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Home > Resources > eNews > Dec 2000 |
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The Managed Care Insider eNews Volume Two Number 11 December 2000 PART ONE of TWO Welcome to The Managed Care Insider eNews. You are receiving this because you have subscribed; the eNews is never sent unsolicited. Subscribe/unsubscribe information can be found at the end of this eNews. The Managed Care Insider eNews is published, copyrighted, and owned by The Scheur Management Group, Inc. (SMG), http://www.scheur.com and is distributed monthly, free to subscribers. If you wish to forward this edition, you may do so only if the edition is forwarded in its entirety. No reproduction of any part of this publication is permitted without the express permission of the publishers. ---------------------------------------------------------------- This edition of The Managed Care Insider eNews considers the e-Health industry: who the players are and what they really have to offer. Is it smoke and mirrors? As always, we invite your comments and suggestions to insider@scheur.com ---------------------------------------------------------------- Insider Vision: The Future of e-Commerce in Healthcare: A Buyer's Perspective and a Seller's Opportunity by Barry S. Scheur INTRODUCTION Last month I discussed at length the disease management industry. Using much of the same outline format, I thought it only fair to address an industry that also affects managed care organizations but has gotten more publicity than disease management, the e-health companies. Despite the great promise and far-reaching visionary predictions that healthcare would be the next business-to-business (B-to-B) and business-to-consumer (B-to-C) industry fortresses to be scaled and conquered, the opportunity has yet to be realized and the roadmap for success is largely uncharted. Internet entrepreneurs drool at a $1.3 trillion industry that has lagged behind in the application of automation of its processes and harnessing technology, as they wait to turn those billions of individual billing and payment transactions into billions of dollars of revenues. But the healthcare Internet business highway is already littered with the wreckage of hundreds of start-up companies, and the transformation of healthcare into e-health, while still evolving, is moving more like a conventional airplane than a rocket. The pivotal question for the designers, promoters, and financial supporters of e-health applications is how to help the healthcare industry, or at least the segment of it dealing with insurance and managed care, understand the opportunities and be willing to boldly exploit them. Taking a line from Shakespeare, however, the e-health companies have to ask themselves whether the fault lies not in the stars but in themselves and then figure out how to deal with the answer. GETTING TO THE BASICS I have the luxury of having worked in just about all of the business areas that intersect when trying to connect e-health opportunities, healthcare businesses, and venture financing: - As chairman and owner of Venture Health Partnership Group, a company that is acquiring and turning around troubled HMOs and health plans, we are banking heavily on our company's commitment to connectivity with physicians' and insurance brokers' offices and with members for information exchanges regarding eligibility, enrollment, claims status and processes, and the communication of critical clinical information. - As the retired founding chairman and a partner of Catalyst Health and Technology Partners LLC, a capital gap company that assists early healthcare and medical ventures with both financing and business development, we have helped launch three companies with e-health applications. - As president of the Scheur Management Group, I have been consultant to a number of companies that are trying to offer various information technology ASP and BSP applications, disease management solutions that utilize information monitoring and communications devices, and companies that want to automate the process of marketing or redesigning health benefits for cost and consumer effectiveness. Having sat on three sides of the healthcare system as owner/vendor target, venture capitalist, and consultant, I believe that the biggest problem in the intersection of the opportunity that brings together e-commerce with the processes of healthcare business and the development and marketing of healthcare benefits is over-hype and under-standing -- i.e., what the buyer truly needs, is willing to pay for, and expects to get in improved efficiency and performance. Now that the gauntlet has been thrown down, let's deal with the specifics. 1. What are the keys to successful differentiation for Internet based e-health companies? 2. What are the primary opportunities within the managed care and healthcare delivery sectors? 3. What are the current pitfalls to successful sales? And how do you overcome them? THE NECESSARY APPLICATIONS From the perspective of a healthcare executive confronted by rising costs, labor intensive processes, physicians angry with lack of autonomy over clinical decision-making and inaccurate/late payments, and prolific governmental regulatory and compliance requirements, what are the key opportunities for automating the healthcare services sector, as it pertains to both product distribution and operational aspects of managed care? - Claims processing and billing, including accuracy and timeliness, but which must also take into account claims reconciliation - Eligibility and enrollment verification, for both physicians and insurance brokers - Dissemination of network information, particularly on an interactive basis, that pertains to characteristics, scheduling, and feedback - "How-to" reference and educational information about how best to utilize the managed care organization's benefits and services - Interactive advice and treatment on specific medical diseases and conditions - Value shopping and purchasing for healthcare benefits, such as direct contribution health plans through vouchers or medical savings accounts - Facilitation of interactive customer contact and response through call centers and enhanced information workflow - Facilitation of integrated care management through warehousing, comparative profiling, patient monitoring, and interactive care delivery - Value-added services that provide additional differentiation to the two sets of customers of managed care organizations -- physicians and consumers/employers. What managed care executives do not consider as top priority for Web-enabled processes are the following: * Design of integrated, automated medical records with access by all providers, a plus, if not a necessity, for effective and compassionate care management * Physician connectivity in a multiple-competitor environment, unless competitive advantage exists * Outsourcing of processes that carry high conversion or equal transaction costs, or which reduce the perception that services are being driven locally * Consumer information portals for multi-organizational reference or comparative shopping * Applications that focus primarily on technology or process improvement, but without the synthesis of adding economic value through enhanced revenue or cost reduction, or brand equity through competitive effectiveness differentiation e-Health companies need to focus on the applications, services, and products that this particular industry wants to offer and needs to have available at this time -- not the particular applications that are considered the most profitable or those with the widest possible distribution. MANAGED CARE BASICS In order for e-commerce businesses to successfully design and sell to the healthcare industry, particularly as it relates to managed care, there are basic business elements to the industry that must be understood by those who are conceptualizing, designing, and selling to those who make decisions about capital priorities and business opportunities. Here are what venturists, Web entrepreneurs, and e-health executives need to know about the managed care industry in terms of its focus, priorities, and challenges: 1. Minimized physician participation and performance Twenty years ago, we spun the story about the potential of managed care on the ability to coordinate and control the organization and delivery of care. What this evolved into, of course, was controlling physicians and physician behavior primarily through underpaying them and then to some degree managing care via cost algorithms that pertain more to contracting efficiencies than quality. But now managed care has changed its tune, at least on the surface, with the cry of "power and autonomy to the physicians" -- an initiative only brought about when health plans discovered that they were getting clobbered in the marketplace of public opinion. Disease management is the new phrase and paradigm for managing care, and many B-to-B companies are describing themselves, for purposes of appealing to managed care, as e-health companies that implement disease management applications through technology, interactive patient education and communication, and automation of business processes that relate to physician office communications and business reconciliation processes. If disease management is really a mechanism for helping to focus on managing care while maintaining physician independence, all well and good. But where the chafing starts as far as managed care is concerned is with the technical requirements (outsourcing) and the economic problems (program conversion start-up.) Much of disease management requires ceding control of care management and the accompanying intensive disease focus to outside vendors and then aggregating those services through portals, enterprises which may not have a reason to really care about maintaining physician relationships from the personal, local, and competitive business differentiation perspective. A good portion of the effective DSM programs and their associated Web connectivity can be traced to the notion of outsourcing care management, a notion that many health plans and their networks find distasteful. Therefore, DSM only really works if the health plan is able to strike a balance between focusing on the treatment protocols for a particular condition while not substituting judgment for or placing a heavy business hand on the physician's head -- which led to the crisis in confidence over managed care in the first place. 2. Poor blocking and tackling Most healthcare systems that are having operational and financial woes can trace their problems to an inability to execute the basic and fundamental business processes -- determining and verifying eligibility, collecting/coding/tracking/paying claims properly, appropriately pricing the product, and maintaining appropriate levels of service for care management and member (and provider) services functions. If you don't do these things right, all the fancy technologies and Web-enabled educational services have very little value. For example, paying claims quickly but not taking into account ongoing reconciliation as most services get approved but some get denied, will not result in the improvement of the entire business process, with the outsourcing e-health vendor taking the brunt of the criticism. Successful health plan management requires first that the basic blocking and tackling issues be addressed, and then building on those results in terms of marketplace relationships. 3. Poor network contracting and delegation If the rates a health plan has negotiated for either hospital or physician network services make it impossible to competitively price the product, the only thing that e-commerce will do is to reduce administrative costs, probably by about five percent. That's substantial, but remember that the costs of administration represents somewhere between ten and twenty percent of a managed healthcare organization's budget, with the actual dollars being spent on care equal to eighty to ninety percent. Contracting, which is a relatively straightforward function based on market forces, has a greater impact as an immediate priority than does the complex process of interconnectivity and interactivity. Good contracting probably can yield better economic returns in the short to medium term than can the resources devoted to process improvement through automating healthcare relationships, a concept which many Internet entrepreneurs find hard to comprehend. 4. Poor product design This means that either the network itself is not competitively desirable in the marketplace or the benefits themselves are too limited, too restrictive, or inappropriately priced. e-Health may ameliorate the administrative aspects of this problem, but in the short term will not dramatically change enrollment or reduce medical costs so as to grab immediate attention. 5. Administrative costs run amuck If you have too many staff members in too many malfunctioning organizational silos, adding a new focus such as business process redesign through e-health technology and applications with its associated costs is perceived as a major headache, not a potential solution. Most managed care executives know they have to do this, but with profits having been absent for the last several years, the sales hype of most Internet companies coupled with their lack of sophistication about the complexity of the healthcare business processes themselves results in avoidance behavior. ---------------------------------------------------------------- End of PART ONE of TWO, The Managed Care Insider eNews, Volume Two, Number 11. Scheur Management Group (SMG) is one of the most experienced specialized healthcare operations management and business revitalization consulting firms in the country. Our expertise is in time-sensitive analyses, strategic business and market planning, operational re-engineering, and communications, as well as implementation of start-ups, expansions, and new products. The firm's clients cover the spectrum of insurers, managed care organizations, physician groups, integrated delivery systems, hospitals, employers, governmental entities, vendors, and other providers. Contributing to this edition is Barry Scheur. Editing and Research by Judith Jaffe. Production Coordination by Nancy K. Belle. TO SUBSCRIBE: visit http://www.scheur.com/smghome.nsf/webcontent/ezine.html or send e-mail to insider@scheur.com with the word SUBSCRIBE in the subject and name, email, company, title, and country in the message. TO UNSUBSCRIBE: send email message to insider@scheur.com with the word UNSUBSCRIBE in the subject. Please take a minute to visit our eNews page at http://www.scheur.com/smghome.nsf/webcontent/ezine.html for archives, subscriber information and to RATE our ezine. Get up-to-the-minute health care news on-line at www.scheur.com Go to December 2000 Part 2 |
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