Healthcare—The Remedy Beyond Reform: Improve Quality, Lower Costs, Transform Care

The industry's top needs are familiar, according to Naraghi and his peers at other healthcare practices and firms: Improve the quality of care while lowering costs. These necessities create a related set of needs for 1) more patient-centric care: 2) more collaborative and integrated care; and 3) more data-driven decision-making.

Given the active regulatory environment and the ever-preset requirement to cut costs—payer margins are projected to decline from 6 percent in 2010 to 5 percent by 2020 while provider margins, on average, should remain flat at 4 percent, according to Bain & Company Partner Julie Coffman—healthcare companies confront an integrated collection of "have-tos" (e.g., ICD-10 compliance and transform the reimbursement model) and "want-tos" (e.g., implement telehealth solutions).

For example, consider approaching a client to discuss implementing a new claims system, one that will reduce costs and help upgrade the company's information technology (IT) capabilities. Jim Costanzo, who heads Ernst & Young's Americas advisory health care practice, says that this work is "about as basic as it gets in the industry—we've all done these types of engagements for years."

However, Costanzo also points out that your pitch better cover the latest technology implications related to mobile devices and apps, human resources (HR) issues related to who operates the claim shop, IT security expertise regarding privacy issues, real estate implications of where the system and its backup capabilities are located, and how the new system integrates with hospital systems.

"If you're not doing all of that and more, then you are not doing your job as a healthcare consultant today," Costanzo adds. "If you are one-dimensional in your thinking, you're not helping anyone."

Beyond Reform

Thanks to some rather one-dimensional general media coverage in the past few years, the industry's fate appears to pivot on the Affordable Care Act (ACA). But insiders know that health reform, even with the Supreme Court's stamp of approval, involves a mix of mandatory and discretionary work conducted within the context of larger "healthcare ecosystem" challenges.

In mid-June, UnitedHealth CEO Stephen Hemsley released a written statement indicating his company, one of the largest insurers in the U.S., would abide by a number of the major components of the ACA regardless of the Supreme Court's decision. In the end, of course, it didn't really matter.

That same week, The New York Times health reporter Pam Belluck wrote a column arguing that: A) regardless of the Supreme Court's decision, the ACA already has stimulated change; and B) the underlying business challenges that drive the ACA still need to be addressed regardless of whether there exists a regulatory mandate, in any form, to do so.
"Healthcare change is inevitable, regardless of the Supreme Court decision regarding the Affordable Care Act," confirms Susan Kanvik, senior director of healthcare for Point B in Seattle.

All that being said, regulations continue to drive change. "The regulatory environment is completely unpredictable in the space," says Costanzo, who echoes Naraghi's point that the industry's challenges and opportunities extend well beyond healthcare reform.

International Classification of Diseases (ICD)-10 compliance, whose scope consultants routinely compare to Sarbanes-Oxley compliance, illustrates the unpredictability Costanzo describes. In April the U.S. Department of Health and Human Services extended the ICD-10 compliance deadline for U.S. healthcare providers from 2013 to 2014.
This extension gives firms and practices capitalizing on this "have-to" work another year to post healthy revenues.

ICD-10 compliance represents "highly attractive work to the consulting industry," Naraghi says, but one with a "limited window of opportunity." This type of have-to work is "more or less contained," he adds. "To play in the broader space you have to be a credible player in the ecosystem."

That credibility hinges on a consulting firm or practice's ability to help clients manage what Vynamic Founder and CEO Dan Calista describes as "swirling change."
"The pressure to lower costs, increase quality and ultimately move from a transaction system to one based on value," Calista continues, "presents significant challenges for the core business of many healthcare companies."

Of course, these trials translate to significant consulting opportunities for firms and practices that can help clients become more patient-centric, more collaborative and more data-driven.

CRM Meets PRM

In 1995, doctors and nurses probably fielded more (and more specific) questions about a prescription drug than they had in the previous 20 years combined. Thanks to the U.S. Food and Drug Administration's direct-to-consumer (DTC) advertising ruling and Schering-Plough's $100 million-plus television advertising budget for Claritin, patients took an important, albeit small, step toward the center of the healthcare relationship/experience/interaction.

Today, DTC advertising is measured in billions rather than millions. And doctors and nurses are just as likely to field questions about antihistamines as they are to be asked if a specific non-invasive, radiation treatment machine is right for them.

"Today's patients, along with their advocates, are well informed and likely to consult websites, blogs and/or other forums before making important treatment choices," notes Bain's Coffman. "Companies must respond by identifying and implementing game-changing improvements to frontline operations, product mix and pricing, go-to-market systems, service delivery, and customer advocacy strategies."

In many cases, Coffman explains, purchasing decision-makers have shifted their focus from the prescribing physician, or the implanting surgeon, to the hospital committee, the private insurer or appropriate government agency.

Vynamic's Calista agrees, noting that healthcare companies need to understand what the growing individual market, as well as Medicare and Medicaid, will mean to their organizations and how to improve customer experiences and integrate evolving consumer models of telehealth, home health, worksite clinics, and even retail venues.
This changing dynamic, one in which the patient is treated as the center of the care experience, is driving healthcare consulting leaders to inject their teams with expertise from other realms.

"Retail expertise is becoming increasingly important in healthcare," reports Susan Kanvik, Senior director of healthcare for Point B in Seattle. "Customers expect to have an experience similar to online shopping … And a large portion of the newly insured have experienced healthcare very differently, more so in an emergency and episodic manger. Companies will need to educate these customers while strengthening their overall PRM—patient relationship management—capabilities."

Traditional customer relationship management (CRM) represents a fairly novel notion in many payer and provider organizations. And these companies face growing pressure to manage the customer, or patient, experience at a time when patients, like most consumers, have never had more information—and therefore power—at their fingertips.
"The physician-patient interaction is changing dramatically," notes Houston-based Emily Yang, Vice President of healthcare for North Highland.

"You have patients walking into their doctor's office who have already done their research online, who have suppositions about their diagnosis and who may even bring their research with them on an iPad. And doctors may be bringing their own innovations to the interaction. A cardiologist may have a great app that shows the different layers of the heart to illustrate what the issue is and what he is going to do about it…. We're only at the very beginning of an entirely new physician-patient education paradigm."

Healthcare companies are hungry for help in understanding, shaping and leveraging this new paradigm because the old paradigm is quite different. Most companies "have the doctor or the nurse at the center of that process," Naraghi says. "The patient is a participant. Everyone recognizes that this needs to change. To drive cost out and improve quality of care, a patient-focused perspective is absolutely necessary."

A More Collaborative Ecosystem

Successfully placing the patient at the center of the healthcare process requires a level of collaboration and integration heretofore unseen within the industry. "A culture of true collaboration is not in place," Naraghi asserts. "To truly drive quality of clear we need that collaboration. It is absolutely mandatory."

Electronic medical records (EMR), for example, require significant integration among different provider segments. Yet most current EMR solutions focus on only one provider segment. Improving quality of care requires a shift from episodic care to more proactive care management as well as a more outcomes-based approach. This represents a major departure from the current approach to care, which is largely defined by the traditional fee-for-service model.

"It all comes together around the reimbursement model," Costanzo asserts. "If you don't have people from the payer side and the provider side working together to figure what the reimbursement model is to get the physicians and hospitals compensated appropriately for making sure the outcomes are better, it all falls down."

Coffman agrees, saying that the move away from the fee-for-service model requires a "herculean, multi-year" effort. "However," she continues, "it is a critical and necessary element to overall health cost management, along with good product design, effective care management and strong member engagement. It requires a deep understanding of the local market, and thinking systematically about the solution so that the critical components are aligned with one another, and in sync with local dynamics."

It also requires a more integrated approach on the consulting side. "We have to stop thinking about payer organizations and provider organizations and we need to stop going to market as such," Costanzo emphasizes.

"Now, certainly there are nuances for payers and for providers. That being said, at Ernst & Young we've built an integrated consulting organization. We don't have a payer group and we don't have a provider group. Instead, we have a healthcare consultancy… Whenever we go to market, we take people from both sides of the house. You have to be integrated as a consulting firm or practice moving forward. It's the key to success."

Ernst and other larger firms also take people from other industry "houses" within their firms. Veteran healthcare consultants say they now routinely work side-by-side with HR and talent consultants, real estate experts, privacy and IT security colleagues and, especially, retail consultants on mid-sized to larger engagements.

The demand for integration on both sides of the service transaction also may be the key to happiness and lifelong learning, especially for veteran healthcare consultants. "I've personally learned so much about retail as we've helped some of our [payer] clients build up bricks and mortar retail spaces," Costanzo, a 30-year healthcare veteran says.
"How do we get customers to come in the door and help these retail outlets sell insurance like Apple sells iPads? That's just a blast to work on."

Data Analytics: Beyond Technology

Other healthcare consultants sound equally excited by other client needs, namely data analytics and technological innovation. "I am very passionate about this [technology] topic because I think we have huge, untapped potential here," says Naraghi, who points to telehealth as just one example. "Telehealth solutions have been available for 10 or even 20 years," he continues. "You have seen many pilot programs across the country and around the world, but nothing on a large-scale or anything that would truly impact the cost and/or curve has emerged just yet."

"I'm convinced, in the most positive sense, that it's time to wake up and smell the coffee. We can come up with new solutions leveraging mobile devices in a secure fashion that could establish an entirely new experience for how we as consumers experience and enjoy health services."

Naraghi's peers at competing firms are equally buoyant about the prospects for truly revolutionary breakthroughs that dramatically improve the quality and accessibility of healthcare while also reducing costs. Among the solutions they mention, mobile health terminals—operated with tablet-esque interfaces (equipped with two-way, real-time high-definition video connections) and connected to electronic health records—figure prominently.

"By using mobile health and telehealth solutions, we can fundamentally change the experience of health consumers and how we deliver services to consumers," Naraghi adds.
"This is just starting and if it is performed on an appropriate scale, well beyond the historical scope of relatively small pilots, we can have a major impact. But it's not about technology. Technology should be in the back room. It's really about the new services to help consumers."

North Highland National Healthcare Leader and Vice President Fletcher Lance agrees with this assessment. Mobile health and other technological innovations on the care side, he indicates, should answer a basic question: "How do I get the right information to the right people that results in improved care and/or lower costs?"

Identifying and developing these new services hinges in large part on deriving relevant insights from the nearly endless amounts of data, both structured and unstructured, payers and providers possess. Healthcare providers want help improving quality and cost-efficiency, which translates to a need for better financial, operational and clinical analytics. For their part, payers want similar assistance with customer segmentation among other types of analyses.

However, to gain these analytical capabilities many healthcare companies need help with their basic IT infrastructure. Healthcare is "significantly behind all other industries when it comes to utilizing technology," Calista notes. Catching up on this count requires a broad range of IT-related activities.

"Healthcare IT has become more than a basic transaction processing and information/reference support," Coffman says, noting that she and her colleagues work with clients that are "harnessing healthcare IT to optimize operations at lower costs, stay ahead of the innovation curve, and enhance quality of care."

This work is not expected to let up any time soon. In the next decade Coffman expects IT healthcare improvements to facilitate three major outcomes:
• Bending the cost curve;
• Increasing the speed and value of innovation; and
• Enhancing outcomes and quality of care.

"Much like the digital transformation of the financial services industry decades ago," she adds, "here will be winners and losers in the new digital age." Some companies "will catch the wave soon enough to reap significant savings; others will wait" and be left behind, Coffman says. "This is a time of great change and turbulence for payers and providers alike, as the basis for competition is shifting across all dimensions," Coffmann says. "There are new customers to be won, new competitive models to contend with and a dramatically shifting regulatory and market environment to navigate."

There are also more human contributions for consultants to help their clients achieve. "When I think about [healthcare] consulting 30 years ago or even 20 or 10 years ago," Costanzo recalls, "I would sometimes tell my teams, 'Look, we're not saving lives here. What we're doing is helping businesses move forward.' Today, we are impacting the health of the population. We really are. "While that's genuinely exciting, it also requires work that may not be as glamorous, like rethinking the reimbursement models," Costanzo says.

Sidebar—The Cure All?
Kaveh Safavi, Leader of Accenture's North America Health Industry Practice, lays out his prognosis for the healthcare sector.

Regulatory change, innovation, cost pressure and rapidly changing customer expectations are transforming the U.S. healthcare companies in ways that expand the scope and complexity of consulting opportunities in the industry. Kaveh Safavi, who leads Accenture's North American health industry practice, recently discussed the industry's challenges and some their implications on consulting firms and practices.

Consulting: What are the three or four most formidable challenges healthcare companies (payers and providers) confront today?
Safavi: For payers, one of the biggest changes and challenges will be new state insurance exchanges. States are expected to begin certifying health plans later this year, and before they do, plans will need to understand how their product offerings and business models align with others in the exchange, thereby shaking up competition. In 2012, payers will also face the so-called medical loss ratio (MLR), which forces insurance companies to report the proportion of premium dollars spent on clinical care. If, in 2011, they spent too much on administrative costs and not enough on healthcare, some insurers will be forced to pay rebates to their members in 2012.
For providers, we'll soon see the beginning of the Hospital Value-Based Purchasing (VBP) Program. Beginning Oct. 1, 2012, Medicare will reduce base payments for each hospital discharge by 1 percent. Hospitals, however, will have the opportunity to "earn back" the lost dollars if they achieve certain performance metrics such as reducing hospital readmissions and hospital-acquired conditions. Hospitals that don't measure up will lose their withholding.

Consulting: What are some of most current and important consulting needs related to healthcare reform and other regulatory changes?
Safavi: There are three main areas where we are seeing a real need from our clients. The first area is the affordability crisis. Health systems are facing rising healthcare costs with limited ability to increase funds. We're ensuring that systems can find savings within their organizations so as not to sacrifice accessible, quality care. Second is the trend to regionalize healthcare operations and decision-making. We're seeing this under the Affordable Care Act with Accountable Care Organizations (ACOs) and health insurance exchanges. Third has been the national stimulus for Health IT. The federal government has provided short-term stimulus dollars to incent investment in health IT. But this leaves many organizations with outstanding issues of interoperability and information exchange.

Consulting: How are mobile, cloud and other technologies driving changes in the industry, and what sort of strategy and IT consulting opportunities do these changes generate?
Safavi: As we see physicians implement electronic health records; systems work to achieve and report quality health outcomes; and payers enter the insurance exchange market, mobile, cloud and other technologies will serve as the backbone behind these initiatives. But with new technology comes new headaches. Organizations will need to teach employees how to use the new systems and achieve interoperability for health information exchange.

Consulting: What are some of the most important skills and capabilities healthcare consulting firms and practices must bring to their work today?
Safavi: Accenture prides itself on its "insight-driven" approach to healthcare which applies our real-world knowledge from the business sector and clinical side to reforming the healthcare system from the back office to the doctor's office.