August 21, 2001
“HOSPITALS AND CHRONIC CARE STRATEGY: STUCK IN THE MIDDLE”
Hospitals are an enigma
when it comes to chronic disease management. While to-date most
hospitals have watched from the sidelines, they have the POTENTIAL
to become star players.
KEY QUESTIONS FOR
HOSPITALS TO CONSIDER
Are you in the chronic
care business? Is it part of your mission to care for your patients’
ongoing chronic care needs? Are these questions even on your radar
screen? If they’re not, they will be shortly.
HOW DO HOSPITALS FIT
INTO THE BIGGER PICTURE OF CHRONIC DISEASE MANAGEMENT? WHY IS THIS
“Taking the First Steps”
is the title of Chapter 4 of the Institute of Medicine’s (IOM)
recent report –
“Crossing the Quality Chasm”. The IOM writes that “common
chronic conditions should serve as a starting point for the
restructuring of health care delivery”. 70% of health care costs in
the U.S. are spent on people who have one or more chronic condition.
Most hospitals are
“stuck in the middle” (SITM) relating to chronic care strategy.
There’s no worse business strategy than to be than SITM.
WHAT ARE THE GENERIC STRATEGY OPTIONS?
In his classic book
“Competitive Strategy”, Harvard Business School Professor Michael
Porter describes several
generic business strategy options. These include differentiation,
cost leadership, and focus.
One generic strategy is DIFFERENTIATION
–- being different from the competition is a key way that customers
can take a variety of forms, including the offering itself, the
distribution chain, the marketing approach, and others.
Another generic strategy option is COST
LEADERSHIP –- striving to be the low-cost producer in an industry.
Cost leadership can be obtained by pursuing economies of scale,
automated assembly methods, lower overhead, proprietary technology,
access to raw materials, better distribution, etc.
(While the third generic competitive
strategy is FOCUS, this is really NOT AN OPTION for a typical
community or academic hospital. This strategy relies on choosing a
“narrow competitive scope within an industry”, which would describe
a specialty hospital, e.g., a heart hospital or a children’s
Porter also identifies a strategy that
he labels “stuck in the middle” –- a recipe for failure. Porter
argues that a company must not attempt to execute more than one
generic strategy at a time. Being SITM results in modest market
share and low return on investment.
for an introduction or a refresher on Porter’s framework.
WHY ARE HOSPITALS STUCK
IN THE MIDDLE?
There are two aspects
hospitals’ being SITM.
First, there’s the
aspect of business strategy.
Hardly any hospitals are pursuing chronic
care as a differentiation strategy. They are NOT INTEGRATING the
components to achieve competitive advantage.
They are also not pursuing a cost
leadership strategy. Hospitals ARE incurring the costs associated
with operating disparate, unconnected program components.
Hospitals typically have many
COMPONENTS and PROGRAMS (i.e., pieces) that could be useful in
developing a chronic care strategy. For example: diabetes
outpatient program, senior center, cardiac rehab program, clinical
guidelines, medical call center, web based education or tracking,
case managers, outpatient laboratory, remote patient monitoring,
electronic medical record (EMR), etc.
These are all components
that COULD be used in a comprehensive chronic care strategy. Most hospitals have many of
these pieces. However, most hospitals haven’t created any glue to
stick together the pieces. In this context, “glue” includes
strategy, ongoing RELATIONSHIPS with patients and physicians,
information systems, coordinated management, coordinated workflow,
shared clinical protocols, and the like.
The second aspect of
hospitals’ being SITM is a moral/financial dilemma. At a gut level,
almost all hospital administrators we know recognize that disease
management is the right thing to do for patients. Yet, there’s no
economic incentive for hospitals to do DM....emptying beds by
keeping patients healthier???
HOW CAN HOSPITALS GET
OUT OF BEING STUCK IN THE MIDDLE?
Pick a strategy and
stick with it.
WHAT’S THE CASE FOR A DIFFERENTIATION
A hospital’s management
might defend a differentiation strategy along the following lines:
“Chronic care must
become one of our core competencies. Payors and employers are
demanding that we develop capabilities to COORDINATE patient care,
as opposed to just providing medical care services. Medical
management will be THE key differentiator in the marketplace. We
must develop the infrastructure, systems, and mindset to promote
evidence based medicine.
“A number of factors
will force us to be in the chronic care business:
“Purchasers are demanding reduction in
variation and improvements in quality of care.
“We have already developed a number of
centers of excellence, e.g. a heart center. It makes sense to extend our
centers of excellence to be involved with care for chronic
“We’re being forced into chronic care
management by our accreditation organization. The Joint Commission on
Accreditation of Hospitals (JCAHO) has announced its intention to
accredit at least 12 chronic conditions
“While reimbursement for chronic care
services is lacking today, there are a number of signs indicating
that reimbursement will be available within a few years.
“Chronic care patients have many positive
qualities: baby boomers, women, needs for ongoing care.
“Our mission includes meeting the chronic
care needs of our community.”
WHAT’S THE CASE FOR A COST LEADERSHIP
A hospital’s management
might justify a cost leadership strategy along the following lines:
health care cost increases are predicted to be in the range of
15-18% next year!
“Employers and payors in
our market are more interested reducing cost than they are in
anything else. Therefore, we must implement a cost leadership
strategy. Our core competency is acute care. We must provide better
and less expensive acute care than our competitors. We cannot afford
to be in the chronic care business. We cannot afford to fund
programs that do not contribute to our ability to best the best
acute care hospital that we can be.
“We have to stick to our
knitting, do what we do best, and deepen our specialization in acute
care. While a few years ago hospitals were broadening themselves to
become integrated delivery systems, today its clear that this is a
failed strategy. Many futurists describe the hospital of the future
as a large intensive-care unit -- one that only takes care of the
sickest patients. Our key resources -- our people and our financial
capital -- will be strained simply to keep up with the
state-of-the-art in acute care.
We’re in the business of filling our beds, not keeping people out of
IS THERE A RIGHT ANSWER?
No. We believe that
hospitals realistically could choose to pursue EITHER a
differentiation or cost leadership strategy.
What’s NOT defensible is
remaining SITM -- bearing the costs of providing many unconnected
components of chronic care, yet not maximizing the value of
providing coordinated care to patients.
To close, here’s a twist
on an old Chinese proverb: “A journey of a thousand miles starts
with recognizing where you are right now.”
YOU ATTEND ONLY ONE DISEASE MANAGEMENT CONFERENCE THIS YEAR...
...it should be the
Third Annual Disease Management Leadership Forum sponsored by the
Disease Management Association of America (DMAA). The conference
will be held October 10-13 in New Orleans.
for Conference information.
Ready to sign up?
for Registration form. (Please list Better Health
Technologies in the “referred by” section)
PRACTICES IN PATIENT SAFETY
“Making Health Care
Safer: A Critical Analysis of Patient Safety Practices”
Prepared for the Agency
for Healthcare Research and Quality (AHRQ) by University of
California at San Francisco (UCSF)-Stanford University
Evidence-based Practice Center; July 20, 2001
For those of you who
don’t have time or inclination to read the full 672 pages (NOT a
typo) of this report, here’s a quick tour:
Summary (including the list of the 11 most highly rated patient
Practices Rated by Strength of Evidence
Listing of All Practices, Categorical Ratings, and Comments
BEEN A WHILE -- A COMPREHENSIVE E-HEALTH UPDATE
Remember the olden days
(i.e., 2000) when eHealth analyses were as plentiful as 7-lls?
Landscape: A Terrain Map of Emerging Information and Communication
Technologies in Health and Health Care”
Robert Wood Johnson
Foundation, June 2001
Click here for
the Table of contents and overview
Download entire 136 page document (Adobe Acrobat required)
E-HEALTH PATIENT PARADOX
“The Increasing Impact of eHealth on Consumer Behavior”
Harris Interactive, June
(Summary of Boston
Consulting Group report “Vital Signs Update: The eHealth Patient
This interesting report
presents and reconciles two seemingly contradictory findings:
eHealth is very
potent in influencing patient behavior
online is challenging
If you find this report
informative, check out BCG’s earlier eHealth research:
Vital Signs: The Impact of eHealth on Patients and Physicians”
Boston Consulting Group,
SYSTEMS FOR CHRONIC CARE –- LATEST ROBERT WOOD JOHNSON FUNDED
Illness in America: Overcoming Barriers to Building Systems of Care”
Center for Health Care
Strategies, July 2001
This report presents an
overview of successful initiatives, financing issues, and key
concerns in continuing attempts to improve care for people with
chronic illnesses. Key topic areas include:
Mental Health, and Social Services
FACTORS PREDICT HOSPITALIZATION FOR CHILDREN WITH ASTHMA
“Predictors Of Hospitalization In Children With Acute Asthma”
Journal of Pediatrics,
BOOMERS ADAPT TO CAREGIVING RESPONSIBILITIES
“In the Middle: A Report
on Multicultural Boomers Coping With Family and Aging Issues”
AARP, July 2001
PRIORITIES AMONG RECOMMENDED CLINICAL PREVENTIVE SERVICES
“Priorities Among Recommended Clinical Preventive Services”
American Journal of
Preventive Medicine, July 2001
Commentary by David M. Lawrence, MD, Chairman and CEO, Kaiser
Foundation Health Plan
American Journal of
Preventive Medicine, July 2001
RECENT ARTICLES ON REMOTE PATIENT MONITORING/WIRELESS APPLICATIONS
“Home, but not alone -- Providers and insurers explore the potential
of Web-based devices that monitor chronically ill patients in their
Internet Health Care,
“Walk a Wireless Mile -- Research reveals big divide in expectations
versus experiences among healthcare providers”
Technology, August 2001
“Take Two Aspirin and Log On in the Morning”
Standard; July 30, 2001
DISEASE MANAGEMENT IN FORTUNE 100 COMPANIES
”Are Fortune 100 Companies Responsive To
Chronically Ill Workers?”
Solutions, July 2001
Article in Health Affairs, July/August 2001
REIMBURSEMENT FOR E-MEDICINE
“Reimbursement for E-Medicine: Not Here Yet, But First Steps Made”
from Physician Compensation Report, July 2001
Disclosure -- No clients
were mentioned this issue.
E-CareManagement News is an
e-newsletter that tracks a major change in health care and managed
care—the paradigm shift from “managing cost” to “managing care”.
This e-newsletter is brought to you by Better Health Technologies,
LLC (http://www.bhtinfo.com). BHT provides consulting and
business development services relating to disease management, demand
management, and patient health information technologies.
You may copy, reprint or forward this newsletter to friends,
colleagues or customers, as long as the use is not for resale or
profit and the following copyright notice is included intact.
Copyright © 2001, Better Health Technologies, LLC. All rights