Tuesday, May 8, 2012

Mergers Ahead!

Mergers ahead!
The Disease Management Care Blog doesn't intentionally subscribe to many health care email newsletters.  But, here's a weekly one authored by Deloitte's Paul Keckley that the picky DMCB actually likes. 

In his May 7 edition, Mr. Keckley agrees with the DMCB that, despite what the common wisdom tells us, health care is still largely a "local" phenomenon.  Currently, only 1.2% of U.S. medical practices have more than 11 physicians on site and 74.5% of health insurers have fewer than 250,000 enrollees. Most hospitals remain single institutions.  That's why ACOs, integrated delivery systems and medical homes remain a health policy sideshow.  The real action is in figuring out what to do with the rest of the health care system.  

And just where is that "rest" going?  When a highly fragmented health care industry is combined with lackluster worker productivity, burgeoning capital needs and growing consumer demand, Mr. Keckley predicts that the business case for economies of scale will become irresistible. 

In other words, a wave of health care industry consolidation is imminent.  Accordingly, our health care future going to be filled by opportunists scrambling to be at the top of a heap made up of national-scope providers, government clearinghouses, product lines, service offerings, alternative insurance options, bio-monitoring, mobile decision-support technology and on-line consumerism. 

The DMCB agrees, but adds an additional wrinkle.  Health care entities that can simultaneously consolidate and make the transition from "local" to "personal" will win.  While access to capital and economies of scale ultimately mean bigger is truly better, patients also want responsiveness, individualized attention, tailored care and a relationship. Companies that combine the best efficiencies that size brings on the back end while exceeding individual's personalized expectations on the front end will be among the elite "Apple" health care systems of the future.

The DMCB recently telephoned United to combine frequent flier miles and two savings vouchers in a complex multicity itinerary that included the high travel maintenance DMCB spouse and request for an upgrade. While the airline industry has a dreary reputation for customer service, this particular call went exceedingly well.  This was a huge company that wasn't local, but it sure was personal.  And the person on the end of the line sure sounded like a population health management nurse.  She was a guide and coached the DMCB to where it needed to go.

The DMCB's advice?  Mergers and consolidation makes sense when they:

1. Stop worrying about what Washington DC, Medicare, the Supreme Court, U.S. Congress, the CBO, the think tanks and, yes, what the DMCB occasionally has to say, about health reform.  Health system architects need worry first and foremost about using consolidated economies of scale to serve patients faster, better and cheaper.

2. Develop the in house expertise it takes to efficiently reconcile running a large company while still meeting their customers' individualized demands.

3. Include empowered and friendly "customer-facing" individuals and plan to use every "channel" at their disposal to communicate and interact with their customers  They need to explicitly plan on answering emails within one business day, answering the phone in three rings, shepherding social media with the resources it deserves and leveraging population health management.

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