The ‘Second Curve’ is a great, hip summary of the whole idea.

There is a lot riding on this idea for it appears to be the single basket holding all of the eggs if we are to find a way to pay something less than a quarter of every GDP dollar for healthcare.

But this basket seems to be woven of several old ideas that have been recycled anew.  Maybe that is the right answer.  Maybe these ideas were right years ago, but the context was just wrong and they did not take root.  In our last post (What Would Lawdie Say) we explored some current external realities that just might be big enough to make the concept work this time.  A lot of people are counting on it, except for the consultants and the lawyers, who get paid either way.

Yet…

Yet, the thinking that prompted this set of posts was the general sense that so much of what we are hearing sounds really, really familiar.

So will this time be different?  Or will we again go to a lot of conferences and buy a lot of physician practices and have a lot of meetings, but still be doing things the same old way five years from now?

With our ‘glass half empty’ hat on, let’s explore a few reasons why you might want to short what the Second Curve advocates are peddling.

Betting on the continuation of the status quo is generally a good bet.  More often than not, tomorrow looks a lot like yesterday.  This inertia is even stronger when the status quo is built on a million disparate parts and players, many of whom have a vested interest in things continuing the way they are.

When someone like Apple comes along to disrupt the music business with the iPod, most of what they needed to make that happen was within their control.  They could build and price and market the product, they could develop the iTunes store that made the device valuable, and they could go directly to the music companies that owned the content to negotiate selling their stuff one song at a time.  They could pull most of the levers to get the disruption started, then just let the market respond.

However, we have this mind numbingly complex, $2.5 trillion dollar industry.  A whole lot of the segments have to work in concert to make this vision a reality.  Within those segments are competitors.  More important, some of the segments are downright antithetical to one another.  And oh by the way, one of those players is the federal government and there are 50 other smaller versions of the same.

This is not where an outsider like Apple is able to come in and play by a different set of rules.  This is the vast collective incumbency agreeing in advance to sacrifice their current positional advantages and assets without knowing what they get in return.

Maybe I am a bit jaded on human nature, but are you really willing to bet on that level of simultaneous sacrificial altruism?

Me neither.

Even if everyone agreed to sit cross-legged by the fire and sign ‘Kumbaya’ together (I am presuming there is a financial or regulatory gun to more than a few heads if this happens), then what? 

When I was working as an ‘organizational transformation’ consultant for big companies, there was this ever escalating battle in finding a metaphor to describe how hard the change process is.

‘It is like changing the tires on your car while driving down the highway.’

No, harder than that. 

‘It is like changing the engine on a 747 while it is in flight.’

You get the point.  Change is hard.

And this was change inside a single company.  Now we’re talking about an entire industry. 

I am from the south, where we specialize in colorful, hyperbolic metaphors, and I have no idea about how to get one big enough for this monster.

One reason that change is hard is because things get worse before they get better.  When a company does this, it can stay the course because management knows it benefits in the end.  But when an industry goes through this valley of despair, this ‘gets worse’ thing is not evenly distributed.  Some companies and entire segments lose and go out of business forever.  Here’s guessing that they will not be too motivated to stay the course during the hard times just so the industry can reform itself.

The second big reason to go short on the big vision is about the money. 

Steven Levitt and Stephen Dubner, the authors of the bestselling book ‘Freakonomics’ note that the point of the book is that people respond to incentives, just not always in the way you thought they would.

Incentives matter.  Who knew?

We’ve got this giant system built on incentives generally tied to doing certain things.  Pharma makes money when more people ingest pills.  Hospitals make money when the beds are full and the ED is busy.  Docs make money by doing something that justifies a CPT code.

We can’t change politics or pro sports or Wall Street because we can’t figure out how to get the incentives right.

And we can’t change healthcare until we get this right either.

Objection! say the glass half full types.  Did you not read the ACO rules just recently published, they ask.

Well no, not yet I must confess.  But I know someone who has a cousin who knows this guy who read a report from someone who actually read the ACO rules.

Turns out participation is voluntary.

Turns out most physicians will still get most of their money from good old fee for service business.

Turns out fringe incentives don’t quite motivate change like the core incentives do.

We could spend a lot of time on this incentive topic, but that would be pedantic, so let’s summarize: 

There are lots of incentives that have to change to make the new vision work.  We haven’t yet figured out what those incentives are, much less found a migration path to get us from here to there.  Until we solve this, I’ll continue to wonder about deck chairs and the Titanic.

Speaking of ACOs, that gets to another reason why we may find ourselves right back to the starting point a few years from now.  The ACO concept, as fresh and fuzzy as it remains, is our proverbial silver bullet.  (Along with HIT, now we have two.  Barney Fife is jealous.).

Even if we assume we can get the incentives right and we can manage the change from here to there, I have to ask a question that might be a little rude during all of this euphoria.

Will it work?

Sure, we have examples of places where truly integrated care delivery is producing the type of outcomes we all want.  Kaiser comes to mind.  Likewise, there are some cool demo projects sprouting up.

Let me revise my question.  Will it work at scale?

I read an unnerving piece the other day.  Three years later, the ACO demonstration projects are still losing money.  Oops.  And these are being done by some of the most integrated delivery systems around.  These organizations have been working together for years, have large physician organizations with the right governance and care coordination processes, and have invested in the enabling information technology.

If these groups that have a head start on everyone else are struggling to find a way to make this work economically, how does that bode for the unwashed masses?  Maybe there has to be more pay-off, which takes us back to the incentive issue.  But if that is the case, you have to wonder how we’re going to bend that elusive cost curve.

I’ll concede it is early.  I’ll acknowledge that when more entities jump into the game, we’ll accumulate wisdom faster about what works and that we’ll develop better tools to make it all work.  However, remember what Peter Drucker said about loss leaders, except for milk, being neither strategic nor permanent.

If this does not work financially for the players, it can’t last.  Period.  Improved quality, better population and disease management, medical homes, readily accessible patient information and the rest are great ideals that go right out the door if the cash is not there.

Let’s hit the rewind button for a minute.

Remember last time hospitals and health systems went on a buying binge, scooping up primary care practices like a power shopper at a clearance sale.  The fact that these practices were losing an average of about $45,000 a doc did not matter.  It was all about the big picture, the downstream work, the need to grab land while the grabbing was good.  Then one day the CFO woke up to find that these money losing employed physicians had grown to an accumulated loss that could no longer be hid in the corner of the income statement.  It was a man-eating plant in ‘The Little Shop of Horrors.’  Divesture was not far behind.

Will ACOs work financially?  We hope so, but have to confess that right now there is not a clear idea about how to make that happen.

The final reason to be skeptical is because hospital DNA is a deep seated thing.

And yes, I am using the term ‘hospital’ and not the more sophisticated ‘health system.’

After a couple of decades now of having ‘health systems’ and all that means, there is still way too much ‘hospital’ language and thinking emanating from this crowd.  Get past the marketing talk and what gets told to the board and watch the day-to-day actions of the people running the place.  Still looks like, operates like, and decides like a hospital.

You think I am being too cynical?  Go find out what drives the comp plan for the top 100 executives at your nearby health system.  I’ll bet bed days and ED volume and outpatient procedures matter a lot more to that group’s bonus than does their HEDIS score for managing people with Ischemic Vascular Disease.

Still not convinced?

Ask about their IT strategy for connecting to their independent physicians.  More often than not you’ll find a plan driven more by what will make the CIOs life easier than you will something that conveys a legitimate vision for building a virtual integrated care delivery network.

I’m just saying.

In all but a few situations, the physicians in a given community are simply not well organized enough to be the foundation of the ACO.  That might be the best answer, the preferred answer to realize the vision, but practically, it is not happening in most situations.  The hospital, er, health system, is going to be the center of the ACO. 

Some systems will hire a bunch of physicians and go that route; others will try a blended model of both hiring and partnering with independent docs; some will go with the all independent model.  No matter. It still comes down to having the mindset, processes, measures, systems and incentives that are Second Curve based.  And right now, most have hospital feathers, hospital webbed feet and quack like a hospital.  Maybe they are the engines of the future, but they really do look like hospital ducks.

Will we make it to the end of the yellow brick road this time? 

Maybe, maybe not.  There are a lot of big forces pushing in both directions. 

It will be fun to watch, especially if you are a lawyer or a consultant.