Lund Byrne Associates

Summer 2014

Management Update

Contents in a

Nutshell:

Living with less

and Physician

Culture

Cost of customer

acquisition

Population

health

Helping Physicians and Hospitals to Collaborate

22747 VINE COURT : SUITE 100 : ROCKY RIVER : OHIO : 44116 : (440) 333-2921 : www.lundbyrne.com

Change

Management

Change is the law of

life. And those who

look only to the past

or present are

certain to miss the

future.

John F. Kennedy

Please direct all questions

and inquiries to:

arbyrne@lundbyrne.com

440-333-2921

www.lundbyrne.com

Can we Learn to Live with Less ?

We are beyond a tipping point and are heading rapidly toward:

More people with health insurance

Lower reimbursement across the board

More complex methods of getting paid

More data on providers and patients

For hospital finances it is hard to argue that the first item is not good;

the reduction in disproportionate share may now be offset by these

newly insured resulting from Medicaid expansion. But the other items

cut to the heart of the existing status quo, if there is such a thing in

healthcare. Where does the old system begin to breakdown?

In the attempt to stabilize costs insurers are shifting more of their

financial risk in the form of higher deductibles, co-pays and more

complex payment methods. For patients this means there will be

more scrutiny of the services being provided and for the providers

more non traditional payment methods that need a high degree of

monitoring and add cost to the traditional delivery model.

However, with the greater access to data being available to payers

and providers it can be shown that certain treatment plans can

provide more predictable outcomes. Armed with this knowledge

payers are now reducing payments to those not meeting average

costs of care (e.g.; CMS Value Based Purchasing) or shifting them out

of network. This does not immediately help providers who see

reductions in income from both volume and fees.

The future for providers is to leverage the cost of care to the lowest

cost provider. Like many businesses, what was once “rocket science”

can now be done by a well trained individual leaving the more

complex problems to those who have the skills to solve them.

(See: “The Innovators Prescription: A Disruptive Solution for Health-

care” Clayton Christensen et al)

Hospitals must redesign their own networks and go beyond the lip

service of “engaging physicians”. Physicians must see real

opportunities for them to contribute to the health systems success.

How?

Physicians are THE clinical leaders and must lead in the design

of the clinical process.

Employed physicians cannot be solely responsible for driving

revenue through their work RVU’s. For now it is important but

preparing for new a model of reimbursement is essential.

Employed physicians are highly qualified technical people but

are not treated as part of the administrative team that

contributes through collaboration to the organizational success.

The employment contract and “group practice” must recognize

and position the skill sets to contribute as part of the team.

> Looking to transform your employed group? Call us for information.

Something (and Someone) will have to give

Mayo Gonda Bldg

Heart Valve Replacement

What is it & at what cost

There are four valves in the

heart:

Aortic valve

Mitral valve

Tricuspid valve

Pulmonary valve

Where appropriate there are 2

approaches to surgery: open

heart (very invasive) and

minimally invasive.

If the surgeon determines the

valve can be repaired, you may

have:

Ring annuloplasty -- The sur-

geon repairs the ring-like part

around the valve by sewing a

ring of plastic, cloth, or tissue

around the valve.

Valve repair -- The surgeon

trims, shapes, or rebuilds one

or more of the leaflets of the

valve. The leaflets are flaps

that open and close the

valve.

Valve repair is said to be the

best for the mitral and

tricuspid valves.

The aortic valve is usually not

repaired but it may be replaced

with a mechanical product or a

tissue replacement.

According to the

“Healthcare Blue Book”

Hospital Services

$40,386

Physician Services

$5,367

Anesthesia

$3,749

There are always variables in

these costs. Go to: https://healthcarebluebook.com/

page_ProcedureDetails.aspx?

id=283&dataset=MD

Seeking Price

Transparency

Lund-Byrne Associates

22747 VINE COURT : SUITE 100 : ROCKY RIVER : OHIO : 44116 : (440) 333-2921 : www.lundbyrne.com

Are we all on the same page with population health?

The Cost of Customer Acquisition in Healthcare

The AMA Council sets guidelines for Telemedicine use and billing: Each patient should have an initial face to

face encounter prior to use of telemedicine systems. However, this recommendation does not explicitly de-

scribe what it means by "face-to-face examinations," the Council's report on which the guidelines are based

provides that "[t]he face-to-face encounter could occur in person or virtually through real-time audio and

video technology."

Most marketers will tell you that there

are three key things that will drive

business to your product. These are:

brand loyalty or “the promise”

product quality, and

price

Marketing to attract consumers in

healthcare is a complicated business.

Perhaps even more complex is

responding to C-Suite requests for

measuring the results of those

marketing efforts. Factors that are

known to inf luence healthcare

consumer decisions include:

physician referral recommendation

reputation of provider and Hospital

recommendation from colleagues

awareness

quality data

posted cost data

Some of these can be measured by

frequency or by consumer surveys with

some interpretation assigned for cause

and effect. The cost of advertizing,

reach out programs and internet

connectivity are all understandable

costs.

One of the challenges, however, is that

there are many other influencers on the

process of customer acquisition and

each of these components has a hidden

cost. If you believe in the old maxim

that says “it is the purpose of everyone’s

job to get and retain customers” then

you will understand how each and every

deliverable is being evaluated by the

consumer.

Consider the cost to capture and make

available hospital and physician quality

data or the cost of discounts from

charges in order to capture a specific

managed care contract.

Discounting to retain contracts is

perhaps the most expensive customer

acquisition cost and yet it is not

included in the current marketing

thought process.

There are two other businesses that are

similar to healthcare in terms of the

overhead costs that need to be covered.

Specifically the Hotel business and the

Airline industry. Each has a high capital

investment in equipment and premises

and each has a huge payroll. How do

they look at customer acquisition as it

relates to “bulk acquisition”

Interestingly, they share the same

concerns that other third party

aggregators and search engines will

ultimately control the consumer path

and that their products will be

commoditized. They then become

passive recipients of business and will

pay third parties for the traffic. As for

hospitals, they will still have to invest in

the patient experience and clinical

quality to stay in the game.

Ensuring the brand promise (customer

experience) is fulfilled remains a key

strategy for marketers; gett ing

operations to buy in, the key challenge.

Thoughts?

Nothing that has value,

real value, has no cost.

Not freedom, not food,

not shelter, not

healthcare.

Dean Kamen

Without a clear definition for the term “population health”

many have set their own interpretations. Some see it as a

pure clinical activity where the focus is on managing high

cost patients and those with chronic conditions with:

Case Management

Protocols for care and patient hand off

Intervention teams

Drug management

Outreach programs.

These are the things that healthcare providers are good at.

The problem that clinicians struggle with in using this ap-

proach is that their at-risk patients often return to home

environments that are working against the care being given

by the clinicians. This makes patient compliance a major

factor in success. However, Telemedicine may be coming to

the rescue with systems for monitoring, reminders and

intervention that automatically communicate between

clinicians and the devices.

This still does not change the community environment in which

patients have to reside. More cities are getting smart about the

built environment and are exploring how to build healthier

communities and are looking at Health Impact Assessments to

help define best practices for urban development, form-based

zoning and building codes.

Given the growing interest, we believe that providers need to be

knocking on the doors of their City Planning Departments to

look into how they can participate in future city planning

initiatives. A healthier urban plan is a win / win.

Lund-Byrne Associates is working with one major city on a simi-

lar initiative and has the experts to support your community

efforts. For information call us 440-333-2921.