The Need for Radical Change in US Healthcare

US healthcare is a catastrophe by every measure: Total cost, health outcomes, individual experience and clinician experience. I have previously provided a three-part fix to our problems. You can read about the three parts: making the individual the customer, creating claims-free care delivery systems, and eliminating laws and regulations that enable rent-seeking.

?

In this issue, we will create a practical playbook for #2: Creating claims-free care delivery systems.

A “Care Delivery System”

Let us start with the notion of a “care delivery system.” How does it differ from a medical practice?

• Enough scale to have processes and protocols that go beyond a single physician’s knowledge
• Ability to continue if a physician—or even a group of physicians—leaves
• A brand for the entity that is independent of the physician’s reputation, although the physician reputation may contribute to the entity brand
• The ability to run the business without microtask-oriented claims???

?

Independent physician associations (IPAs), medical groups (MGs), and ACOs (accountable care organizations) meet some of these criteria, except the last one. ACOs have made progress on the last point. Once you read my playbook, it will become clear how far off these traditional approaches are.

?

Why are physicians frustrated with these models? Because while they reduce some of the administrative, contracting and IT challenges, they do not address the fundamental issues: The care delivery system needs to move away from claims, needs its own brand, and needs enough scale to address at least a metro area, and in some cases, a state or multiple states.

?

But, but, but.... Don’t these entities use “value-based arrangements”? No, they do not. The vast majority of VBC (value-based care) contracts are FFS (fee-for-service) contracts with some cosmetic levers around savings, bonuses, etc.

A Playbook for Creating a Claims-Free Care Delivery System

Here are seven steps that will create a claims-free care delivery system:

1. Create an IPA + MSO combination focused on delegated risk: Existing IPAs are all focused on FFS revenue, with the minimum amount of risk-taking to get “bonuses” for value-based care. My recommendation is to start at the other end: Operate only with delegated risk. The main delegated risk archetypes are episode pricing and service-line capitation. (Global capitation is difficult to pull off at this stage.) This surprising strategy will differentiate the care delivery entity immediately and will create a laser focus on total cost (which most practices can’t even measure) as well as clinical efficacy (which practices can’t measure, either). The good news: Because there are so few delivery entities that take delegated risk, the payer (managed care company) will have to work with the entity in a reasonable manner—there aren’t 50 other practices doing this.
2. Include marketing/branding from the get-go: Most care delivery practices have close to zero branding and marketing unless they are hospitals. Start with the name: You are likely to be called “West St. Louis Primary Care Associates” or something similar. You should, instead, pick an enduring name that you can invest in as you expand your geographical reach and services. You also need a regular marketing budget to reach out to individuals (not employers or managed care organizations). A CRM (customer relationship management) system is a worthwhile investment from the beginning.
3. Create a system without a doctor-patient relationship: Your education and professional training have been built around a trusted, high-value doctor-patient relationship. However, look at at-scale service businesses around the world: From Marriott to Norwegian Cruise Lines to Gensler (architectural firm) to McKinsey. Not one of them sells a relationship with a specific person. The locus of value for an at-scale business is the company’s institutional knowledge, process excellence, experience, data, etc. Once you make this switch for your own company, it is a freeing experience. You will find yourself working on the business, not in the business. Today’s threats will become your new opportunities.
4. Provide a mobile career path for clinicians: As well-paid and personally rewarding as a clinical career is, one limitation is that it is almost always tied to a specific location (especially for doctors). The reason is the personal-relationship-driven nature of today’s business. A major benefit of my recommended playbook is that the value belongs to the care delivery system, not an individual. Therefore, after working in, say, metro New York for a few years (perhaps because you graduated in the area), you can move to Seattle, or Denver, or Miami. This is a significant talent attractor, and a necessity in an era when you will compete against many types of organizations (startups, AI companies, managed care organizations, hospitals, retail companies) for clinicians.
5. Sell at least a small set of direct-to-consumer care offerings: One investment that will pay off handsomely in coming years is a few direct-to-consumer offerings, i.e., services that people pay out of their pocket, and not as a part of their benefit design. Example: An executive physical, or a gut biome test combined with custom dietary plans. These services may not make you any real money, but they will position you well as the market evolves toward direct-to-consumer.
6. Create an end-to-end patient experience: Do not rely on managed care or EMR (electronic medical record) experiences. I have used all the mainstream offerings, and all of them are mediocre and horrible (apologies to mediocre and horrible people everywhere). Remember that user experience is much more than user interface (the digital app, AI, e-mail, etc.). You may need specialized advice to create these experiences; your physician training does not prepare you to become great experience designers.
7. Structure processes that enable external capital injection as well as statewide/national/global expansion: The ownership and legal structures of this entity should enable both the practice entity and the management service organization to raise external capital. This has implications for voting rights, legal form, state of incorporation, etc.

As is clear from this list, this is a big lift, and requires deep knowledge of healthcare, digital technology, and general business (especially marketing). Unfortunately, because this is a new area, existing partners—such as traditional MSOs (management service organizations) and value-based are enablers—are not well-suited to the task.

?

Is there room for independent practices? Yes, there is, but in niche/specialized spaces, not as the system. Consider the hotel industry for business travelers: Most business travelers stay at Marriott, Hilton, Hyatt, etc. A small subset will use a boutique hotel. Similarly, a small number of specialist clinicians can have “non-system” businesses. Most clinicians will be a part of claims-free care delivery systems.

?

What have you seen that works well? What are the pitfalls? I welcome your thoughts on this important topic.