June 22, 1999
The Need for a
Strong Care Management Value Chain
Health care organizations can learn a valuable lesson by
understanding how a “value chain” applies to care management
approaches. Implementing the best care management approaches
will require a MINDSET and CULTURE that understands and embraces the
value chain process.
Most of our e-newsletter readers (currently about 1,100) have roots
in clinical care, business or technology. The value chain
concept is understood better in the business and tech worlds, and
there’s no reason it can’t be understood by everyone in healthcare.
So what’s a value chain? Here’s an example. Our PCs were
marketed and assembled by Dell. Stickers on the front note the
Intel chip inside and Microsoft Windows software. Our printers
were manufactured by HP, the Zip drives were made by Iomega, the
network line connection shows a 3Com logo. No one company had
the people, capital and knowledge to bring the PCs to our desktops.
Rather, all this took a group of companies that formed a value chain
to deliver PCs.
Technology companies have long understood value chains. We
speculate that this is because technology based companies have been
through far more “discontinuous innovation” (in the words of Andy
Grove, former President of Intel). In plain old English ,this
means health care has gone through far fewer “REALLY BIG changes
that throw out the rules of the current game.” However, health
care is standing on the brink of entering the digital age.
When new technologies enter the mainstream, “it is not just a
new market coming into existence but
also a whole new system of commerce to support that market. ...Value
chains (are) an interdependent collection of companies working
together to assemble the various product and service offerings
needed by the new market. It is a revolution, and typically it
does not favor the establishment, which historically has tried to
resist rather than co-opt new technologies.” Geoffrey Moore,
The Gorilla Game: An Investor’s Guide to Picking Winners in High
The key word is “interdependent”. This word doesn’t fit the
culture of health care very well. Health care workers have
struggled to cross departmental boundaries within their own
organizations, never mind across organizations. We suspect
that readers who work in the health care delivery system will grasp
The imagery of a physical chain is important in understanding a
value chain. The whole chain is only as strong as it’s weakest
We’ll share a example of an opportunity for improvement in the
existing care management value chain. We call our case in
point “The FedEx Truck Phenomenon”. We’ve personally
heard variations of this over and over. The FedEx Phenomenon is our
shorthand term for the contacts that occur between some health plans
(or disease management companies) and physicians in trying to get
doctors to follow specific clinical guidelines or protocols.
Here’s how it works. 10 AM: The FedEx truck drops off the
health plan’s new written guidelines for managing patients for a
specific patient condition, e.g., congestive heart failure (CHF).
The cover letter (which is never read) states that the health plan
expects the doctor to use these guidelines in managing THEIR (the
health plan’s) patients. 12 Noon: The guidelines are
buried in a closet with dozens of other protocols issued by multiple
other health plans. A variation: the guidelines are in
the trash by 5 PM.
Here’s the managed care plan’s side of the story: Tremendous
statistical variation exists in the delivery of health care by
physicians; this variation suggests that patients are getting less
than optimal care at excessive cost. Study after study is
showing that clinical guidelines are highly effective at reducing
variation, improving quality, reducing cost, and increasing patient
satisfaction. For example, the national average annual rate of
rehospitalization of patients with CHF is about 23%; patients in CHF
disease management programs have are hospitalization rate of about
Here’s what we hear from doctors: “My complaint is that this
guideline is dumped at my doorstep. I’ve had no input
into it. I have no systems in my practice to implement it. I
participate in contracted provider networks for a dozen different
plans. Each of them has given me clinical guidelines for
multiple conditions; each of the guidelines is in a different format
and contains differences in recommended treatment approaches.
I don’t get paid for all the extra work that would be involved.
There’s no way I can keep track of all this! Maybe it’s true
that guidelines could improve patient care, but darn it—I resent
that anyone tells me how to practice medicine. And if I took
the time to know all this stuff, I’d have no time for treating real
How’s that for coordinating a handoff in the care management value
Our point here is not to be critical, but rather to be observant.
We’re also not implying there’s an easy resolution here. We
are saying that it doesn’t make for a very strong value chain in
delivering the best patient care.
Why is the value chain concept of particular importance NOW?
We believe that health care in general, and care management in
particular, is on the brink of BIG changes being brought about by
information technology and the Internet.
Are there action items in all this? Yes, we’ll suggest two
changes in MINDSET. Admittedly these are not as easy to carry
out as crossing off “feed the cat” from your to do list.
First, develop awareness of the need to envision a value chain with
the patient at the end of the chain.
Second, redefine your competitors.
FROM: the competition is someone (or an organization) that
does the same things you do. In the past, for physicians it’s been
the other docs down the street; for hospitals, the hospital across
town; for health plans, the plan in the next county.
TO: The competition is the GROUP of organizations putting
together a value chain to deliver a complete offering to serve
In this brief e-newsletter, we just want to emphasize the importance
of the value chain, not to discuss all its nuances and complexities.
For those of you interested in some of the subtleties, here are a
few references. Cambridge Technology Partners provides an
excellent overview entitled
“Competition’s New Battleground: The Integrated Value Chain”.
A white paper relating to health care --”Successful Care Chain Management”—is offered by
Confer Software (formerly Araxsys).
”We have met the enemy and he is us.” Pogo
We have been working with a private investor funded, start-up
internet disease management company. Some of the unique
aspects of the business and clinical model are: 1) patient centric,
not disease centric, 2) superb web tools to connect
patients/families, physicians, and case managers, 3) a unique
consumer portal with incentives to encourage patient and physician
adherence to protocols, 4) guaranteed ROI.
”The Future of the Internet in Health Care: A Five-Year
Forecast” California HealthCare Foundation. A concise summary
is located at
The Informatics Review. The
full text document is also available for download.
Recent e-health IPOs show strong first day gains.
of Americasdoctor.com, which filed it’s S1 statement
(prospectus) on June 11.
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.
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