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E-CareManagement News

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 IMPORTANT?

“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 value.  Differentiation 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 hospital.)

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.

Click here 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 STRATEGY?

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 conditions.

“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 STRATEGY?

A hospital’s management might justify a cost leadership strategy along the following lines:

Employer 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.

“Disease management? We’re in the business of filling our beds, not keeping people out of them.”

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.”

IF 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.

Click here for Conference information.

Ready to sign up?  Click here for Registration form. (Please list Better Health Technologies in the “referred by” section)

BEST 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:

Executive Summary (including the list of the 11 most highly rated patient safety practices)

Chapter 57. Practices Rated by Strength of Evidence

Chapter 59. Listing of All Practices, Categorical Ratings, and Comments

IT’S BEEN A WHILE -- A COMPREHENSIVE E-HEALTH UPDATE

Remember the olden days (i.e., 2000) when eHealth analyses were as plentiful as 7-lls?

“The eHealth 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)

THE E-HEALTH PATIENT PARADOX

“The Increasing Impact of eHealth on Consumer Behavior”

Harris Interactive, June 26, 2001

(Summary of Boston Consulting Group report “Vital Signs Update: The eHealth Patient Paradox”)

This interesting report presents and reconciles two seemingly contradictory findings:

eHealth is very potent in influencing patient behavior

reaching patients 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, February 2001

SYSTEMS FOR CHRONIC CARE –- LATEST ROBERT WOOD JOHNSON FUNDED RESEARCH

“Chronic 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:

Community-Based Care

Consumer Self-Determination

Integrating Medical, Mental Health, and Social Services

Eliminating Barriers to Employment

5 FACTORS PREDICT HOSPITALIZATION FOR CHILDREN WITH ASTHMA

“Predictors Of Hospitalization In Children With Acute Asthma”

Journal of Pediatrics, August 2001

BABY 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

Research article

“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 homes”

Internet Health Care, July 2001

“Walk a Wireless Mile -- Research reveals big divide in expectations versus experiences among healthcare providers”

Health Management Technology, August 2001

“Take Two Aspirin and Log On in the Morning”

The Industry Standard; July 30, 2001

DISEASE MANAGEMENT IN FORTUNE 100 COMPANIES

Are Fortune 100 Companies Responsive To Chronically Ill Workers?”

Partnership For Solutions, July 2001

Press release

Article in Health Affairs, July/August 2001

REIMBURSEMENT FOR E-MEDICINE

“Reimbursement for E-Medicine: Not Here Yet, But First Steps Made”

AISHealth.com reprint 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 reserved.


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