Emerging enterprises of health care management

A new class of health care management organization is emerging that thrives by taking advantage of health care’s rampant and institutionalized waste. These firms mine the market dysfunction that has developed over decades, which will almost certainly yield enough fuel to drive a new way to manage care and cost.

The founders of these organizations have deep health care experience, and they understand the mechanisms of excess. More important, the ones I’ve met are mission-driven, with a deep sense of outrage that health care’s exploitation has become so pervasive and overt. So their businesses are purposeful.

They know that supply chain, health information technology, care delivery and health care finance firms have devised dozens of ways to drive unnecessary care and cost, often operating outside of market-based rules and delivering only nominal value. And that these forces explain why US health care costs double what it does in other developed nations, and why credible studies estimate that half (or more) of all our health care spending delivers no value.

Most of the mechanisms of excess are embedded in business practice or in policy, so they are difficult to see. Under business practice, think of hospitals that pay physicians a percentage of the value of what they prescribe, driving up utilization. Or health plans that pay three to five times more for high value products/services than what any volume purchaser can negotiate in the marketplace, driving up premium.

In policy, think about Medicare’s fee-for-service arrangements that promote unnecessary care and inhibit innovation that is focused on better management. Or the medical services valuations under Medicare that have been jiggered by the specialist-dominated American Medical Association RVS Update Committee (RUC), over-valuing specialty care at huge expense to patients, purchasers and primary care. Or PhRMA’s Medicare D deal with Congress that prohibits competitive bidding for drug purchases. There are many more examples.

Against this backdrop of widespread intentional misuse, these new firms are founded on at least six key ideas that strikingly contrast with most other health care firms.

First, their business models create value for clients by isolating and disrupting as many distinct mechanisms of health care excess as possible, and by driving appropriate care and cost.

Next, because the mechanisms of health care waste are embedded, not just in care delivery, but in every health care sector, efforts to manage them must be full continuum and inter-disciplinary, with many vectors deployed simultaneously. No single approach — primary care medical homes, wellness/prevention, disease management, health analytics and clinical decision support — is enough to create a sustained level of impact that, while improving health outcomes, consistently saves more than it costs. Further, the expertise required to effectively manage goes beyond clinical skills, health plan mechanics, risk, technology, policy and many other disciplines.

Third, these firms establish comprehensive primary care practices that provide not only life management and convenience care, but that facilitate significant steerage and control over downstream care. (Some also provide occupational health services, for a broader impact.) Most are developing powerful back offices, with robust health IT, analysts and medical managers focused on the identification and management of clinical and financial risks. These capabilities favor evidence-based care, guiding clinical decision support and other activities aimed at improving health outcomes while reducing unnecessary cost.

Fourth, these companies are structured to optimize value for patients and purchasers first (rather than for the vendors), and they do so transparently, following market principles. For example, most operate outside fee-for-service reimbursement. So rather than having an incentive to deliver more products and services, making a margin on each one, they are paid to manage the care and cost processes. This means they have no incentive to deliver unnecessary care (or deny necessary care). Instead, they are rewarded if they implement mechanisms that ensure the appropriateness of care throughout the care continuum.

Fifth, this approach — full-continuum management of health care clinical and financial risk — is appropriate to any at-risk health plan structure. Medicare Advantage, Medicaid Managed Care, medically indigent populations and so on.

And, sixth, because it can leverage market forces, driving better local and national pricing with volume, its capacity to succeed increases with scale. This means that, in the context of existing health care, this new approach has the potential to rapidly grow and displace convention.

I know of several organizations, each in different stages of development, that follow these themes: WellPortal, Iora Health, Chen Medical Centers, Qliance and WeCare TLC. They have first succeeded in different sectors — employee health, worksite clinics, Medicare management, chronic disease management, direct primary care — but have realized that producing greater value requires broadening their management toolkits and skillsets beyond excellent care delivery. All are intent on focused management of every type of excess, and most can already show powerful results.

Health care cost has become an overwhelming national problem, so a cottage sector that can thrive by taming the industry’s most corrosive practices is potentially as game-changing as genomics or nano-technology.

More pragmatically, though, the new enterprises of health care management will prove a breath of fresh air for patients and purchasers, and a startling revelation to the entrenched and overfed health care industry.

Brian Klepper is chief development officer, WeCare TLC, and blogs at Care and Cost.

Comments are moderated before they are published. Please read the comment policy.

  • Deceased MD

    I certainly don’t believe in excessive healthcare costs. And the laws in place as pointed out are ludicrous. Medicare purchases drugs from Big Pharma without negotiations. Colchicine used to cost 5 cents per pill and now it is $5. The list as Brian points out is extensive.

    On the other hand, to really address these cost issues, it requires regulation. We need to get back to the anti trust laws and get rid of lobbyists. Ok never going to happen? or wishful thinking?

    But havng another big business determine what is medically necessary, I find disturbing. So with the new Obamacare, everyone may be required to have insurance but everyone is also allowed to be denied care as well.
    unfortunately there is not always the gold standard trial for every medication and intervention in medicine. Yet it is known to be effective. I agree there is excess. I agree that there are procedures and medical devices that are more costly and there are other choices that are equally effective that cost less. But I am skeptical that big business is going to effectively manage care. Maybe cost. But not care. In fact the most appopriate term might be mangled care.

    • Disqus_37216b4O

      “Colchicine used to cost 5 cents per pill and now it is $5.”

      Because the government mucked around and interfered with the free market.

      Who’s stopping a competitor from setting up and manufacturing this drug and selling it for 5 cents per pill? Government regulations, set at the behest of their cronies in Big Pharma.

      Giving the State more power and demanding more government regulation is just going to lead to more crony capitalism.

      You touch on the problem when you comment that “Medicare purchases drugs from Big Pharma without negotiations”, but you don’t quite get there. Government and big business will always do favors for each other, quid pro quo. You want to give legislators more power, yet who owns legislators? Big business. And big business will always have the money to buy legislators.

      • Deceased MD

        interesting discussion. So what do you suggest? How do you see that government mucked up the free market? Maybe we are talking about the same thing. There has been what I will call a deregulation in the laws, driven in this example, by Big Pharma. I guess I was wishing for the government to not give in to industry who now create laws that best suit them clearly.

        The true meaning of govt regulation really means just that. Such as the anti trust laws from nearly 100 years ago that protected true competition. That is what I define as govt regulation. Not industry writing the law. That is just I think called corruption.

        So in the current state of affairs you have a point. I guess I was thinking of the government regulating to protect the free market. May not happen. Happened a long time ago with the anti trust laws, but i can wish.

        As far as the example with colchicine, again I would call that deregulation where the government caves in and does what industry wants. There is no regulation there. Just reinventing a patent. That is not regulation.

  • Michael Wasserman

    Back in the late 1990′s, I ran a company called GeriMed of America. We had clinics staffed by Geriatrician’s and did relatively well in full-risk Medicare. Unfortunately, our average patient was 80 years old with multiple co-morbidities and this was before risk adjustment. One of the problems a lot of programs dealing with the Medicare problem will find is a lack of trained clinicians. So many young doctors are being trained in the high tech procedure based model that they don’t understand a high touch, low tech approach to caring for the frail elderly (the highest cost cohort of patients). Still, the programs you mentioned are a step forward!

Most Popular