Integrated Health Care and Medical Marketing
After months of painstaking negotiations, the Maryland Hospital Association, Maryland state regulators and the US Department of Health and Human Services (HHS) have agreed to place a cap on hospitals’ annual budgets in an effort to slow medical spending growth. The decision to implement a cap may represent a landmark shift in US health care reform.
In an unprecedented state-wide move, Maryland hospitals and payors are seeking to realign reimbursement structures to discourage fee-per-service revenue strategies.
If the plan works as intended, facilities will no longer have strong financial incentives to perform more procedures per patient. Instead, they will be financially rewarded for reducing the overall number of services provided to a given patient by reducing bounceback ER visits, readmissions, hospital-acquired infection rates, and improving coordination of care with follow-up providers.
Meaningful change has been a long time coming.
Reform advocates have long argued that such changes were necessary to tamp down Americans’ annual per capita spending on health care.
Currently, American health care consumers spend 250% more than most other member countries of the Organization for Economic Cooperation and Development (OECD) — an extra expenditure that hasn’t equated to better results. Average American life expectancy (78.7 years) lags over a year behind the average life expectancy for the entire 34-nation OECD (79.8 years).
Important to keep in mind, though, are the factors that contribute to American health care spending beyond the fee-for-service model:
- Most of the increases in spending in the U.S. have come from technological advances and innovation — whether breakthrough or incremental, stepwise advances
- The heterogeneity of the U.S. population versus more homogeneous countries infuses variability and reduces predictability
- The U.S. dedicates more resources toward premature birth and end-of-life care
Obviously, there are trade-offs. However, few would argue that there is not a significant opportunity to eliminate waste and unnecessary spending.
In Maryland, the idea is that more efficient acute care– delivered not reactively, but strategically, with long-term wellness goals for the patient taking priority — will result in less wasteful medical spending. Hospitals will be tasked with identifying (and amplifying) best practices for the treatment of underlying pathologies, as opposed to treating patients symptomatically.
Strong state regulation of budgets, paired with rewards for improving patients’ overall wellness track, will provide downward pressure on hospitals to spend efficiently. As acute care becomes more focused and attentive to its position in the overall progression of care, hospitals will also realize incentives to better coordinate with preventative and follow-up care providers.
This represents an enormous opportunity to grow your organization via integration.
Think like a Rockefeller.
Whether the tycoon John D. Rockefeller is a good or poor role model for patient care, some of his business strategies may be exactly what the doctor (and the government) ordered. Before becoming known as a monopolist bent on undercutting competitors into bankruptcy, Rockefeller’s Standard Oil Company was a model of corporate efficiency.
Where other petroleum producers dumped refining byproducts (like gasoline) into rivers, Standard Oil found ways to use them by powering its machines. Instead of specializing in the refining of oil, relying on oil and equipment suppliers and selling to wholesalers, Standard Oil bought controlling interests in manufacturers and retailers up and down its supply chain. It could control manufacture of its products from the ground well to the store shelf.
With the movement in Maryland focusing on improving top-to-bottom care, health care organizations and health plans should take a hard look at that model.
If you specialize only in acute care, you cannot influence your patients’ health before they hit your ER door and have little to do with arranging (or affecting the quality of) follow-on care. You’re fighting an uphill battle.
Integrations are already happening in the market.
Acute care organizations nationwide, in the move toward Accountable Care compliance, have already increased buyouts of private physician practices, and many smaller, community hospitals are being assimilated into larger systems.
In most cases, purchases have focused on bringing specialists in-house to take advantage of centralization and resource sharing, or in the case of facility buys on leveraging purchasing power, negotiation power with payors and increasing geographic footprint.
Moreover, variability in physician practice makes coordination and standardization a challenge… unless the health care organization “owns” these “assets” as employees instead of contracted affiliates in a network.
Health care reform’s downward pressure on micro scale profit margins is already squeezing smaller providers out of the market, or incentivizing them to sell out to larger organizations. But is that bad for health care?
Integrated health care networks
There is a significant advantage for a health care organization that could market to consumers its ability to provide services along the entire continuum of care, from preventative services (fitness centers, nutrition counseling, primary care physicians), to acute (on-demand minor care clinics, emergency services, inpatient critical care with all its attendant specialization under one roof), to follow-on services (LTACHs, skilled nursing facilities and in-home rehab therapies) and, hopefully, back to the preventative care level.
In such a system, there is little need to coordinate care with outside providers: you can sell ease, convenience and relationship to your constituent consumer base.
Consumers have always been confused and disheartened by the complexities of self-managing progression of care — coordinating appointments, deciphering multi-faceted billing from several providers, referrals. This confusion causes many patients (and in some instances their providers) to make mistakes in their treatment regimen.
These are the benefits that an Accountable Care Organization (ACO) is supposed to deliver, with reimbursement ties to outcomes and patient satisfaction. The Kaiser Permanente system has been a leader in health care following a similar path. In fact, when I led market research on health care organization brand equity in my days at P&G, Kaiser was one of the few organizations with a solid, positive brand equity.
If your organization can show its consumers a start-to-finish treatment map, and provide them a well-paved road to cure, better aggregate results should follow.
The watch-out is that a self-contained, integrated health system can limit consumer choice. Also, salaried physicians may find a mandate to adhere to standardized practice (derided among professionals as “cookbook medicine”). There may be pressures to reduce or deny certain procedures or care because of the bottom line.
Not to be lost in all of this is the patient’s role (and responsibility) in exhibiting healthy behaviors and following health care providers’ recommendations and direction. All the capital expenditure, information systems and systematized processes can only go so far if patients do not take an active part in wellness.
c2b solutions is working with several health care organizations to use its extensive consumer insights and psychographic segmentation to facilitate positive behavior change, and help ensure these organizations’ shift to integrated models lives up to the investment.