In our
first
discussion of this theme, we looked at how emerging "consumer-directed health plans" may split the health insurance
pool and what effects this may have on the cost and availability of healthcare services. This time we're going to consider a
couple of "splitter" strategies in the healthcare provider space: "focused factory" models for provider organizations and
"boutique" medical practices.
Focused Factories
Regina Herzlinger, a Professor of Business Administration at Harvard Business School, extrapolated established
techniques from the manufacturing sector to healthcare in her book Market-Driven
Healthcare: Who Wins, Who Loses in the Transformation of America's Largest Service Industry. Her basic concept is
that efficient organizational process strategies (vertical product line integration, use of information technology, "just in time"
inventories, etc.) can be applied to the design of healthcare services. These nimble provider organizations can target the
full needs of a specific clinical problem such as heart transplants, cataracts, diabetes or kidney dialysis. By doing one
thing only, these organizations can do it better, faster, cheaper and more profitably than the inefficient "full service"
medical centers that today provide most patient care. Now that patients today are smart, informed and want control over
the healthcare services they receive, they will naturally seek out and use these best-of-breed focused factories of
healthcare services.
Herzlinger's book was hailed by many as revolutionary when it was published in 1997. We found that somewhat odd,
because for years large healthcare organizations have had specialty centers (like heart failure clinics) that concentrate
expertise and streamlined patient management systems in just this fashion. Also, it's no surprise that "practice makes perfect"; there is abundant evidence that the
quality of care delivered is a direct function of the volume of cases managed. So what appears to be new in Herzlinger's
notion is that instead of running such practices as "silos" within larger organizations, focused factory practices would all
be separate entrepreneurial commercial enterprises all busily working on a Darwinian landscape governed by Adam
Smith's invisible hand. This is the free marketeers' nirvana for healthcare.
We think that many aspects of this concept make sense. Any organization that sees high volumes of cases will see the
broad variation of presentation and complication that occur in patient populations, and can have experienced personnel and
systems to deal adroitly with those clinical issues. These organizations should be able to optimize staffing, facilities and
supplies management to the precise needs of their patients.
However, the success of this focused model of care depends on how crisply the organization is able to focus on the
inherently fuzzy nature of real patient problems. Consider the fact that most patients -- particularly elderly, chronically ill
ones -- have multiple problems that span multiple foci. Even within a single organ system, patients may need the services
of multiple "factories". For instance, patients with heart disease often have several cardiac problems -- heart failure,
symptomatic coronary disease, secondary valvular problems and arrhythmias. How would Acme Chest Pain Center deal
with atrial fibrillation in one of its patients? What would Jones Heart Failure Clinic do when Mrs. Smith complains of
angina?
Do these separate entities need to merge into Amalgamated Heart? Do they contractually deal with each other to lateral
patients to each other? What then happens to continuity of care? Efficiency and timeliness of intervention? The potential
for confusion, delay, errors and omissions is orders of magnitudes worse when you add in all the problems from multiple
organ systems that patients often have. What will Acme Chest Pain do with a patient complaining of abdominal pain or a
rash? Who will manage a patient's anticoagulation when Travelers' Infectious Disease Clinic starts an interacting
antibiotic?
The fans of focused factories point to success stories like vision centers and dialysis centers. But these represent the
easy carve-outs that already stand mostly to the side of the healthcare system. Trying to carve up the entire universe of
patient needs is much, much more problematic.
Even if logical and efficient slices are possible, how do patients who become sick get sorted into the right factory?
Some patients may know that they need Jones Heart Failure Clinic when they are short of breath, but most don't. (For that matter, many
primary care and ER docs mistakenly diagnose "pneumonia" when heart failure is present.) Most patients just know
that they have a problem. So who points them in the right direction? The easy answer is: Don's Diagnostics, where you can
get triaged while you wait. But how will Don's handle patients who need immediate hospitalization? Who will they call?
How can Don's have all the requisite expertise? And what about all the patients in rural and underserved areas? If there's
currently not even a single generalist service available, how will patients there ever have access to the whole spectrum of
"factories"?
Eventually, the fuzzy process of dealing with patients' overlapping problems appears to lead back to care designs that look, well, just like what
we've got now in the typical multi-specialty healthcare system. So if that's the case, how does maintaining all the multiple
business entities add benefit? We're uncertain, and we also think that the failure of this concept to take hold nearly five
years after it was first proposed indicates that lots of other people are also uncertain.
Boutique Medical Practices
In contrast, this development is one that we're fairly certain is a bad idea. Boutique healthcare (aka "concierge medicine" or "retainer medicine") appears to be the latest
manifestation of a phenomenon as old as human history: those with wealth can demand and receive better services than
those without. Even in healthcare this has always been the case; it's just not been blatantly visible the way it is when
companies like MDVIP or MD2.
Here the concept is simple. In return for annual fees of $2000 to $20,000 -- above and beyond insurance payments for
procedures, meds and specialty referrals -- these docs will provide 24x7 care including housecalls, accompanying patients
on trips or visits to specialists, etc. Instead of caring for a population of 1500 - 4000 patients, these docs are "retainer
physicians" for 100 or so "clients" ("valets" for their "masters" more accurately). The big benefit for the docs is that they
can work a lot less, grab more control of their lives, and make a lot more money, while their clients get all the personal
attention they crave.
Fundamentally, as long as this remains an isolated phenomenon whereby those who can buy the best do so with their
own cash, we can look the other way. It flouts the tacit presumption of social equality that most people in the US still
cherish, but to retain that quaint presumption these days is only possible by pointedly ignoring how for toward a plutocracy
this country has moved.
The bigger danger is that boutique healthcare will expand in popularity in a fashion similar to vouchers for private schools.
Once the wealthy are able to reassign tax-supported resources toward their own private healthcare, the remaining funds
available for the rest of us will be compromised. Currently there is some indication that boutique medicine may run afoul of Medicare rules.
However, given the ideological commitments of the current administration, there's not a lot of reason to hope that
pressures in this direction will be resisted. Regulations are made to be unmade and unenforced.
Still, the demographics of wealth are such that the number of clients for boutique medicine will never be large
so the impact hopefully will be limited. Besides, if boutique medicine gains so much traction that public healthcare
facilities collapse, the joke still will be on the wealthy clients when there is no ER to care for them after their downtown
myocardial infarction or freeway SUV rollover. This trend fortunately appears to be an inherently self-limiting one.
In any case, there are many ways that enterprising individuals are looking to split the healthcare conundrum into
manageable pieces. Sometimes the motivation is to enhance care for all patients; in others it is for the benefit of the few.
Some taxonomic splits make sense; others appear confusing and confused. These are definitely interesting times.
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