Perennial Care Care Coordination for the Senior Life Stage
In collaboration with the Mayo Clinic Center for Innovation Melissa Cliver • Dave Passavant • Christina Payne
Designing + Leading a Business Profs. Boni, Evenson + Weingart Carnegie Mellon University Spring 2009
Contents Introduction Process, Territory Map Research Literature Review, Synthesis Christensen, Value Chain Discovery Implications, Innovations, Care Network, Patient Journey, Why Seniors Concept Perennial Care, Framework, Disruptions Value Proposition Strategy Business Strategy, Revenue, Costs Risks, Next Steps
Introduction Research Discovery Concept Strategy
Our Process The current state of health care in the US is both unsustainable yet essential to our economy. At 16% of GDP, our nation’s total quality of care is not aligned with the immense and rising costs. At the highest level, our objective is to increase the holistic value delivered by the health care system while reducing costs from current levels. Throughout the process, we designed a disruptive business concept that delivers new value for all stakeholders while offering a reduced and sustainable cost structure. We began by understanding the landscape and key players in the health care system. In order to create our territory map, we considered five lenses:
• • • • •
Rewards & incentives in the system and determine where they do not promote the health of the overall system. Examine where costs and values are out of alignment in the system. Motivation, fear, frustration of the current players in the system Non-market forces that have impacted the evolution of the current system (social factors, environmental factors) Resistors to change in the system.
5
Territory Map
payers
uc ed
insurance medicare medicaid
on ati
SOCIETY
RISK MANAGEMENT
healthy people
jobs
pr
home ca r e cu sto m er
COMMUNITY icipation part fund
patients & family
k ion ris ect ot RISING COSTS
TECHNOLOGY PROCESS IMPROVEMENT taxes
economic benefits
secondary benefits
advancing science
s
CARE/VALUE
providers physicians leadership staff
university system
stimulus impact
pharma
Introduction Research Discovery Concept Strategy
Our territory map illustrates the importance of the 3P’s in the system and the relationship between them. Ultimately, waste and added costs not only affect those direct interactions in health care, but also the community and society as a whole. We also noted that educating the 3P’s about the impact their individual actions have on the health care system while re-engineering incentives to reward keeping costs low would be an integral part of our concept. In our introductory meeting with Bill Bertschinger, he suggested we focus on leadership, community and staff. At the Mayo Clinic, billing was the least favored experience for patients, second only to parking. We endeavored to study this process as an example of a health care process that is causing confusion, frustration, and waste in the system. We were also encouraged to focus on individuals and away from hospitals and to disrupt the equilibrium to create the ideal state.
7
Literature Review Chakravorti, Bhaskar. The New Rules For Bringing Innovations to Market Harvard Business Review March 2004 Porter, Michael. Redefining Competition in Health Care Harvard Business Review June 2004 Burns, Lawton & Wharton School Colleagues. The Health Care Value Chain. Jossey-Bass March 2002 Mango, Paul D. & Vivian E Riefberg. Three Imperatives for improving US healthcare. The McKinsey Quarterly, December 2008 Farrell, Diana. Why Americans pay more for health care. The McKinsey Quarterly, December 2008 Matthews, Anna Wilde. Surprise Health Bills Make People See Red. Wall Street Journal, December 4, 2008 Daschle, Tom et al. Critical: What we can do about the Health Care Crisis St. Martins Press 2008 Christensen, Clayton M., Scott D. Anthony, Erik A. Roth. Healing the 800-Pound Gorilla: The Future of Health Care Harvard Business Review June 2004 Christensen, Clayton M., Jerome H. Grossman M.D., and Jason Hwang M.D. The Innovator’s Prescription: A Disruptive Solution for Health Care
Synthesis
Introduction Research Discovery Concept Strategy
For our literature review, we sought articles mostly regarding current health care issues and innovations. In order to synthesize our findings, we used our five lenses as a guide to detect patterns and inefficiencies. Based on our literature review and several brainstorming sessions we created the following team observations and insights: The Health care system in the US is not built to effectively service all types of care. It is built for catastrophic and acute care, services chronic care and ignores holistic care. Opaque processes in service structure create unnecessary complexity for health consumers. Accessibility and format of medical information is not consistent or comprehensible. Stakeholders incentives are misaligned which impedes change and positive growth. Just in case procedures and use of technology are over prescribed regardless of cost. Innovation disbursement is stunted because of an infrastructure that resists change. Short term solutions do not facilitate a strong network among the 3ps.
9
Christensen on Innovation Harvard Business School Professor Clay Christensen’s theories regarding industry innovation were central to much of our thinking. In December 2008, Christensen published “The Innovator’s Prescription”, which applies his theories of industry innovation to the health care industry. The concepts of sustaining and disruptive innovation are fundamental to Christensen’s thinking. Sustaining innovation occurs when technology or ideas, even breakthrough ideas, sustain the functioning of the current system (pg. 2). Christensen notes that incumbent market leaders almost always win the battle of sustaining innovation, because they are defending leadership position in a system that they are succeeding in. Most of the innovation in health care today that focuses on cost transfer would be considered sustaining innovation. But he argues that disruptive innovation is actually what is required to drive true change in health care. Disruptive innovation occurs when a firm brings to market a business that transforms formerly expensive and complex products, services, or capabilities into simple and affordable ones for a consumer. The disruptive innovation helps the consumer do a job or task that they are already trying to do. He notes that historically it is almost always new companies or totally independent business units of existing firms that succeed in disrupting an industry. (pg. 3) Christensen further theorizes that there are three fundamental conceptual business models that drive innovation in any industry (pg. 20).
Solution Shops provide intuitive, specialized recommendations of solutions to
Introduction Research Discovery Concept Strategy
unstructured problems. Consulting firms are an example of a Solution Shop. Value-Adding Process transforms inputs into outputs of higher value via a repeatable process. Facilitated Networks institutions that operate systems in which customers buy and sell, and deliver and receive things from other participants.
Christensen argues that in any industry disruption occurs when new businesses focus on innovating using one type of the three models above. He argues that it is inefficient for a business to operate in a hybrid of these models and that efficiency gains from business model specialization ultimately allow firms to deliver superior products and services at lower cost. What does this mean for health care? Christensen argues that most of health care innovation has resulted from technological advancements in drugs and medical devices and small process changes aimed at reducing costs. But he argues what is actually needed are new disruptive business models to accompany the technological disruption. For example, he argues that modern hospitals today are a combination of Solution Shops and Value Added Providers. This is driving cost inefficiency. It would, for example, be more efficient to have a building of specialized Orthopedic doctors that would send you to an MRI business that does nothing but MRIs and does them in a cost effective manner. If coordinated well this would drive costs down in the system and for the patient.
11
Accountable Care Organization Christensen recognizes that care coordination to help patients navigate the increasing complexity of health care is a key role in a disrupted health care delivery model (pg. 129). Essentially the advisor is able to direct patients and caregivers through the complex array of treatment and care options. The advisor directs patients to providers in either of the three business models depending on the patients need. Christensen and his team conclude that advisory attempts in the past have failed primarily because they were led by primary care physicians. He concluded that effective advisory must be led by an independent entity, thus freeing the model from the cost burden of being physician led, and allowing physicians to focus on delivering, not coordinating, care. Chronic Care Christensen also focuses on the severity of chronic disease diagnosis and management in a system built to service acute problems. We learned that 75% of health care costs are related to chronic disease. These findings narrowed our focus on creating an innovative model for chronic disease management.
Any program for resolving our runaway health-care costs that does not have a credible plan for changing the way we care for the chronically ill can’t make more than a small dent in the total problem. Clayton Christensen, The Innovator’s Prescription
Introduction Research Discovery Concept Strategy
Diseases with immediate consequences Myopia
Psoriasis
Hypothyroidism
Allergies
Infertility
Crohn’s disease Celiac disease
Depression Ulcerative colitis
Multiple Sclerosis Epilepsy
HIV Parkinson’s
Sickle cell anemia Type I Diabetes Asthma
Cystic fibrosis
Schizophrenia
Cerebrovascular disease
Hyperlipidemia
Congestive heart failure
Coronary artery disease
Chronic hepatitis B Osteoporosis Hypertension
weak
Chronic back pain GERD
Type II Diabetes
Alzheimers
Behavior-dependent diseases
Technology-dependent diseases
Motivation to comply with best known therapy
strong
Obesity Bipolar disorder
Addictions
Diseases with deferred consequences minimal
Degree to which behavior change is required
extensive
Christensen’s Chronic Quadrangle.
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Health Care Value Chain
Innovators
Producers
Gatekeepers
Insurance
Rx Mfgrs HMOs Device Mfgrs Benefit MedicalManagers Surgical Mfgrs
Distributors
Purchasers
Wholesalers Mail-Order Group Purchasing Orgs
Delivery
Providers
Hospitals Physicians IDNs Pharmacies
Consumers
Payers
Gov’t Employers Individuals
To familiarize ourselves with the Health Care industry we studied the structure of the current value chain. This core structure for this chart was taken from a 2000 study done by Burns at the Wharton School of Business at The University of Pennsylvania. We have added the titles above the chevrons as meta-classifications of the roles that members of each point in the value chain typically play.
Introduction Research Discovery Concept Strategy
We note that recent innovation in the health care industry has been largely driven by horizontal integration in the value chain. Meaning, parties that fall into the same chevron have been merging or otherwise consolidating, largely to create buying leverage with suppliers that precede them in the value chain. While this type of consolidation can drive cost savings, it ultimately is unlikely to lead to substantial disruptive innovation. An example of this would be networks of hospitals (such as UPMC in Pittsburgh) that are consolidations of multiple formerly independent regional hospitals. Opportunities for disruptive innovation exist in the form of partnerships and collaborations between multiple disconnected members of the value chain. These are termed vertical partnerships. The ideas that we pursued focused not on driving more cost savings via horizontal consolidation of like partners, but rather opportunities for disruptive innovation between formerly disconnected members of separate meta-categories in the value chain.
15
Design Implications Create a platform that aligns care with customized services Incorporate development of technology with transparency and education Create incentives that foster a sustainable health care system. Create a system that rapidly adopts and implements valuable disruptive innovations Support long term patient health needs and offer integrated holistic care.
Other Innovations We found other successful models that service specific needs and reduce waste in health care systems, such as D-life (facilitated network for diabetes management), Hello Health (targeted acute care service), and Health Dialog (aggregated healthcare data service.) While these business models are sustainable, we determined that chronic care support networks are siloed and enter patients’ lives post-diagnosis. These models address some of the patient’s support network and focus on collecting and disseminating patient experience and treatment information. This led to our analysis of the patient’s support system and journey to managing care before conditions become worse.
Introduction Research Discovery Concept Strategy
Care Network The care network includes all the possible support and resources available to a patient. Our goal was to utilize and connect these different entities to enable a more holistic approach to managing care. We divided the care network into three classifications of sub-categories: support, medical expertise, and
io
ion education
CA
RE
NE TW
government
work
RK
t tu
ns
t rdiza nda a t /s
O
in st i
institutionalized processes.
community
insurance
supp
friends/ family
primary care
s rt
ort
specialists
other patients wellness
17
m e dic al e xp e
awareness
LEARNING
PA T
Patient Journey
knowledge
incentive
We began to determine what steps task
validation
and tools patients need to maintain
time steps tools commitment
reward satisfaction feedback recognition
a healthy lifestyle and avoid chronic
access
NT IE
environment nutrition community
complications. The upper left diagram was our initial attempt to flush out the steps based on our knowledge about
ACTION
the process that patients go through
barriers
when identifying a need for care and peer pressure
geographic economic
education
negative reinforcement
receiving it. We also identified barriers in that process. Demographics and life stages impact a
life stage
person’s ability to adhere to a healthy
prenatal m
ge ana
lifestyle, and there are patterns of
m en t
CH
RO N IC
complications when segmenting the JO
N UR
e en ar aw
EY
infant
adher e
nce
ss
child
c ea
n tio
act i on
r is diagnos
senior
different life stages and health each life stage has its own journey.
young adult
adult
catalyst that made us examine consequences. We determined that
SENIOR CARE
adolescent
population in this way. This was the
Why Seniors?
Introduction Research Discovery Concept Strategy
The baby boomer generation will double from 36 million in 2003 to 72 million in 2030. More than half of Medicare patients have 3-4 separate simultaneous chronic conditions, have difficulty gathering and coordinating relevant information, getting around and piecing together the demands of contemporary society. The average caregiver accompanying a senior is a woman in her mid 30’s to 50’s with her own children and responsibilities, working full-time earning approximately $30,000 per year. The statistics about elderly care admittance to the ER are severe. According to a study published in the Annals of Internal Medicine, side effects from three commonly prescribed drugs (warfarin, insulin and digoxin) are responsible for a third of all emergency room visits by senior citizens suffering from adverse reactions. In addition, many other visits are due to complications or an acute exacerbation from multiple chronic diseases not properly managed. These trends are leading to hospital crowding, which could have serious repercussions in only a few years. As it stands, the senior population does not have another location or resource to redirect themselves.
Medicare will cost 27% of total federal budget by 2030. 55% of medicare patients ages 65 - 74 have 3 or 4 chronic conditions simultaneously.
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Our Concept: Perennial Care Perennial Care is a long-term support service for seniors to navigate the complexity of health care using a coordinated ecosystem of partnerships, enabling informed health care decisions for those receiving care, as well as for the caregiver. We developed Perennial in response to the recognition that while there are many services both local and national to support seniors, many are under utilized. This lack of knowledge and planning drives seniors to the Emergency room for expensive care and contributes to high costs and misaligned care. The Perennial Care Management team is comprised around three separate but equally critical roles: Medical midlevel, Guide, and Manager. Within the overarching realm of Life Stage Planning for Health care we envision an opportunity to brand similar care coordination businesses targeted at different life stages. Perennial is: Long-term ongoing care, affiliated with life and beauty; maintenance and care to bloom for many years, evoking imagery of perennial flowers. Definition: 1. Lasting for an indefinitely long time; enduring perennial beauty. 2. (Of plants) having a life cycle lasting more than two years. 3. Lasting or continuing throughout the year, as a stream. 4. Perpetual, everlasting, continuing; recurrent.
Introduction Research Discovery Concept Strategy
Medical
Guidance
Management
This person has enough formal medi-
This person spurs the dialogue need-
Helps the senior and caregiver navi-
cal training to perform basic triage
ed around various topics pertain-
gate the complex options available
and patient diagnosis. Supporting
ing to social and life planning. This
relative to medical records and pay-
chronic or complex conditions, com-
person would gently discuss how
ments. We expect seniors to have
pliance, drug interaction awareness,
the patients and their family want
increasingly complex choices relative
and basic testing administered by a
to manage this stage when thinking
to combining Medicare payments with
mid-level PA or nurse practitioner. A
about the extension of life inter-
private insurance and out of pocket
holistic thinker, a “pharm-assist�, and
twined with the quality of life. They
payment options. This person would
more importantly can direct a patient
understand the resources available
also be working with the EHR, EMR
to a VAP or Solution Shop if further
in the community such as transpor-
and other related software. The Man-
diagnosis and testing is needed.
tation and housing options. They
ager provides value by explaining the
can also identify mental conditions a
payment options available depending
senior may exhibit and recommend
on the coverage each senior has, and
lifestyle changes or direct them to a
assisting with an optimal payment
physician for further evaluation.
and financing strategy so that seniors maximize the value their coverage can provide, regardless of the source.
21
Our Framework Shown to the right, we begin at the top with innovations primarily in the technological realm that funnel into the process. Our care team is charged with understanding and keeping abreast of current innovations as well as hard data and research. The team will focus on research that is evidence based and particular to the life stage of the service. The Journey The patient journey in this context is comprised of awareness, action, diagnosis, reaction, adherence, and management. We utilize this process to understand where the patient is in their care journey, and what support they need for themselves and their caregiver. For example, the section of reaction and adherence could be a major life transition that could greatly impact the caregiver. The “guide” of our service would be very aware of the needs of the caregiver at this time. Similarly in the action and diagnosis phase the “manager” would be astute at providing the resources and details for the journey to both the patient and the caregiver. The “midlevel medical person” or Nurse practitioner or Physicians Assistant would be very present during the diagnosis to management phase and particular to our service, would continue to be at top form during on going management. This avoids the current situation where the “reaction” might be the winding down of direct medical services. The Care network is similar to the innovations that funnel through the top. The team needs to be aware of how each of these bubbles of support are affecting the patients and the caregiver. What resources do they have? Can they access the entire care network? e.g. They have a little-
Introduction Research Discovery Concept Strategy
data mining
home care in
ns tio va no
telemed
EMR/ EHR
internet
money, but get government support, have a large family and feel comfortable and active in their community occasionally seeing a specialist, or conversely they might not have
education
R
ac
n tio re
s rt
diagnosis
specialists
friends/ family
s u pp ort
act i on
primary care
community
ess
maintains the relationship.
a
en ar w
all of the health care innovators, then
P
JO U
EY
destination needed within some or
ement
T IEN AT
the caregiver and refer them to the
nag
adher enc e
Perennial uses this pathway to insurance
W
N R
ma
facilitate the care of the patient and
NE T
government
work
SE NI O
in st i
would be suggested.
CA RE
RK
then a different set of arrangements
tio tu
tion rdiza
O
access to most of the care network,
/ ns
nda sta
other patients wellness
m e dic al e xp e SS
FN
VAP
23
Why we are disruptive An early insight we found in our research is that the US health care system was built around the need of delivering care for acute or episodic conditions. However today 75% of health care costs are driven by chronic conditions such as diabetes, heart disease, obesity, and depression. The current care delivery model does not fit the health needs of our population. We decided to focus on the fact that the care delivery model today is centered around one expensive and scare resource: the physician. We observed that many customers are being “over served� today, meaning they are obtaining health care services from a physician whose expertise exceeds the care need required by the patient. This dynamic has led to businesses like Minute Clinic, where simple, empirical health care is delivered by nurse practitioners, not physicians. This principle for disruptive care can be extended to a life stage care model that focuses on developing relationships between elderly and non-physician health care delivery workers. This relationship, combined with increased input from caregivers, should enable care providers to gain better holistic insight into the health of a patient and address the issues that lead to chronic conditions. The overall cost structure for this type of care is substantially lower than traditional hospital and physician care model for three primary reasons:
Lower cost of workers. The model requires that patients are matched with
Introduction Research Discovery Concept Strategy
worker expertise that matches the level of care that the patients need. There is no over-supply of expertise to need. The cost of the workers is lower because the intuitive skills and schooling required to service patients at this level is lower. Increased use of technology. Medical technologies, from Electronic Health Records, to Telemedicine and Drug Management software are still in the process of development and adoption in the industry. Technology diffusion has been stunted because of incentives that do not encourage or reward firms to take risk and drive innovation. The model we are proposing is built on the foundation of being a low cost service delivery business and from the coordination benefits of adopting these leading technologies. And a new organization is free to engineer new processes to fully utilize these technology enablers. Partnership with value-added providers. By focusing on care coordination and delivering intuitive medical services, our model will benefit from partnerships with low cost, highly specialized VAP service providers. These providers may be co-located in the same facility, or may be remote. The key principle is to be vigilant not to chase revenue by engaging in VAP activities that may increase the top line but will ultimately drive an inflated cost structure and reduced specialization.
25
Rx
SP
ER
GP Rx
ER
GP
Care giver
Rx
Care giver
before and after: process for senior patient
Value Proposition In addition to the value offered to
to understand the implications of a
the patient and the caregiver stated
combination of drugs: time our service
above, we also offer great value to
can provide. This simple adjustment
those paying the bill. Insurers will save
will save billions of dollars to the payer,
tremendously because one of our
keep the senior safe and alert and
main goals is to keep seniors out of
alleviate extreme anxiety and time
the emergency room.
spent for the caregiver. While the institutions housing the emergency
Many seniors are also misdiagnosed
room will lose profits in this proposi-
with dementia and placed in nursing
tion, we argue that the overcrowded
homes because of reactions to drugs
emergency room will be a thing of the
that make them dizzy or “out of it.�
past easing the chaos and allowing the
Slurring speech is a symptom of both
emergency room personnel to focus
brain deterioration and a drug
on the many patients to serve in a less
reaction. In many cases it takes time
overwhelming state.
Business Strategy
Introduction Research Discovery Concept Strategy
Framework The business model for our idea was developed using a framework outlined by Christensen in his book “The Innovator’s Prescription”. It contains the following components (pg. 9):
• • • •
Unique value proposition that helps a customer do a job they’re already trying to do. Unique resources the company brings to bear to deliver on the value proposition. The processes a firm uses to transfer resources into something of value to the customer. The profit formula the firm employs to cover costs and meet the required investment return targets for deployed capital.
Based on individual experience we added two more components to this framework:
•
Risks and Assumptions we recognized while developing the plan. Including the probability or importance of each and an implication or mitigation plan
•
for each. An actionable Implementation Plan that can be used as a starting point for a firm to create an operational plan should they choose to launch the business model created.
27
Selecting a Target Market In health care there is no shortage of revenue to pursue. Health care spend was $2.2T in 2007 (source Department of Health and Human Services), or more than 16% of US GDP. This figure is expected to grow to $4.3T by 2017, which is projected to represent over 20% of US GDP (source, Centers for Medicare and Medicaid Services). The first challenge in creating a business plan was to decide which portion of the massive health care market to target for disruption. Defining a total addressable market (TAM) consumed several weeks of our time. We noted that in health care there is no shortage of opinions and very good ideas about how to drive reform in the industry. The breakdown has occurred in the focusing and implementation of the ideas. Few firms have been able to create business models that allow them to profitably transfer their good ideas into sustainable disruptive businesses. We had the benefit of being industry outsiders. We were able to analyze industry dynamics and record insights free from status quo bias or experience bias that results from professional experience in an industry. Our research and insights ultimately led us to focus on a disruptive health care delivery model for seniors. Simple demographic trends driven by the aging of the Baby Boomer generation and the disproportionately high cost of elderly care were key drivers in our decision. There is a deluge of statistics that highlight the importance of disrupting the current model of senior care:
Introduction Research Discovery Concept Strategy •
Per person personal health care spending for the 65 and older population was $14,797 in 2004, 5.6 times higher than spending per child ($2,650) and 3.3 times spending per working-age person ($4,511).
•
The elderly represent 12% of the US population but drive 34% of the costs of health care, or almost $700B per year in 2007.
•
As the leading edge of the Baby Boomer generation becomes eligible for Medicare, average annual spending growth by public payers (7.2 percent) is expected to outpace that of private payers (5.3 percent). As a result, the public share of total national health care spending is expected to exceed 50 percent by 2016. (Source: Department of Health and Human Services.)
Note that our decision to focus on elderly care is a focusing of our larger idea of creating a care model that focuses on meeting the needs of consumers based on their life stage. Our research led us to conclude that consumers have dramatically different needs, or jobs to do, depending on their life stage. The sample care model we have developed focuses on the senior population, but similar models could be developed targeting young professionals, new families, empty nesters, etc.
29
Revenue Sources
Insurance
Patient/Caregiver
Medicare
Private insurance companies pay for
As seniors and caregivers increasingly
Similar to idea #1, if the cost sav-
the service based on cost
personally take on the costs of their
ings of the model can be proven the
savings. An increasing number of
care they will be incentivized to
government will be incentivized to
seniors have private insurance to
manage those costs to keep them
subsidize senior participation in the
supplement or replace Medicare.
low. As the shortage of Primary
program. Documenting and explain-
An increasing number of physicians
Care Physicians worsens we expect
ing a clear ROI will be critical to
are not accepting Medicare, which
relationships between PCPs and
convincing the government that
they can do because of the physician
seniors to become increasingly
payment for this service is a good
shortage. If effectively implemented
strained simply due to a lack of
investment. Medicare has been ex-
this service will drive substantial
availability of physicians and ap-
perimenting with reimbursing for care
savings in the cost of senior care
pointments. These consumers will
coordination services, but the lack
by reducing emergency room visits,
be looking to an alternate source for
of a well executed business model
encouraging lifestyle change that
guidance in dealing with their health.
that focuses on tasks that reduce ER
addresses chronic care, and driving
visits, chronic illness, and increase
better patient adherence to
patient treatment adherence have led
treatment regimens.
to inconsistent results.
Introduction Research Discovery Concept Strategy
We created a quantitative revenue and cost model based on our analysis of how the sources of revenue and cost structure of this business may likely be developed. As with any model, this model is driven by the assumptions that were made around business growth rates, resource costs, advertising success, customer willingness to pay, and many other factors that impact the profit function. We did not spend time to research the exact expected costs (for example, the loaded salary cost of Nurse Practitioner). Rather, we recommend that our model be used as a conceptual starting point for a business team that is tasked with building a comprehensive profit model for this concept.
31
Costs A key objective of the Perennial Care concept is to keep fixed costs low. We will achieve this by engineering the business as a service business, driven primarily by variable costs that increase only as the number of patients served increases. While we have not done a deep dive into the real costs of each component of our service, we have identified key conceptual costs buckets that we believe will define the cost structure for the Perennial care service. They are as follows: People First and foremost we expect these costs to be lower than the salary costs in most health care business today because our service is not physician led. Our goal is to match consumer to exactly the amount of expertise they need from our staff, and not provide more or less. Recall that our people costs revolve around three key roles, the mid-level or nurse practitioner, the social guide, and the business or payment manager. Other than the nurse practitioner we believe these roles do not exist at large in health care practices. Property, Plant, and Equipment. Our objective was to design a business that could be delivered without strict facilities requirements. Meaning, we could launch a Perennial care site in any existing basic office building. The goal is to free the service from the cost burden of having to exist in a medical hospital. The Perennial service would require basic office equipment including computers and office supplies etc. Depending on the level of basic testing and triage delivered on site, basic medical and diagnostic supplies would also be required.
Introduction Research Discovery Concept Strategy Technology Technology costs will be driven by the 5 major categories of technologies required that we have identified in our concept design. These are EHR software, telemedicine equipment, caregiver tracking software, drug management software, and call center technology for the 24/7 support line to provide seniors with an alternative to emergency room care. A key assumption in our model is that each of these technologies is available largely “off the shelf� and can be implemented with little custom development. The goal of each of these technologies is to provide efficiency and allow us to deliver a high quality service at a reduced cost. If custom development is required the startup costs for the Perennial service will increase. A final note is that we believe the Perennial service can reach profitability very quickly based on the fact that it is primarily a service business. However there are two key assumptions that would impact our ability to reach profitability quickly. One is that the technology required, particularly the drug and caregiver software, are available off the shelf and do not require extreme amounts of custom development. We believe it is critical that all three of the management roles in the Perennial system have an integrated view into the holistic health and medical history of the patient. Our hope is that there is software available on the market today that achieves this task, but we have not researched or identified this software. Secondly, we are assuming that customer acquisition costs will be low because customers will be directed to our service by either Medicare or their private insurance provider. If we pursue the customer funded model we will incur customer acquisition costs in the form of marketing and advertising that will create a cost burden that is not reflected in the model today.
33
Risks We identified several risks that could inhibit the success of our model. Electronic Health Record not compatible with existing physician and hospital networks. Because we are essentially adding another care entity into the existing care delivery model we want to make it as simple as possible to transfer information between our service and existing primary care physicians and specialists. Interoperable electronic medical and health records have long been promised but still seem to be a distant reality. If we are unable to electronically pass medical information to PCPs and specialists our service will still be valuable but may be viewed by these parties as adding another layer of complexity to delivering care for the patient. Doctors resist Perennial care service. We have observed that the physician’s main objectives are to deliver quality care to patients and to maximize the profitability of their business. If we are successful we will help doctors do both. However, as with any disruptive new concept we expect physicians to initially view our service with skepticism. We must make every effort to ensure that patient information exchange is smooth and seamless between Perennial and PCPs and specialists physicians. Our goal is that doctors will view Perennial as an asset in care delivery that provides them with comprehensive information about a patient’s health, and ultimately allows them to deliver better care more quickly, spend less time on care coordination and administrative tasks, and thus utilize their skills to better serve the patients that need their attention.
Introduction Research Discovery Concept Strategy Seniors must be convinced of the value of a non-doctor advisor. In our society we are conditioned that a doctor is the only person that can provide quality medical advice. We all, understandably, want the best possible expert medical care we can receive. A key to the success of our model will be convincing seniors that they do not need to go to an MD to receive medical attention or advice. If we are successful seniors may consider going to Perennial as “going to the doctor�. We expect that if we are able to deliver expert level care and advice and pay attention to comprehensive senior and caregiver needs in a way that is simply impossible for a PCP to do today, both seniors and caregivers will be exceptionally satisfied with the service and will recognize the benefits as opposed to the PCP centered care delivery model.
Next Steps We firmly believe that Perennial Care can make a significant impact on the increasing costs of healthcare. We recommend starting with a pilot project at the Florida or Arizona Mayo Clinic facilities for validation with seniors. Below is an estimated timeline for this concept to come to fruition.
Select pilot location (FLA or AZ) Perform supplemental research to confirm quantitative value claimed in business model. Concept Validation with Seniors and Caregivers
Select resource team for pilot site Evaluate technology options Document processes to be used in Solution Shop for 5 key technologies Develop private insurance customer prospect list
Summer 2009
Fall 2009
Select VAP partners for testing
Winter 2009
Launch pilot site
Spring 2010
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Thank you Special thanks to Maggie Breslin and Bill Bertschinger at the Mayo Clinic for their insight and collaboration.