Top Investor Focus: JP Morgan 19

By: Sherri Douville, CEO & Board Member at Medigram

The purpose of this post is to help investors and executives in healthcare understand what direction the U.S. health system is going and foster understanding for why there is so much confusion about it today.

If you look at the two “peaks” below, ask any health system CEO and they will verify current state in the “straddle”. How they exit to the second curve is a roadmap some of them have and some of them are struggling to define.

On the heels of JP Morgan #19 where lawmakers, healthcare executives, entrepreneurs, and analysts descend on San Francisco many in suits, the consensus is that the entire healthcare industry is mostly committed to value based payment. This requires hospitals and physicians taking risk. It’s worth defining briefly what risk is in the context of hospital or physician contracting and provide insight for where and when there is resistance to accepting and acting on this national trend and why.

In risk based models of healthcare financing, providers meaning hospitals and doctors assume some of the financial risk that was historically assumed by health care insurance companies and charged to employers. As providers are widely taking on more risk, investment in Health IT and tools that allow them to do that were rated at JP Morgan as the most attractive segment according to a report by Leavitt Partners and KPMG from a survey of active investors.

image credit: KPMG and Leavitt Partners 2019 Investor Outlook Survey

Generally, there are two forms of risk sharing, upside which involves shared savings if you have saved money as a hospital or doctor based on an agreed target with an insurer. There is downside risk sharing which is epitomized by the concept of an ACO. In two-sided risk models, providers still share in the savings but are also responsible for some of the loss if spending is above the agreed target

Alternative payment models such as bundled payments and ACO’s depart from traditional fee for service (physicians and hospitals getting paid for everything they can do, regardless of results). These programs operationalize these types of risk sharing concepts.

For example, shared savings is an example of an upside risk alternative payment model. In both upside and two sided, or downside risk models, health systems succeed by providing more efficient, less costly care which is better for patients. Medigram has designed our technology and services to help health systems with this shift. Further, there is no direct conflict or competition with tools or companies that have dominated the value based market because these technologies were designed for a desktop use case. Medigram is designed specifically for supporting physicians in their environments, in a mobile context.

Quote of Dr. Don Rucker, Head of ONC under HHS at Top of Mind 2019 image credit: twitter

Why are some healthcare systems and their executives slower to adapt or seem to resist this value based trend of taking on more risk?

1. In all fairness, neither physicians nor hospitals can succeed without real partnership of insurance companies. Payers have to provide access to what’s below and depicted to the right for data. Insurers vary in their data and collaboration capabilities.
2. Many of today’s healthcare executives rose through the ranks as medicine was industrializing itself. LEAN and its subsequent movement is primarily focused on controlling operations, a worthwhile goal in a fee for service context, before a time when physician leadership, engagement, and alignment became as important as it really is in the value based world. Shifting from an operations-centric paradigm to a collaborative paradigm involving physician engagement is a complete change that is out of the reach of many organizations. There will be winners and losers.
3. Further, many of today’s executives also rose through the ranks in the 90’s when “managed care” was a big discussion. One reason why managed care mostly failed is that its exclusive focus seemed to be on rationing care without any real emphasis on results to the patient. Today, society is much different than it was in the 90’s and people like me (Gen X) and (Gen Y) bring different demands to our institutions when we do choose to engage with them. Any health system that needs to cater to Gen X and Gen Y as either patients or caregivers will not try to deny that the world is a very different place with marked demographic and societal changes apparent today. As patients, we demand results and efficiency! As our country strains under the unsustainable cost of healthcare with mismatched results, you can see why today’s consensus for value based care is very different from the conversation of the 90’s. The country spent $3.4 trillion on health care in 2016, a number that is projected to grow to $5.5 trillion by 2025. [1]

[1] https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2016.1627

Edited by: Dr. Arthur Douville, health system Chief Medical Officer and steering committee co-chair for bundled payments.

Sherri Douville is CEO and board member for Medigram, the modern, mobile communication platform and system for physicians. At Medigram, Sherri enjoys advising customer executives and their boards on how to tie their technology strategy to their financial and clinical quality goals. Sherri leads a world-class team of technology, healthcare, physician, and business executives in Medigram’s mission to eradicate the leading cause of preventable death, a delay in information. Sherri has been published and quoted 15 times in the last two years in healthcare IT, healthcare management, and IT media. She has 15 years of healthcare experience in executive management, product development, sales and marketing including with Johnson & Johnson, and as a health care product development and business consultant. She has a BioPhysics degree and has completed three certificates in electrical engineering and computer science through MIT. Ms. Douville is a global panel member for the MIT Technology Review. Sherri also serves on the board of the NorCal HIMSS (Health Information Management and Systems Society) as membership committee chair. She has previously been co-chair of the CxO leadership forum, co-chair of the Annual Innovation conference and a member of the board nominating committee. Sherri also advises Health IT, Medical Informatics, and genetics startup companies; Sherri and her husband, Dr. Art Douville have volunteered together with a variety of NonProfits including as a member of the Board of Fellows for Santa Clara University.