Co-ops, the Unconventional and Healthcare Innovation

The health care reform debate moved into a new phase over the weekend when Health and Human Services Secretary Kathleen Sebelius said a public insurance option was "not the essential element" of any overhaul, and non-profit cooperatives could also fulfill the White House goal of creating more competition on insurance.

So, what's a co-op? Now the pundits on all sides of the spectrum are in a frenzy of prognostication and analysis. The result, so far, is much like the rest of this health care debate -- it depends on whom you talk (or listen) to. The answer varies from: 'They don't make any difference,' to 'they are a great idea' or 'they are a terrible idea.' Pick your poison.

Perhaps, as Mr. Shakespeare said, it's just more "Sound and fury, signifying nothing." There certainly has been no lack of sound and fury lately as health care reform bumps its way through our polarized political system.

But there could be something here and, personally, I am intrigued. Here's three reasons why.

My 40 years experience as a physician, health care executive, academic scholar, advisor, and most importantly, a patient, leads me to believe health care reform will be driven by organizations that can, from the start, focus on just one thing -- getting patients exactly what they need at continually lower cost.

Secondly, that focus will have one defining, transformational result -- patients will receive much more care, for much less cost.

Third, counterintuitive to conventional wisdom, the advantage of co-operatives is that there are not many co-operatives in existence.

That's an advantage because there are no well-defined, widespread models to copy and implement. Therefore, we won't be tempted to put a bunch of experts in a room with the charge of designing and implementing "the co-op reform."

"But, wait," you say. "That's not good, that's bad! We have to have lots of best practices and big companies to copy and implement!" That is the conventional wisdom, "not enough to copy, too small a sample, it's just Group Health in Seattle and a few others; no dice for co-ops."

That's why conventional wisdom is conventional. As a Visiting Scholar at Harvard Business School, I studied those few companies that successfully innovated and transformed their industries. One thing all those companies had in common was that they were all unconventional. Secondly, those companies and the innovations that powered them were not designed and implemented; they were made through rapid cycles of test, validate and improve.

As readers of my past columns know, I believe our current dilemma is the direct result of all the past "solutions" we have implemented in health care over the last 30 years.

The culprit in this dilemma is not a shortage of money, bad planning or too many
mean-spirited people. Rather it is our antiquated approach to change in health care.

We commonly institute change by gathering lots of data, analyzing it carefully, having lots of meetings and then implementing expert decisions back down on the point-of-care. Data up/implement down. Unfortunately data up/implement down starts to fail when complexity and the speed of change increase.

It's not that the experts in the meeting rooms are not smart. Rather it's that they can't get enough data up fast enough, to analyze and implement quick enough, to keep up with what's happening now.

Viewed in this light, our current system is not broken or dysfunctional. In fact, it's perfectly designed to deliver exactly what it delivers, less care at more cost. To get the transformational performance that will deliver much more care at much lower cost, we will have to do something different.

Fortunately, "something different" is not rocket science. It is the focus of my forthcoming book, Designed to Adapt: Leading Healthcare in Challenging Times, available this September from Second River Healthcare Press. Instead of moving information to decision-makers in meeting rooms, the transformation of health care will be led by organizations that create new critical-thinking skills and develop and coordinate
state-of-art decision making where the information is, close to the patient at the point of care.

The methods, skills and tools that deliver on this promise are called "adaptive design," and they have been tested and validated in many health care organizations over the past 12 years. Adaptive design is a combination of the strategy of disruptive innovation, with the knowledge management methods of a few great companies, like Intel and Toyota, who adapted and prospered when others failed to change. Here are some adaptive design health care results of more care at less cost:

A Massachusetts hospital increased surgical volume by 16 percent while decreasing surgical staff overtime by 14 percent. A Minnesota hospital nursing unit won the award for most improved patient satisfaction in a 17-hospital system as they simultaneously generated $1.7 million in savings to the hospital. A Colorado hospital pharmacy made it simpler for patients to get the medications they needed while decreasing drug costs by $1.9 million.

That's getting much more for much less. The methods that created these results are available, we just need a flexible framework upon which to build. Perhaps the
co-operative model offers that opportunity.

What's the co-op advantage? -- There aren't very many of them so we will have to make them! And that's the only way to produce the transformational results that will get patients exactly what they need at continually lower cost. And without those results, we won't fix healthcare.

Dr. John Kenagy is a former Visiting Scholar at Harvard Business School and the author of the forthcoming book Designed to Adapt: Leading Healthcare in Challenging Times (Second River Healthcare Press, 2009)

Comments

[mcmchugh99]

I would be happy to see the state and federal governments provide more financing for cooperatives of all kinds, including cooperative banks.

I am on the Left, and I see that we are in a state of system failure, and not only in health care. I've seen this coming for 20 years or more, so we need to experiment with new ways of doing things, rather than clinging to old ways that have failed.

This is not a substitute for expanded public health care, but a very useful supplement to it.

[John Kenagy - Huffpost Blogger]

Thanks for your comment - In my experience, "system failure for 20 years or more," is an accurate diagnosis.

The seductive pull of "trying harder" is extremely difficult to resist, but "trying harder" at what has not worked is not the answer. Therefore, testing and validating new methods needs to be an essential part of healthcare reform. That's the only way we will fix healthcare.

[tompoe]

There are 50 million people without health insurance waiting for your response to their question, will your coop cover me? I live in Miami, Phoenix, Salt Lake City, Bismarck, Chicago. Oh, sorry. You haven't thought about that, yet. Well, keep thinking, there, John, and let us know the answer when you're ready.

[John Kenagy - Huffpost Blogger]

The answer is easy. If the goal is to create a new co-op designed to develop a transformational entity providing much more care at much lower cost, you would never start by trying to manage the complexity of a person living in five different cities.

The history of innovation makes it clear, however, that starting to develop those capabilities in a town like Bismark, is much more likely to develop the new skill sets, methods and technologies that could deliver much more for much less for your wandering, itinerant example.

Example, two brother surgeons in a small town on the frigid plains of Minnesota create the very disruptive concept of the multispecialty physician organization that becomes the Mayo Clinic.

[tompoe]

Quite a history, too. From the mid-1800's to what we see, today, an impressive healthcare delivery system that serves its patients well. Not even remotely relevant to providing health care to all citizens of the United States. You seem to avoid the reality the rest of the world understands. We have a right to health care. Our government fails to acknowledge that right and provide universal health care for its citizens.

[BlueOnBlue]

There are a couple of examples of successful health care co-ops, but they succeed not so much by being private enterprises as by being microcosms of fully socialist systems. Group Health in Seattle, for instance, not only provides insurance coverage, but owns its medical facilities and employs the physicians in them.

In this way, it is much more like the NHS in the UK. If we proposed a national system like this, right wing people would be apoplectic.

There is no successful model of an insurance-only co-op for a very good reason. It doesn't work.

[mcmchugh99]

I think he's talking more about producer and consumer cooperatives, which I am strongly in favor of, as long as there are also cooperative banks to finance them.

[John Kenagy - Huffpost Blogger]

From a transformational innovation view point, I agree that insurance only won't work because you must connect to the point of care if you are going to be truly innovative. Transformational disruptive innovations always start close to the end customer and grow from that point.

Starting from the patient and working back is the essence of adaptive design. I am intrigued by the fact that a variety of co-operative ventures could be designed from the start to be innovative, focused on the job of getting patients exactly what they need at continually lower cost. That creates the potential for rapid cycles of test, validate and improve which is the only way, to my knowledge, truly transformational organizations are built. There is probably much to be learned from Group Health, but I am not talking about simply copying their business model and "rolling it out."