Health Care’s Blue Ocean

Blue Ocean Strategy describes a planning model for envisioning and forming successful new businesses. Through such constructs as “uncontested market space,” “value innovation,” and “the strategy canvas,” the book takes us on an expedition beyond the red ocean of market-share competition into the blue ocean of novel, imaginative enterprise. From Southwest Airlines to Cirque De Soleil to the Model T, the authors demonstrate how blue ocean businesses achieve dramatic leaps in value for dramatically reduced cost.

So where is home care’s blue ocean? And how does our thinking have to change to get there? A fundamental blue ocean strategy points the way: Plan for the mega trends that will impact your industry decisively, irreversibly and with a clear trajectory. For home care, these trends are crystal clear. In the coming years we will see: 1) An exponential increase in the number of people with disabling, chronic health problems, 2) A concomitant decrease in available caregivers, 3) Diminishment in the resources that will support health care, especially under commercial and government health insurance, and 4) An inevitable increase in stress on family caregivers. To paraphrase a colleague, you would have to be a stone not to see that home care is in for big changes.

Disruption

These defining trends will force adaptation in health care delivery, impacting home care and institution-based care equally—and oppositely. For home care they spell a gold rush; “not so much” for Physician-driven, Hospital-based, Insurance-subsidized care (PHI). PHI requires big resources—$2.7 Trillion a year at last count, and rising. As insurance supports diminish, PHI will lose capacity. The hospital bed itself will become a scarce resource, just in time for the baby boomers’ arrival and the associated skyrocketing demand for health care. A creative adjustment will have to be made. Move over doctors and hospitals, an NP/RN-driven, Home and Community-based, Consumer-subsidized model (NHC) is poised to emerge. NHC will be a sustainable, sufficient, affordable, PHI supplement (not replacement), that will disrupt many aspects of PHI’s orthodoxy and dominance. Just as Southwest Airlines redefined air transport and Cirque Du Soleil redefined entertainment, NHC is about to redefine health care. Dare to imagine: Home and Community-based care is health care’s blue ocean.

Value

Most of us measure health care value in the same way we measure value in other products and services. If it is conveniently available, affordable, and generally makes our lives easier, simpler, more productive, and more fun—basically better—we consider it valuable. By these measures, PHI’s health care value proposition is falling short. Indeed, for many, it is nonexistent. Fifteen percent of all Americans cannot access health care at all. They don’t have insurance. Those of us who have access (insurance) pay more in exchange for less benefit every year. And to claim our value, we must do so in the places we like to visit the least—the doctor’s office, the emergency room, and the hospital. If ever an industry was ripe for value innovation, this is it.

Innovation

For home health care, game-changing technology is just around the corner. GE and Intel have recently partnered to develop the next generation of home health monitoring devices. For many of us, “Dr. Google” already makes house calls. Soon, online diagnostic and treatment software will make us all full-fledged physician’s assistants. And a home-visiting nurse practitioner (NP), armed with a hi-tech PDA, will soon become an emergency room alternative. Add diagnostic imaging and on-call specialists, wide awake at 3 AM on the other side of the globe, and you’ve got a new set of circumstances altogether. What parent would not pay a premium for an NP to visit a sick child at night, rather than trek to the ER? Slowly, but surely, one syndrome, one illness, one injury, one condition at a time, we needn’t get into our cars or onto the subway to get care. Instead of taking our problems (us) to the solution (the hospital), the solution will come to the problem. “Hospital” beds become “home care” beds, and “home health care” becomes a redundancy.

As value innovations develop, several core concepts will spur home health care’s evolution.

Core Principle – Health Care, Not “Just” Home Care

Home care’s identity has been defined both by what it provides and by what it does not. For Medicare, Medicaid and commercial insurance, the definition of home care has always been limited. It must be short-term, intermittent, treatment focused, and authorized for homebound patients only. These historical restrictions were born in the early days of Medicare, when the Medicare-A home care benefit could only be accessed following a 3-day hospital stay, just as it still is for Medicare’s rehabilitation benefit. Thus, from the beginning, home care has been characterized as “incident to” the provision of actual health care, with “health care” defined as care provided under the direction of MDs and offered in hospitals. But this limited definition is about to change.

As technology enhances our ability to treat illness at home, as well as to remotely monitor, teach, and coach people to health, home care diversifies and evolves beyond narrowly-defined limits. As our living rooms, shopping centers and places of employment become more versatile caregiving venues, home care is no longer a post-discharge service. Suddenly, the tables are turned. Hospitals and physician’s offices become post-admission and post-prevention venues, and the home becomes the central location for acute care, chronic care and care-for-health. Hospitals and physicians support home care, and not the other way around. It’s a bit of a Cinderella story. Home care comes of age.

Core Model – Community Health

One of the defining characteristics of our current health care approach is that care is most readily provided to individuals who have health insurance. So it should come as no surprise that health measures for the population are declining as fewer and fewer individuals have that insurance. We need a new strategy, one that focuses on the health of the community rather than on individuals with insurance benefits. And what health care sector is better positioned to define this model than home care?

To develop a community-health model, home care agencies must think of themselves as community-health companies, and of their staff and their automobiles and their offices as community-health resources. This broadens the mission in a way that is good for patients and clients, good for outcomes, good for “business,” good for the community, and, ultimately, good for the economy. Think of “community” as analogous to a beehive. No beehive produces much honey by only taking care of the sick bee with the best “bee health insurance” or the bee with the most “bee money.” Continuing the analogy, economic growth (honey) depends on community health (all the bees!). And we will not keep our ERs and hospitals—absolutely vital community-health resources—from being overrun by sick worker bees without a community-health model of care. Follow the bouncing ball. Home care is provided in peoples’ homes. Homes contain families. Families comprise the community. And the community is the foundation of our society. Protecting the community’s health, rather than treating one patient’s health at a time, lifts our vision and takes us into a bluer, richer, deeper ocean by far.

Core Practice – Home-Visiting, Mid-Level Practitioners

Most chronic illnesses require some level of ongoing monitoring of the patient at home that is provided by a knowledgeable care-management professional—just the kind of service health insurance no longer subsidizes! Outpatient benefits under Medicare B and commercial insurance do cover checkup visits and symptom-management consults, but they are typically provided in the MDs office. It’s time for that to change. For it is hard to see how we develop the most-effective rehospitalization-reduction programs without mid-level practitioners serving in home care as home-visiting, outpatient treatment professionals and long-term care managers. We need to get NPs, PTs and LCSWs into the community. Many providers have taken this up, employing NPs as field clinicians doing “office visits” in the home. And Remington Report readers are familiar with the home-visiting physician model (see last issue’s article by Gresham Bayne).

The literature supports the efficacy of this approach. Programs that succeed in reducing re-hospitalizations share a common profile. The most effective ones always involve some form of ongoing care oversight by a health care professional—a pharmacist making house calls post D/C from the hospital, a case manager more intensely involved with the family during and after discharge, a technology overlay that requires ongoing, post-discharge monitoring by a nurse or a doctor. But there is another consistent pattern with these programs. Most are unsustainable. They rely on either grant funding from foundations or pilot-program funding through insurance. And when promising programs fail to meet the efficacy standards on the funder’s timeline, many come to an end.

It all boils down to the tension between managed-care limitations and fee-for-service access. “Managed care” is an insurance invention that works very well for people who rarely get sick, but it does not meet the needs of people who are sick all the time—like, for example, most home care patients! Most home care patients are frail, elderly, physically disabled and chronically ill. Their treatment outcomes are equally behavior dependent and disease dependent. Prior to PPS, we knew this. We let our nurses, therapists and social workers care for their chronically ill patients as they—the clinicians—saw fit, keeping a step ahead of exacerbations and injuries. Medicare trusted their judgment as to what was and wasn’t reasonable and necessary care, and it paid agencies by the visit. PPS, a form of managed care, put an end to ongoing, professional care management for most Medicare-A home care patients. However blasphemous, fee-for-service was good for patients. And it will be again.

As a result of managed care restrictions, long-term care at home is now mostly unsupervised by professionals. Some consumers (who can afford to) now hire private Geriatric Care Managers (GCMs). Independent GCMs fill the void that primary care nurses, therapists and social workers once filled under pre-PPS home care. But for the most part, monitoring and care oversight at home is provided by family members, friends and private-duty home care operators, most of whom are not professional care managers. Forward thinking home care agencies will reinvigorate their care management efforts through both private-pay or profit-subsidized GCM, and Medicare-B, mid-level, fee-for-service practice at home. We need to bring the foremen and forewomen back to the jobsite. Maintaining the medical stability of our neediest patients at home requires professional care oversight that is sustainable and affordable to middle class consumers of long-term care. Sooner or later, the state will cut its budget, the insurance company will quash the study, the foundation runs out of grants. But families, communities and care receivers will still need us.

Core Revenue – Disability Care At Home (Private Duty)

Disability care at home—basic aide, homemaker and companion assistance—has been a core service of home care from the start. The health systems of America should all build bronze statues to our CNAs, HHAs and LNAs (depending on the state!). It’s not more complicated than that. Preventing hospitalizations for frail, elderly, chronically ill, disabled people means someone has to bring the care receiver a glass of water, a breakfast, or a washcloth. Every nurse, nurse practitioner and doctor who has ever treated a home care patient could not have done so without the help of the almighty home health aide.

During fee-for-service home care days, Medicare would pay for up to 56 hours a week of home health aide time for up to 3 weeks if the need was sufficiently dire, i.e. – if hospitalization was likely without it. And many home care agencies met this level of need. Thus, private-pay, “private-duty” care had very little wiggle room to grow. You can’t sell a bushel of apples for 10¢ on one side of the street when they are giving them away on the other. Fortunes changed with PPS, however, and the private duty industry has been growing like wildfire ever since.

Private duty home care (PD) is a service, but it must be run like a business. Whatever the auspice, whether owned by a health system or a certified agency, whether a franchise or a mom-and-pop-shop, PD companies will lose money if they ignore the E-Myth. The E-Myth, or Entrepreneur’s Myth, explains why so many new businesses fail despite the fact that the business owners are very good at what they do. Indeed, that’s the myth! For example, high-level home care skills do not themselves assure success in running a home care business. Performing the service is only half the game, running the business of performing the service is the other half. PD is not different from operating an auto repair shop or an auto parts store. You can lose money in PD, despite the exponential growth in demand, if you don’t run a tight business ship. If the competition doesn’t get you, the cash flow will. And success or failure in PD always turns on the director’s ability to both manage the care and perform a rigorous break-even analysis. Absent that, it’s all downhill.

PD competition has become intense. There are now a lot of providers, and many reasons for it. A PD business is relatively easy to start, can be immediately lucrative, and, despite many state’s licensure efforts, most PD companies are virtually unscrutinized. There simply aren’t enough state or local government watchdog agencies to actually police the industry. And consumers, often frail, elderly and living alone, may be totally naïve to what home care means. Most have never needed home care before. Many opt for home care under pressured, desperate circumstances, often in a hospital eager to go home. The patient’s desire to go home dovetails with the hospital discharge planners’ and case managers’ mandate to get them there. Thus, often enough, the agency that has the warm body at the moment of discharge is the one the hospital CM will push. Health care is always in a rush.

Still, PD will play a pivotal role in home care’s future. But PD must evolve as well, from its current version of a competition-driven, aide/homemaker business, to a true, long-term home health service (LTHH). LTHH is PD’s blue ocean. LTHH will be a hybrid of pre-PPS home care and nursing-home-level care at home. It will include expanded GCM-type services (many national PD companies are developing GCM service lines as we speak). And LTHH will include other community-health services, such as Adult Day programs and Respite Homes. LTHH is just that—caring for people in the community for the long term. It is not PPS reform or OASIS C. But it is the only sustainable, long-term revenue stream there is for sufficient amounts of care for home care’s growing national caseload.

Core Financing – Medical Banking

The Innovator’s Prescription charts the pluses and minuses of various health insurance approaches—commercial managed care, single-payer government plans, health savings account/high deductible plans, and so on. Its conclusion: The type of insurance that will best enhance health and cut health care costs is the one that engages patients as both health care decision makers and payers, i.e. – the one that includes health savings accounts (HSAs). The reason: People are more likely to change unhealthy lifestyles if by doing so they get richer. For most people, the fear of ill health, even when it is a tangible reality, is simply a less pressing motivator. But when 401Ks and HSAs share a monthly statement, suddenly health, money and behavior connect. Thereafter, theoretically anyway, personal health will improve to make personal savings go up and health care costs go down.

Enter a relatively new health care concept—“Medical Banking™.” Medical banking™ (MB) blends health management and wealth management. One feature of MB goes something like this: 1) Employees put money into HSAs. 2) Banks manage the accounts. 3) Banks suddenly have an investment in the health of their depositors, i.e. – healthy depositors withdraw less money. 4) Banks (in partnership with home care agencies?) go into the health and wellness coaching business. What’s good for the goose is good for the gander. Everybody wins. And unlike insurance premiums, the money belongs to depositors.

When asked why he robbed banks, Willie Sutton purportedly once said, “Because that’s where the money is.” Half of America’s savings are held in our small and mid-sized community banks. It therefore makes sense that as insurance supports diminish, America’s communities will turn to banks for guidance, planning, long-term care resource management, and access to funds. For home care to get to its blue ocean, it will need a consumer-health-care-resource-organizing machine. Perhaps MB holds part of that solution. For just as all caregiving is local, increasingly, more care funding will be local as well. And home health care’s sustainable source of care and funding will flow from the same well—families, communities, and care receivers themselves.

Summary – A Strategy Canvas for Community Health

In Blue Ocean Strategy, the “strategy canvas” is a planning tool that visually portrays competitive factors in an industry or service sector. Each factor is weighted in importance, indicated on an X axis from low to high value. Competitive factors are then spread across the Y axis, and by drawing a line between them to connect the dots, we can visually portray an industry’s “value curve.” Blue-ocean strategists use this diagnostic approach to then focus on alternative factors and measures—adding new ones, diminishing the importance of some—to create a divergent value curve, a key indicator of the new business’s likely blue ocean success.

Attached is “The Strategy Canvas for Community Health.” In the canvas, PHI and NHC are compared for such factors as technology, access, insurance, sophistication in treatment protocols, high-level professional training, the caregiving site, self-care management and prevention. As the red line indicates, the competitive factors most valued in PHI today draw a high-cost value curve that sustains from left to right, then drops precipitously off. NHC’s yellow value curve meets with PHI on left, then drops for most of the canvas, then jumps high on the right for self care management and prevention.

I offer this canvas as a puzzle of sorts. It is meant to get you thinking. Notice, the value curves diverge. It’s a good sign. It suggests that home care’s blue-ocean future is out there, waiting to be created, by all of us.