MANAGING;SOME ANSWERS TO THE BIG QUESTIONS IN HEALTHCARE
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October 14, 1996 01:00 AM

MANAGING;SOME ANSWERS TO THE BIG QUESTIONS IN HEALTHCARE

Mark R. Middlebrook
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    The rapid pace of change in healthcare today, fueled mainly by the rise of managed care, has forced consumers and providers to face fundamental questions on either side of the same equation.

    How can consumers access low-cost, high-quality healthcare?

    How can providers offer that kind of care for payers and consumers while differentiating themselves in consumers' eyes?

    The response from providers has been a healthcare revolution in which there have been three main advances: integrated delivery systems, demand management and reduced healthcare costs.

    This revolution has heated up competition for control of regional markets as HMOs, insurers and other providers vie for sometimes hundreds of thousands of enrollees. By the year 2000, a number of regional integrated delivery networks will have merged or affiliated with multistate organizations capable of managing millions of enrollees.

    Physician-driven networks are playing an increasingly important role in the marketplace. Physician management companies are rapidly acquiring and packaging physicians for managed-care contracting.

    The ultimate goal is to create organizations that can integrate doctors, hospitals and payers into a cost-effective and higher-quality system. Important success factors in these networks are better management of information across the system, more emphasis on measuring clinical outcomes, achieving greater cost-effectiveness through continuous process improvement, re-engineering of patient processes and streamlining of management structures.

    In the final analysis for patients, that means the new alliances create a seamless continuum of care for patients who need physicians, outpatient care, acute-care hospitals, skilled-nursing facilities, and care in the home and hospice. The range of alternatives is expanded to promote patient care in the most appropriate, least restrictive setting.

    Demand management is the use of various tools to help reduce demand for healthcare services by allowing consumers to take more responsibility for managing their care.

    Here's an example: An HMO enrollee with a health problem calls either a health plan or provider system for advice. A nurse, guided by software, performs triage and directs the individual to the most appropriate level of care. Software protocols may cover 95% of potential ailments. This demand (or access) management is a hybrid strategy, intended for cost management on one hand but also for health promotion. The goal is to streamline healthcare demand and to educate consumers in taking more responsibility for managing their own routine health needs.

    These market-based reforms are bringing down costs, and it's going to continue. Healthcare spending is down. The Department of Labor reported prices rose just 2.5% in 1995, helped by the smallest increase in health costs in 23 years. HMO premium prices fell by 1% to 2% in 1995. Many expect another 3% decline this year.

    Government-sponsored health reforms would further control costs through cuts in the rate of growth of Medicare and Medicaid spending, which combined with the increase in demand will cause real cuts in reimbursement. The budget cuts and heavy discounts are putting a financial strain on hospitals and physicians. If providers are to survive, they must continue to make aggressive cost reductions.

    Managed care has been the catalyst for integrated delivery systems, the introduction of demand management and the reduction of healthcare costs. But we also should look at some of the larger challenges confronting our evolving healthcare system:

    Aligning incentives. Economic incentives of all partners in the healthcare equation should be aligned to ensure that everyone is working to achieve the same goals. How integrated a provider network is directly impacts how rapidly it moves, how quickly it makes decisions and acts, and how well it controls costs. Aligning payment and delivery of care for each member of the provider team is a tricky proposition because fee-for-service medicine creates incentives that can be at odds with preventive care and prospective payment.

    Clinical integration. Over time, the true measure of success for integrated delivery networks will rest on their ability to operate as seamless networks. Clinical integration, the extent to which patient care is coordinated across the continuum of sites and services, is difficult to master. Done right, it adds value and promotes better performance. But merely assembling the pieces under one umbrella doesn't mean a system will operate as one. Within each operating unit are rules, traditions and cultures that can impede the smooth transition of patients from one setting to another.

    Customer service. The goals of any provider network must be developed with customer service and satisfaction in mind. Healthcare consumers are much more educated and aware of their options than ever before and have come to differentiate providers on the basis of service.

    Our biggest challenge in reshaping healthcare for the future is the challenge of leadership. Today's effective leader is a manager of change. For healthcare leaders that means collaboration vs. competition and leading the change process rather than managing for stability. One lesson kids learn from playing video games is that standing still will get them zapped quicker than anything else. We in healthcare have learned the same lessons.

    In the end, even though healthcare is evolving toward massive integrated delivery networks, each community is different and will require its own set of innovative leadership and innovative solutions.

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