Enter Tom Daschle

Tom Daschle's book, "Critical: What We Can Do About the Health-Care Crisis", forecasts the mindset of the incoming DHHS Secretary. Many of the ideas in the book frame what is likely to be Daschle's approach to President-Elect Obama's goal of reducing the number of uninsureds. There are three main points from the Daschle book that are key:

First, Tom Daschle is an activist. He wants to leverage government's growing role in health care spending (46%) to reshape the market. Especially in this downturn, with public support for the government to "do something", there is a ripe political climate for an activist agenda and Daschle knows it.

Second, Daschle has in mind the "machinery" for leveraging change. He proposes a National Health Board, which he likens to the Federal Reserve Board, with a role he defines as:

"[T]he Fed Health would ensure harmonization across public programs of health-care protocols, benefits, and transparency. Ultimately, the Fed Health would offer a public framework within which a private health-care system could operate more effectively and efficiently."

Lurking behind the "policy-speak" of that statement is a central idea that the Federal Health Board can leverage a 46% share of overall health expenditures to standardize terms and transactions in the market. Of course, even Daschle acknowledges that by itself, administrative savings from standardization is not enough, thus....

Rationing is needed to deliver both lower costs and better (and more fair) access. In his book, Daschle cites the role of the Britain's National Health system in enforcing rationale use of scarce health resources, with a particular focus on what he considers inefficient spending on technology and medications. In case his favorable citation of Britain's National Institute for Clinical Excellence (NICE) leaves any doubt, Daschle spells out specifically that the Federal Health Board would:

...[T]he Fed Health could set standards for quality and coverage, promoting best practices and identifying the trade-offs on services (emphasis added). It would use information on the comparative clinical and cost effectiveness of different treatment options to set standards for Federal programs."

Third, "trade-offs on services" is the key to Daschle's vision. If Daschle is going to deliver on the twin demands of lower cost and more care, either the Federal Health is going to have to say "no", or consumers are going to have to start making smarter choices on their own so that the market can drive out products, services and providers that do not deliver real value added. Daschle seems to have little confidence in consumers at this point; his focus is on having the NHB make the tough decisions.

Smoking Ban Reshapes Heart Market

I read some dramatic numbers today from Pueblo, Colorado. In the three years since implementing a ban on smoking in public places, hospitals admissions for heart attacks dropped 41 percent!

In the new study, researchers reviewed hospital admissions for heart attacks in Pueblo. Patients were classified by ZIP codes. They then looked at the same data for two nearby areas that did not have bans — the area of Pueblo County outside the city and for El Paso County. In Pueblo, the rate of heart attacks dropped from 257 per 100,000 people before the ban to 152 per 100,000 in the three years afterward. There were no significant changes in the two other areas.

There are multiple implications from this data. First, obviously, it is a good thing. As someone who has a family history of heart disease and has paid a few visits to the cath lab myself, the potential that reduced exposure to second-hand smoking actually does reduce the risk of heart attacks is encouraging news. For those focused on population-based health statistics, or reducing overall costs of health care, the study adds fuel to the fire to push for broader smoking bans.

For hospitals facing a dominant competitor in the heart care market, the study begs an odd question: would the better way to address the competitors' heart care market share be [1] build a heart program of your own; or, [2] invest in a couple of lobbyists to push through a smoking ban to both improve community health AND cut your competitors' top line volume by half?

Buy Low: Growth in a Down Economy

I spoke this morning with two health system executives about the current economic downturn. Both shared the same message. October and November volumes missed budget by 4 - 6%. Bad debt and charity care will likely be up between 6% and 8% when things settle out. December is obviously not closed, but census at their hospitals is holding steady.

Both were already weighing significant cost reductions in the first quarter so that they can preserve resources for physician acquisition and IT investments. We discussed short-term tactics that can build a firewall around clinical niches where the hospital has market share strength and stronger margins. The objective is to target market those niches, and consumer segments within them, to maintain volume, revenue and margins.

One of the two shared an interesting observation: with her competitors largely shelving strategic marketing efforts in the third and fourth quarters, in response to leaner financials, she feels he can acquire market share in priority segments at a discounted cost. "We're still funding our strategy; we've just focused it more tightly around acquisitions and referral source management, and scaled back on advertising," she said.

This strategy of targeted investment in market segments and clinical niches is one of the most successful at delivering growth in the short-term, and, positioning you for significant market share expansion in the long-run. I'll keep in touch with my colleagues and report back on the outcome of their efforts over the coming months.