Does 3M’s Acquisition of CodeRyte Represent a Defensive Strategy?

This week’s announcement that 3M has acquired CodeRyte was a surprise as much as it was completely predictable.  On one hand, 3M Health Information Systems has had enjoyed what seemed at times to be a near ubiquitous presence in the coding solutions market for years and has been noticeably absent in the M&A arena since 2006 when it acquired SoftMed Systems (note: the $230M acquisition of Attenti in 2010 sits within 3M’s Track and Trace Solutions division).  However, with the impending move to ICD-10 in October 2014 as well as a broader trend toward greater levels of clinical documentation granularity and improved data management and analytics capabilities in healthcare, it is completely understandable that 3M had to make a provocative move to both protect its market share and strengthen its ability to deliver value to its provider customers in a highly regulated, increasingly complex healthcare environment.  The fact that 3M has had a reseller arrangement with CodeRyte since 2009 is further evidence of the existing relationship and fit between the two organizations.

With that being said 3M’s move to acquire CodeRyte represents, in our opinion, a potential defensive strategy to maintain its leadership position in coding and documentation improvement.  While not conclusive, there are a host of data points that seem to support this assertion:

• Heavy reliance on legacy encoder and grouper technologies – 3M’s leading flagship products provide a lot of financial stability for the organization, but these technologies are becoming dated amid the industry’s ongoing evolution and other, more nimble solutions coming to market
• Success and momentum of Optum and A-Life – Optum’s acquisition of A-Life has been very successful in the marketplace as of late, further challenging 3M’s existing position in computer assisted coding (CAC)
• Uptake of point of care workflow tools – While 3M’s 360 Encompass System provides an intriguing bridge between customer’s financial and clinical data at the point of care, this solution is relatively new and has presumably not had the sort of uptake that meaningfully impacts the division’s top-line
• Limited success in penetrating adjacent markets – 3M has struggled to extend its solution set into growing opportunities with payers, Health Information Exchanges (HIEs), and Accountable Care Organizations (ACOs).  Payers, for one, represent a huge counter-market to the providers as the entire healthcare industry looks to neutralize the impact of the ICD-10 transition

This isn’t to say that the combination of 3M and CodeRyte isn’t innovative – in fact, the addition of CodeRyte’s Natural Language Processing (NLP) and CAC capabilities could greatly improve the workflow efficiencies at the end-user level.  However, the need of 3M to bolster and extend its coding capabilities is apparent as emerging clinical, financial, and compliance objectives increasingly require a more pervasive data management and analytics platform delivered at the point of care and throughout the healthcare ecosystem (providers, payers, EMR vendors, consumers, etc.) to solve a range of increasingly complex and intermingled challenges.

 

Seth Kneller

Seth Kneller is a Vice President at TripleTree covering the healthcare industry, specializing in revenue cycle management, clinical software solutions, geriatric care and healthcare analytics. Follow Seth on Twitter or e-mail him at skneller@triple-tree.com.

Read Full Post »

Linking ICD-10 and the future of HCIT

With only 18 months left until the Centers for Medicare & Medicaid Services (CMS) ICD-10 implementation deadline, pressure to comply is mounting for a vast array of healthcare constituents.  ICD-10, or International Statistical Classification of Diseases and Related Health Problems 10^th Revision, is a medical code set used to standardize both diagnoses (ICD-10-CM) and procedures (ICD-10-PCS).  Mandated to replace the existing ICD-9 standards on October 1, 2013, its been well documented that ICD-10 will provide a level of clinical granularity far exceeding that of its predecessor; and as shown below a vast increase in the sheer number of codes.

The implementation deadline has spurred some debate.  James Madard, Executive Vice President and CEO of the American Medical Association (AMA), recently wrote a letter to HHS Secretary Kathleen Sebelius asking her to halt the ICD-10 implementation process.  “The timing of the ICD-10 transition…,” Madard wrote, “… could not be worse as many physicians are currently spending significant time and resources implementing electronic health records into their practices.”

Madard alludes to an issue that is central to both payers and providers which are that multiple Healthcare IT guidelines (ICD-10, HITECH, etc.) will need to be smoothly and quickly implemented to ensure proper reimbursement and avoid heavy government penalties.  The ICD-10 concerns for providers are becoming a boon to vendors, as solutions ranging from data analytics and terminology management to consumer focused solutions are enjoying strong demand.

In our view, vendors need not worry that an extended deadline will curb this demand.  As the healthcare universe shifts from fee-for-service to capitation and bundled-care reimbursement models, innovative technology will be a chief driver in achieving cost reduction.  In addition, we’re recommending that vendors align their business strategy and product offerings around three initiatives:

1. Effectively working with Channel partners to provide bundled “end-to-end” solutions that satisfy reporting requirements for multiple federal mandates
2. Creating flexible product platforms that can be easily integrated into legacy systems (and updated as necessary)
3. Stay out ahead of government regulation and build organizational agility that can meet changing client demands

Let us know what you think.

Jeff Farnell

Jeff Farnell is an Analyst at TripleTree covering the healthcare industry, with a specialization in revenue cycle management, compliance and tech-enabled business solutions. You can email him at jfarnell@triple-tree.com.

Read Full Post »

ACO Update: A Third Horse Enters the Race

A few months ago, we noted that the release of regulations for ACOs would trigger an ACO services race across the healthcare landscape, where market participants would be sprinting to create service offerings that would help hospitals and physician practices become compliant with the CMS ACO regulations for sharing financial risk and the rewards.  So where do things stand six months later?

Just like earlier this year, the “Big Two” – Optum and Aetna – seem to be squarely in the lead of creating a turnkey ACO solution.  And in the last few weeks, we’ve seen a couple items of note from these two.  The first was an interview with Charles Kennedy, CEO of Aetna’s ACO division on HISTalk.  In the interview, Kennedy talks about how Aetna is pursuing the ACO opportunity via three go-to-market offerings:

• Clinical integration (basically an HIE via Medicity)
• A population-based approach with chronic disease management tools that typically rolls out to hospital employees as a way of deploying a light version of an ACO
• A full, private-label health plan, where a delivery system has their own health plan “powered by Aetna”

Last week, Optum announced that it has brought together its own ACO division with more than 700 people (!) focused on enabling “Sustainable Health Communities,” which is Optum’s version of the ACO concept.  Optum’s press release calls out its own five-part strategy:

• Patient and population health management
• Informatics, analytics, and technology
• Clinical integration, network development, and physician change management
• Payment model, contracting, and actuarial expertise
• Operating expertise

Interestingly, the press release also mentions that Optum is also bringing solutions to market targeted at commercial health plans and government payers – the other side of the ACO/shared risk/bundled payment equation.

The big question we have been trying to figure out here at TripleTree is who is going to follow “the Big Two” and their industry-leading ACO partnership announcements (specifically: Optum with Tuscon Medical Center and Aetna with Carilion Clinic)?  Where are the other healthcare companies that are going to pursue this mammoth opportunity?  Wellpoint’s acquisition of CareMore, McKesson’s acquisition of Portico, and Harris Corporation’s acquisition of Carefx certainly point to their interest in this market, as does Premier’s burgeoning alliance with IBM – but we have yet to see any of these or other players signal their interest in developing a broader set of provider-focused bundled payment service offerings.

This past week we think have finally seen another company unequivocally throwing its hat in the ring:  The Advisory Board Company announced the creation of a new company called Evolent Health, in partnership with the UPMC Health Plan.  Evolent intends to provide a platform for population and health plan management to leading health systems as they develop their value-based care strategies.  This follows ABCO’s earlier acquisitions of Crimson, Concuity, and Cielo MedSolutions – all earlier signals that the company was pursuing the hospital analytics, contracting, and registry marketplaces in a big way.

It makes perfect sense for The Advisory Board to do this – with nearly unparalled access to hospital c-suites across the country, it was only a matter of time before they launched a solution to address the many, many requests they must be getting to help with hospitals’ new risk-sharing strategies.  We see this as a welcome development in this space, and hope to see other HCIT players, undoubtedly facing their own questions from their healthcare clients, enter the fray as well.  Where are you, Accenture, Microsoft, and Elsevier?

Let us know what you think.

Conor Green

Conor Green is a Vice President at TripleTree covering the healthcare industry, and specializing in revenue cycle management and tech-enabled business services. You can email Conor at cgreen@triple-tree.com.

Read Full Post »

ACOs: Millions of Web Hits…Dozens of Theories…One Bottom Line

Nine million. That’s how many web hits are returned during a Google search for “Accountable Care Organization,” and reflects the countless articles, white papers and opinions that have been published regarding the potential successes and more likely pitfalls of the proposed ACO mandate. As highlighted in my colleague’s recent post, our team is continuously evaluating the business development opportunities being fueled by the demands and requirements of these new provider organizations.  Last week, the members of our Healthcare Executive Roundtable recently discussed and debated an element of the ACO equation that is not typically highlighted and could become a critical component of ACO success (or failure)…Trust.

In boardrooms around the country, health care executives are focusing on the technical requirements for their future ACO’s clinical and administrative systems. They are pouring over spreadsheets and attempting to understand the data and analytical tools that will be necessary for adequate financial and quality of care reporting. Getting these operational elements “right” is important; however, these business leaders should also focus on designing a culture – and the corresponding behaviors, communication, and incentives that will fuel strong and collaborative relationships between the ACO and its community of providers.

As Ed Brown, CEO of Iowa Clinic puts it, “People are unclear about what the value-based world looks like, and they’re unsettled on what clini­cal integration really means. And nobody has really made it work.”  This lack of clarity around the value-based model will make it challenging for providers to leave the financial security blanket of the traditional fee-for-service payment engine.  Moreover, influencing them to modify their approach to patient care for the benefit of the system and the promise of shared savings is a monumental effort. Success by any measure will largely depend on the trust established between providers and the ACO organization itself. ACO’s should prioritize establishing trust with providers in three key areas:

• ACO Operations and Management:  Providers need to trust that the ACO is well run. Understanding the organizational governance, expertise of the management team and core capabilities (strategic assets) will help generate confidence that the ACO is well-positioned to generate enough shared savings to make participation worthwhile. In addition, it is critical that the ACO measure and report management performance metrics that demonstrate its accountability to the providers.
• Compensation Incentives:  Providers need to trust that they are getting their fair distribution of shared savings. Clinical algorithms defining quality and outcomes must be evidence-based; and the financial tools and risk-adjustment methodologies used to distribute payment must be easy to understand. Above all, the organization’s compensation schemes must be highly transparent and accessible so that providers can validate that they are being treated as an equally valued business partner in the organization.
• Confidence in Provider Team:  Providers need to trust their ACO provider colleagues. If the right incentives are in place to bring members within the organization together, providers will need to trust that their peers will also be active participants working toward fully coordinated care within the ACO. Under an accountabilities and outcomes-based model, it will be important that providers view their care responsibilities as extending beyond the encounter. Active provider participants should be practicing first-class follow-up care, improving patient satisfaction, and reducing re-admission rates which will achieve collective rewards.

The inclusion of ACOs as a provision of the Patient Protection and Affordability Act is a strategy to realign delivery systems in the US so that they provide high quality, coordinated care.  The bottom line for achievement might simply boil down to whether providers can engage in meaningful and integrated relationships with the ACO and with each other. Since relationships are based on trust—predictability, integrity, and reciprocity–it is imperative that ACOs make trust a deliberate priority.  Our research and advisory agenda is 100% focused on the possibilities of ACOs, and moreover the innovations and business models which will be required to make them successful.

Let us know what you think!

Emma Daugherty & Archelle Georgiou

Emma Daugherty is a Senior Analyst at TripleTree covering the life sciences sector with a focus on provider technologies and patient safety.  You can contact her at edaugherty@triple-tree.com.

Archelle is a Senior Advisor and Chair of TripleTree’s Healthcare Executive Roundtable, and focused on creating health through innovation.  You can follow Archelle on Twitter or email her at ageorgiou@triple-tree.com.

Read Full Post »

Perpetuating the Increased Quality of Care Cycle through Value-Based Purchasing

With the majority of talk about healthcare reform centered on the individual / consumer mandate and universal coverage, many are missing another positive change proposed by CMS: value-based purchasing.

Value-based purchasing (VBP) has underlying implications on five themes:

• Measuring the patient experience
• Measuring clinical quality
• Market pricing, especially local market pricing
• Executive and clinician compensation
• The changing role of technology and technological requirements

The essence of VBP is that buyers of healthcare (including individuals and plans) should hold providers accountable for the quality of care provided.  Much like consumer satisfaction and pay-for-performance in other industries, healthcare providers are now being held accountable for not only providing the required care, but providing a quality product.  However, the question of rating the quality of care is a bit more difficult than showing compliance with a “Six Sigma” type of program.  By bringing together outcomes-based data with cost data, it is possible to show an improvement ratio such that increasingly positive outcomes are equated with reduced or targeted spending – below are a few considerations:

• Linking patient satisfaction and quality: Measuring the patient experience is trending toward monitoring key outcomes in 17 clinical measures (including patients’ views on communication with staff and doctors, cleanliness and quietness of the hospital and pain management) across five healthcare categories, including acute myocardial infarction, heart failure, pneumonia, healthcare associated infections and surgical care improvement.  Based on a hospital’s score across these measures and categories, this will impact diagnostics-related group (DRG) payments as soon as 2013.  By 2014, mortality outcome measures for additional health conditions and hospital-acquired conditions will be included.
• Clinical quality – another important VBP benchmark:   As providers are measured and compensated accordingly, top tier providers will begin to quickly separate from the pack.  However, critical access hospitals will need to remain accessible, regardless of their quality measurement.
• Market pricing and VBP:  With provider compensation schedules initially being implemented as a penalty rather than a bonus, areas with poor outcome metrics will see the cost of providing care rise. Additionally adding to the skewing of local market pricing, an incentives algorithm will be implemented, meaning high performing hospitals will continue to perform better than those being penalized, due to the financial incentives providing new resources for a high performing hospital.

The link between quality of care, the provider’s income statement, and executive and clinician compensation also becomes much more clear and real. As the provider receives additional incentives for increased quality of care, the employees of the provider will likely see performance compensation tied to the quality of care metrics for the hospital. A higher performing provider will attract higher paid experts with better backgrounds, perpetuating the increased quality of care cycle.

Underpinning all of this is the increasing role that technology will play in the healthcare system. In order to document the quality of care metrics, a clear link to data will need to be established at the point of care. This means that data warehousing and analytics will be paramount. Sophisticated pricing and measurements of quality and satisfaction will be derived from the data and technology in use.

Value-based purchasing has the potential to radically alter how both providers and patients view healthcare.  Our team is actively advising business leaders and investors with some thinking about how healthcare will cease to be an intangible product that is provided at any cost, focusing instead on how to plan the market dynamics or “rankings” and “customer service”.

Have a great week.

Adam Link

Adam Link is an analyst at TripleTree covering healthcare delivery models, specializing in software and wireless health.  Follow Adam on Twitter at AdamJLink or email him at alink@triple-tree.com.

Read Full Post »

Tech Platform Innovations in Healthcare Will Rely on “hCloud”

This week, TripleTree hosted its fourth Principals Forum web cast of 2010 discussing the impact cloud computing is making across the healthcare landscape.

Our colleague Ryan Stewart facilitated our panel-centric discussion around the broad healthcare industry issues of improving access to, and care within the healthcare system.  After a few introductory remarks by Scott Donahue of TripleTree on the evolution of Software as a Service (SaaS) to cloud, our panel of four accomplished healthcare veterans took the helm, they were:

• Dr. Giovanni Colella, President, CEO & Co-Founder – Castlight Health
• John Holton, President, CEO & Founder – SCI Solutions
• Nancy Brown, Chief Growth Officer – MedVentive, Inc.
• Albert Prast, CIO/CTO – Connextions

The panel cited real world examples where cloud-based solutions are influencing how hospitals, doctors, and the patients consume information, primarily:

The impact of hCloud on healthcare workflows:  Cloud computing is weaving itself into both the clinical and administrative areas of healthcare and fundamentally changing the dynamic of “IT support” for healthcare workflows and care delivery. Impacts of cloud computing in healthcare can be seen in:

• Anywhere, anytime access to accurate and usable information: hCloud is enabling the mobilization of data to the right constituent, through the right medium at the right time.  This is having a profound impact on how providers deliver care, patients access care, and consumers (i.e. patients) purchase healthcare coverage and connect with the care community.
• Improved access to and utilization of information: One of the biggest challenges in healthcare is the fact that critical data (necessary for clinicians to make accurate decisions, or consumers to make informed choices) is spread out across multiple systems and points of care.  Healthcare IT’s data structures are based on encounters and events rather than on a holistic patient viewpoint making it very difficult to identify and collect the data, let alone analyze the information. Traditional “silioized” approaches to managing data are being challenged by solutions that leverage the cloud to more efficiently gather, integrate, and act upon critical information.
• New levels of collaboration across the care continuum: Utilizing the Web as a platform provides a lower cost, more ubiquitous method of connecting provider communities as well as linking patients to providers appropriately.
• Empowering consumers: With better access to information, more transparency, and the ability to retrieve information across a multitude of digital and physical mediums, consumers are more involved in identifying the right channels of care and types of coverage for their individual needs.
• Cost efficiency: Cloud, the web, and SaaS have made developing the clinical and administrative systems to support healthcare more cost efficient. As these models become even more mainstream in healthcare, hospitals can focus less on building out massive IT infrastructure projects and more on supporting clinical workflows. Legacy systems can be gradually phased out and modern architectural standards will better support necessary integration across the enterprise.

Certainty there are complexities and information sensitivities within healthcare that are more acute than other industries, but as Dr. Collela eloquently stated that “Cloud computing is coming to healthcare… There is no way to stop it.”  With so many stakeholders standing to benefit from this computing paradigm, and with proven delivery points across industries and within healthcare, it is just a matter of time until the cloud moves away from these specialized discussions to become more accepted as mainstream within healthcare.

The evolution of hCloud is a core component to our research agenda for 2011, and will be influencing how our strategic advisory clients think through growth, financing and liquidity strategies in the months ahead. Click here to listen to the audio replay of the web cast; and here to read our most recent publication on hCloud.

We’d like to know what you think. Have a great week!

Scott Donahue

Scott Donahue is a Vice President at TripleTree covering infrastructure and application technologies across numerous industries and specializes in assessing the “master brands” of IT and Healthcare. Follow Scott on Twitter or e-mail him at sdonahue@triple-tree.com

Read Full Post »

Beyond Substance Abuse: Drug Safety Becoming a Major Health Concern

According to fda.gov, the Human Drugs Program monitors over 10,000 currently marketed drugs in the U.S.  According to the Centers for Disease Control (CDC), prescription drug spend in 2008 doubled from the previous decade as 10% of Americans now use five or more prescription drugs.

It’s not controversial to assert that drug information, education and compliance is a huge, complex and important issue confronting the healthcare landscape.

Given this complexity, it has become exceedingly difficult for physicians to track potential adverse reactions to drugs and maintain appropriate antibiotic prescriptions, particularly when they are diagnosing or administering care at the patient bedside.

Below is some backdrop and perspective on why TripleTree is following this so closely:

• The FDA currently tracks adverse drug events through a post-marketing surveillance program, compiling the results in their adverse event reporting system (AERS). While this is helpful to identify black box warnings, it is not designed to help the physician stay up to speed with new medical knowledge.
• The issues surrounding the use of prescription drugs are most severe in the hospital setting where patients are vulnerable to unforeseen interactions or medical errors that take place during the medication use process.
  • Many hospitals today are fighting these challenges pre and post-event, using clinical informatics tools that focus on reducing errors in prescribing or retroactively treating patients who have experienced an adverse event.
  • Unfortunately most events take place during the “monitoring stage” of the medication use process, when the adverse effects are most difficult to catch. For an outline of the five stages of the medication use process, see U.S. Pharmacopeia.
• Few hospitals have a system in place to monitor drug use during the patients’ stay.  According to a study conducted at the University of California, only one third of CA hospitals are using tech-enabled surveillance tools to help identify infections and those that did saw significant improvements in infection control practices and patient outcomes.
• Appropriate antibiotic use, known as antimicrobial stewardship, has been in the spotlight lately as the failure of antibiotics to effectively treat certain strains of bacteria becomes a more acute concern. Even with the constant influx of new drugs, many modern antibiotics have been so heavily (and often inappropriately) used that bacteria have developed resistance and rendered them ineffective.

For physicians who are not accustomed to employing clinical data and evidence-based guidelines for real-time decision making at the point of care, a change to incorporate drug safety at the point of care could been seen as a disruption to their workflow and very costly. However, the ramifications for ignoring adverse drug events (and increasing patient deaths) in the face of reform are equally concerning.

While the American Recovery and Reinvestment Act is oriented around the interoperability of healthcare data, significant hurdles exist to stimulate provider adoption.   TripleTree is paying close attention to the innovative vendors who offer clinical informatics technologies, decision support tools and patient surveillance systems.  These tools are bending the cost curves, and patient safety concerns, of drug safety enough to encourage physicians to adopt point of care solutions and will play a key role as health reform evolves.

We’d be interested to know what you think – have a great week!

Emma Daugherty

Emma Daugherty is an Analyst at TripleTree covering the life sciences sector with a focus on provider technologies and patient safety.  You can contact her at edaugherty@triple-tree.com.

Read Full Post »