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E-CareManagement News 

June 22, 1999




The FedEx Truck Phenomenon:
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 Technology, 1998,p.8.

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 this immediately.

The imagery of a physical chain is important in understanding a value chain.  The whole chain is only as strong as it’s weakest link.

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 1%.

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 human beings.”

How’s that for coordinating a handoff in the care management value chain?

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 patients.

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


BHT PROJECTS

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.



e-HEALTH


”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.
CareInsite
drKoop.com

Profile 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.

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 © 1999, Better Health Technologies, LLC. All rights reserved.



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