 VICTORY
CONSULTING™
HEALTH CARE BUSINESS STRATEGIES & ECONOMIC RESEARCH FOR EMPLOYERS AND PROVIDERS
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Health
Care Stakeholders At Pivotal Juncture on Workable Partnerships
by Noel K. Harper M.B.A. Health
care executives are all too familiar with new business paradigms that
portend radical change for everyone but provider organizations. Why then
should they be concerned about knowledge management (KM)
- considered by
many to be the new business paradigm of the 21st Century? Why
should they approach KM any differently when, for example, the business
practices of health care providers remained relatively unchanged, while
organizations in other industries felt compelled to revolutionize their
operations, strategically applying the principles of total quality
management (TQM), re-engineering, e-commerce, and six sigma among
others? The answer to the foregoing lies in a series of industry developments that will obligate providers to exploit KM in order to fashion innovative products/services that address the needs of the increasing number of employers who are finding virtue in the concept of productivity management (HPM) - an emerging discipline being investigated by organizations such as the Institute For Health and Productivity Management (IHPM), the Cornell University Institute for Health and Productivity Studies, The MEDSTAT Group, and the American College of Occupational and Environmental Medicine (ACOEM). Since the collaborative efforts of these organizations it to gather data from empirical studies to facilitate employers in documenting the contribution of health care programs to increased productivity, providers should assume that in due course, they will need to justify how their products/services complement the efforts of employers in this regard, in order to maintain or gain a competitive advantage. Providers should seize the opportunity to form workable partnership with employers and contribute to their efforts to derive benefits from HPM because, as it will be determined from the following which summarizes pertinent industry developments, employers and providers are at a pivotal junction. Many
employers are now agreeing with
management experts who suggest that in the 21st Century,
attaining and / or maintaining a competitive advantage will only be
achieved by organizations which have mastered the ability to foster KM
programs. Such KM programs must facilitate constructive harnessing of
intellectual capital (IC) from human capital assets, which are then
developed into innovative products and services. Most importantly, it
must be noted that management experts also suggest, a competitive
advantage is more likely to be achieved by employers who recognize good
health and the general well being of human capital
assets as primary drivers of productivity. The
significance of positive co-relationships of this magnitude between a
competitive advantage, increased productivity, KM and the health / well
being of personnel changes the dynamics of the health care delivery
business. Health care is an industry in which employment-based contracts
dominate the concept of modern health insurance. This feature makes
providers largely dependent on the health care benefit expenditures of
employers who are sufficiently successful to sustain a health insurance
program for the benefit of employees. Historically, however, the contribution providers make to
facilitate the productivity of employees has not been factored into
health insurance reimbursements. Additionally, employers struggling to
succeed, and many small employers, give sundry reasons why health
care benefits are not made available to employees. These facts
underscore the perception that health and well being has not been
considered a prerequisite for achieving optimal productivity and
a competitive advantage. But, this dynamic is
about to change. Providers posses the means of rewriting the rules and positively impacting their own business success, as well as that of their employer-clients. This opportunity exist because the greater number of employers recognize that good health and the well being of personnel are prerequisites to the development of productive, innovative employees, as well as the ability to achieve or maintain a competitive advantage. These issues weigh heavily on the minds of executives in corporate boardrooms as they consider ways to continue doing what's in the best interest of employees and their organizations, despite soaring health care cost. Yet, they have remained hopeful of finding cost-effective solutions that would facilitate attainment of the objectives sought by stakeholder on both the supply and demand sides seek . While this period of hope prevails, employers are focusing their efforts to revolutionize the market on an arsenal of options, spawned by the market in the wake of managed care's demise. For example instituting "pay-for-performance" compensation programs, which in essence rewards providers who facilitate attainment of their objectives. Increasing numbers of employers are despairing, however, and many are considering or actually discontinuing health care coverage. In due course, the record may show that those who discount their ability to change a system, which is inherently out-of-sync with their objectives, are likely to protect their interest by opting for less risky consumer-driven health plans (CDHPs). While I like other industry observers acclaim the emergence of CDHPs in the marketplace as major progress in the right direction, their growing popularity places employers and providers at a pivotal junction. Many employers, particularly those who discount their ability to derive increasing levels of benefits from additional investment of resources in health care initiatives, may resort to CDHPs as a means of effectively limiting their total health care related expenses. However, using defined contributions to fund CDHPs, would not only deny their organizations the potential good that might accrue from wellness, fitness, prevention and disease management programs, but, as more employers exercise this option, the benefits likely to accrue to all stakeholders from the vast amounts of resources being invested in clinical research and the life sciences would be diminished. Research indicates that these investments continue to generate a myriad of
technologically-advanced
products and services. Even though many such products/services are of
tremendous direct or indirect benefit to the health and well being of
employees, their insured family members or loved ones, the likelihood
that stakeholders will ever realize the full benefit of such scientific
advances remains doubtful if employers continue to use CDHPs and other
mechanisms to shift health care
benefit cost increases to employees and/or to exclude coverage for
certain products/services. Without radical change, a significant
percentage of such products/services will likely stay beyond the reach
of many, and the optimal health, productivity and financial benefits
will not be realized by stakeholders. To change this scenario, there is little choice but for providers and
employers to engage each other in partnerships. Health care partnerships must be fostered to
effectively target the unified goal of securing high quality, cost-effective
clinical products / services that positively impact the heath and well
being of employees, their insured family members or loved ones, while at
the same time influencing measurable productivity increases. In the
absence of data that compares investment against actual returns,
employers will always be hesitant to participate fully in health care
programs they typically perceive as costly. However, the full
participation of employers is more likely assured when it can be
demonstrated that productivity returns justify health plan benefits
offered to employees. Even as employers associate health care benefit expenditures with the availability of healthy employees, they are challenged to fashion strategic systems, such as H WB PRO developed by Victory Consulting that would allow them to monitor and evaluate increasingly costly health care initiatives, in order to justify the continuation or adoption of specific programs. Secondly, research points to a lack of cooperation from providers as contributing to the difficulties employers experience in attaining expected results from wellness, fitness and disease management (DM) programs. It suggests, therefore, that partnerships between providers and employers that are capable of fashioning programs to address and resolve these issues are the ones most likely to be rewarded in the emerging CDHP marketplace. Moreover, stakeholders who are involved in such partnerships will need to employ KM to accelerate the development of appropriate solutions. Justifying The Role Of KM In The Health Care Setting A
broader analysis of prior statements and assertions is obviously
required, beginning with an examination of, or justification for
identifying KM as the new business paradigm of the 21st Century.
Thomas A. Stewart, widely recognized as the world’s leading expert on
working with intellectual capital (IC) offers convincing arguments for
managing knowledge or IC, which he is credited for defining as
“the sum of everything everybody in your company knows that gives you
a competitive edge in the market place.” His book “The Wealth Of
Knowledge - Intellectual Capital and the 21st Century
Organization,” (Doubleday Books a Division of Random House, Dec. 2001)
reads like a “Who’s Who” among corporate icons, with
“virtually” each company’s KM experience an affirmation of the
principles espoused by he and other management experts. There’s little
wonder he feels confident in proclaiming one of the biggest
accomplishments of KM “... is the simple fact that any board of
directors will now listen if you bring up the subject.” Maybe
corporate leaders are favorably disposed to KM because, as his book
suggests, “... companies can make untold millions by managing IC more
effectively and save millions more.” The
American Productivity & Quality Center (APQC), an internationally
recognized resource for process and performance measurement, very likely
has subscribed to this school of thought since 1995, when it began
advocating KM as a business strategy to its membership. As a general rule it must be assumed that, it'is in every employers' best interest to optimize the return on investment (ROI) from funds allocated to health care benefit, the same as it expects from compensation and other benefit programs. To realize this ideal, every employee, in return must be committed to increasing his/her potential value to the organization's total capital assets. Such a scenario has the highest probability of occurring when an employer endeavors to foster a health and well being centric organizational culture. At the same time, an employer should be committed to working in partnership with health care professionals to effectively leverage the optimum benefit that might accrue to employees from proactive initiatives, inclusive of:
These and other areas of interaction with patients provide an abundance of opportunities for providers to employ KM to custom design unique products/services that would go beyond improving the health and well being of patients. Since, most patients are likely to be connected in some fashion to employers that are based in the target market, each with conditions that are unique or peculiar to a specific work environments. For example, research shows that patients with perceptive health problems consume significant amounts of resources in search of answers. Perceptive health problems can impact the health and well being of an employee as well as family members. Therefore, employing KM to continually tap the creative and innovative talents of human capital assets, allows a provider to develop products/services that would positively influence its stature with both patients, their family members and their employers. The
words of economist Brian Westbury captures the essence of the
partnership arrangement that should exist between providers and their
employer-clients, as he addresses an issue of growing importance to
CEOs, the subject of HPM. Quoted in the February 2004 issue of Health and
Productivity Management, in an article entitled, “Employee Health: 21st
Century Human Capital,” Westbury made the profound statement,
“productivity is the secret weapon of capitalism.” Further, he
instructs employers that: “In the emerging new economy of this new
century businesses must look for new sources of productivity gains to
drive performance and provide a competitive advantage. And the best
place to look is right under their noses - the total health and well
being of their employees.” His
well articulated position steadfastly ties health care to the very
backbone of capitalism via productivity. This suggests that it is
inconceivable for providers and employers to continue to focus
exclusively on issues underlying much of the discord
and discontent that have historically permeated their relationships.
Evidence is mounting that supports the position: The focus of provider /
employer relationships should revolve around the formation of
partnerships that add value to each entities’ bottom line. In fact,
the scope of employers’ narrow focus on cost - which was driven into
the ground by managed care - has already been adjusted to accommodate
concerns regarding quality of care, and is now being expanded even wider
to target benefits from cost-effective HPM programs. When
one draws on the teachings of experts the likes of Stewart and Westbury,
inevitably it must be concluded that decision makers in the growing
number of boardrooms where the KM school of thought is being debated,
will acknowledge the importance of investing in cost-effective HPM
programs to secure a competitive advantage. The movement towards HPM
programs should therefore motivate providers to utilize KM to forge partnership
arrangements with employers in their target markets. Doing so would
would enhance their strategy for optimizing ROI and securing a competitive
advantage. Employers are in need of help from providers to achieve
three objectives. Specifically, the need for providers
to develop programs that would facilitate: (1) personnel in achieving
good health and help to ensure their general well being; (2) the
education of personnel from employer-clients so
that they become savvy health care consumers; and, (3) the establishment
of rigid quality and cost controls to ensure that employer-clients
receive the highest possible productivity-returns on funds invested in
health care benefit programs. The
task falls squarely on the shoulders of individual providers who must be
successful in convincing employer-clients that money spent on their
“unique brand of products / services” represents investments which
help to ensure that physical or emotional disorders do not remain
undetected and untreated, thereby prohibiting personnel from fully
contributing to the organization’s collective IC. Indeed,
to meet this challenge, providers themselves must foster KM programs
that capture invaluable IC from their own human capital assets.
This process should lead to the development of a mix of innovative
health care products / services that relate to issues impacting the
health and well being of personnel affiliated with employers in their
target markets. Only by doing so can providers better position their
respective organizations to maintain or achieve a competitive advantage.
Stewart reveals KM is impacting the operations of employers across the nation as they seek to increase revenues and save on operating costs. Therefore, providers can expect employer-clients to look for savings by demanding they justify the value of their health care products / services. The foregoing is a logical expectation because controlling health care benefit expenditures, a major component of total human resources cost, is a growing concern in many organizations. The gravity of the problem is such that: "Health care has become a total business issue, as employers face the prospect of doubled health benefit costs by 2007. No longer confined to the HR or benefits department, rising health costs are a CEO-level concern." (Watson Wyatt/ Washington Business Group on Health, Washington, DC, 2002.)
Influencing
Partnerships Based On Relationships Between Health and Productivity
Management And Knowledge Management Based
on research of the emerging health care market it is indicative that
productivity related concerns would influence significant numbers of
employers to continue to favor the long tradition of sponsoring health
care benefit programs. Because, in doing so, they will be positioned to
maintain better leverage over their investments in HPM programs. This
indicates that as the industry transitions to domination by
defined contribution (DC) programs that fund health reimbursement
accounts (HRAs) and health savings account HSAs, two versions of the
increasingly popular consumer driven health plans (CDHPs), a variety of
health care benefit products will certainly coexist in the
marketplace of the future. Further,
unless provider organizations form contractual partnerships with
employers, which focus on the development and delivery of products
/ services geared to advancements in HPM, they will continue to
face the Herculean task of finding innovative ways to serve increasingly
complex demands from stakeholders affiliated
with employer-based benefit programs. In the absence of such partnership
agreements, research suggests that employees / patients, employer /
payers and health plan or insurance company administrators - each a
stakeholder with significant interests in traditionally sponsored
benefit programs - will continue to confound providers with disparate,
if not conflicting objectives, while otherwise united in a complex bond
as a single client. With
the IRS ruling of June 2002, on health reimbursement arrangements (HRA),
and the more recent passage of the Medicare Bill of 2003, employers no
longer need to look wishfully at DC health care programs. HRA programs
are now being investigated by increasing numbers of employers purposely
because they can be designed as consumer-driven health plans (CDHP) to
cap company expenses. HRAs facilitate the business objectives of
employers by offering financial / tax incentives comparable to those
available from company sponsorship of traditional health care benefit
programs. Consequently, HRAs have succeeded in making DC programs very
attractive alternatives. Indeed,
Employee Benefit News, July 2003 reports, “ It's been a
bellwether 12 months for consumer-driven health plans. Momentum is
starting to increase, and we are seeing all of the major insurance
companies, both publicly traded and Blue Cross Blue Shield-style plans,
beginning to offer CDHP style products. … Vendors brag that they can't
get the quotes out fast enough for self-insured employers wishing to
evaluate CDHPs for Jan. 1, 2004.” While there are some issues yet to
be addressed, the IRS ruling on HRA unfettered employers from the
restrictive provisions of medical savings account (MSA) type
programs.They are now free to experiment with CDHPs and further exploit
financial / tax incentives, to foster what some consider the ideal
health care marketplace - one that is consumer-driven. Employers hope
this event will bolster their chances of receiving optimal value in
return for investments in health care programs. In any event, with
growing knowledge about the positive relationships between productivity
and health, employment-based programs will continue to exert significant
influence on the health care market.
The
foregoing should suffice for health care business executives to conclude
that employers in their target markets have varying but substantive reasons
for either sponsoring or funding health
care benefit programs. More importantly, employers will continue to
retain a vested interest in the health of human resource assets, even
while they struggle to respect the HIPAA rights of personnel, since
failure to do so jeopardizes the potential for fully exploiting an
employer’s IC and its ability to achieve a competitive advantage. Research
also reveals a trend toward employers who are seeking to maximize their
ROI in health plans by utilizing the results of benchmarking studies on
HPM. Employers are becoming convinced that with HPM they may have at
last found evidence-based business cases which support the notion that
investing in health care benefit programs may return significant value
to their IC. Employers
are becoming enlightened to a growing body of evidence which supports
the conclusion that the $13,277 per employee (MEDSTAT, 2000) which
companies already spend on average to ensure optimal returns on
productivity and innovation from healthy human resource assets will rise
considerably, if expenditures are ineffectual at identifying and
treating the health related causes of “presenteeism” - employees who
are at work but who aren't performing at peak levels because of common
health conditions, estimated to cost employers $180 billion in lost time
each year (MEDSTAT, 2000). Therefore,
in the future, it is
foreseeable that provider organizations will be routinely challenged to
show how their products / services improve the ability of
employer-clients to fully exploit investments in health care programs
by: facilitating optimal productivity gains; helping to drive innovation
and thereby contributing to a competitive advantage. Without question,
employers must structure their partnerships with providers to optimize
on these benefits, if they hope to remain viable in the 21st Century.
Fostering
the right organization culture is paramount to an employer’s ability
to exploit KM and HPM
In
a recent study, employers who were asked to rank factors
affecting employee performance most decisively selected organization
culture - by nearly twice the number of the votes received for employee
health issues. The unveiling of this data surprised researchers
at the Institute for Health and Productivity Management (IHPM). Knowledge
management expert Larry Stevens points to the significance of
organization culture, in Knowledge Management Magazine, December 2000,
by honing in on issues affecting the ability of organizations to exploit
the benefits of KM programs. Stevens espouses the opinion
that an organization must be “socially ready” to become a knowledge
organization before its “tacit” knowledge can be audited i.e.
identified, valued, and then exploited. The nebulous, but critical nature of tacit knowledge is highlighted in the definition given by J.S. ATHERTON (2002) in “Learning and Teaching: Tacit knowledge.” Tacit knowledge by his definition “is the term used to describe the stock of expertise within an organization which is not written down or even formally expressed, but may nevertheless be essential to its effective operation.” The
foregoing implies that the fundamental process of exploiting the
benefits of KM, and mining the organization’s undocumented store of
tacit knowledge, in particular, is a task which is best achieved by
fostering a health and well being centric
organizational culture. Even though achieving this objective may
present a formidable task for most employers, every employer must accept
the challenge to ensure that its organization culture would facilitate
exploitation of KM programs, and contribute to maintaining or achieving
a competitive advantage with stakeholders it now counts or hopes to
attract as clients in the knowledge-based marketplace of the 21st
Century. Employers
are cautioned that barriers to identifying, valuing, and then exploiting
tacit knowledge almost certainly exist in every organization. The
British National Health System (NHS) which is embarked on a major KM
project suggests that people are generally disposed to sharing
information. At the same time, the NHS documents numerous reasons why
people may be unwillingly to, or simply do not share. Knowledge
sharing is a critical element of any business strategy for achieving
success in our knowledge-based economy, and management may implicitly
attempt to communicate as much with its policies and procedures. There
is no guarantee, however, that policy will equate with reality unless
fostering the right organization culture is paramount and reins supreme
among the strategic objectives targeted by management. Every employer should therefore consider conducting a social-readiness test to learn whether a knowledge sharing environment is functioning or will function within its organization culture. After taking steps to satisfy this requirement, management must then proceed with auditing its human capital assets to identify, value, then exploit its “tacit” knowledge. This will ensure it is positioned to compete successfully in the marketplace of the 21st Century.
Copyright: Victory Consulting.. All Rights Reserved. To be included as a subscriber to HealthCare Business TrendLines, please contact: Victory Consulting, 9801 Fall Creek Rd. #130 , Indianapolis, Indiana 46256, Tel. # 317-441-6735, E-mail: hctrendlines@vcstrategies.com
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