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December, 2014

What about hospitals?

Paul Roemer, who had a contribution on the ICMCC blog on April 30, which was viewed more than 600 times, produced another great article on his blog, this time about the business model of hospitals:

The large provider business model is dying.  Play along with me for a minute.  How many different services and procedures are offered by the “average” hospital?   A couple thousand.  Some are performed hundreds of times each day, some on a somewhat regular basis, and some rarely.  Let’s focus on those done rarely.The funny thing about having the ability to do something is you have to pay for the resources and technology whether you do it once or hundreds of times.  The less you do it, the larger the negative ROI.  Most large providers offer many services with negative ROIs.  How does one alter the business model to compensate for that?  Charge for parking; charge $7 for each Tylenol, outsource less profitable services.It might be important to recognize that the reason many services—the ones most patients need—are marginally profitable is because those services are helping to fund the unprofitable services.
Why hospitals are like airlines and movie theaters, Paul Roemer.

True, absolutely. The resources he mentioned for all those different services (”A couple thousand”) are above all the necessary, often very specialized staff, 24/7.
But he is missing one very important point, in my view. Rarely performed services suffer from lack of routine. The more often a procedure is performed, the bigger the guarantee it is done right. So not only does it cost irresponsibly much to maintain at every hospital the ability to perform all those procedures, it is also hazardous for the patient.

I shortly spoke about a new hospital structure at one of our ICMCC conferences a couple of years ago. Some time earlier I had a long conversation about the concept with an adviser to the NHS. Unfortunately, a couple of months later I found myself in the hospital for treatment of a rare cancer and for a long time I did not have time or energy to pursue the subject further.
But I would like to share with you my view, which has not changed since.

During that conference speech I said the following:

I foresee a completely different health system, more than ever focusing on the central and decisive role of the patient. A medical generalist probably together with pharmacists will function as advisors. They will be the central information point, the spin in the patient’s web, doing the basic error checks and providing consumers with access to information.
Hospitals will split into two groups; there will be specialized clinics, probably run by industry. To exaggerate maybe a little bit, I see a Siemens clinic for cardio-vascular problems, and maybe also a Philips one. These clinics are fully specialized in these specific treatments. After-care and monitoring can be done in large “nursing” hospitals. They will be in touch via video and other tele-applications with the specialized clinic. These specialized clinics can be regional and will be competitive. The patient, in close contact with his insurer and his medical advisors can chose in which clinic he wants to be treated.
ICMCC Conference, 2 June 2005, The Hague, The Netherlands, Lodewijk Bos

Those specialized clinics should be regional, the care facilities should be local.

When I mentioned this idea to the NHS adviser it was received sceptically. Having specialized clinics for certain diseases/treatments made sense, the routine aspect I mentioned earlier being the main argument. But the follow up, the after care in a different location, brought up questions. Let’s look at the advantages. You can build these facilities in a much more friendly style (hotel room like, if you wish, it is cheaper than the average hospital room and far more comfortable for the patient). It will also be localized in the direct neighborhood of the patient’s relatives.
The main question was “what happens when there is an issue/emergency with the patient?” These care clinics do not have the staff available to properly deal with it. My answer was, that is why we created healthcare technology, telemedicine. Every patient has a screen at his bed, directly linked to the clinic where he received his treatment. His EHR will be accessible at both facilities and videoconferencing can take place between the care institute and the specialized clinic. They can advise on proper care in the new situation and if necessary can have the patient transported via helicopter back to the “cure” clinic. That remark was followed by a gasp and the reaction “what about the costs?“. My answer was that the helicopter would be much cheaper than the staffing and the equipment that is on standby in the actual situation.

Of course there will be academic/research hospitals on the top of this pyramid and I can imagine their specialists partly work in cure clinics. The whole concept came to me during a conversation with a daughter of a surgeon who told me her father would much prefer to do surgery as much as possible. Surgeons, medical specialists are craftsmen, highly trained, extremely skillful and with immense responsibilities. And the more they practice the better they get at it.

This means that we have to rethink the whole concept of how we structure cure and care. It will bring considerable cost savings, will make work far more efficient and will have a very positive effect on the patient, as he will receive cure that has guaranteed quality and care in an environment that will be of big advantage to his/her healing process.

A piece by Randy Murray (iPad Causes Flashback – My Early Days In Tech And Medical Information Systems) left me wondering once more why these concepts, apparently already 25 years old, are still not, or at least hardly, implemented?

It will be a major paradigm shift and only one of the many that we will have to work on.

Lodewijk Bos

4 May 2010 | Categories: Blog.
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  1. I have many responses to this excellent and insightful post but the most prominent one is based on a conversation I had yesterday with Linda Stone in which we examined how many small changes in processes have large impacts – cost savings, education, quality of care. Some examples are concierge medicine, shared appointments, doctors using laptops during appointments, and doctors not having the post-examination conversation with the fully clothed patient. I would welcome your further thoughts about how these changes happen and how to orchestrate them so that the net result is better care.

    • Lodewijk says:

      Thank you Lisa. To achieve the real paradigm shifts we will have to start thinking out of the box and away from old concepts. I know, this will hurt many, but in the structure I suggested the social aspects will be changing as well. The patient-physician relationship will focus on the GP/nurse coordinator level. To put it in an extreme example, the surgeon will perform and deliver, hardly being involved in social/emotional aspects of the person underneath the green blanket.
      I know this is a rather harsh position I take, but in my view it is the only way to make care and cure (cost) efficient at the same time maintaining and improving the role of the patient. I think most patients will be served much better if the communication with their medical team goes via one coordinator, who offers the patient eventual treatment options (within the proper context), who will convey the patient’s concerns (if any) to the team. A good functioning EHR system will record all these exchanges, therefore giving the patient a way to review and control the process real time.
      At the same time a “bonding” to one specific member of the team is being created.

      I realize this discussion goes to the roots of how we perform cure and care traditionally. However, once again, I think the only way to achieve real paradigm shifts, necessary to confront all the challenges ahead of us, is by starting from scratch again.

  2. Paul Roemer says:

    Lodewijk, great points. I think your sentence, “Those specialized clinics should be regional, the care facilities should be local.” is exactly what will happen, even if those services have to be outsourced to the government. Hospitals already have two loss leaders in ER an indigent care, regional–even if it’s 1-2 per city make more sense than Pittsburgh having more MRIs than Canada.

    Physicians outsource more complicated care to hospitals; hospitals should position themselves the same. My Best – Paul

  3. Lodewijk says:

    As a consequence of the above exchange, Lisa pointed me the other day via Twitter to this story from the Denver Post: “Shared health visits get patients more time with doctors“, because, she wrote, the above story was “related to group visits” (http://twitter.com/lisagualtieri/statuses/13499372969). It is a very interesting story about which I have 2 remarks. 1. A big part of the story is about money. 2. in a general way it might work. However, in most countries, I don’t know for the USA, a doctor is not allowed to communicate disease-related specifics to anybody but the patient himself. So these group sessions can only deal with generic stuff. And maybe a third remark. It is an American (as in USA) story. From what I read and perceive US Americans have a different attitude towards communities and “public” sharing than most of the Europeans. That’s why so many patient communities are US American and that’s why it is so difficult to get similar communities off the ground in European countries. And unless you deal with illiterate people, much of what these group sessions achieve can also be achieved by concepts like information on prescription.

    But this is not what my above post is about. Paul was correct in his remark that it is ridiculous that there are more MRIs in the city of Pittsburgh than in the whole of Canada. And that is one of the points. Yesterday an article was published in a Dutch newspaper about an, in Dutch perspective, historic move by one of the big insurers. They decided to purchase medical services for specific problems only from specific, qualified and experienced hospitals. In this case it was about bariatric surgery. The reason for doing this was because the insurer, the payer in the Dutch system, wants to “force hospital to specialize in a limited number of areas and to make contracts based on quality“. The article continues as follows:

    CZ (the insurer) announced to start next year with bariatric surgery, i.e. surgery in serious obesity cases.Those procedures are now done in 25 hospitals and as many want to start with it. Obesity is a growing care market in which many hospitals want to have a share. According to the (Dutch) Bariatric Surgery Working Group these extremely heavy procedures are only in good hands with surgeons with much experience and routine; in other words, at least 50 performances per annum. This will seriously limit the number of complications and casualties.
    (CZ heeft aangekondigd volgend jaar te beginnen met de bariatrische chirurgie, ofwel de operaties bij ernstig overgewicht. Ingrepen die nu in 25 ziekenhuizen worden gedaan en waar evenveel andere mee willen beginnen. Overgewicht is een groeiende zorgmarkt, waar menig ziekenhuis een rol in wil spelen. Volgens de Werkgroep Bariatrische Chirurgie zijn deze uitermate zware operaties echter alleen in goede handen zijn bij chirurgen die er veel ervaring en routine in hebben; ofwel minimaal vijftig operaties per jaar. Dat beperkt in hoge mate het aantal complicaties en sterfgevallen.)

    The reaction by the director of the National Obesity Clinic says it all:

    “It really is the insurer’s role to go for this. Risk management is part of their job. If things go wrong the insurers will have to cover the costs of complications and follow-up surgery. By concentrating procedures both the insurer (costs) and the patient (quality) are better off.”
    (Het is echt aan de zorgverzekeraars om hierop in te zetten. Zij zijn ook de risicobeheerders. Als het niet goed gaat, zijn de kosten van complicaties en hersteloperaties immers ook voor de verzekeraar. Door zorg te concentreren is zowel de verzekeraar (kosten) als de patiënt (kwaliteit) beter af.)

    Unfortunately, politics reacted the way Paul described in his original post, in their usual, almost spastic stance: “Hospital care has to be good everywhere, especially around the corner. That is very important for many people. We too are against too much power to the insurer“. (De ziekenhuiszorg moet overal goed zijn, juist om de hoek. Dat is voor veel mensen erg belangrijk. Wij zijn ook tegen teveel macht voor de zorgverzekeraars.)

    As I said, it is like a spasm. It is impossible, on the level of both equipment and staff, to cover every aspect of medicine in every available hospital. To continue in Paul’s line of reasoning, it would be like going to your local airfield and expect them to honor your request to be flied, directly and immediately, to China. A request they only would get a couple of times a year. But just for those few times, if done the way hospitals work, they bought and maintain an aircraft capable of flying that distance, they have ground staff on alert for luggage and passenger handling, custom officers on call and highly trained, and therefore expensive pilots on continuous standby. Pilots, BTW, who will have to fly those expensive planes regularly (and in this local case probably without passengers), otherwise they will loose their license to fly that machine in the first place. Would you enter the plane if you knew your pilot only flies a 777 only 5 times a year?

    Apparently the system expects us to do so when we talk medicine.

  4. Interesting blogpost that reminded me of Clay Shirky’s recent article about the Collapse of Complex Business Models which was mentioned and reflected upon in another blogpost by Howard Luks here http://twurl.nl/w5nnt0 ‘Back to the concept… Small, wonderfully designed, welcoming acute care facilities for fractures, cuts bruises exist throughout the area around the mother ship (hospital). Small, specialty specific centers concentraing on Cardiology services, Orthopedics, ENT, Opthomology, etc emerge along the fringe of the system to manage a significant percentage of the needs of the patients in their area. Slightly more centralized, yet disbursed chronic care centers emerge. These centers are tasked to actually monitor their patients to prevent deterioration, re-admission, etc to the point where the potential need for hospitalization is interceded.’

    Whenever I (dare to) talk about small, relevant, agile, maybe mobile and certainly partly online healthcare/hospital concepts like these with care- professionals they tend to be very very sceptical. And they don’t seem to like the idea of leaving their mother ship behind. I can certainly understand their scepsis but I do believe that healthcare and hospitals will (have to) change, one way or another and I’ll do my best to make this change happen.

    • Lodewijk says:

      Thank you Jacqueline for pointing me to Howard Luks’ blog.
      Of course they don’t like leaving the actual situation as it favors them in every possible way.

      • Shirky wrote about that too “Institutions will try to preserve the problem to which they are the solution.” and he once again was cited in another very interesting blogpost by Kevin Kelly http://twurl.nl/ubc7os.
        I guess it’ll take a lot of time before health institutions will chop off pieces since it’ll hurt them unless some of them will be doing it in a very successful way and then the others might want to follow cq want to copycat it.

  5. Paul Roemer says:

    I love the airline analogy. A friend of mine is the CFO for a hospital group. Each hospital offers orthopedic services, none of which are ranked in the top 100 in the US. They also have an orthopedic clinic–ranked in the top 10. He recommended they undertake a process of phasing out those services at the hospital and transition all orthopedic procedures to the clinic. The idea was supported by the C-suite and the board killed it. I guess it is more entertaining at the country club to be able to say we have the ability to do good medicine and less good medicine across multiple locations than it is to be able to talk about only doing good medicine at a single location.

    • Lodewijk says:

      You started the airline analogy :) .
      I don’t think for them it is about quality of medicine. It is the old concept of the “mother ship”; you don’t chop off pieces for then they feel mutilated.
      However, it should be about quality. One time excellent values far more than 100 times average on both costs and benefits side.

  6. Lodewijk says:

    Well, sometimes evidence based does make sense :) At least for the care hospital.
    What if a Ritz-Carlton executive ran your hospital? by Wendy Johnson, Hospital Impact, 2 June 2010

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