At yesterday’s IHI conference, I was asked to serve as a panelist for the CEO Summit. We began the day with an inspirational case study from outside the health care industry – the transformation of US News and World report from a paper-based subscription model to a diverse web-centric family of products.
In 2007, it was clear that offering a paper-based magazine below cost, subsidized by advertising, was unsustainable. Google’s sale of targeted adds at low cost eliminated the business models of many print publications.
US News decided to become a specialized web resource offering news, college ranking, hospital ranking, and car ranking. The advertising on each of these sites is highly targeted and actionable – when a customer clicks on a car, they are redirected to a local car dealer’s website. At a time when web-based advertising may be $1.00 per 1000 clicks, US News and World report can charge $30.00 per 1000 clicks for qualified car buying customers.
This transition required layoffs, sale of the paper-based subscription customers to Time magazine, and a significant temporary reduction in sales in order to transition to an entirely new business model. The future was unknown and the path to get there was risky. In retrospect, it was exactly the right thing to do.
In health care, we are at a similar crossroads.
In an era of health care reform, we have three challenging choices:
- Become a pioneer Accountable Care Organization (ACO) at a time when no one knows exactly what is necessary to succeed, but risks are minimized for early adopters
- Wait to become an ACO until the tools and technologies needed to succeed are better known, but risks for failure will be higher
- Continue to rely on fee for service income and hope health care care reform is delayed or deferred. If health care reform proceeds, fee for service income will drop steadily over time leading to the slow demise of organizations which depend upon it.
Just as it was an educated guess to move US News and World Report to the internet in 2007, moving health care organizations to population health/wellness-focused accountable care organizations seems like the right thing to do. Yes, it may result in the downsizing of academic health centers and a reduction of some services like lab and radiology that are more expensive than community-based dedicated labs and imaging centers. However, the future of health care looks a lot more promising for community hospitals and outsourced ancillaries than for academic health centers with high overhead costs.
Jim Reinertsen MD, Senior fellow of IHI and former CEO of CareGroup moderated a discussion of these ideas with Derek Feeley, Chief Executive of the National Health Service (NHS) in Scotland , George Kerwin Chief Executive Officer of President Bellin Health Systems, and me.
Our panel agreed with the model shown in the graphic above. We’re on a journey from episodic care to coordinated care to patient directed care. We’re moving from fee for service to bundled payments/capitation. Our IT systems are evolving from segmented to integrated to community based.
health care leaders must make a decision Change now and risk moving too soon, incurring high costs. Wait and risk moving too late, losing your competitive advantage.
In Boston, the health care marketplace is evolving so rapidly that our answer is clear – we must move to community-based coordinated care funded through bundled payments/capitation. Implementing this transformation over the next few years will be a challenge for everyone, and along the way we need to ensure that the patient experience is not compromised. We’ll need leaders with a vision of the future, a guiding coalition of stakeholder supporters, a sense of urgency from the external environment, and a tolerance for risk. I’m eager to be a part of the next phase in health care and look forward to learning from the people who make it happen.
A great discussion – thanks to IHI for the opportunity to participate and Jim Reinertsen for facilitating it.
In addition to his CIO role at BIDMC, Dr. Halamka blogs at GeekDoctor.blogspot.com.