly, VCs invest other people’s money into their companies and have a strong fiduciary responsibility to make sure that the entrepreneurs run their companies properly. Sure, casual board meetings might be fine as long as the company is delivering terrific results. However, at the first sign of trouble, I hear things like: “The founder is not really capable of being CEO. He doesn’t even present critical information in an organized fashion at the board meeting.” Well, maybe he would have done that had you not instructed him to “keep things casual”.
As an entrepreneur, you should take board meetings seriously because board meetings are serious. If one of your VCs implies that board meetings aren’t serious business or that they prefer that board meetings be primarily open-ended discussion, you should view this as a 5 year-old child requesting complete autonomy and unlimited candy—that may be what they are asking for, but what they really crave is structure.
2. They want to grab a cup of coffee
Some of my best friends are VCs, and I am always happy to see them. Some VCs have important business to discuss with me and I look forward to those meetings. Some VCs are extraordinarily smart and meeting them is educational, and I am grateful for their insight. However, many VCs who want to have coffee with me are none of the above. Worse yet, they have no agenda and no purpose. They just want to “compare notes.”
When I was CEO, I didn’t take meetings with no agenda and no purpose. I’m not sure why I should take them as a VC. Of course, when I was CEO, people knew better than to request a meeting with me with no agenda and no purpose. I think that these VCs have mammas that didn’t raise them right.
More importantly, VCs having coffee with one another is a key conduit for VC groupthink. This is how you get 30 venture-backed startups going after the same market at the same time. It’s bad news for VCs and it’s bad news for their companies.
My proposal: less coffee, more original thinking.
3. They confuse pattern matching with knowledge
As a VC, I have come to understand the value of “VC pattern matching.” Experienced VCs have been on dozens of boards and seen thousands of deals. As a result, they recognize patterns of strategy and behavior that generally work, and patterns that generally fail. This is very valuable information for an entrepreneur who, if lucky, only sees one deal in his career.
Unfortunately, many VCs overreach with their pattern matching. Rather than saying, “Most companies who sell at this stage, regret doing so, and here’s why,” they’ll say, “Don’t sell now, that’s a stupid idea.” Other commonly expressed and incomplete patterns include “don’t hire very fast”, “hire faster”, “don’t build a sales force”, “build a sales force”, “don’t build downloadable software”, and “build an iPhone app”. None of this is useful input for your specific company.
A pattern-matched instruction without a rationale provides very little help. Either admit that you are pattern matching and that pattern matching is limited, or explain yourself.
4. They are pseudo-tough
VCs often confuse marginal social courage with real courage. For example, they think CEOs who fire people easily are tough. I’ve fired dozens of people and laid off hundreds. None of them was easy—not a single time. Having an easy time firing your loyal employees indicates a lack of courage and a lack of leadership. More specifically, it indicates a lack of willingness to really understand the negative consequences of those actions. If you fire people easily, you likely lack the toughness to look in the mirror.
VCs who value pseudo-toughness often display it themselves. I see them bully entrepreneurs by directing them to do things without having the intellectual courage to explain “Why?”. They berate the CEOs in their companies, but don’t have the cojones to stand up to their own senior partners. They undermine their own CEOs in their own companies by interfering with important decisions, but don’t have the moral fortitude to even tell the CEOs that they are doing it. These behaviors are not tough; they are pseudo tough. Pseudo tough VCs really annoy me, and damage their companies in the process.
If you are a VC and want to be tough, be real tough. For a VC, real tough is:
* The strength to explain in detail to an entrepreneur what she is doing wrong when the company is doing well, in order to improve her performance.
* The courage to do what’s right even if it makes you look really weak to the partners in your firm.
* The valor to tell an entrepreneur precisely why you are not going to invest in her company rather than giving the traditional “VC no” by just going dark.
Give it a try, tough guys.
Some VCs do things that I really don’t like. This post is for them.
1. They are fake casual
A lot of VCs dress casually, speak casually and encourage the companies in which they invest to have casual board meetings and casual discussions with investors. They say things like, “We’re part of the team with you and we’re building this together, so no need for formal behavior, formal thinking, or unnecessary preparation.” This would all be terrific—if it were actually true.
In reality, the entrepreneur is building the company, and I’ve yet to see a VC who shows up in the company’s office at 8 am and works until 11 pm 7 days/week, so no: they are not “part of the team”. More importantly, VCs invest other people’s money into their companies and have a strong fiduciary responsibility to make sure that the entrepreneurs run their companies properly. Sure, casual board meetings might be fine as long as the company is delivering terrific results. However, at the first sign of trouble, I hear things like: “The founder is not really capable of being CEO. He doesn’t even present critical information in an organized fashion at the board meeting.” Well, maybe he would have done that had you not instructed him to “keep things casual”.
As an entrepreneur, you should take board meetings seriously because board meetings are serious. If one of your VCs implies that board meetings aren’t serious business or that they prefer that board meetings be primarily open-ended discussion, you should view this as a 5 year-old child requesting complete autonomy and unlimited candy—that may be what they are asking for, but what they really crave is structure.
2. They want to grab a cup of coffee
Some of my best friends are VCs, and I am always happy to see them. Some VCs have important business to discuss with me and I look forward to those meetings. Some VCs are extraordinarily smart and meeting them is educational, and I am grateful for their insight. However, many VCs who want to have coffee with me are none of the above. Worse yet, they have no agenda and no purpose. They just want to “compare notes.”
When I was CEO, I didn’t take meetings with no agenda and no purpose. I’m not sure why I should take them as a VC. Of course, when I was CEO, people knew better than to request a meeting with me with no agenda and no purpose. I think that these VCs have mammas that didn’t raise them right.
More importantly, VCs having coffee with one another is a key conduit for VC groupthink. This is how you get 30 venture-backed startups going after the same market at the same time. It’s bad news for VCs and it’s bad news for their companies.
My proposal: less coffee, more original thinking.
3. They confuse pattern matching with knowledge
As a VC, I have come to understand the value of “VC pattern matching.” Experienced VCs have been on dozens of boards and seen thousands of deals. As a result, they recognize patterns of strategy and behavior that generally work, and patterns that generally fail. This is very valuable information for an entrepreneur who, if lucky, only sees one deal in his career.
Unfortunately, many VCs overreach with their pattern matching. Rather than saying, “Most companies who sell at this stage, regret doing so, and here’s why,” they’ll say, “Don’t sell now, that’s a stupid idea.” Other commonly expressed and incomplete patterns include “don’t hire very fast”, “hire faster”, “don’t build a sales force”, “build a sales force”, “don’t build downloadable software”, and “build an iPhone app”. None of this is useful input for your specific company.
A pattern-matched instruction without a rationale provides very little help. Either admit that you are pattern matching and that pattern matching is limited, or explain yourself.
4. They are pseudo-tough
VCs often confuse marginal social courage with real courage. For example, they think CEOs who fire people easily are tough. I’ve fired dozens of people and laid off hundreds. None of them was easy—not a single time. Having an easy time firing your loyal employees indicates a lack of courage and a lack of leadership. More specifically, it indicates a lack of willingness to really understand the negative consequences of those actions. If you fire people easily, you likely lack the toughness to look in the mirror.
VCs who value pseudo-toughness often display it themselves. I see them bully entrepreneurs by directing them to do things without having the intellectual courage to explain “Why?”. They berate the CEOs in their companies, but don’t have the cojones to stand up to their own senior partners. They undermine their own CEOs in their own companies by interfering with important decisions, but don’t have the moral fortitude to even tell the CEOs that they are doing it. These behaviors are not tough; they are pseudo tough. Pseudo tough VCs really annoy me, and damage their companies in the process.
If you are a VC and want to be tough, be real tough. For a VC, real tough is:
* The strength to explain in detail to an entrepreneur what she is doing wrong when the company is doing well, in order to improve her performance.
* The courage to do what’s right even if it makes you look really weak to the partners in your firm.
* The valor to tell an entrepreneur precisely why you are not going to invest in her company rather than giving the traditional “VC no” by just going dark.
Give it a try, tough guys.
Monday, April 12, 2010
The Customer Experience Movement
Corporations removed major quality defects in the 80’s, re-engineered business processes in the 90’s, and now it’s time to take on the next big challenge for corporate America: Customer experience.
I often equate the customer experience movement to the quality movement which is well described in the book Quality Is Free: The Art of Making Quality Certain by Philip B. Crosby. As Crosby said in his book: You can do it too. All you have to do is take the time to understand the concepts, teach them to others, and keep the pressure on.
Here are 7 critical areas in which the customer experience movement can learn from the quality is free movement:
1.Nobody owns it (or the corollary, everybody owns it). In the early stages of the quality movement, companies put in place quality officers. Many of these execs failed because they were held accountable for quality metrics and, therefore, tried to push quality improvements across the company. The successful execs saw their role more as change facilitators – engaging the entire company in the quality movement. Today’s chief customer officers need to see transformation as their primary objective — and not take personal ownership for improvement in metrics like satisfaction and NetPromoter.
2.It requires cultural change. Many US companies in the 1980’s put quality circles in place to replicate what they saw happening in Japan. But the culture in many firms was dramatically different than within Japanese firms. So companies did not get much from these efforts, because they didn’t have the ingrained mechanisms for taking action based on recommendations from the quality circles. Discrete efforts need to be part of a larger, longer-term process for engraining the principles of good customer experience in the DNA of the company.
3.It requires process change. Quality efforts of the 1980’s grew into the process re-engineering fad of the 1990’s. As business guru and author Michael Hammer showcased in his 1994 book Re-engineering the Corporation: A Manifesto for Business Revolution, large-scale improvements within a company requires a change to its processes. That perspective remains as valid today as it was back then. Customer experience efforts, therefore, need to incorporate process re-engineering techniques. That’s why these efforts must be directly connected to any Six Sigma or process change initiatives within the company.
4.It requires discipline. Ad-hoc approaches can solve isolated problems, but systemic change requires a much more disciplined approach. That’s why the quality movement created tools and techniques — many of which are still used in corporate Six Sigma efforts. These new approaches were necessary to establish effective, repeatable, and scalable methods. A key portion of the effort was around training employees on how to use these new techniques. Customer experience efforts will also require training around new techniques. Here are a couple of my posts that describe this type of discipline: Experience-Based Differentiation and Are You Listening To The Voice Of The Customer.
5.Upstream issues cause downstream problems. This is a key understanding. The place where a problem is identified (a defective product, or a bad experience) is often not the place where systemic solutions need to occur. For instance, a problem with a computer may be cause by a faulty battery supplier and not the PC manufacturer. A bad experience at an airline ticket counter may be caused by ticketing business rules and not by the agent. So improvements need to encompass more than just front-line employees and customer-facing processes.
6.Employees are a key asset in the battle. The quality movement recognized that people involved with a process had a unique perspective for spotting problems and identifying potential solutions. So the many of the tools and techniques created during the quality movement tap into this important asset: Employees. Customer experience efforts need to systematically incorporate what front-line employees know about customer behavior, preferences, and problems as well as what other people in the organization know about processes that they are involved with.
7.Executive involvement is essential. For all of the items listed above, improvements (in quality then and in customer experience now) require a concerted effort by the senior executive team. It can not be a secondary item on the list of priorities. Change is not easy. To ensure the corporate resolve and commitment to make the required changes, customer experience efforts need to be one of the company’s top efforts. Senior executives can’t just be “supportive,” they need to be truly committed to and involved with the effort.
The bottom line: The 'great customer experience is free' movement continues!
I often equate the customer experience movement to the quality movement which is well described in the book Quality Is Free: The Art of Making Quality Certain by Philip B. Crosby. As Crosby said in his book: You can do it too. All you have to do is take the time to understand the concepts, teach them to others, and keep the pressure on.
Here are 7 critical areas in which the customer experience movement can learn from the quality is free movement:
1.Nobody owns it (or the corollary, everybody owns it). In the early stages of the quality movement, companies put in place quality officers. Many of these execs failed because they were held accountable for quality metrics and, therefore, tried to push quality improvements across the company. The successful execs saw their role more as change facilitators – engaging the entire company in the quality movement. Today’s chief customer officers need to see transformation as their primary objective — and not take personal ownership for improvement in metrics like satisfaction and NetPromoter.
2.It requires cultural change. Many US companies in the 1980’s put quality circles in place to replicate what they saw happening in Japan. But the culture in many firms was dramatically different than within Japanese firms. So companies did not get much from these efforts, because they didn’t have the ingrained mechanisms for taking action based on recommendations from the quality circles. Discrete efforts need to be part of a larger, longer-term process for engraining the principles of good customer experience in the DNA of the company.
3.It requires process change. Quality efforts of the 1980’s grew into the process re-engineering fad of the 1990’s. As business guru and author Michael Hammer showcased in his 1994 book Re-engineering the Corporation: A Manifesto for Business Revolution, large-scale improvements within a company requires a change to its processes. That perspective remains as valid today as it was back then. Customer experience efforts, therefore, need to incorporate process re-engineering techniques. That’s why these efforts must be directly connected to any Six Sigma or process change initiatives within the company.
4.It requires discipline. Ad-hoc approaches can solve isolated problems, but systemic change requires a much more disciplined approach. That’s why the quality movement created tools and techniques — many of which are still used in corporate Six Sigma efforts. These new approaches were necessary to establish effective, repeatable, and scalable methods. A key portion of the effort was around training employees on how to use these new techniques. Customer experience efforts will also require training around new techniques. Here are a couple of my posts that describe this type of discipline: Experience-Based Differentiation and Are You Listening To The Voice Of The Customer.
5.Upstream issues cause downstream problems. This is a key understanding. The place where a problem is identified (a defective product, or a bad experience) is often not the place where systemic solutions need to occur. For instance, a problem with a computer may be cause by a faulty battery supplier and not the PC manufacturer. A bad experience at an airline ticket counter may be caused by ticketing business rules and not by the agent. So improvements need to encompass more than just front-line employees and customer-facing processes.
6.Employees are a key asset in the battle. The quality movement recognized that people involved with a process had a unique perspective for spotting problems and identifying potential solutions. So the many of the tools and techniques created during the quality movement tap into this important asset: Employees. Customer experience efforts need to systematically incorporate what front-line employees know about customer behavior, preferences, and problems as well as what other people in the organization know about processes that they are involved with.
7.Executive involvement is essential. For all of the items listed above, improvements (in quality then and in customer experience now) require a concerted effort by the senior executive team. It can not be a secondary item on the list of priorities. Change is not easy. To ensure the corporate resolve and commitment to make the required changes, customer experience efforts need to be one of the company’s top efforts. Senior executives can’t just be “supportive,” they need to be truly committed to and involved with the effort.
The bottom line: The 'great customer experience is free' movement continues!
Friday, April 9, 2010
Stop Demanding Too Little of the Health Care Industry
April 8, 2010
by Peter Neupert
For too long we've held health care to a different standard than other businesses — a lesser one. Patients complain they are paying too much while doctors complain they are being paid too little. They're both right — it's time to shift the value chain in health care, fundamentally changing the business of health care.
Imagine if health care could be transformed like nearly every industry that touches our lives — more choices, more services, more convenience, and more value. Not only would the quality of our lives improve, but skyrocketing costs would be brought back in line as providers and consumers could find the appropriate "package" of value (convenience, price, outcome, risk). While there are some unique characteristics surrounding the market demand for health, transformation is possible — but it will only be possible if we stop pretending that economics and incentives for consumers and other stakeholders don't matter or can be managed via insurance alone.
In the last 30 years, the health care industry has evolved around providers, insurers, the government, employers — with hidden pricing mechanisms and a perverse payment system that can't keep pace with the changing nature of disease and opportunities in delivery systems. Most stakeholders have no idea what anything costs — let alone having anywhere near the kind of services and support to make informed decisions that we do in every other aspect of our lives. The regulations and mindsets governing health care have simply inhibited the kind of broad–scale innovation that's happened in other industries. We've been locked into the past with a fee–for –service model that's out of date. We need to reward and drive "value" based upon innovation to drive better health outcomes.
Why not let consumers and other health professionals like nurse practitioners or even software do some of the work that the most costly physicians should not and cannot be doing anymore? Physicians should focus their unique expertise on the things that require very specialized knowledge and skills, like treating top–priority, chronic diseases. As Clay Christensen points out in The Innovator's Prescription, every industry that touches our lives has been transformed — complex, expensive products and services once only available to few are now accessible and affordable to the masses and provided by those (people or even software) with far less training. Why not health?
We have to engage consumers in their own health economics — providing incentives, tools and information to support informed choices, to hold consumers more accountable and to create real economic 'value' for wellness. Today, there is no economic value for wellness — providers don't get paid for it, and insurers can't really value it either. This is why there are so many failed experiments that focused on getting consumers engaged in their own wellness. Yet, lots of people pay lots of money for vitamins or other 'wellness' products and services. The supplement industry alone is roughly a $30 billion business. There's a huge market for drugs that aren't "reimbursed" — Propecia and now all the off–patent drugs like Claritin, Prilosec and so on. There are examples of new types of "practices" like Qliance (an all you can eat model that doesn't involve insurance) resulting from doctors and patients voting on a new type of value exchange. And there are clearly segments of health — dentistry, veterinary, cosmetic surgery — where the marketplace is rewarding innovation and the discovery of better value equations built around a price, quality and service equation.
Regrettably, today's health delivery system and payment framework does not reward innovation around health management, prevention, and real–time consumer engagement. There are many entrepreneurs and great ideas: New market entrants — virtual care over the Internet to a patient's home from American Well, new delivery channels like CVS Minute Clinic, new types of programs and services for behavior–intensive disease management like Redbrick. These new entrants can help shift the business of care, enabling physicians to focus on using their unique expertise on areas that require their very specialized knowledge and skills. The real challenge is that the path to unlock the economic value and reward innovation is blocked by the perverse, rigid market structure created by the third–party payment system and a consumer mindset that health care is "free".
To truly shift the business of health, we need to drive the right combination of structural change, innovation and use of technology to create a better system — essentially, drive real value for every dollar spent.
by Peter Neupert
For too long we've held health care to a different standard than other businesses — a lesser one. Patients complain they are paying too much while doctors complain they are being paid too little. They're both right — it's time to shift the value chain in health care, fundamentally changing the business of health care.
Imagine if health care could be transformed like nearly every industry that touches our lives — more choices, more services, more convenience, and more value. Not only would the quality of our lives improve, but skyrocketing costs would be brought back in line as providers and consumers could find the appropriate "package" of value (convenience, price, outcome, risk). While there are some unique characteristics surrounding the market demand for health, transformation is possible — but it will only be possible if we stop pretending that economics and incentives for consumers and other stakeholders don't matter or can be managed via insurance alone.
In the last 30 years, the health care industry has evolved around providers, insurers, the government, employers — with hidden pricing mechanisms and a perverse payment system that can't keep pace with the changing nature of disease and opportunities in delivery systems. Most stakeholders have no idea what anything costs — let alone having anywhere near the kind of services and support to make informed decisions that we do in every other aspect of our lives. The regulations and mindsets governing health care have simply inhibited the kind of broad–scale innovation that's happened in other industries. We've been locked into the past with a fee–for –service model that's out of date. We need to reward and drive "value" based upon innovation to drive better health outcomes.
Why not let consumers and other health professionals like nurse practitioners or even software do some of the work that the most costly physicians should not and cannot be doing anymore? Physicians should focus their unique expertise on the things that require very specialized knowledge and skills, like treating top–priority, chronic diseases. As Clay Christensen points out in The Innovator's Prescription, every industry that touches our lives has been transformed — complex, expensive products and services once only available to few are now accessible and affordable to the masses and provided by those (people or even software) with far less training. Why not health?
We have to engage consumers in their own health economics — providing incentives, tools and information to support informed choices, to hold consumers more accountable and to create real economic 'value' for wellness. Today, there is no economic value for wellness — providers don't get paid for it, and insurers can't really value it either. This is why there are so many failed experiments that focused on getting consumers engaged in their own wellness. Yet, lots of people pay lots of money for vitamins or other 'wellness' products and services. The supplement industry alone is roughly a $30 billion business. There's a huge market for drugs that aren't "reimbursed" — Propecia and now all the off–patent drugs like Claritin, Prilosec and so on. There are examples of new types of "practices" like Qliance (an all you can eat model that doesn't involve insurance) resulting from doctors and patients voting on a new type of value exchange. And there are clearly segments of health — dentistry, veterinary, cosmetic surgery — where the marketplace is rewarding innovation and the discovery of better value equations built around a price, quality and service equation.
Regrettably, today's health delivery system and payment framework does not reward innovation around health management, prevention, and real–time consumer engagement. There are many entrepreneurs and great ideas: New market entrants — virtual care over the Internet to a patient's home from American Well, new delivery channels like CVS Minute Clinic, new types of programs and services for behavior–intensive disease management like Redbrick. These new entrants can help shift the business of care, enabling physicians to focus on using their unique expertise on areas that require their very specialized knowledge and skills. The real challenge is that the path to unlock the economic value and reward innovation is blocked by the perverse, rigid market structure created by the third–party payment system and a consumer mindset that health care is "free".
To truly shift the business of health, we need to drive the right combination of structural change, innovation and use of technology to create a better system — essentially, drive real value for every dollar spent.
Tuesday, April 6, 2010
Chaos & Organization in Health Care
by Thomas H. Lee and James J. Mongan
One of the most daunting challenges facing the new U.S. administration is health care reform. The size of the system, the number of stakeholders, and ever-rising costs make the problem seem almost intractable. But in Chaos and Organization in Health Care, two leading physicians offer an optimistic prognosis. In their frontline work as providers, Thomas Lee and James Mongan see the inefficiency, the missed opportunities, and the occasional harm that can result from the current system. The root cause of these problems, they argue, is chaos in the delivery of care. If the problem is chaos, the solution is organization, and in this timely and outspoken book, they offer a plan.
In many ways, this chaos is caused by something good: the dramatic progress in medical science—the explosion of medical knowledge and the exponential increase in treatment options. Imposed on a fragmented system of small practices and individual patients with multiple providers, progress results in chaos. Lee and Mongan argue that attacking this chaos is even more important than whether health care is managed by government or controlled by market forces.
Some providers are already tightly organized, adapting management principles from business and offering care that is by many measures safer, better, and less costly. Lee and Mongan propose multiple strategies that can be adopted nationwide, including electronic medical records and information systems for sharing knowledge; team-based care, with doctors and other providers working together; and disease-management programs to coordinate care for the sickest patients
One of the most daunting challenges facing the new U.S. administration is health care reform. The size of the system, the number of stakeholders, and ever-rising costs make the problem seem almost intractable. But in Chaos and Organization in Health Care, two leading physicians offer an optimistic prognosis. In their frontline work as providers, Thomas Lee and James Mongan see the inefficiency, the missed opportunities, and the occasional harm that can result from the current system. The root cause of these problems, they argue, is chaos in the delivery of care. If the problem is chaos, the solution is organization, and in this timely and outspoken book, they offer a plan.
In many ways, this chaos is caused by something good: the dramatic progress in medical science—the explosion of medical knowledge and the exponential increase in treatment options. Imposed on a fragmented system of small practices and individual patients with multiple providers, progress results in chaos. Lee and Mongan argue that attacking this chaos is even more important than whether health care is managed by government or controlled by market forces.
Some providers are already tightly organized, adapting management principles from business and offering care that is by many measures safer, better, and less costly. Lee and Mongan propose multiple strategies that can be adopted nationwide, including electronic medical records and information systems for sharing knowledge; team-based care, with doctors and other providers working together; and disease-management programs to coordinate care for the sickest patients
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