Harvard Kennedy Schoolof Government

Outcome-Driven Innovation

Program Results – Providers – January 2004

What is the goal of this project?

The goal is to provide:

Suppliers Insurers Regulators Service providers

and others with the market insight that is needed to direct resources and speed progress toward health care reform and market and product innovation.

What are the challenges?

There are many constituents - suppliers, insurers, regulators, service providers and patients - all of whom have conflicting desired outcomes …

… but to create improvement, value must be defined through the eyes of the customers – mainly the patient and the provider.

What are the project objectives?

Understand what patients and providers are trying to get done – i.e., jobs, outcomes and constraints

Prioritize opportunities for improvement Identify groups of providers and patients who are best

suited to create an effective health care model Use this information to formulate an innovative solution

to health care Create a framework in which idea generation for a new

health care delivery model can be objectively assessed for its impact on patients and providers

The Components Of Success

PatientOutcomes

Provider Outcomes

Inputs

New Delivery Model

Idea Generation

Optimized Solution

Refine against Outcomes

Refine against Constraints

Phase I: Understand patients as a customer set

Phase II: Understand providers as a customer set

Find opportunities for an innovative health care model that satisfies the outcomes of the providers and the patients

What steps have we taken?

Patients: How was Phase I accomplished?

Identify Customer Outcomes In May 2002, we conducted interviews with 70 males and

females of all ages and income levels. The interviews were conducted in Miami, FL and Minneapolis, MN.

72 jobs and 42 outcomes were identified in this stage.

Prioritize Inputs Between August and October 2002, we surveyed 270

individuals that represented an accurate sample of the US population across age and gender.

Identify Broad Market Opportunity Opportunity scores of 12.0 or higher are considered

significant areas of opportunity.

What opportunities exist among the patient population – for Maintaining Health?

Opportunity scores of 12 or greater represent significant opportunities for improvement.

Job to be done Importance Satisfaction Opportunity

Detect any disease or illness at its earliest possible stage 9.4 5.1 13.7

Know with certainty that your body is free from disease, infection, tumors

9.3 5.1 13.5

Reduce the risk of developing age-related diseases or disabilities - e.g., cancer, stroke, arthritis, heart disease, osteoperosis, gum disease

9 4.6 13.4

Maintain the desired level of physical performance - stamina

8.7 4.1 13.3

Determine if blood is flowing normally through the arteries (e.g., locate clogged arteries)

9.2 5.2 13.2

Get the proper amount of sleep 8.5 4.1 12.9

Maintain mobility of the joints 8.8 4.8 12.8

Reduce the risk of contracting an incurable or potentially fatal disease - e.g., AIDS, multiple sclerosis, cancer

9.4 6.2 12.6

Achieve the desired level of energy - prevent fatigue 8.4 4.2 12.6

What opportunities exist among the patient population – for Seeking Health Care?

Job to be done Importance Satisfaction Opportunity

Minimize the cost of medical insurance 9.4 2.4 16.4

Minimize out-of-pocket costs for standard medical treatment

9.2 3.1 15.3

Minimize the cost of long-term care insurance 8.5 2.1 14.9

Minimize the time it takes to obtain approval from the insurance company for a requested treatment or procedure

9.1 3.7 14.5

Increase the percent of treatment options that are considered - including alternative medicines and new drugs or treatments

8.7 3.1 14.3

Minimize out-of-pocket costs for prescription drugs 8.9 3.5 14.3

Minimize the cost of long-term disability insurance 8.1 2.2 14.0

Minimize the time it takes to get an appointment with a specialist - e.g., referrals and other doctor visits not required

8.6 3.2 14.0

Minimize the number of mis-diagnoses 9.3 4.6 14.0

This segment manages health from the inside-out as they address issues related to food consumption, nutrient absorption and food processing. “You are what you eat.”

This segment feels their health is pre-destined and acts to prevent or control diseases to which they believe they are genetically disposed.

This segment manages health from the mind, as they are intent on keeping it clear and focused and free from stress. “Healthy mind, healthy body”.

This segment manages health from the outside-in, as they are focused on maintaining weight, muscle tone and joint flexibility - as well as managing anxiety. “Look good - feel good”.

What unique patient segments exist based on the Jobs for Maintaining Health?

Segment 3: Healthy Minded

Segment 2:Body Basics

Segment 4: Genetically At Risk

21% 21%

34% 24%

Segment 1: Food Centric

Segment 1: Food Centric / Self Reliant

This group wants to take charge of their own health. They focus on what goes into their bodies, are more concerned with what to eat, nutrient imbalances, toxins and toxic effects and food absorption and processing. They are also concerned with overburdening any internal organs and making sure they are working properly. Memory is also a key issue.

When obtaining health care, they seem to have a strong mistrust of the doctors. They are more concerned with the doctor’s qualifications, questionable tests and procedures, questionable ‘follow up’ visits, with costs for non-standard treatments and with treatment plans that do not work. They make more doctor visits than average and feel they should have better access to premium services.

This segment contains a higher population of women (64%) and people under 5’6’’. They tend to have lower than average incomes, come from the Northeast or Northwest and have more children between 1 and 5. They have a greater concern for their health, are more likely to have government paid insurance and to be unsatisfied with their primary physician.

21%

Segment 2: Body Basics / Pay As You Go

Individuals in this segment manage health from an external perspective. They are concerned with maintaining muscle tone, body weight and joint mobility as well as maintaining concentration and focus and managing anxiety. They are also concerned with preventing the recurrence of a disease as well as preventing a genetically disposed disease.

When obtaining health care they are especially concerned with the out of pocket costs for standard treatments and much less satisfied in many areas of seeking care. They are concerned with the time it takes insurance companies to approve requested treatments and second opinions along with them denying treatments and dragging their feet when paying charges. This segment is also concerned with the cost of prescription drugs.

The individuals in this segment tend to be less educated and contain a higher percentage of smokers (25%) and people without insurance (15%). They are more likely to be between 20 - 34 and 65 - 80 and to use the web to diagnose problems, find alternative treatments and to validate diagnoses.

34%

Segment 3: Healthy Minded

Individuals in this segment believe that a healthy mind means a healthy body. They want to maintain a positive attitude, stay mentally alert, get the proper amount of sleep and maintain focus and concentration. They want to remain free from pain and relieve physical stress. They are also concerned with contracting and spreading disease and with unwanted drug interactions.

This group wants to minimize the chances of mis-diagnoses and receiving the wrong treatment along with reducing the negative side-affects from the treatment.

Individuals in this segment tend to be middle age (35 - 54), more educated, have higher incomes and older children at home. They are less concerned about health care issues although most have insurance (97%). They are more satisfied with their insurance company and with their primary physician and are more likely to believe that only those that can afford superior health care should get it. They are more likely to be from the Northwest and to search the web using Google and “other” methods - but not for diagnosis information.

21%

Segment 4: Genetically At Risk

Individuals in this segment are trying to determine if any genetic defects exist, to prevent the onset or reoccurrence of a genetically disposed disease and/or to learn to control a disease or problem once diagnosed. They are strongly concerned with the toxin levels in their body and if their senses and internal body parts are overburdened or functioning improperly. Relieving mental stress is also a key issue.

When obtaining health care they want to obtain care quickly in the event of an emergency and to reduce the cost of long term disability insurance. They are very concerned with many aspects of diagnosis including ensuring accuracy and reducing the time it takes to determine the extent or seriousness of the problem. They want to ensure that needed diagnostic tests are covered as well as needed treatments and procedures.

This segment tends to be somewhat older, more educated and to have higher incomes. They are the least satisfied with their health care coverage, most likely to use alternative treatments and to believe that everyone should have the same care - regardless of what they can afford. They are more likely to use the web (Web MD) and to live in the upper mid west.

24%

Patient confidence is still high

Barely 25% of patients expressed a high degree of distrust in the system

Less than 20% think they can do better than their doctors

Over 60% want more choice over how they spent the money employers contribute to their healthcare (supporting voucher and MSA’s)

Patients (86%) want to play a more active role in managing their health

Providers: How was Phase II accomplished?

Identify Customer Outcomes In July 2003, we conducted interviews with approximately

55 providers, including primary care physicians, specialists, nurses and alternative care providers.

109 outcomes and constraints were identified through this process

Prioritize Outcomes In July and August 2003, we surveyed 180 healthcare

providers, that represented a sample of the target population and included the same types of providers listed above.

Identify Broad Market Opportunity Opportunity scores of 12.0 or higher are considered

significant areas of opportunity.

What opportunities exist among the provider population – practicing medicine?

Practicing Medicine Outcomes Importance Satisfaction Opportunity

Minimize the number of people who adopt poor behavior and lifestyles (e.g., smoking, obesity, etc)

8.6 2.0 15.2

Minimize the frequency with which providers are limited in treatment options due to health plan restrictions

8.6 2.4 14.8

Minimize the time it takes to get a non-formulary medicine approved by the insurance company, e.g., get an override

8.4 2.0 14.8

Minimize the time it takes to obtain a patient's complete medical record including other physician notes, lab reports and x-rays

8.7 3.0 14.4

Minimize the time that is spent determining what drugs are covered by the patients insurance

7.9 1.9 13.9

Minimize the chance of harmful prescription errors, e.g., dosage errors, incompatibilities, conflicts with other medications

9.5 5.1 13.9

Opportunity scores of 12 or greater represent significant opportunities for improvement.

What opportunities exist among the patient population – managing medicine?

Note: The opportunity scores seen for this group are unlike any others – they are substantially higher than what we find in any free market environment.

Managing Medicine Outcomes Importance Satisfaction Opportunity

Increase the number of reimbursements that are fair, e.g., proportionate to the level of expertise, time and effort put forth

8.9 1.5 16.3

Minimize the likelihood of patients foregoing needed care because they cannot afford it

9.0 2.0 16.0

Minimize the time that is spent preparing medically unnecessary documentation in order to protect against legal liabilities

8.8 1.7 15.9

Minimize the likelihood that recommended provider treatments are second guessed by people who are not qualified to do so, e.g., insurance clerical workers

8.6 1.6 15.6

Minimize the cost of malpractice insurance 8.7 1.8 15.6

Increase the threshold of reimbursement - the base level of reimbursement

8.5 1.6 15.4

What constraints do providers have on a health care model?

Opportunity scores of 12 or greater represent significant opportunities for improvement.

Constraints Importance Satisfaction Opportunity

The model must ensure people take responsibility for their own health

9.0 1.4 16.6

The model must improve the patient's motivation to make needed lifestyle changes

8.8 1.7 15.9

The model must give providers the freedom to practice medicine

9.6 3.6 15.6

The model must reward providers for doing the right thing 8.5 2.3 14.7

The model must reduce the cost of pharmaceutical drugs 8.0 1.3 14.7

The model must not financially incent the provider to withhold care from the patient

9.2 3.8 14.6

The model must not increase overhead 8.1 1.7 14.5

The model must financially incent patients to not abuse the system

7.8 1.5 14.1

What can we conclude about the constraints?

A new healthcare model must address the misalignment of incentives of both patient and physician

A new healthcare model must be willing to put more responsibility on the patient for their health

The cost structure of the new model must be equivalent or better than the current one

Future Health Care Model Ideas

To what extent do you agree with … Top Box Use of email and phone ‘visits’ with patients 44%

Structure reimbursement based on physician performance (quality of care, outcomes, etc.) 62%

Patient to play a more active role in their health care 92%

Allow for real-time metrics on patient health electronically, allowing on-going diagnosis without a physical visit

19%

A single payor universal health care system run by the government (expanded Federal Health Plan Benefit)

26%

Clear shared articulated risk between doctor, patient and insurer 81%

Severity adjusted bundled rate in exchange for being able to practice as provider sees fit 38%

System should allow me to meet my income goals for hard, quality work 89%

I would prefer to mentor, partner or instruct patients 89%

I would prefer to work within a small practice that was part of a large virtual corporation (partnership approach) as opposed to a larger multi-specialty group practice (salary based)

55%

Health insurance should allow the customer to choose either catastrophic or all circumstance insurance 78%

I believe the consumer self choice model will succeed 55%

Role of Insurers

Contrary to expectations …

… we also found that only 35% of the providers believed that ‘insurance companies add no value’.

This segment is concerned with managing the long term health of their patients. They prefer to interact with patients in person, focus on preventative medicine, and are very concerned with referrals.

This segment consists of providers who are focused on getting a patient taken care of in an efficient manner, without wasting extra time or effort. They are also uniquely concerned with limiting workload.

This segment consists of health care providers who are very crunched for time. They don’t like redundancy, don't want to spend excessive time with patients, and are very concerned with the cost of managing the practice.

This segment wants to spend more time educating and diagnosing patients – working with them. They want to conduct accurate diagnoses and minimize patient complications.

Provider’s Natural Segmentation

Segment 2: Time Constrained

Segment 3:Patient Conscious Perfectionists

Segment 4: Efficiency Minded

34%

22%

35%

9%

Segment 1: Total Health Managers

This substantial segment wants to spend time working with their patients for their long-term health. They are very open to alternative care programs and emphasize preventative care. Because they are often the first line of care, they need to have a solid referral base on which to draw as well as good tools to identify needed specialists.

This group has a much higher percent of NP’s, PA’s and Chiropractors than the total market. This group is younger than the average, and is more likely to be female, in practice less than 10 years, and more likely to be in the bottom income range (< $100,000 per year). This group is also much more dissatisfied with their income. Regarding the future of healthcare, this group strongly resists email or phone visits with patients, reimbursement based on performance, real-time electronic monitoring of patients, and insurance companies. They are however, the strongest advocates of patients playing a more active role in their own care.

Segment 1: Total Health Managers

34%

This group represents the high patient-load, managed care oriented physician. They see many more patients per week than the average and have higher incomes. They have a disproportionate share of male PCPs and Specialists in large group practices and partnership models with the majority of reimbursement coming from managed care.

They want ready access to patient’s medical history and want to reduce the time it takes to evaluate treatment options, collaborate with other providers about the patient’s care, and monitor drug effectiveness when formularies require change in medication. They are highly concerned with all aspects of labor costs and the issues surrounding working with multiple insurance carriers. This group is also concerned with over-utilization of services and ordering duplicate services

This group is very receptive to technology-enabled efficiencies. They strongly agree with email and phone ‘visits’ and real-time monitoring of patients. They also disproportionately believe that insurance companies DO add value and like the idea of reimbursement based on performance and severity adjusted bundled rates in exchange for autonomy in practicing medicine. They also strongly believe the consumer self-choice model will work.

Segment 2: Time Constrained

22%

This segment wants to spend more time diagnosing patients, educating them and working with them. Their primary concerns are conducting an accurate diagnosis, minimizing patient complications and making sure patients have access to the care they need.

They are not concerned with high labor costs or insufficient referral networks. This could be due to the higher proportion of providers in this segment that work for a managed care organization or a specialized hospital system that provides a substantial infrastructure and specialist base.

This group has a higher representation of specialists and surgeons and a higher portion of indemnity reimbursement. They are more likely to have worked for all three types of provider models (independent, salaried, and partnership). They are older than average (55 years and older), are twice as likely to be satisfied with their income, and have a higher propensity to want to mentor and partner with patients than the average.

This group likes the idea of different types of patient visits (email and phone) as well as remote monitoring of the patient’s condition. They are not as enthusiastic about performance-based reimbursement, nor do they believe the consumer self-choice model will work.

Segment 3: Patient Conscious Perfectionists

35%

This segment is a small set of the population that seeks to provide solid care to their patients but doesn’t want to waste time or work too many hours. They want to make it easier to collaborate with other providers that are involved in the patient’s care and be able to benchmark against best practices. Their specific concern with limiting the hours worked is twice that of the general population makes them a good group to approach with a salaried provider model with traditional work hours.

This group is much more concerned with reducing the number of visits necessary to diagnose patients and the time spent collaborating with other health care providers regarding the patient’s condition. They also want to reduce the time it takes to obtain pertinent information from the patient and the time it takes the patient to accept a treatment plan.

This group contains over twice the percentage of nurses than the market as a whole. It also contains much more seasoned professionals (over 20 years in practice) who see less patients per week. They are much more likely to work in a general hospital or government / university hospital.

This group strongly opposes email or phone visits as well as severity adjusted bundled rates.

Segment 4: Efficiency Minded

9%

What can we conclude about Provider inputs?

Providers are naturally segmented by how they want to practice medicine – no other variables accurately reflect how they differ

The segment a provider is in dictates the type of health care environment in which he/she will be most comfortable working

Health care organizations can use this information to better attract the types of physicians that will work well in the type of environment they are trying to create

Tying It All Together

Patients already pay significantly – to stay healthy …

Healthy Sick

PatientPays

InsurancePays

Personal trainers Gyms Food supplements Nutritionist

counseling Diagnostic

preventative tests

Experimental Treatment

Infertility LTC

$70 Billion Annually

Healthy Sick

PatientPays

InsurancePays

Personal trainers Gyms Food supplements Nutritionist

counseling Diagnostic

preventative tests

Experimental Treatment

Infertility LTC

Hospitalizations X-Rays Laboratory Prescription Drugs Transplants Chronic Diseases Restorative Care

Well checkups Immunizations

But they expect to pay nothing when they’re sick …

How do you create a market for traditional health care?

Follow the dynamics of market creation that the upper quadrants have done …

… by creating a health care model that can better meet the outcomes of the segment of

patients you want to target.

Match Provider outcomes to Patient outcomes to create maximum value

S1:

Total Health Managers

S3:

Patient Conscious

Perfectionists

S1: Food Centric

S2:

Time Crunched

S4:

Efficiency Minded

S2: Body Basics

S3: Healthy Minded

S4: Genetically

At Risk

Provider Segments Patient Segments

Patient Self-Choice

Total Health Managers

Food Centric

Rationale:A combination of Total Health Managers and Patient Conscious Perfectionists would be ideal for two of the larger patient segments – by providing care how and when they want it.

With such a combination, the Total Health Managers will be available for common ailments and well visits. The Patient Conscious Perfectionists will be there to assist when more specialized care is needed.

These two patient segments tend to focus heavily on their own care and health and seek care only when needed.

Healthy Minded

Patient Conscious

Tying it All Together

S1:

Total Health Managers

S3:

Patient Conscious

Perfectionists

S1: Food Centric

S2:

Time Crunched

S4:

Efficiency Minded

S2: Body Basics

S3: Healthy Minded

S4: Genetically

At Risk

Provider Segments Patient Segments

Kaiser Model – Provider/Payor

Rationale:This combination of providers will be a highly efficient group who will welcome technology that will increase their capacity. Because the Time Constrained group is used to handling large workloads, the addition of more Total Health Managers to their practice would make them even more efficient and provide better care to the patient.

The Food Centric - Self Reliant will likely enjoy this model as they will be able to gain trust in the system as a whole instead of having to evaluate each doctor they come into contact with. This model should also reduce their suspicion about unnecessary visits and financial motivations for doctor recommendations.

The Body Basics - Pay As You Go group is likely to be attracted to this type of practice’s lower out of pocket costs. This group is also likely to be lower utilizers due to their age and demographics and will therefore financially benefit the provider model.

Total Health Managers

Food Centric

Body BasicsTime Constrained

Mayo Model

S3:

Patient Conscious

Perfectionists

S1:

Total Health Managers

S2:

Time Crunched

S4:

Efficiency Minded

S1: Food Centric

S2: Body Basics

S3: Healthy Minded

S4: Genetically

At Risk

Provider Segments Patient Segments

Mayo Model

Rationale:This group of providers wants to provide high level specialized care. They want to ensure plenty of time is spent with patients to make the most accurate diagnosis.

This model would be attractive to the Healthy Minded group who wasn’t as concerned with paying more for premium services. While this group of patients is likely to seek care, when they do, they will want full attention and top physicians.

The Genetically Pre-disposed group will benefit from the expertise of this model and will likely seek pre-emptive care and predictive tests – even at out of pocket costs.

Patient Conscious

Perfectionists

Healthy Minded

Genetically at Risk

Single-Payor Model

S1:

Total Health Managers

S3:

Patient Conscious

Perfectionists

S2:

Time Crunched

S4:

Efficiency Minded

S2: Body Basics

S1: Food Centric

S3: Healthy Minded

S4: Genetically

At Risk

Provider Segments Patient Segments

Single-Payor Model

Rationale:This group of providers will do well in an environment paid by salaries with managed workloads. This group would also benefit from giving NP & PA’s more responsibility for the care of the patient’s basic needs.

The Body Basics - Pay As You Go group is likely to be the best patient target for such facilities as they want care to be as inexpensive as possible.

Body Basics

Total Health Managers

Efficiency Minded

Next Steps to Consider

How do the Outcome-based Segments apply to your organization?

What provider and or patient segments are most suited to your organization?

Are these segment differences reflected in your provider base and if so, do you modify their patient load accordingly?

Are there ways in which you can target a specific outcome-based patient group to be more profitable?

Are there ways that your organization can address the outcomes that patients are trying to achieve in maintaining health?

Next Steps to Consider

What health care models could be devised to leverage this market-driven perspective?

How do we satisfy both patient and provider outcomes? Different ideas/solutions/theories can be evaluated

against the outcomes of both constituents The outcome-based model will show exactly what the

areas need to be re-addressed to maximize value Systematic modeling and simulation is possible – how

can they system be optimized? Let’s evaluate ideas and begin to propose some possible

solutions

Sandy Bates, Strategyn

Tony Ulwick, CEO Strategyn

sbates@strategyn.com

ulwick@strategyn.com

(512) 527-0911

(561) 582-6336