Health Care in the Age of Personalization Part 3: How Business Models Must Evolve

Glenn Llopis, Contributor, Forbes
May 30, 2019

First Republic is proud to support medical professionals and their practices by sharing insights to help build their business. This is Part 3 of a six-part series on health care in the age of personalization.

Health care seems to be in a constant state of transition, as organizations move from fee-for-service to value-based business models.

But if we’re not simultaneously considering how health systems will need to operate in the age of personalization, changes made today might not be relevant a few years from now.

In the first article in this current series (Health Care in the Age of Personalization), I introduced the age of personalization, how it’s connected to inclusion, why it is significant for healthcare and why health care, in particular, can help point the way for all industries to lead in the age of personalization. In the second article (Identifying the Real Metrics of Inclusion), I discussed the need for new metrics to measure for inclusion rather than diversity – and why health care is in prime position to adopt systems and methods that enable inclusion that honors our new age of personalization.

When you think about getting a healthcare system ready for personalization, that process likely affects nearly every aspect of the business. In this article, I will explore three of the big topics – reimbursements, leadership and the dual roles of health care as a public good and as a business.

  • Part 1: Reimbursements – How to rethink the way treatments are bundled and priced in order to account for personalization in insurance reimbursements.
  • Part 2: Leadership – How to bring top technical expertise into health care (hint: sometimes you have to think outside of health care).
  • Part 3: Public good or business? – How to reconcile the tension between the moral imperative to care for people and community and the pressure to reduce costs.

The leaders I interviewed were open and enthusiastic in our conversations. I will structure this similar to a Q&A style, in order to give you more of them and less of me.

Part 1: Reimbursements

I discussed these trends with Dr. Alan List, president and CEO of Moffitt Cancer Center in Florida. I introduced the topic by sharing my observation that the healthcare industry was not designed to handle mass variance. I would say that about any industry – that the amount of variance (some would call it diversity, or differences) has changed the dynamics of how organizations deliver care, how they recruit and retain employees, how they recruit and retain physicians and caregivers.

Dr. List described it as a retail-ization – saying, “Individuals want quality as well as price to create the value” – and pointed out the complications this variation and retail-ization raises for the insurance industry.

Dr. Alan List:

When [insurers] are forecasting their budget for the next year, variability means there’s no control over it. They would love to have situations where they know the expectations for treatment of X disease will cost this amount, there will be limited variation, everyone will be doing it the same way.

Glenn Llopis:

For me, that brings up the question of value-based care. Where do you see value-based care models today and in the future, given this mass variation that’s been caused by this cultural demographic shift in our country?

Dr. List:

Certainly, value-based care is something that [Moffitt has] been leading in nationally, in the oncology space. We do one thing – cancer research and cancer care – and at least on the care delivery outside of clinical trials, we wanted to be at the table with the insurers when all of this began. The movement toward a different payment model and this value-based care model means that the value is really all about cost and quality.

We’ve been experiencing decreasing reimbursements, but what we wanted to do is be at the table with the insurer to create these new models – to make sure we’re doing the right thing for the patient, and that we can do the right thing for the patient in the future. Where we started was clinical pathways. Everyone’s familiar with treatment guidelines – the National Cancer Center network has guidelines for cancer, and you can pick a chemotherapy regimen out of five.

That’s not a pathway. What we’ve done is created 56 pathways for cancer care and individual cancers. That starts with the diagnostic workup or prevention, whether it’s chemotherapy, radiation, how often do you do a PET scan, when you need a PET scan, when you don’t, and all the elements of care and charges, and what you do at relapse. We select the treatments based upon toxicity and cost and efficacy. All three things are considered all the way up to hospice at the end.

That is what brought insurers to the table, because that limited variation and expectations of costs. You would know from the beginning what it is going to cost, because this is exactly what we’re going to do and we’re not going to have excessive billing because we’re an institution following a pathway and not individual charging. That brought them to the table. We’ve been able to create models such as bundles.

Llopis:

Does that actually save money?

Dr. List:

I had a conversation with one of the largest insurers in the country and that conversation started with, them saying: “Listen, I can give chemotherapy cheaper in the community at a private doctor’s office where there’s no facility charge from the hospital.” And I said, “Yeah, you could do that, but you’re missing the big picture.”

We’re not just chemotherapy for lung cancer (we were talking specifically about lung cancer). We have all aspects of care and, because the individuals are not profiting from this, we have better outcomes at a better value. And he said, “Prove it.”

So, we gathered data for several thousand lung cancer patients we had treated over a several-year period. He compared us to others around the country and he said, “You’re right. You have better outcomes and you’re cheaper.” We were in the middle to the lower end of the pack. They wanted to do a bundle.

That began bundling in lung cancer with this insurer. But we’ve done all types of payment models, and right now about 25% of our payment comes from these new payment models that we’re testing.

Llopis:

To me this seems like a great example of standardizing personalization. There are still standards, as there should be. But those standards can be broadened to accompany more individuality – in this case, from five chemotherapy regimens to 56 different pathways for care.

Part 2: Leadership

Another business model consideration includes the decisions an organization makes that prepare it for the capabilities and technologies needed today and anticipated for the future. A big part of that is how an organization chooses to staff its executive and leadership teams. Strategic, inclusive hiring can help.

The age of personalization requires new capabilities that cross all domains, but technology is probably one of the more prominent capabilities needed, given that much of personalization is driven by advancements in digital capabilities and artificial intelligence.

Providence St. Joseph Health (with locations in states throughout the West and Southwest) is deliberately choosing to recruit leaders with backgrounds outside of health care. This is another valuable form of diversity – tapping the expertise and insight of people who bring completely different perspectives and experiences to the table. Read this previous article for more on the value of this approach.

I spoke with president and CEO Dr. Rod Hochman about the Cultural Demographic Shift and how Providence is disrupting its own company in order to prepare for the age of personalization.

Dr. Rod Hochman:

The concept of personalization and standardization is a good one. Every individual is different. And what we’re looking at is, how do you care for each of those individuals based on who they are?

This is an age of consumerism where individuals have a lot of information at their own hands and we absolutely support that. And we’re in a process of digitizing a lot of what we do in health care so that individuals can get their care where they want it, when they want it and how they want it, whether it’s on their iPhone, their iPad, sitting in a traditional office or getting care at home.

Llopis:

Providence seems to be comfortable with hiring from outside the industry, recognizing the need for different minds that can help strengthen the foundation that has been built over time. That can be a key strategic advantage.

Dr. Hochman:

We’ve been hiring from places like Amazon and Microsoft and T-Mobile, to get their take on the diversity of millennials but also [to get their insight on] how to take care of people individually as consumers and understand what their needs are.

Five years ago we hired our chief digital officer from Amazon, to put together our digital approach to the individual and to understand what the different groups want in terms of how they receive their care. We’ve developed a whole group of care sites called Express Care so that they can get their care when [they want]. Beyond Express Care, we have a pretty extensive program that includes applications on their iPhones that are suited to their particular care needs.

Llopis:

When did you realize that hiring from other industries would be a good strategy? And how receptive was the organization?

Dr. Hochman:

We started this well over five years ago thinking this is the only way you can help transform an industry that’s in the midst of very dramatic change, particularly with the digital revolution. We were going to need new people to help us do that.

The combination of [those outside healthcare] with the people that have been in health care for a while is the secret to our success.

Our chief financial officer is from Microsoft and was never in health care in his life, and he has been a superstar for us. As I mentioned, our chief digital officer came from Amazon, and our chief marketing officer came from T-Mobile.

Llopis:

Is it just about bringing in people from technology? Or are there other ways to bring in new thinking?

Dr. Hochman:

We’ve also done that [on the clinical side]. Our chief clinical officer was the head of quality for Kaiser, which is a different care model than what we’re used to. Our president of population health was the chief medical officer at United Healthcare.

So we have definitely disrupted ourselves with people who can give us different points of view. I think it’s made a stronger, more competitive organization as we look forward.

To survive, you really need to transform. And the way to transform is with people who afford you new viewpoints about where the world is. If you ask us the one thing that’s most successful in our strategy over the last five years, it would definitely be exactly this topic.

Llopis:

I find this refreshing in an industry that can often feel insular and separate from other industries in terms of hiring and recruiting. We need to break free from that and recognize the value of having people with different perspectives.

Part 3: Public Good or Business?

I spoke with Mark Laret, president and CEO of UCSF Health in San Francisco, about the age of personalization, and he immediately expanded the conversation to include health equity.

This subject of health equity will overlap with a few of the articles in this series because I agree with Mr. Laret that it needs to be front and center when we talk about population health, individual health and how to pay for what’s needed to ensure both. It’s also a good way to introduce some of the tension around healthcare as a business and healthcare as a public good.

Mark Laret:

When we talk about diversity and inclusion, we also include the very close sibling health equity, because in a way that is almost the overlay of the moral imperative that drives the focus on diversity and inclusion.

I think that this is right at the nexus of the interface of where is health care a public good and where is it a business? My argument has been that those of us in health care have an obligation to think about the health and well-being of the whole community because it helps the whole community if those who are well-off and those who are not well-off are cared for better. It becomes a moral imperative.

Llopis:

What are the challenges?

Mr. Laret:

Part of the challenge in health care is that the business model at large has encouraged organizations to optimize their performance, and the public companies in health care have as their primary obligation to return shareholder value.

The structure of the U.S. healthcare system, which is generally built on a market model, pushes for revenue optimization and business optimization – which pushes [organizations] to look to the better-off socioeconomic groups, regardless of ethnicity or anything else, and put their focus there at the exclusion of those who are less well-off. And, of course, there’s a strong link between those who are less well-off and those of any minority status – those of color, sexual orientation, disability, mental illness, homelessness, exposure to violence – all those things put people in that camp.

In general, personalization and customization involve more costs than standardization. If there’s one-size-fits-all, everybody gets the size and you don’t have to worry about inventory or anything else.

In this country, we have really struggled with healthcare costs. As we look at personalized medicine and the huge breakthroughs that are being made in cancer treatment, with genetically modified treatments to meet the needs of an individual – there are costs associated with that. I personally think this is going to be a great discussion topic [for society], and I have a strong bias that we need to at least make a minimum amount of personalized medicine available to everyone as a core operating premise of how our healthcare system could work.

Llopis:

To address your point about those who are not well-off – what I see is that many institutions view those who are struggling from a socioeconomic perspective as a cost center. When, in reality, whether we like it or not, those are the customers and the patients of the future. There has to be a solution. It’s through the research that we do with these populations that will get us to better serve and understand everyone even better.

Mr. Laret:

When you talk about personalization versus standardization, this is a tension that we have all the time, because we’re under constant pressure to improve the value proposition and particularly reduce costs. There’s always this pressure for more standardization, which has the potential to reduce the personalization or the individual contribution. So what we end up trying to do is have individuals contribute creatively to how they can improve our value proposition. It is a tension inside the organization at all times.

I think part of the challenge in health care is that we’re right at the interface of the weak social infrastructure that we have in this country. In our emergency department, we have homeless patients coming in, and they get treated, and they need to have some certain follow-up care, they go back down to Golden Gate Park and they’re back in our emergency room at enormous costs in three days or three weeks, and that cycle continues. We spend a fortune on that.

Whereas if we were able to or had the mindset to invest more in the social infrastructure, we can take care of these patients in more of a longitudinal way, probably at much lower costs. I think when you start talking about these issues you rapidly move out of health care and into all the adjacent areas that we see, where there’s work to be done and services that are needed.

Llopis:

How is cultural diversity being incorporated into your value-based care model, and how is it connected to the core of advancing your entire enterprise strategy?

Mr. Laret:

How we think about diversity at UCSF is largely driven by San Francisco itself. Just coming to San Francisco was an eye-opener for me, and seeing how we as a city and UCSF as an institution embraced diversity. In fact, the guy who hired me, Mike Bishop, won the Nobel prize in medicine for his work with Harold Varmus on understanding how normal cells can become cancerous. And Mike Bishop said the reason he won the Nobel prize was because of the diversity in San Francisco and at UCSF.

What he recognized early on and has been documented in many other settings, as you know, is that diverse environments spawn creativity.

We welcome everyone, regardless of race, ethnicity, sexual orientation, religious beliefs. Whatever you do, come here and contribute. We create an environment that’s welcoming to you. I’m saying that’s our goal; we don’t always achieve it. We’ve got plenty of work to do.

[If we can make you feel] safe in San Francisco and at UCSF, we are the beneficiaries of that.

Llopis

These insights from Dr. List, Dr. Hochman and Mr. Laret bring me once again to the assertion that inclusion is one of the most powerful growth strategies for organizations in any industry in this age of personalization. We can and must shape our business models to enable inclusion and to proactively seek it out.

Disrupting our own organizations to prepare for the age of personalization is not a cost. It’s an investment. It’s one of the last remaining true-growth opportunities.

My next article will continue this series by exploring how the healthcare industry’s mandate to address population health fits into this new age of personalization.

This article was written by Glenn Llopis from Forbes and was legally licensed through the NewsCred publisher network.

The views and opinions expressed in this article do not necessarily represent the views and opinions of First Republic Bank.