Innovation in Healthcare Part 2

Last week TIGI discussed the shift in the focal point of innovation in Healthcare, how the technology revolution shaped the industry, and how the industry is changing for Providers and Suppliers alike. This shift from supplier innovation to provider driven innovation coincided with the beginning of the global financial crisis, which caused many health systems to immediately reduce spending, and increase value analysis and increase the scrutiny of purchasing decisions. The transformation of U.S. healthcare in another transition, this time from volume based incentives to value based incentives, simply accelerated the shift in innovation.

The shift has created a series of challenges for providers and suppliers alike.

For providers the challenges are these:

1. Integration
   Various technology platforms, all with different usage conditions, maintenance requirements, and replacement life cycle terms require diligent monitoring and contingency planning. Because process improvement can be attained through the proper deployment of equipment, process automation, and IT utilization, creating harmony among disparate systems is a perpetual challenge for executives and managers.
2. Standardization
   One of the most reliable remedies for process variation is the use of standardized technology, but more importantly, protocols and procedures. Because healthcare delivery is contingent on physician input, implementing standardized protocols and procedures does not always happen without extensive review of clinical judgement and the ways protocols conserve this judgment. Standardizing devices, services, and equipment is a long term project with multiple contingencies that must be managed.
3. Engagement

   The most difficult challenge to any process improvement initiative is human behavior. Physicians need to be engaged and their perspectives and recommendations sought. Employees need to participate as they are the pivot point for organizational change. Most crucially, the patient and his or her caregiver must be part of the picture. To achieve disease state management in multiple settings, the family and patient must shoulder part of the care delivery burden. Doing this with standard tools is emerging as a priority for many facilities.

For suppliers the challenges are equally fundamental:

1. Value

   There is an apparent value gap in most supplier-provider interactions. Selling equipment, supplies, devices, and drugs into value oriented and innovative organizations requires a lot of skill and ability on the part of the sales and marketing teams. At times these skills can be scarce. Furthermore, many health systems are required to deliver cost savings to their managers and boards. Therefore, they ask suppliers to demonstrate value either through compelling clinical capabilities and efficiency, and/or through dramatic and long term cost reduction; i.e. price reductions. This state of nature conflicts with many supplier expectations that reform would increase utilization and demand, at stable or increasing price points.
2. Share

   Manufacturers monitor market share as a number 1 determiner of commercial success. In the value-based market of today, structural elements like Accountable Care Organizations (ACOs), and bundled payment schemes undermine the ability to grow case volume. Instead ACOs and health systems are seeking ways to minimize expensive interventions and increased utilization.
3. Actions

   How to engage in a meaningful discussion with a provider organization remains a conundrum for many suppliers. Some have developed and promoted “risk-sharing” agreements, but most have not been able to make any breakthroughs in new contract forms. Suppliers are struggling to know how to behave in this marketplace.

Join the conversation. How are you positioning yourself in this market?
Also, if you’re challenged by this situation and need to develop a more coherent strategy, you may want to give us a quick call.

By:
Gunter F. Wessels, Ph.D., M.B.A.
Total Innovation Group Inc., Practice Principal, Partner
and
Sam O’Rear
Total Innovation Group Inc., Senior Partner