HFMA VIEWS

Scott MacStravic, Ph.D.

It has long been a major tenet of health care that everyone should get equal quality of care, regardless of race, education, income, or other individual differences, including whether or not they can pay for the care they need. This does not obligate every provider to welcome every patient, regardless of ability to pay, nor does it preclude providers from offering “boutique” or “VIP” levels of service to wealthier patients, but the medical care is supposed to vary only by provider, not by patient.

This tenet turns out to apply only to half of medical care, the half that applies to reactive treatment of sickness, where the primary criterion for success is that patients should be cured, or at least given the best chance to survive and be restored to as close to a normal level of health as possible. By contrast, the other half of medical care (by definition, not in terms of how much medical care falls into which category) – namely proactive health care, aimed at preventing disease and injury in the first place, or managing existing chronic conditions to minimize their crises, complications and worsening, violates this tenet.

In reactive sickness care, it is the mission or health care organizations (HCOs), and the professional commitment of individual clinicians, to do whatever is necessary and appropriate for each sick patient. The assumption, or at least hope, is that someone, any combination of patients, themselves, employers, insurers, governments, or charities will cover the costs of what is needed, even if some patients pay nothing at all. The benefits of care are measured in terms of patients’ health; only the costs are measured in dollar terms.

But in proactive health care, the mission of providers -- whether traditional HCOs and clinician practices, or the new “vendor” organizations specializing in proactive health – is to minimize reactive sickness care costs to payors. If commercial or government insurers are the payers, this means reducing reactive sickness care utilization and expenditures such payors must pay for. If employers are the payers, this often means reducing the total economic impact of employees’ (plus dependents’ or retirees’) unhealth on those payors’ financial performance.

So, where reactive sickness care delivers treatment for money, proactive health care delivers money for money, not mixing apples and oranges, but apples and apples. This makes it a relatively simple matter, at least conceptually, to determine how much should be invested in not just proactive health strategies overall, but even in individual patients’ cases. The best way to be sure that an overall proactive health program delivers the desired results to both provider and payor is to ensure that the return on investment in each patient is positive.

While controlling costs based on the probable cost savings achieved with each patient may be too complicated, doing so for different patient segments is both logical and common. Patients with the same health promotion, risk behavior change, risk condition reduction, or disease management challenges, for example, can be handled differently from those with other challenges. And perhaps even more important, patients with higher-risk reward potential because they seem more likely to succeed may logically be afforded more attention, effort, and investment than those with less potential.

This has usually been reflected primarily on the risk side, with patients having the greatest current and predicted levels of costs to payers, either just from sickness use and expense or total costs to employers, are given more attention. But it makes just as much sense, at least in planning investments, to consider the probability of success, not merely the potential savings. In fact, if potential savings can be predicted in dollar terms, and the probability of achieving them in percentage terms, the “value” of each patient, and therefore the maximum amount that should be invested in each, is simply the product of savings amount times the percentage probability.

Rather than go to all the effort of making individual patient-specific predictions of potential savings times probability of achieving them, the common practice is to categorize and segment patients according to “tiers” of risk or value. Using three tiers, representing high, medium and low levels of risk or value seems to be the most common practice, though any number that makes sense and improves the efficiency of investments and overall returns can work just as well.

Once tiered, by particular problem or goal, then by risk/value within each such category, patients are accorded different types and levels of attention. Those at the high level may be assigned a personal coach, for example, to be contacted by face visits on an individual or group basis, or phone coaching sessions. Those at the medium level could be assigned to group vs. individual sessions, to less frequent or shorter coaching sessions. And those at the low level may be sent mailed or e-mail messages, written materials, or asked to visit a website for self-initiated interactions.

Traditional HCOs and practices may have difficulty deliberately varying the intensity and “quality” of their interventions for such a crass, commercial reason as predicted risk or ROI. But it only makes sense if proactive health intervention programs are to be profitable. Delivering the “best possible proactive care” to everyone, regardless of risk and value differences, would simply guarantee that proactive health care would be a money-losing business, fitting into “community benefit” or charitable services missions, rather than business logic.

When there are such clear and consistent success criteria as money spent in proactive care investments compared to money saved for payors in reduced sickness care or total labor costs, it simply makes sense to use these in planning and implementing efforts. It amounts to simply making proactive health investments meet the same criteria as capital and operational investments providers make within their own organizations. And it will surely be the only way that proactive health investments will pay off for providers, as well as payors.

Newt Gingrich
Founder, Center for Health Transformation

HFMA recently asked Newt Gingrich about the role of government in reducing the number of uninsured. His response follows. The full interview will appear in the September issue of hfm magazine.

Health savings accounts are another example of the administration moving toward the individual-centered system we need. HSAs encourage wise decision making and personal responsibility, and they enable consumers to take greater charge of their own health and wellness. By incentivizing healthy behavior, these types of consumer-oriented arrangements can go a long way toward achieving better-quality health care at lower cost, as market forces are injected back into the industry. One of the major obstacles to the uninsured getting coverage is lack of access to plans that fit tight budgets, small business, and the self-employed. HSAs and other tools to bring more coverage choices to the American people, such as cross-state insurance, can help alleviate the burden of finding the right coverage.

However, consumerism without access to information about price and quality is useless. This is why the government must insist that businesses working with the government be required to post their prices and their performance results, set against a benchmark of standardized quality measures. By giving Americans the tools they need to best manage their health, we can enable individuals to make smart decisions about the consequences and benefits of their decisions. This change will mark a fundamental shift in our way of thinking about health, putting a much greater emphasis on individual responsibility that will alleviate the burdens currently straining our healthcare system.

Margaret E. O’Kane
President and Founder, National Committee for Quality Assurance

Following is an excerpt from Margaret O'Kane's commentary "Redefining Value in Health Care: A New Imperative" forthcoming in the August issue of hfm magazine.

Supporting the elimination of unnecessary care is easy if you are a patient or a payer. It’s a little more complicated for hospitals and health systems whose balance sheets may rely on the income from hysterectomies and full-body scans that might have been avoidable. Hospital and health system CFOs are uniquely situated to see both sides of this issue, as financial stewards of organizations that both provide care and purchase it.

Though purging the system of unnecessary care--and the associated revenue--may feel to CFOs like a conflict of interests, it shouldn’t. Consider the alarming economic backdrop against which this unnecessary care occurs. According to Brookings Institution economist Henry J. Aaron, at the current rate of increase, by the year 2022, half of the nation’s economic growth would go toward increases in healthcare spending. By 2051, all economic growth would be required to sustain health care.

The relentless rise in healthcare spending--spending that has outpaced growth on income by 2.5 percent annually for the past 40 years, says Aaron--is of course due in part to continuing positive advances in care in the form of new procedures, new technologies, and new pharmaceuticals. The fact is that we have no choice but to wring every bit of waste out of the system if we are to afford these advances and those yet to come. Rationing of some kind remains a real possibility in the future, but the imperative--both financial and ethical--is to apportion care based on effectiveness rather than cost. Better still is to avoid rationing altogether by creating an efficient system that reliably provides only evidence-based care. CFOs must join with their organizations’ chief quality officers to champion this goal.

When they do, they will find that quality very often costs less. For example, Allegheny General Hospital in Pittsburgh saved $2 million by investing $35,000 in improvement work that dramatically reduced cases of ventilator-associated pneumonia and central line infections, costly conditions that represent net losses for the hospital; and Charleston Area Medical Center saved $3 million on drug and supply costs through judicious review and administration of antibiotics for surgical patients and reduced the rate of infection.

Kevin C. (Casey) Nolan
Managing Director, Navigant Consulting, Inc.

On (yet another) long-haul flight across the United States, I read a very interesting article in the Wall Street Journal. I read the Journal every day, looking specifically for non-health care articles that could be applied to health care, as I believe that the health care industry can learn a great deal from the other 85% of the economy. And in this particular issue of the Journal was an article was on a new approach to client satisfaction measurement that GE and other Fortune 500 companies have adopted that focuses on the something called the “net promoter” concept (“Client-Satisfaction Tool Takes Root: GE Embraces Measurement of Customers’ Experience, Winning Back ‘Detractors’” by Kathryn Kranhold, July10, 2006). The concept was inspired by Andrew Taylor, CEO of Enterprise Rent A-Car, who condensed his company’s customer satisfaction survey down to two questions (how likely would you be to use us again? and how likely would you be to refer us to a friend?). GE asks customers to rate how likely they would be to recommend the company to a friend, using a scale of 1-10, with those who rate GE a 9 or 10 being classified as “promoters,” those who rate GE as a 7 or 8 are seen as “passive,” and those who rate the company 6 or below are considered “detractors.” GE calculates a net promoter score by subtracting the detractors from the promoters.

This is a simple, and highly “elegant” (as the engineers like to say) approach to customer/client satisfaction, and one I believe every health care provider should consider. It also reminds me of the words of wisdom I learned from my father many years ago. My dad was a pediatrician and a real pioneer in many respects. I recall asking him one time about a particular hospital and its reputation. His response was a precursor to the net promoter concept and one I have used many times since. He told me that the ultimate test for a hospital or a physician was whether they could pass what he called the “mom test.” The “mom test” was this: ask a physician if s/he would (assuming they had a good relationship with their mom!) send his/her mom to a particular hospital or physician. The answer to that simple question tells you more about a particular provider than even the most elaborate, statistically valid patient satisfaction or consumer preference survey. So the next time your eyes begin to glaze over as you are looking at those massive reports on patient satisfaction scores or consumer image survey results, remember the net promoter concept and the “mom test.” As my mom often counseled—keep it simple. Sometimes—often?—mom does know best!

Richard L. Clarke, DHA, FHFMA
President and CEO, HFMA

What do price transparency, pay for performance, discount policies for the uninsured, community benefit accounting, and tax exemption have in common (other than they all seem to result in more cost or lower payment)?

These concepts, and the concerns they generate, converge in the notion that healthcare organizations (especially not-for-profit hospitals) are community trusts.

I don’t mean trust in the legal sense, but in the sense that these organizations serve as trusted community assets—among the most important assets that any community has. Being a community trust means that the actions of the organization’s management team must be based on what is best for the community within the organization’s financial and structural capacity—not so easy when media and regulatory attention seems designed to penalize good work rather than help create solutions.

So what should we do to earn and fulfill this trust? First, we must embrace consumerism. We must adopt a philosophy of actively engaging consumers in their health and medical decisions. As healthcare leaders, we must set the tone for the organization that members of the community are our primary stakeholders—our primary customers. Our focus should be serving their needs and helping them achieve improved health status. In internal meetings, external communications, and actions, we must demonstrate that the community we serve is our focus—not physicians, payers, or employers.

Second, we must live that philosophy by improving internal systems and by working with others to remove barriers to engaging consumers. A key concept of earning and fulfilling community trust is price transparency. Trust cannot be generated or maintained with our stakeholders if they believe we’re trying to confuse or cheat them with unintelligible pricing information. And the pricing information that is most meaningful to patients is tailored to their condition, insurance coverage, discount eligibility, and past payment history. A wealth of resources for this effort is currently available, including the summer 2006 PATIENT FRIENDLY BILLING® report Consumerism in Health Care (www.patientfriendlybilling.org).

Third, those of us who are not-for-profit healthcare providers must fulfill our charitable mission by identifying and communicating how we meet the needs of all members of the community—not just those with the ability to pay. And we must be accountable to the community for our actions. Discount policies for the uninsured converge with consumerism. Such policies reflect the idea that within its financial capability, an organization has an obligation to engage consumers, regardless of their ability to pay. Collaboration is important here as well. Working with community groups, employers, and payers to develop local solutions to obtain insurance coverage and/or provide services to this portion of the community is a key. The February 2005 Patient Friendly Billing report contains a wealth of information on how to achieve effective discount and collection policies as well as approaches to collaboration.

To truly be a trusted community asset requires courage in leadership. It requires us to move beyond rhetoric, to remove barriers, and shine a light on hidden agendas. And it requires us to evaluate all our professional activities on the most important criterion of all: how they help our communities.

HFMA recently discussed the impact of Massachusetts' health reform legislation on hospitals' creditworthiness with Roger Goodman, assistant vice president, healthcare ratings team and higher education and other not-for-profit ratings team, Public Finance Group, at Moody’s Investors Service. In the course of the conversation, we posed this question: If there were one thing you could tell hospital CFOs to do differently to improve their credit ratings, what would it be? Here is his response:

If there were an easy answer to that question, I think everyone would be rated higher than they are now. Hospitals face a lot of common challenges that you’ve mentioned or I’ve mentioned, for instance, Medicare, the growing uninsured population, and investing in clinical quality. But they also face unique circumstances in their local markets, including physician relationships and dynamics and external competition demographics. The best thing a CFO and the management team of a hospital can do is plan strategically, implement those plans and operate soundly over time, and continue to pursue their specific strategy for, not only pursuing and enhancing their mission, but also improving their competitiveness.

Over a long-term horizon, we wouldn’t encourage any really short-term focus on getting a certain number to a certain point in the next year. We often look for a well-articulated plan, again over the long term, as one of the key drivers of credit quality and rating.

You can read the entire interview in the forthcoming August issue of hfm magazine.

Robert Fromberg
Editor-in-Chief, HFMA

Yesterday I was meeting with staff at HFMA to establish our magazine’s 2007 editorial calendar.

The process is to come up with 12 rather broad subjects, one for each monthly issue of the magazine.

Then the fun starts, as we must answer this question: so what do our readers want to know about these topics?

We have research findings to help with this task, but some judgment is necessary as well.

Take, for example, the revenue cycle. Now the revenue cycle has been a top concern among HFMA members for a number of years. And we have information about what underneath that broad subject is of most concern:

• Key performance indicators related to the revenue cycle
• Front-line staff training
• Improved upfront information capture
• Point-of-service collections
• Using technology to improve the revenue cycle
• Denials management

But here’s the rub: we have been publishing on these topics for a few years. We know these topics are still hot, but we don’t want simply to continue publishing the same information.

Our plan for FY07 is to focus on what innovative organizations are actually doing in these areas—to present examples that go beyond the conventional wisdom. For example, rather than simply listing the technology that can enable better front-end information capture, we’ll find out what organizations are doing to ensure that a system’s capabilities are actually used.

I welcome your thoughts about what revenue cycle information would be valuable to you. Just click on the “comments” link below.

Scott MacStravic, Ph.D.

[The Measurement Challenge, cont'd]

The estimation of productivity is almost always necessary, because measuring actual productivity of every employee every day would be prohibitively expensive. Unless employees have explicit output measures, such as with piecework, their productivity is usually estimated based on employee self-reports. These are subject to both limits of perception of one’s personal productivity and a natural tendency for employees to never make their productivity levels look too bad, lest they be fired.

Fortunately, there have been a number of productivity/presenteeism measuring devices developed and tested in recent years. These include the Stanford Presenteeism Scale. Once providers and employers agree upon the measurement device or system to be used, and both accept the results based on such estimates, the evaluation of the total benefits of HPM can go forward, and fair payment or sharing of total value gains can be achieved.

Of course, whether corporate clients and providers accept the same results as attributable outcomes and benefits of HPM efforts will depend on mutual trust and past experience. Providers will have to ensure that they are viewed as “benevolent” rather than “opportunistic”, as being client advocates, rather than seeking only to exploit their customers in their own interest. The consumer advocacy scale can be used to track clients’ perceived trust, and likelihood of remaining a client.

On the other hand, rather than rely on clients’ expressed satisfaction with past results and current trust, it may prove better to at least include asking clients about their expectation of future gains from remaining clients of the same HPM provider, and their anticipation of any loss should that relationship end. This combination of expected benefits and anticipated loss has been shown to better predict customer persistence in a real relationship than is true for satisfaction with past benefits alone. [K. Lemon et al. “Dynamic Customer Relationship Management: Incorporating Future Considerations into the Service Retention Decision” Journal of Marketing 66:1 Jan 2002 pp. 1-14]

There is a blue ocean out there, but one that remains blue primarily because of the combination of the difficulty of gauging the productivity and total performance impacts of HPM, and the skepticism of employers over results that represent combinations of estimates and predictions, rather than “hard evidence”. This means that providers that can master the challenge of delivering credible evaluations, along with delightful results will be able to enjoy the blue ocean advantages that much longer, since their rivals will face precisely the same barrier. 

Appendix

Dow Chemical Co. – Table of Labor and Medical Costs

Disease     (Abs/Pres x  %Emp = Subtl)  + (Medical x %Emp = Subtl)  = Total

Allergy	$7763	18.9	$1467	$1442	18.9	$273	$1740
Depression/Anxiety, etc.	$23,754	4.3	$1021	$2017	4.3	$88	$1109
Arthritis	$9246	9.0	$829	$2623	9.0	$236	$1065
Back/neck	$10,882	7.0	$762	$2249	7.0	$157	$919
Heart/Circ	$9616	7.1	$683	$2531	7.1	$180	$863
Stom/Bo	$10,702	3.4	$364	$2585	3.4	$88	$452
Migraine	$10,643	3.1	$330	$1689	3.1	$52	$381
Diabetes	$8358	2.4	$201	$3663	2.4	$52	$289
Breathing	$14523	1.5	$218	$2900	1.5	$33	$251
Asthma	$8522	1.3	$111	$1782	1.3	$23	$134
Totals			$5986			$1218		$7204

Table is based on published research, including J. Collins, et al. “The Assessment of Chronic Health Conditions on Work Performance, Absence and Total Economic Impact for Employers” JOEM (Journal of Occupational and Environmental Medicine June 2005 547-557; and S. Nicholson, et al. “How to Present The Business Case for Health Care Quality to Employers” Applied Health Economics and Health Policy 4:4 2005 209-218 I calculated the costs per employee by multiplying the costs of each condition times the proportion of employees who had each condition, then summed all of the ten conditions’ costs to yield the total costs per employee.
1. Abs/Pres reflects the total estimated negative cost/revenue impact of both absenteeism and presenteeism for each disease condition; %Emp = the percentage of employees who identified each disease condition as their primary chronic illness; Subtl = subtotals for each of the separate absence/presence vs. medical cost components of each disease category’s costs to Dow Chemical
2. Disease conditions are: Allergies; Depression/Anxiety/Emotional Disorders; Arthritis and Joint Pain/Stiffness; Back and Neck Pain; Heart and Circulatory Disorders; Stomach and Bowel Disorders; Migraine and Other Chronic Headache; Diabetes; Breathing Disorders other than Asthma, such as COPD, Emphysema, etc.; Asthma. All are listed in order of greater total costs per employee – Cancer was not included in the study, even though it is a common and expensive chronic condition for its survivors, and adds substantially to total costs. Nor were risk conditions such as overweight/obesity, which have been found to have significant labor costs of their own, as do risk behaviors such as smoking independent of their effects in promoting chronic conditions. So the above data are surely conservative.

Read Part 1 of this post.

Read Part 2 of this post.

Read Part 3 of this post. 

Scott MacStravic, Ph.D.

[The measurement challenge, cont'd]

Fortunately, new computer technologies and analytical tools have made predictive modeling, based on analysis of much more data in much less time than was true just a few years ago, far more reliable and credible. MedAI, for example, a predictive modeling firm in Orlando, FL, has won many awards for the proven accuracy of its forecasts of health costs. But since there is only the predicted future not experienced to compare to the actual future experienced, employers may simply not be willing to accept “on faith” anybody’s prediction if it results in making them pay more money for HPM services.

And when the differences made by HPM efforts represent those between estimates of productivity impacts, since productivity is so difficult to accurately measure, employer clients may be that much more uncertain about the results. Comparing estimates of actual reality to predictions of different realities will surely sound like a lot of guesswork, rather than a scientific basis for evaluating HPM effects and paying the providers that deliver such effects.

There are ways of making such comparisons more “scientific”. The random controlled trial, the gold standard in medical research, could, in theory, be used in HPM cases. Employers or the providers they hire could identify HPM prospects based on existing conditions or risks, then randomly assign some of them to being “treated” with a particular HPM intervention, while the rest are left “untreated” for comparison purposes. But consciously depriving some employees of the benefits of HPM participation, often including financial incentives, could easily cause labor unrest.

Moreover, history suggests that employers hate to limit something that works to only a portion of the population at risk. A random control trial involving different school districts in Wisconsin, for example, was ended after the first of three planned years. The results for the “treatment” group were so positive that the sponsors of the test enrolled all the controls in the treatment group, so there was no scientific comparison of the second and third year results.

And with HPM, results tend to increase over time. It takes a while for most people to change their risk behaviors, for example, or to adopt greater compliance with medications. Gordian Health Solutions, for example, has reported that the average ROI ratios for its employer DM clients have been $1.69:1 in the first year; $2.00:1 in the second, and $2.46:1 in the third. [“When It Makes Cents to Back into the 80/20 Rule” Gordian Health Solutions Oct 3, 2005 (www.healthleadersmedia.com) Lacking a random comparison control group, employers could not be sure that such results were scientifically valid.

Part 4 will appear tomorrow in HFMA Views. To read Part 1 of this post, click here. To read Part 2 of this post, click here.

The Measurement Challenge

What has kept health productivity management (HPM) from flooding the market is the extreme difficulty of measuring its impact on total performance. It is known that healthy workers are significantly more productive than are unhealthy ones, but most employers are not sure how much more. Absences related to employee sickness are difficult to measure, since employees take “sick days for personal reasons, and personal time off for sickness reasons. Declines in productivity at work caused by “unhealth” has usually been found to be many times as expensive as absence alone, but identifying such declines as a major challenge.

Most of the research has been done on the negative performance impact that employee unhealth has. In an analysis conducted of Dow Chemical Co. employees, looking at the impact of ten categories of chronic conditions, for example, the total cost impact was gauged at $7204 times every employee Dow had. Of this total amount, only $1218, or barely over one-sixth of the total, reflected direct medical care costs for treating such sicknesses. Presenteeism, by contrast, accounted for the vast majority, roughly four-fifths of the total.

Gauging the total savings from HPM, however, is even more difficult than gauging the total costs of employee unhealth. The savings from employees who have an existing chronic condition will reflect the difference in their sickness care expenses and productivity losses when their conditions are controlled, perhaps even “reversed” (defined as requiring only lifestyle vs. medical management) as compared to when not controlled. This will normally represent a large share of the difference between employees with given conditions and those with none, but by no means all of that difference.

Once people have a chronic condition, they tend to cost more to employers, no matter how well managed their conditions are. Moreover, the majority of people who have one chronic condition have more than one, so while one may be under control, the other may not. And relapses into “out-of-control” status are common even after conditions become under control. And, of course, this creates the challenge of measuring something that does not happen, the situation that can be measured, compared to a situation based on predictions of what would have been the case if employees’ conditions were not managed.

This is nowhere near as simple as comparing “after” to “before” situations. Evaluation of disease management (DM) efforts, for example, often overstate savings by comparing costs for patients newly diagnosed with a given condition, when their health care and productivity costs are likely to be greatest, to the costs in the subsequent year, when “regression to the mean” tends to reduce costs below the first year level even if nothing is done to cause such reductions.

Moreover, there tends to be a “self-selection bias” affecting those who end up participating in a DM intervention. Those most motivated to improve their health and comply with recommendations for taking their medications and changing their lifestyles will be more likely to participate, and to achieve reductions in costs. If average costs across all employees with the same condition “before” are compared to average costs of only those who participated “after”, the differences will tend to overstate the impact of the intervention, by including the impact of self-selection.

Even tougher is the evaluation of disease risk management (DRM) efforts aimed at preventing the onset of chronic or acute conditions. All risk reduction efforts have the challenge of predicting what would have happened without such efforts, then the predictable costs of the “would have happened” situation, in order to measure the differences. While the reality of actual costs for employees identified as at risk can be calculated or estimated, the prediction of costs that will be compared to the actual will necessarily involve an “educated guess”, since prediction is always fraught with uncertainty.

Part 3 will appear tomorrow on HFMA Views. To read Part 1, click here.

Scott MacStravic, Ph.D.

The authors of the book on the “blue ocean strategy” [WC Kim & R. Mauborgne The Blue Ocean Strategy, Harvard Business School 2005] have made a strong case for finding or creating the blue ocean strategy rather then persisting in fighting over scraps in the “red ocean,” the only other kind and dominant type of market. The usual market is red because of the bloodshed among competitor fighting for the little opportunity that exists to gain market share, growth and profits, given the hordes of others seeking precisely the same things.

By contrast, the “blue ocean” is new, unoccupied, and reflects markets that no one has discovered or created yet. Some examples the authors cite of such oceans include the high-end coffee experience market before Starbucks. When you are the first to discover or invent a market, the opportunities can be immense, while the competition is non-existent, at least for a while.

The so-called “healthcare system” (which is in the sickness care, not the healthcare business, and is anything but an organized system) is clearly in the red ocean at present. Not only are providers fighting desperately with each other over scraps, but the scraps are getting smaller and less nourishing as payers keep trying to put the brakes on their spending. Even as the boomer generation promises dramatic increases in sickness care demand, payers promise to find ways to cut their costs of paying for that demand.

The Blue Ocean Market

There is at least one blue ocean out there that providers might consider. And since health care is usually a local market, this means hundreds or thousands of blue lakes or ponds, rather than just one national or global ocean. This opportunity with few active competitors is the market for health-productivity management (HPM). What has kept this market from exploding is the combination of payers’ focus on reducing sickness care costs, and the difficulties involved in measuring the productivity-health connection.

HPM is, simply put, the full range of preventive/proactive health initiatives that have as their object and effect the reduction in the incidence and prevalence of disease and injury. What makes it different from the many disease and risk management efforts already underway is first that HPM focuses mainly on employees, rather than on commercial or government insurance beneficiaries. And second, it focuses on the productivity and other performance impacts that protecting and improving the health of employees can produce.

There have been a host of studies on the connection between health and productivity. On average, they have concluded that the productivity/performance consequences of employee “unhealth” are between two and five times the costs of sickness care alone. In other words, employers can afford to pay somewhere between two and five times as much to proactive health providers than can insurance plans. At such levels of payment, or “gainsharing” arrangements when agreed to, providers can find it profitable to deliver HPM to far more employers in far more markets than is the case today.

Tomorrow: The blue ocean strategy measurement challenge.

Robert Fromberg
Editor-in-Chief, HFMA

The Commonwealth Fund last week posted a very helpful summary of state health reform activity. The posting includes an in-depth look at Wisconisin, shorter pieces on nine other states, and information on federal policy actions affecting state healthcare financing.

As one might expect, the common threads include care for those most vulnerable, especially children; public-private partnerships; simplified coverage options; and publication of quality and cost information.

Focusing just on this last aspect, I found one passage in the Wisconsin article especially sobering:

The WCHQ, WHIO, and similar public reporting initiatives share the challenge of encouraging consumers and employers to use cost and quality information in their purchasing and care choices. WCHQ recognizes the need to make its Web tool easier for consumers to navigate and is considering working with consumer organizations to determine how to do this.

Queram notes that, although employers are interested in the performance data, most do not offer financial or other incentives to steer workers toward better-performing health providers...

Over the long run, the Wisconsin initiatives will need to develop a sustainable business model for health information collection and reporting. This will require commitment from the private and public sectors and evidence that these efforts work—that they encourage purchasers, consumers, and health providers to change their behavior and lead to higher quality and more efficient care.

The attention to quality and price transparency is so intense, and the case for providing this information is so compelling, it would be sad indeed if the information ultimately is not used. According to HFMA's latest PATIENT FRIENDLY BILLING® report, Consumerism in Health Care, price and quality information will only be used by consumers if it is useful to consumers. The report presents strategies for doing just that, most notably providing information about quality and a patient's estimated payment responsibility prior to providing a service in a fashion tailored to each patient. The report acknowledges that providing information in this way requires significant attention to process, people, and technology, but leading organizations already are making headway. Look for an article on three such organizations in the August issue of hfm magazine.

Scott MacStravic, Ph.D.

Forrester Research, in a recent report on the financial services industry, rated banks, insurance, brokerage and similar companies on their “customer advocacy.” [B. Doyle “Customer Advocacy 2006: How Consumers Rate Their Banks, Brokerages, and Insurers” Forrester Research Business View Trends May 22, 2006 (www.forrester,com)] Forrester defines “customer advocacy” as “consumer perception that the firm does what’s best for customers, not just firm’s bottom line.”

Some of the country’s largest banks rated poorly, with scores indicating as few as 18-35% of consumers though they were customer advocates. BY contrast, the always top-rated insurance company, USAA, which offers insurance to members of the armed forces, persuaded 68% of consumers, among 5,000 who were surveyed, of its commitment to customers. Credit unions as a group were rated just behind at 67%.

Since Forrester deals with national firms and industries, while health care is almost entirely local, it is understandable that it has not reported on customer advocacy among hospitals or physician groups. But this may be an important measure of reputation or image to check on. With the recent revival of government reviews of tax exemption, scandals about hospital’s “overcharging” uninsured patients, and generally declining trust in health care providers, checking on consumers’ perceptions of customer advocacy, perhaps getting ratings of your own organization compared to competitors, may offer some useful insights.

Even more important might be probing consumer ratings of your customer advocacy to learn why they score you as they did. Certainly, probing patient satisfaction ratings to learn the reasons for them offers useful insights into how providers can improve their ratings, and the same should be true for customer advocacy. While lobbying federal, state and local governments may well be essential to protecting tax exemption, having local consumer support should help with that, as well as with marketing, public relations, and fund raising. Do you know what’s your score?

Robert Fromberg
Editor-in-Chief, HFMA

Our family’s annual trek to watch the fireworks contained a management lesson for me. My wife, kids, mother-in-law, brother-in-law, and I left the house for the fireworks after it had started getting dark. I prefer to leave early for everything (it’s a family joke, if you can call a joke something the rest of the family refers to while gritting their teeth). But we live in a fairly small community, so it doesn’t take long to get from home to the local high school, where the fireworks are launched.

The place we usually watch the fireworks is a square block enclosed by a fence. Within the fence is a sports field and blacktop. We arrived to see the area within the fence already pretty dense with people.

“Oh well, “ I said, “in we go,” or words to that effect.

But my wife suggested it was too crowded. And she pointed out that leaving the enclosure always takes forever because there are only a few narrow breaks in the fence.

We were standing in the middle of an intersection; the streets were blocked, so no cars were in sight. People were beginning to set up chairs on the strips of grass between the sidewalk and the curb—in fact, I saw no grass available except people’s lawns.

“Where should we sit?” I asked.

“Right here,” she said.

“In the street? In the intersection?”

“It’s blocked off—no cars,” she pointed out.

Sure enough. We had a clear view of the fireworks. We had a clear spot to put our chairs. The kids would have room to run around. We would have a clear exit when the event ended. And we weren’t going to be flattened by cars. What could be better? We set up camp, and within minutes others joined us, so we had a nice little community.

All of which is yet another example of the power of thinking outside that fenced-in area of what-we’ve-always-done.

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Yesterday, the 4th of July, I received an email message from an author containing a revision of an article, which reminds me—again—of how hard we all work these days. I’m sure this author was not the only healthcare finance professional using the holiday to catch up on some work. Still, I hope everyone found a little time for relaxation.