Archive for Group Practice CEOs
by Scott MacStravic
November 28, 2007 at 2:16 pm · Filed under Health Plan/Payer CEOs, Group Practice CEOs, Business of Health, Marketing
While marketing in the health care industry has a fairly long history, finally, it is nowhere near as long as that of other, indeed most other industries. The modern discipline of marketing, with market research, customer experience management and targeted advertising is roughly 60 years old, having emerged soon after WWII, while health care marketing is only 30 years old or so. As a result, we have long looked for models in other industries.
As a service industry, it has been natural for health care to look at other service industries for a model to follow, or at least to adapt. The financial services industry has been suggested by many, since it involves a valuable “life asset”, namely wealth, and services that are designed to help people manage that asset, as is somewhat true with another life asset, i.e. health.
Retail sales industries have been suggested as models, since “customer service” is an essential component of health care, in addition to clinical quality. Besides, many marketing gurus have recommended that health care organizations increase their revenue sources by engaging in retail sales of health-related products. And health care has increased its availability and access through “retail” convenience clinics that are located in popular shopping malls, supermarkets, drug stores and superstores.
But there is another possible model available to health care – the automotive industry. It might seem counterintuitive, since that industry deals in a durable good, the automobile, rather than a service, but there is much to recommend the idea. Primarily, it is the fact that the automotive “customer experience” lasts far longer than the purchase transaction. People keep and use their cars for years, if not decades, and the benefits vs. costs of ownership is a major factor in customer loyalty, not merely the purchase transaction.
The auto industry has moved significantly in its marketing, from decades-old focus on the features and attributes of their product to a recent, usually overblown emphasis on the “driving experience” it offers. Prospects are being told that everyone will envy their having a particular brand, want to drive with them, and look up to owners of that car. They are being told that their lives will become better, their stress reduced, their enjoyment and excitement increased, merely because they drive a particular car.
While this marketing could be criticized as ridiculous “puffery”, it at least suggests something that health care marketers could emulate – a focus on what happens to patients after and because of their health care patient experiences and relationships. What “meaning in their lives” do patients perceive as consequences of their hospital stays, outpatient visits and physician relationships? What differences would they expect in their lives if they chose other providers and relationships, if any?
Health care providers become significant partners in a host of life-meaning experiences. From pregnancy and childbirth to menopause and aging to end of life, hospitals and physicians are frequent partners in life stages and events that the majority of patients experience. And the consequences of acute disease treatment and chronic disease management, to say nothing of proactive efforts designed to reduce the incidence of disease and injury in the first place – make major differences in people’s lives.
Until providers expand their horizons to see their “products” in terms of life meaning and impact, health care marketing will be mired in myopia, focused on features and attributes, or rare and episodic encounter experiences. Unless providers recognize and make the most of the life impacts they already have, and on added impacts they might have, hopefully in a more realistic and credible fashion than is true with automobiles, they will miss out on huge opportunities to become major “life partners” with patients, instead of modest sickness fixers.
by Scott MacStravic
September 17, 2007 at 9:31 am · Filed under Health Plan/Payer CEOs, Group Practice CEOs, Prevention and Health Promotion, Employee Health Management, Proactive health management, Health Management
Deselecting prospects for HM interventions can occur before they are invited to participate, by simply deciding that particular people who are eligible for a given intervention do not promise sufficient potential risk/reward ROI for the cost of the intervention considered. This is really no more than careful selection of whom to invite in the first place. The more serious de-selection challenge arises with people who have enrolled, but do not participate, cooperate or change their behaviors/lifestyles enough to deliver the predicted value.
Many such participants will de-select themselves, by simply not responding to invitations to participate, or dropping out once they are enrolled in a particular HM intervention. Many will drop out if they do not participate, or make no changes that would deliver any benefit to them anyway. But when there are incentives for participation, some may continue to do the minimum needed to qualify for incentives, but not make the changes needed to either gain personal health benefits, or deliver any value to HM sponsors or providers.
When participants choose not to enroll, or when they de-select themselves, sponsors and providers may decide to seek to “recapture” them through new persuasive communications, incentives or both, assuming their predicted value is great enough to warrant added effort and expense. If participants do not show any signs of achieving close to their predicted value, such as not participating with coaches, not opening e-mail, making website visits, and particularly if not making the kinds of lifestyle/behavior changes needed to deliver value to sponsors, then the sponsor or provider may choose to “fire” them.
This should obviously be done carefully and politely, with reasons for doing so made clear, along with the fact that their dropping out will save them time and save the sponsor effort that is now being wasted. Such a notice may be enough to spur some to re-energize their participation, but many will probably be happy to drop out if they are not gaining any incentives. It is for this reason that incentives should be linked to clear demonstration of behavior changes, rather than merely going through the motions to qualify.
For members of insured populations, insurers will clearly worry about losing the members who are “fired” from an HM intervention. They may prefer that members who do not respond well to one HM intervention be offered another they might respond to better. With employee participants, the potential of a loss of an employee over being dropped from an HM intervention may not be pretty low, but employers may object to the idea, or prefer offering non-responders other options as well.
Since the average participant in an HM intervention will have five or more health risk behaviors, risk conditions or chronic diseases, the option of offering another option might make sense anyway. It may be that the behavior changes for one risk are significantly more difficult for a given participant to make than the changes required in another. Non-responsive participants may be offered the option of selecting from among as many HM options they are eligible for, in which case, their act of making a choice, rather than being “recruited” to the one the sponsor/provider prefers may also help engage them better in the new intervention.
De-selecting or switching non-responsive participants is at least a logical option to consider when trying to optimize the overall ROI from a given HM intervention and overall investment. Of course, when incentives are based on behavior changes, or even better health improvements, the lack of any gain by non-responsive participants in one HM intervention may make them more likely to drop out, or even request another option. When incentives are based on improved productivity and performance by employees, the prospect of added pay for performance can be the most powerful incentive for enrollment, cooperation, and behavior change.
There are also intrinsic benefits to participants that may affect both their willingness to enroll in HM interventions, and their persistence therein. By calling participants’ attention to behavior changes they have succeeded in making, health improvements that have resulted, etc. HM providers and sponsors may increase participant retention as well as cooperation, and thereby decrease reliance on extrinsic and expensive incentives. Intrinsic benefits also do not tend to diminish in impact over time the way extrinsic ones do. Personal health and life quality benefits often arise so gradually that participants may not notice them, or be aware of how significant they are unless asked about them, reminded of progress and their significance.
The combination of selection of HM targets based on predicted risk/reward potential, graduating HM interventions based on such potential, and careful de-selection or intervention modification among those who are not responding can significantly improve providers’ and sponsors’ success rates and ROI. This requires additional investment in predictive modeling, and planned adjustments during participation. It also requires tracking specific behaviors, health status, and cost/productivity/performance changes that may risk violating HIPAA regulations, as well as added costs, but careful use of selection and de-selection or offering options should more than cover such costs.
by Scott MacStravic
September 12, 2007 at 3:51 pm · Filed under Insurance, Employer CEOs, Health Plan/Payer CEOs, Group Practice CEOs, Disease Management, Health Management
There seem to be five categories of things that employers, insurers, and government payors for healthcare are trying to manage:
- Case – pretty much restricted to hospital admissions or expensive episodes of sickness care, and intended to improve its coordination, efficiency, and quality
- Care – similar to case, but including pre-admission and post-discharge services, with the same intent
- Health – aimed at protecting and promoting general health and wellness, chiefly by promoting healthy behaviors, but also healthy environments
- Risk – preventing and modifying unhealthy behaviors, plus detecting and controlling or reversing risk conditions, in order to reduce the incidence, prevalence and costs of sickness
- Disease – minimizing the crises, complications, worsening, and costs of chronic conditions
The five differ in terms of whose behavior they hope to change, with care and case management focused mainly on sickness care providers, while health, risk and disease management focus mainly on patients’, employees’, plan members’ or beneficiaries’ behavior. Disease management is the more likely of the patient behavior change modes to include the patients’ physicians as well, so is a cross or “boundary area” between the care/case and health/risk modes, though many DM providers deal solely and directly with patients, while others limit themselves to motivating and coaching providers, who are then expected and usually paid to deal with patients.
For payors to deal with patients’ own physicians is a complicated and difficult process, since payor’s populations at risk rarely are the same as physicians’ populations. Exceptions arise in the case of worksite clinics, staffed by nurse practitioners, physicians, or both, which can serve precisely the population that employers wish better managed, for as many of the five management challenges that employees will permit. The same applies to staff model HMOs, where the population at risk is cared for by the same group of physicians.
Otherwise, independent physicians would have to cope with a wide range of different payors, each with its own idea of how the various management challenges should be handled. This complexity would add to the cost of physicians’ participation, and make it more onerous and difficult for them. Moreover, if payors are already paying for their own internal management programs, or have hired a specialized provider to do so, bringing in patients’ physicians will add significantly to costs.
All five are focused primarily on managing costs, at least when they are sponsored, paid for, and controlled by payors. Some degree of case and care management can be supplied by patient advocate services, however, where patients, or sometimes their employers, may pay for such services. Health, risk and disease management services are often paid for out-of-pocket by patients, when they prefer having control over the goals, processes and outcomes of such services, rather than relying on the generosity of payor sponsors.
The degree to which costs can be controlled varies widely across the different applications, with case management having the narrowest and most reactive focus, while health and risk behavior management have the most proactive. Risk condition management is proactive in that it first detects the condition, then reacts by attempting to keep it from getting worse, or perhaps reducing, even reversing it for added protection. Disease management is equally reactive in that it applies to people already afflicted by chronic disease, though it is proactive in terms of aiming to minimize its consequences and worsening in future.
The biggest difference across the five applications is often the scope of the costs to be reduced. For case and care management, the costs always include, and mainly comprise sickness care costs. Occasionally, when employee disability “cases” or “care” are involved, disability costs and early return to work are also included, to reduce short- or long-term disability insurance or direct expenses (STD/LTD). When workers compensation cases are involved, both reducing its direct costs and speeding employee return are likely to be involved.
For disease management, initial focus was invariably on reducing sickness care costs, since “health care” costs often increased, due to the provider services and management drugs required to control chronic conditions. The trade-off is often reflected in “value-based” health benefits, where treatments that control chronic conditions are handled as investments, rather than costs, as long as they reduce sickness costs. Since most chronic diseases cause worker absences, productivity and performance impairment, DM increasingly focuses on these costs as well.
Both health and risk management will often focus on similarly wider cost dimensions, when they are applied to employee populations, and occasionally on retirees and dependents as well. These two applications have the potential of preventing the most sickness care costs by reducing the incidence and prevalence of disease and injury. And they can promote “positive wellness”, and “positive presenteeism”, where workers are not only neither absent nor impaired, but surpass the norm in terms of productivity and performance.
To maximize “positive presenteeism” and workforce performance, however, more than health and risks must be managed. Employee motivation, capabilities, and leadership must all improve in order to complement health improvements and optimized employee contributions to their employers. Moreover, when productivity and performance are involved, the definition of “health” and “risk” become altered, to include all dimensions of both that tend to impair employee contributions, not merely cause sickness care costs.
For example, among the biggest “impairment factors” for employers to be concerned about are allergies, mental/emotional problems, chronic pain (including neck, back, joint and head pain), sleeping problems, obesity, smoking (separate from its health risks, it causes lost productivity due to “smoke breaks”),etc. Poor nutrition and poor fitness impair employee performance directly, in addition to risking disease and injury. Poor “hydration” at work, i.e. not drinking enough fluids, can have similar effects. These problems may be managed through medical interventions (e.g. nicotine replacement therapy for smoking, drugs for insomnia, bariatric surgery for extreme obesity), but require behavior modification primarily.
The costs to be managed by all five applications include the costs of the application, itself, though this is somehow often overlooked in published reports of success. And the costs to be managed should also include the costs to participants, not merely any out-of-pocket expenses, but the time, loss of enjoyable activities, and other personal burdens imposed on those who participate. It is the benefits and costs to participants that are most often overlooked, yet usually make the greatest difference to the cost savings that payors are able to achieve.
by Scott MacStravic
September 11, 2007 at 3:38 pm · Filed under Insurance, Employer CEOs, Health Plan/Payer CEOs, Group Practice CEOs, Employee Health Management, Health Management
Regardless of how particular HM providers charge and clients pay, the relative attractiveness of different providers and their programs can be easily compared in the same key terms, the net economic impact of the HM program(s) involved. This can only be done, however, after the client knows or has a credible estimate of the percentages of its population who will be eligible/logical targets for each HM intervention program under consideration. The key factor that makes all methods comparable is the “success rate” or net positive impact per participant for each HM provider. Once this is known, comparative prices and ROI expectations can be calculated for all charge/payment types.
For example, if an employer has 1000 employees, and the HM provider charges a flat fee, such as $10,000, this amounts to $10 per employee. If 25% or 250 employees are known or discovered to be obese and eligible for a weight management HM program, the effective charges amount to $10,000 divided by 250 eligibles = $40.00 per eligible. If the predicted net positive economic impact, per HM participant, is $200 – it will take $10,000 divided by $200/participant = 50 participants to yield a breakeven level in terms of net impact. Since 50/250 = 20% participation just to break even, and 40% will be needed to yield a $2:1 ROI, the use of incentives may well be likely, adding to the clients’ or HM providers’ costs, and complicating prediction of net impact.
For any number of employees and eligibles, the necessary participation rate needed for any particular flat fee or charge per population member can be calculated as follows:
- Calculate the numbers of participants needed to pay for the HM costs, i.e. total costs divided by the average positive dollar impact per participant – e.g. $10,000 divided by $200 in the above illustration = 50 participants needed, then the percentage this represents or 50 divided by 1000 = 5% of the total population.
- Calculate the percentage of participation needed by dividing the percentage of the total population by the percentage of eligibles found or predicted – 5% divided by 25% = 20% in the above illustration to yield the breakeven participation rate.
- Once the breakeven participation rate is calculated, the participation rate needed to achieve any ROI level above $1:1 can be determined by multiplying the breakeven rate by the ROI ratio desired – e.g. 2:1 means doubling the breakeven rate to 40%; $3:1 would require 60%, etc.
This simplified calculation can be used for any population size, once the savings per participant is predicted or guaranteed by the HM provider. (The guaranteed or risk/reward approach to pricing will be discussed in the fifth posting in this series.) For example, if the population size were 50,000, more likely with an insurer, the fixed fee for the population $30,000, and the savings per participant were $100 (since only sickness cost reductions would be counted), the participation rate needed would be calculated as follows:
- $30,000 divided by $100 = 300 participants needed, which translates into 300 divided by 50,000 = 6% of the population needed
- If the percentage of members in this population eligible for this HM participation were 20%, then the percentage of participation needed to break even would be 6% divided by 20% = 30%.
- Since this is only breakeven, a 2:1 ROI ratio could only be achieved through 60% participation, which would no doubt require incentives.
- If incentives amounted to even $50 per participant, this would change the calculations since the net impact per participant would fall to $100 minus $50 = $50
- $30,000 divided by $50 = 600 divided by 50,000 = 12% of the population.
- With 20% of the population eligible, a participation rate of 12% divided by 20% = 60% would be required to break even, and 120%, which is mathematically impossible, to achieve $2:1 ROI.
Flat/per member fees are the simplest payment approach, and make budgeting easier because costs to clients and revenue for providers can be predicted before purchase. And fortunately, as the above examples illustrate, fixed fee/per population member charges can be translated into charges per eligible and participation needed to breakeven or better, just as charges per eligible (in the next posting on the subject) and per participant (the one after that).
Because flat fee/per population charges tend to be used by lower-priced, lower-cost HM interventions, the only reason for looking at other charging or payment methods is to obtain higher impact per participant impact, so that the total economic impact will be greater and ROI amounts greater. The ROI ratio should never be the sole basis for choosing among different HM providers or programs.
As long as the ROI ratio is admirable, i.e. well above breakeven, it is the combination of the number of participants and the net impact per participant, after fees and incentive or other enrollment and overhead costs, that determines the best investment. This should always be the net economic impact expressed as an amount, as long as the ROI ratio is good enough, not the highest available.
Whenever up front calculations indicate that high levels of eligible target participation rates would be needed to achieve desired ROI levels, chances are that incentives may be needed to achieve high levels. When that is the case, the net ROI from HM interventions cannot be predicted based on charges alone, but will require at least estimates of incentive costs. If the HRA has already been completed, the numbers of population members eligible for specific HM interventions will be known, but the number who will participate will not. Since participation can only be predicted based on incentives, the participation rate prediction, as well as the costs per participant, will vary together, based on whatever decision is made regarding incentives.
Predicting reductions in health-related costs, regardless of type, also is based on per participant results, so , and new business revenue – requires the same information.
The fixed/per member fee approach may be preferred for initial HM trials, but one of the other options may make more sense to at least some prospects, and particularly to clients once they know more about their members, and about the effectiveness of the interventions. On the other hand, this approach often comes with the lowest fees around, so may be preferred by even “veteran” clients.
by Scott MacStravic
August 20, 2007 at 8:10 pm · Filed under Employer CEOs, Hospital and Health System CEOs, Group Practice CEOs, Health IT, Health Management
It seems almost as if authors have taken as a wordsmith challenge the creation of new and different meanings for the first word in the initials “PHM”. The “HM” always means “health management”, but the “P” may stand for any one of the following adjectives:
- Performance – when HM is used to improve this among employees
- Personal – when HM is provided to self-paying consumers
- Personalized – when tailored to individuals vs. one-size-fits-all, or segment-differentiated
- Pervasive – when disease management becomes a continuous and deliberately intrusive, constant element in patients’ lives
- Population – when it is applied across populations such as insurance plan members or employees
- Predictive – when it focuses on altering predictions about individuals’ or populations’ health
- Pre-emptive – when it aims to replace sickness with health
- Preventive – when it employs primary, secondary or tertiary prevention methods
- Proactive – to distinguish it from reactive sickness care
- Productivity – when it aims to improve employee performance
- Prospective – when it is based on what is foreseen otherwise
This widely varied use of different adjectives to precede “Health Management” is not a serious problem, since the varied meanings are all embraced in what most of us think about and do when thinking about or applying PHM. On my own part, I file articles under the generic initials “PHM” rather than worrying about what the “P” is said to stand for. There are more similarities across all the different labels than differences.
And just to add to the list, it occurred to me this morning that there is still another “P” that can apply, though it would involve a number of specific elements that would distinguish it from a number of other PHM examples. It would be called “Precision Health Management”, and would roughly correspond to “precision marketing” as defined and applied by a research and consulting firm. [“Precision Marketing Solutions” Aberdeen Consulting Group Aug 1, 2006 (www.mycustomerl.com)]
Precision health management would be like precision marketing in that it would rely on predictive modeling and analytics to identify and grade the risks of individual HM prospects, and particularly the different potential value of each to sponsors of PHM, as well as the idiosyncratic personality factors of each relative to selecting the most cost-effective PHM interventions. Its use in marketing is a sound basis for application to PHM, since both aim to understand, predict, and influence consumer behavior.
Just as marketing is increasingly moving toward customization of relationships, interactions, transactions, and customer experiences in general with customers, so Precision HM would strive for a similar degree and kind of individualized approaches to managing individuals’ and populations’ health. This would include, for example, choices to consciously avoid “acquiring” some consumers, and even “firing” some already acquired, when their predicted or actual value is less than their predicted or actual costs.
It would include precision choices of communications channels, frequency, and content, involving whatever mix of channels and messages is predicted to be most cost-effective. It could easily involve the use of the same kinds of software (e.g. SSP and SAS) and contact center strategies currently used in marketing applications designed to improve customer lifetime value (CLV). It would alter this common set of initials to “PLV” for participant lifetime value, but would otherwise involve similar content and analytic as well as communications technologies.
As with its marketing applications, users of precision HM could choose to adopt internal, on-demand, or outsourced analytic, process, and communications, in whatever mix over time proves most cost-effective. And as with precision marketing, this approach to PHM would strive for, and should achieve similarly higher levels of ROI for its adopters. The use of predictive metrics in rules-based application to individuals or segments, where appropriate, should ensure that the value proposition offered and delivered to each individual will optimize the value that both participants and PHM sponsors gain, in both the short and long run.
It is unfortunate that so far, the healthcare industry has been significantly behind the curve in terms of taking advantage of emerging and constantly innovating computer analytics and communications technologies. Precision HM represents a challenge to all who are or might consider being involved in PHM to ride the “breaking wave” of such innovations in pursuit of the most mutually valuable results possible for all stakeholders concerned.
