Fixing America’s Broken Health-Care System

With a growing number of patients unable to pay their medical bills due to the economic downturn, the fever for healthcare reform is running high in Washington, D.C., and politicians are lining up on both sides in offering solutions.  It’s clear that healthcare providers are facing a perfect storm that combines growing costs, declining revenues and industry reform. What’s also clear is that providers will need to become more innovative than ever in finding ways to boost economic efficiencies without lowering standards of care.

That aside, “Changes in medical technology will underpin growth in utilization of hospital care, contributing to rising overall U.S. health care spending”, said George van Horn, senior analyst at market research firm IBISWorld.

In a survey conducted by MedAssist, when asked which categories afford the greatest savings opportunities for hospitals, 29% of respondents pointed to improved technology (e.g., electronic health records, computerized physician order entry), while 26% mentioned preventative care and chronic disease management (e.g., asthma, diabetes). Survey participants also cited streamlining administrative costs and reimbursement contingent upon quality outcomes (both at 21%) as viable areas for cutting costs.

Outsourcing financial/revenue cycle services and implementing new IT programs – over cutting fixed cost – is considered as being one of the best strategies to reduce hospitals’ administrative costs.

Policy makers are already overlooking  many of the key opportunities in addressing what is really broken about the system. Some key considerations  in implementing an efficient health-care system include the following:

1. Restore Competition in the Marketplace

The four largest carriers in the country have 99% of providers in the network and in most states, the #1 carrier has 60-70% market share. In any other industry, this would raise antitrust issues, but for healthcare, no one seems concerned.  Solution?  Break up the BUCA monopoly (Blue Cross Blue Shield, United Healthcare, CIGNA and Aetna) and restore competition to the marketplace.

2. Enable the American Consumer to Become an Astute Buyer of Quality Healthcare

The key to cost control is to bring transparency to pricing. For example, a California patient who needs a chest X-ray is charged anywhere from $120 to $1,519; in fact within a few blocks in Sacramento the price climbs from $451 to $790 from one hospital to the next. The solution – every provider must disclose the net prices that they charge and consumers need to know how to find high-quality care.

3. Eliminate Hidden Revenue Streams

Do away with fragmentation in the healthcare delivery system, and instead, all Pharmacy Benefit Managers must fully disclose all sources of revenue or profit, block doctors from owning the diagnostic machines they refer their patients to, ban trips, money and other incentives from drug companies to doctors and force hospitals to disclose profitability and markup to implant devices.

4. Our Health – NOT Healthcare – Crisis

The nation is hysterical over 18,000 cases of Swine Flu, yet we have 100 million obese people in this country. The current administration should create an aggressive public campaign to promote a healthy lifestyle, restore funding for physical education in schools, as well as institute the use of prevention-based healthcare.

5. Facilitate Administrative Efficiency

Real savings can be realized by ensuring that the government define a standard for claims submissions between providers and payors, drive a set of rules for dealing with pended claims that makes sense, among others.

6. Protect the Risk Pool

The only way to make universal coverage work is to make sure it’s universal. The first step – mandate that all employers offer insurance or force them to contribute to a government fund. In addition, we need to limit coverage to basic minimums set nationally, and to ensure that everyone can afford coverage; we should require carriers to pool risk above a certain amount per claimant.

Entrepreneurship And Innovation Key Ingredients For Survival And Success

As Economist Joseph Shumpeter once said, “creative destruction”, or innovations, cause old inventories, ideas, technologies, skills, and equipment to become obsolete. Schumpeter recognized that recessions are like a cold shower; a necessary adjustment for change.

Schumpeter’s ideas resonated at the Detroit Economic Club’s National Summit today, where Ernst & Young LLP released a report that highlights the vital importance of entrepreneurship and innovation in today’s economy. At a time when business leaders are struggling to balance short-term survival with long-term demand for growth, innovation and an entrepreneurial mindset is essential.

The new white paper, Entrepreneurship and Innovation: “The keys to global economic recovery”, details the clear connection between entrepreneurship, innovation and economic growth. Drawing on academic research, leading business minds and real-world experience, the report shows how developing new products and services, revamping organizational processes or adopting fresh approaches to partnerships can enable companies to take advantage of the current economic climate.

“Entrepreneurship and innovation inherently thrive in downturns; in fact, some of the world’s largest companies were born during a recession,” said James S. Turley, Global Chairman and CEO of Ernst & Young. “In times like these, it’s especially evident that entrepreneurial thinking isn’t optional. It’s more than a buzz word — it’s a business strategy.”

The paper analyzes many aspects of the entrepreneurial debate, including:

-Recessions tend to favor the naturally innovative temperament of an innovative mind. Historically, entrepreneurs have thrived in recessions, and helped to bring about a return to economic health. According to a recent Ernst & Young survey, 67% of entrepreneurs are focused on pursuing new market opportunities brought on by the downturn.

-The market leaders of today are not necessarily the market leaders of tomorrow. Globally, all the major indexes turn over every five years. For example, the Global Forbes 2000 has experienced a 51% turnover; the HDAX (Germany), 50%; the FTSE 350 (UK), 50%; the KOSPI 200 (South Korea), 49%; and the Bombay 200 (India), 91%. Entrepreneurial-minded enterprises are growing with incredible speed and quickly entering the ranks of the world’s largest corporations.

-Innovation is often disruptive, yet it is critical to maintaining and sustaining market leadership. Strong organizations embrace this and make it a part of their corporate culture.
-Entrepreneurship is not about size; rather, it’s a state of mind. Large companies can and do build and sustain cultures that embrace the power of innovation.
-Government policies can play a big role in encouraging entrepreneurial growth. Free flows of capital, labor and ideas benefit innovators, as does an educated populace. Additionally, governments can create conditions that attract foreign investors and encourage or discourage innovation through the tax code.

 
“Those with an innovative mindset can unlock the hidden opportunities in this recession,” noted Mr. Turley. “New companies will spring up that will revolutionize whole industries, while mature companies will build innovative cultures that can strengthen their competitive edge for generations. After all, innovative companies outperform their industry peers and are the most attractive to shareholders. We must do everything we can to stimulate creative thinking across our organizations, teams and processes. Our economic recovery depends on it.”

“Smart businesses are taking advantage of the recession rather than let it take advantage of them”, says Toon van Beeck, senior analyst at market research firm IBISWorld. “It’s survival of the fittest”.

For Ernst & Young’s full report highlited at the summit, click here.

Ethical brand/products rising in demand

 Corporation Institute (ECI) has found the current economic climate is having little effect on consumer desires towards making ‘ethical’ purchases. Demand for produce certified by organisations like the Rainforest Alliance and Fairtrade is soaring in 2009. We can expect further growth in the market for industry standards and certification.

Rob Cameron, head of the Fairtrade Labelling Organisation, told the Annual Responsible Business Summit in London last month that consumption of products under the Fairtrade label is continuing to rise. Retail sales volume is expected to increase from €2.4 billion in 2007 to €3 billion when the 2008 figures are released. This rise will have been aided by partnerships with the likes of Starbucks and Cadburys.

Last month the Rainforest Alliance reported that the amount of forest and farmland certified by Rainforest Alliance will continue to soar along with demand for products that meet standards for social and environmental sustainability.

“The drive is coming from all along the value chain and especially companies. We’ve never seen more interest from companies, from consumers and from producers,” said Chris Wille, Rainforest Alliance chief of Sustainable Agriculture.

It’s clear retailers seeking to cut costs in the economic downturn, need to continue investing in environmental sustainability to retain customers.

Sharon Greene, Managing Director of RISK International told ECI that their recent studies show 72% of European consumers prefer ethical brands.

‘In order to keep customers and other stakeholders engaged with their brand, companies need to stay abreast of the recent developments in this sector’ says Pam Muckosy, Head of Research at the ECI.’