Ian Morrison's politically incorrect views on healthcare.
Hyatt: There is much talk about change in the healthcare industry. What significant change do you see?
Morrison: First of all, it's important to put the change into perspective. This is an industry that talks about change but, in fact, changes very little. Let's look at healthcare from 30,000 feet, and take one component of it, such as who pays for healthcare. You will notice that the distribution hasn't changed more than one percentage point in 30 years. The payers are still basically business, government and households, and the recipients are still mainly doctors and other individual providers, hospitals and corporations. Many of the names on the paychecks are different but, in aggregate, the industry hasn't actually changed very much in 30 years.
It is very conservative, and that frustrates people who come from other industries expecting it to change more rapidly. This is because the healthcare industry doesn't have the same commitment to change as other industries. On the other hand, the healthcare industry is pro-faddism, and so we go through a lot of strategic reorientation.
Hyatt: What would help the industry become more innovative?
Morrison: Some of the lessons that we can draw on from other industries regarding change are: 1) that the creation of standardized platforms makes a difference; 2) investment in information infrastructures is necessary; and 3) there is an important role for discipline market leaders who will reshape the field. These are the people who imagine a different space and a different way of doing things. In our industry we haven't had many sustainable leaders, and this is in part a big obstacle to change.
Hyatt: What might help drive change?
Morrison: Consumerism is a very powerful driver. Not that consumers are saying, "Oh boy, am I glad I am paying more out-of-pocket for my healthcare." Instead, they are reluctantly empowered, on one hand, and more sophisticated on the other. The shift from defined benefits to assigned contributions has forced more consumerism, and they are up to it in healthcare, both in terms of their demands and their skepticism.
Next you have the driver of information technology - particularly the Internet - creating potentially powerful transformative effects. This is one of the great healthcare ironies. The Internet offers great promise, but the healthcare industry has yet to embrace it. Patients are more sophisticated in the use of the Internet than providers. According to a recent Harris Survey, 60 million Americans went online for health information, and 91% found what they were looking for. It is, however, a double-edged sword: More information might be better, but it could also cause more anxieties.
Then you add the thrust of new medical technologies, which will challenge us in ways we haven't even begun to imagine. For instance, Viagra is part of a broader set of interventions that will be both wonderful and scary simultaneously and will create difficult choices. Despite the fact that there could conceivably be highly effective cures for specific diseases, the general history of medicine has been that whenever a new technology comes along, it creates more expense initially. Hence, there will be problems paying for it.
Hyatt: How has information technology affected healthcare?
Morrison: The Internet has already played a role in healthcare standardization because of people's access to all kinds of information. There has also been the introduction of new tools to communicate data between clinicians and administration.
Hyatt: What about the cost of the new technologies versus the returns?
Morrison: There is a significant amount of cost associated with the initiation of these technologies. It will take some time to create and get buy-in for any standardized platforms among the different players in healthcare. There is also the need to understand the critical nature of interoperability. There is a difference between the promise of information technologies and an immature infrastructure, which is where healthcare is today. In the long term, I think creating the information technologies to implement the standardized platforms will make a very big difference.
Hyatt: Where do you see your clients placing the lion's share of their investment in technology?
Morrison: There are many strategies that differ according to classification of whether you are on the provider/supplier side or the payer side. But if you take the payer side, for example, there are three strategies that I am noticing. First is "Vertical Integration for Value," similar to Kaiser's recommitting to vertical integration of the plan, the doctors and their own proprietary clinical infrastructure, as well as their information infrastructure. The second is a "Consumer-Friendly" strategy, with Blue Shield as an example. The Blue Shields of the world are betting on a consumerized future where their information technology can touch consumers as individuals and, in turn, help the company customize their health-related offerings. The third strategy is the "Virtual Single Payer" and is the default strategy for most health plans. This is where the health plan gets big, gets ugly, takes providers and turns them into hamsters on a treadmill, and essentially becomes a virtual version of the Canadian system or the German Sickness Fund.
Hyatt: Which strategy do you think will win out?
Morrison: I think the prevalent one will be the virtual single payer.
Hyatt: That's discouraging. I guess I had higher hopes that we had learned the lessons the first time we attempted to cross that bridge.
Morrison: I think it's going to be ugly for everybody. "We will regulate them and they are not going to make much money." The consumer strategy will also grow, but what I think is going to become evident is that there are limited numbers of people who can afford to trade up unless there is a fundamental restructuring. In some sense it might be best to learn from Kaiser how to manage the costs of medical care more effectively - because that's where the money is. Having consumers pay more for medical care without fundamentally altering the way we practice medicine seems, to me, to be the "10% effect." We need to deliver services differently, because I think that 90% of Americans will not be in the Blue Shield types of plans as they exist today.
Hyatt: Since healthcare is experiencing international mergers and expansion, what role will economic and market factors play in reshaping the future?
Morrison: I think the most alarming fact is that we are in the longest expansion period ever, and at the same time we have more than 40 million people who are uninsured and nobody cares! The big question is, how bad can it get? There are some pretty tough challenges ahead when you acknowledge that the healthcare business is not exactly rocking and rolling right now. You have to ask what would it be like if the economy took a downturn?
Hyatt: Do you sense the same thing happening worldwide?
Morrison: I recently returned from South America, where they have a tiered system. It is similar to ours in that they have safety nets for the poor, socialized insurance for the middle class, and the rich trade up. The trend in countries like Argentina and Chile is for the middle-class socialized system to move to a market-based model. This is in sharp contrast to the Canadian or Western European countries, which are still committed, despite experiments in competition, to the socialized models. I think these contrasts will continue.
Hyatt: What positive initiatives do you see happening in America today?
Morrison: I see innovation in California, Iowa and Minnesota, where people are taking action locally and trying to do the right thing in their communities. Blue Shield in California, for example, is trying to do some things that make for-profit healthcare more responsive to consumers. I think Kaiser's recommitment to clinical management correlated to information management is a pioneering effort. I see many initiatives taking a positive direction.
Hyatt: And where are the potholes?
Morrison: I think Washington is a disaster area. I don't know how it makes policy, and I am not hopeful about the process going forward. Unfortunately, I also see business backing away from its leadership role in health.
Hyatt: Given that U.S. companies are often valued by the stock market based on market capitalization, and given that most healthcare providers' and institutions' revenues are shrinking, what do these organizations have to do to maintain a sufficient profit margin?
Morrison: I believe Wall Street will be disappointed in the profit margins of healthcare companies for a long time to come. The conditions are almost set for a default strategy in many cases. The not-for-profits are really the only ones with the guts and freedom to make significant change because they are not publicly traded. The real question for healthcare organizations should be, "Is the purpose serving your community or making money?"
I think this is the American conflict about healthcare. On one hand we like markets to move upwards; on the other hand we are uncomfortable with people making a ton of money on healthcare.
Hyatt: What qualities should the healthcare industry look for in its executives?
Morrison: I think that the executive competencies that are undervalued are innovation and the ability to execute well-established ideas. We tend to be more attracted by fads than by major innovations. It's really the ability to imagine change and then implement that change that matters.
Hyatt: Where should healthcare managers start to evoke change in their respective organizations?
Morrison: One main area that needs changing is governance. I don't think healthcare institutions are governed well. Boards of directors are often peopled with those who want to feel good about serving rather than those who have business acumen or are connected to the communities they serve. The typical board is a bunch of old guys who are more interested in other things than the appropriate community transformation of their institutions. It is a very conservative industry, made more conservative by its governance boards.
Hyatt: Don't you think that conservatism is at least partly related to the fact that you are dealing with people's lives?
Morrison: Yes, I guess you don't want to make it up as you go along. I'm not saying that there aren't some valid reasons for it, but it has become an impediment to change.
Hyatt: Right about now I'd bet there are some managers or administrators and CEOs or COOs who are saying, "How can I possibly effect a change in governance?"
Morrison: They can start by asking these questions: "What is the purpose of the enterprise? What are we here for?" Other questions should raise concerns about their constituents: "Is the leadership's vision reflected by the board? Do they believe in the health issues of the community or is it just survival?" If it's institutional survival, which is what I think most boards and CEOs are about in this kind of environment, then the institution will continue to default to less important issues, probably not innovate much, and eventually fail.
CEOs and managers should be pushing themselves to develop the capacities that will allow their organizations to be sustainable in the future.
Hyatt: Changing demographics related to an increase in the aging population continue to fuel the post-acute care industry. What are your thoughts on public policy in this area as we look ahead?
Morrison: The numbers of those over 65 really begin to increase starting in 2020. The fastest-growing segment of the population today is the group over 85 years old, and this is expected to continue. I think this creates tremendous opportunities and challenges. The post-acute care industry has really suffered under the recent Medicare reimbursement changes. Part of the problem is that we don't have a clear concept of what our national policy is toward older persons and how we will care for them. Our default policy is Medicaid, to take care of those in nursing homes, which is unsatisfactory. It is not a sustainable plan. The question then becomes, can we build policy instruments, such as long-term care funding systems in the private sector, to alleviate some of the inevitable public burden? And, can we restructure the Medicare system?
Hyatt: Obviously there will continue to be a need for home healthcare, nursing homes and residential living centers. Do you see new entrants to the market?
Morrison: I think it's about life care. There will be an explosion of opportunities over the next 20 to 30 years, which will involve some existing components, such as home healthcare, and others that will be newly created, because I don't think that the average baby-boomer's aspiration is to spend his last years in a traditional nursing home. I think we are going to want to "do everything" until our last breath.
Hyatt: And information technology's role?
Morrison: Hugely important. You are going to have a bunch of 80-year-olds who have been Net-literate since they were 40, and they are going to look for services to be delivered electronically and, potentially, by very intelligent and sophisticated instruments. Many will also seek social support from communications technology.
Hyatt: Any concluding thoughts to offer our readers?
Morrison: Step up to the leadership challenge. In the final analysis, leadership is about values. It's important to have a dialogue with people about what they believe in, what they see as the goal and purpose of the organization. If leaders can "connect the dots" in terms of the values and motivations of the organization's stakeholders, then we can have a better healthcare system.
My thanks to Ian Morrison for this interview, and for not giving the standard politically correct responses. He challenges those in the healthcare industry to do more. I, for one, am looking forward with great anticipation to his upcoming book. I am also interested in further exploring this concept of organizational change in the industry. If you have had an experience or idea that you have implemented related to this issue, please send your comments to Laura Hyatt, Hyatt Associates, at 2956 Kelton, Los Angeles, CA 90064. Be sure to include your name, organization, address, area code and phone number.
Laura Hyatt is president of Hyatt & Associates, Los Angeles, CA.
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|Title Annotation:||interview with the former president of The Institute of the Future|
|Date:||Sep 1, 1999|
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