First posted on Venture Valkyrie 5/4/2014

Well I don’t know why I came here tonight,
I got the feeling that something ain’t right,
I’m so scared in case I fall off my chair,
And I’m wondering how I’ll get down the stairs,
Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you.

–First verse of Stuck in the Middle with You by Stealers Wheel

I spent last week at the Health Evolution Partners Summit, which is always a great place to catch up with friends and meet new ones.

The meeting is pretty much the place to be if you want to hobnob among the health systems’ leaders—the triple threat of payers, providers, and policy-makers who are both piloting and bailing out the ship of healthcare change.

For someone who spends a lot of time around the entrepreneur set, this is not the usual conference crowd. This meeting is full of people with nicely coiffed gray hair (none of this sticking up in front stuff) drinking grown-up drinks (not Red Bull) and wearing sensible shoes. At this event you very rarely hear the slang so characteristic of Silicon Valley or find executives walking around in ironic t-shirts (they actually wear suit jackets and, gasp, ties). No one is, god help me, SnapChatting. There are some Fit Bits in the room but the wearable of choice is more likely to be a Rolex. If you use the word “coding” in this group, people will think of ICD-10 and medical billing, not programming a computer. Most of the crowd can remember having jobs at a time when there was no Internet in the workplace and no mobile phones at all.

Old school wearable for healthcare executives

Old school wearable for healthcare executively wear suit jackets and, gasp, ties). No one is, god help me, SnapChatting. There are some Fit Bits in the room but the wearable of choice is more likely to be a Rolex. If you use the word “coding” in this group, people will think of ICD-10 and medical billing, not programming a computer. Most of the crowd can remember having jobs at a time when there was no Internet in the workplace and no mobile phones at all.

There is even a healthy sampling of senior executive women at the HEP Summit; traditional healthcare companies are actually a place where females are found in leadership roles, not just found playing the part of the girlfriend to some 26-year-old tech geek who fills his workplace with only his own kind.

Straddling the Old and the New World

And this group of people, who know everything there is to know about how we got into such a healthcare system mess (because they helped create it) and what has got to be tackled to fix it (even if not how to do that exactly) is dealing with quite a conundrum. They are caught in a vortex where they have to straddle the old world and new world—the land where healthcare decisions are mostly still driven by volume and not quite ready to chuck it all for a world based on “value.”  Basically, they are stuck in the middle between two healthcare systems and not sure when they are going to get out and exactly what direction in which they will be heading.

Healthcare: straddling two worlds

Healthcare: straddling two worlds

Since the passage of the ACA in particular, everyone is talking about moving to a world where we “pay for performance” and incentivize value and share risk and all that jazz. ACOs are forming and companies are rising up like Jiffy Pop to help payers and providers move to the world where everyone’s interests are (allegedly) aligned around financial and clinical metrics that everyone shares. In my mind’s eye this world of value looks like the world’s most collegial sandbox, with everyone lovingly sharing the one shovel and sole bucket to build a mighty castle of health and wellness and prosperity. Can you hear it? The strains of Kum-ba-ya?

A Dose of Reality

Yet maybe we will someday get to Nirvana and all of the incentives will be aligned and everyone will be working towards the same goals and reducing costs won’t be perceived as killing someone’s P&L, and angels will sing and every consumer will deliver happy, happy HCAHPS scores. But in the meantime, a dose of reality. Most hospitals are still actually better off revenue-wise if they drive up volumes of procedures and over-treat patients. Most insurance companies (if risk-bearing) are still actually better off financially if they deny as much care as they can get away with. And each of these protagonists is participating in pilot programs to do quite the opposite. They have small parts of their business dedicated to shared risk models and ACO programs and all that stuff that is meant to be our future, but it is not quite yet our present. And this poses some really sticky situations and some mind-bending dichotomies. No wonder the use of psychotropic drugs is skyrocketing.

Hospitals do today have some portions of their business where re-admissions are a major financial negative. It is not in their financial best interest to have congestive heart failure inpatients re-admitted within 30 days of discharge, for example, or they bear the cost of that readmission. But on the other hand, if someone with an orthopedic complaint is readmitted within 30 days of discharge, the hospital gets paid again. So for some patients it’s good to be highly diligent with follow-up and prevention and with others, not so much. I actually had an entrepreneur explain to me last week, speaking about his hospital-focused population health program, that many of his customers actually want to admit as many patients as they can get their hands on, but they only want them in for a day or two to maximize the profit value for the case rate….except for those patients for whom they are at risk and for those patients they need to manage the hell out of them so they never cross the threshold of the building. So basically this guys’ clients are running in two different directions depending on which contract they are holding in their hands.

Of course, it is impossible to train the entire hospital to act in two completely different ways based on the patient who shows up. You simply can’t run two different workflows and two different case management programs and two different follow-up programs efficiently. Most of the time the actual caregivers in a hospital—physicians, nurses, etc—don’t even have a clue in what insurance program or risk-pool the patient is enrolled; certainly no one is yet handing out bar-coded wrist bands that tell the caregiver whether to minimize or maximize services, based on the financial motivation (I hope).

The solutions to one's healthcare woes

The solutions to one’s healthcare woes

Payers have a similar conundrum. In theory they have to run entirely different systems to manage their ACO relationships (where they have off-loaded the risk to providers) vs. their full risk programs and on top of that they are now dealing with all sorts of weird employer-driven value-based pricing and HSA initiatives.   This means multiple claims, care management, contracting workflows and a plethora of network arrangements and a lot of Alka Seltzer.

Stuck in the Middle

The transition from old school insurance to new school provider/payer partnerships is evolving, but it is definitely not happening overnight. And while we are stuck in that middle part, everyone is standing with one foot on their old business model’s grave and the other foot on their new business model’s banana peel. It is a slippery slope and one where there is probably even more hassle, paperwork and cost as a result of being all things to all situations and not entirely rooted in either volume or value economies.

We live, as the Chinese curse says, in interesting times.   From a cost and quality standpoint, slow change may be worse for patients, payers and providers than ripping off the band-aid. Fast change creates fear and chaos. In the words of our Silicon Valley brethren, healthcare innovation is in an extended beta at a middle school dance.

Unico_AnelloOne of the most interesting dynamics to emerge as evidence of this Middle-earth phenomenon is the awkward mating process occurring between old school healthcare enterprises and new world technology companies. While healthcare traditionalists try to incrementalize their way to better value-based worlds, technology zealots are riding in with their “One Ring” to save healthcare people from themselves and bring order to chaos. It is truly the clash of the culture titans, although some are finding their alliances a bit less uneasy, or so it seems. Of course, as all Lord of the Rings fans know, the One Ring slowly but inevitably corrupts its bearer, regardless of the bearer’s initial intent. Thus it will be interesting to see if the tech crowd can give the healthcare industry a helping hand into the current century without compromising itself or whether the Silicon Valley elite will be forced to turn themselves into pretzels in order to capitalize on the healthcare revenue opportunity.

A study in shoe contrast: me, Amir Rubin and Aaron Levie

A study in shoe contrast: me, Amir Rubin and Aaron Levie

My Old School/New School Panel

To this end, I had the good fortune to be asked to moderate a panel at the conference which include me, the CEO of Stanford Hospital and Clinics, Amir Dan Rubin, and the CEO of Box, Inc., Aaron Levie. Two more different-seeming men you could not find. While both are incredibly lively and smart and committed to their mission, they epitomized the old school/new school dynamic in many ways. Rubin looked board-room ready in his suit, Levie looked Spiderman-ready in his red socks and bright blue tennis shoes. Rubin has grown up in the healthcare system, working at UCLA Medical Center, Stony Brook Hospital and in healthcare consulting after getting his Masters in Health Services Administration at the University of Michigan. Levie dropped out of USC at age 20 to start Box and ride the tech wave.

But interestingly, while they come from different worlds and undoubtedly answer to different drummers, they seemed to have a sincere synergy of mind, talking about how Stanford could use and is using newfangled technology to inspire its employees and engage its patients in the interests of improving value in a world still mired in old-world thinking and massive Epic installations. They talked about their unlikely business partnership as if it were obvious. And while they run vastly different organizations with markedly different cultures, they made it seem like there was hope to find a middle ground in that middle place where healthcare currently sits. Plus they threw around buzzwords like mobile, cloud and big data as if they were competing for the national title in healthcare IT bingo.

Sam and Frodo trying to meaningfully use the ring

Sam and Frodo trying to meaningfully use the ring

So who knows?

Maybe the true and honest blending of tech and healthcare worlds will be the bridge that gets us out of the purgatory that is co-existing in the antithetical worlds of value and volume. It will be interesting to see if the tech titans and healthcare captains of industry can share the Ring or if, in the end, the clash will be too great, the need to impose one’s culture too strong. Who is Sauron and who is Sam? Or are they Sam and Frodo? Too early to tell, but right now they’re stuck in the middle with each other.