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Joe Flower

If competition actually drives the cost of health care up rather than down, what would bring lower costs? What provisions in a “health reform act” would actually drop costs in health care? Let’s leave aside for the moment all the myriad other arguments – some might be seen as too much government intrusion, some would destroy the health plan industry, some would be cripplingly difficult for providers, and so on – and just focus on cost. Given the real structure of health care markets in the United States at this moment, what could be written into federal law and regulation that would actually reduce cost?

Some of these changes are massive, some would be invisible to those outside the industry, but all could be legislated or regulated, and all would “bend the curve” toward lower costs. Choose any you like, though some are “and” choices, others are “or” choices:

1. Single payer: Eliminates insurance company overhead, increases medical loss ratio (the percentage of dollars put in returned as medical resources) to perhaps 95%, and gives the government (probably some rate-setting commission) the power to dictate prices and availability, like Medicare on steroids.
2. “Robust” public option: All providers must take its payments as full payment, rates tied to Medicare rates (perhaps plus a percentage), Medicare rates decided by an independent rate-setting commission.
3. Limiting medical loss ratios: Many European countries dictate that health plans must return 85% or 90% or 92.5% of the premium paid in as medical services paid out.  U.S. health plans, in contrast, compete on (and brag to Wall Street analysts about) how low their medical loss ratio is. Some are as low as 60%.
4. Negotiating drug prices: Allow the government to negotiate drug prices for life-saving drugs.
5. Malpractice reform: Our adversarial system of dealing with malpractice costs us, directly, only about one half of one percent of medical spending. But the extra tests and unnecessary procedures of “defensive medicine” cost an estimated additional 3% – $60 billion per year, an amount equal to most of the cost of extending coverage to all Americans. And still most victims of real malpractice are left without any help or compensation at all, most actual medical mistakes pass without comment, and most of the few really “bad” doctors out there are still able to practice medicine unhindered.
6. More docs, more clinicians: Increase the supply of medical service by expanding medical and nursing school enrollments, reducing barriers for foreign medical school graduates, reducing internship requirements, and allowing nurses and techs to perform more procedures.
7. Bundling: Many parts of health care could be “bundled” into coherent products – a replaced hip, an uncomplicated birth, a cornea transplant, diabetes management – from diagnosis to re-hab, counting all imaging, drugs, everything. Payers should pay for these as single payments, just as you don’t pay the auto body shop for each sheet of sandpaper or quart of paint, but for the whole job. This would drive providers to discover the most efficient way to do it.
8. Publishing outcomes: There are comparable measures of quality that do not penalize places that take more complex or difficult cases. Establish standards and put all the statistics on the Internet.
9. Publishing prices: You want a new hip? Here’s what it costs at each of these institutions, here is their clinical quality outcome rating, here is their customer satisfaction rating, right there on the Internet. This is true competition that would drive down prices and drive up quality.
10. Banning discounts: Counterintuitive? Perhaps. Any CFO of a health care organization would tell you that their “master charge list” is a phantom made up only for negotiating discounts, and the discounts are all over the map – so no one can tell you what the “real price” of any part of health care is. This means that competing on price at all is very difficult, if not impossible. “Common carrier” rules in communications and transportation dictate that the price is the price, and the little buyer pays the same as the big buyer. This would massively transfer risk to the providers to get their costs under control and get their prices right.
11. Giving a premium to integrated “accountable care organizations:” All the organizations consistently put up by reformers as good examples of giving the most and best health care for the dollar, such as Mayo, the Cleveland Clinic, Geisinger, Group Health of Puget Sound, Kaiser, and Health Partners of Minnesota, are structured differently from the rest of health care. The doctors are on salary, or share profits in the whole enterprise. Many of these organizations are “capitated:” they cover everything for a set monthly fee. There is no encouragement to do anything unnecessary, and every encouragement (since they are in competition) to do whatever actually works for better health. They do good, conservative medicine in a collaborative team-based style. We cannot mandate the growth of such organizations, but we could give an extra 5% or so to encourage their growth.
12. Increasing subsidies for digitization, tied to productivity improvements: There are huge inefficiencies in the actual practice of medicine. No one can improve on them until the people running health care can actually track what they are doing, in detail. In something as complex as health care, that means total digitization, like any other business.
13. Subsidizing automation: Many things in health care would be done much more efficiently by automation, from lab work and pharmaceutical distribution to tracking inventory. Today’s system does little to encourage such automation – instead,it actually supports the inefficiency.
14. Standardization and checklists: Many parts of health care have established pathways that are clinically proven and widely published in the medical literature, yet followed only at the clinician’s whim. These are not matters for the doctor’s judgment, these are matters like washing your hands between patients, fully draping a patient for a central line placement, getting clear verbal confirmation from everyone in the surgical suite that they agree on who the patient is and what the operation is for. Standard pathways, and simple feedback mechanisms like checklists to make sure they are followed, are still not common practice in health care. If regulations made them mandatory, following them would save billions of dollars in fighting infections and having to re-admit patients to the hospital with problems that could have been prevented.
15. Warranties: You define the job and put a price on it, now back that with a warranty. Today, if I have an operation, and get an infection from the operation, or it has to be done over, the provider actually gets paid for taking care of the problem. With a warranty, I (and my insurer) would pay nothing. This would drive the risk for quality back on the provider.

Though politically some might characterize some of these choices as “radical,” none is “radical” in the real world of health care. Each has been proven, in practice, in some part of the current market, even single payer (think Medicare and the Veterans Administration). Each is practical, not just theoretical. Each could be done with current technology if we decided to do them. Most could be done without any massive new bureaucracy, just from a tweak here and there in the rules, undoing rules that have been set for the convenience and profit of payers and providers, and setting them instead to force them to compete on actual value for the patient and for the nation.

We could drive down the cost of health care while driving up quality and serving everyone. How much could it be driven down? The evidence (from other countries and from variations in our own market) says that we could do health care in the United States, with full choice and higher quality than today, for everyone, for half to two thirds of today’s cost.

Dan Coughlin

Recessions Breed Bad Habits

When times are tough, the tough get going. Unfortunately sometimes they go too hard for too long and wipe out their creative juices. One of the worst habits people develop during bad times is working constantly without a break. This can be working to keep the business alive, working to justify that a current job is deserved, or working to get a job. In any case, nonstop working generates dramatically negative effects. Imagine a baseball player who plays 500 games a year and takes batting practice eight hours every day of the year. Does the word “burnout” come to mind? And yet that is the unsustainable pace many business people put themselves on during dismal economic slumps.

Vacate to Accelerate

Ok, repeat after me, “I need great energy to do great work.” All together now, “I need great energy to do great work.” And now just the men… And now just the women…

When times are good, most people take breaks. They go on vacations. They get refreshed. And their renewed energy contributes to the upward cycle of greater performance at work. When times are bad, many people avoid taking necessary breaks. They try to work themselves into a frenzied state of being in the name of “We’ve got to plow through this and find a way to succeed.” Their reduced energy contributes to the negative cycle of lowered performance at work.

For the good of your organization, take regular breaks. Take your vacation days and get away from work. During the work day, take a break and go for a walk. Clear your mind. This is critical to long-term success. If you really want to accelerate your achievements in a meaningful way, then vacate your work setting and let your mind rest. You’ll come back to work ready to climb the next mountain rather than wanting to drive into the nearest ditch.

The Power of the Unfocused Mind

Ironically, the people who supposedly never take a break end up wasting a lot of time at work being “half in and half out.” Really get away from work so that when you come back you really come all the way back.

Take ten minutes to really daydream about a particularly happy time in your life. Let the good memories soak in and clear everything else out. Then when you mentally come back to a work issue you’re coming at it with a fresh mind. Rather than worrying all day about things you can’t control, give your mind the rest it deserves by consciously going away from work and going to a mental resort.

We’ve all heard people say they get their best ideas while taking a shower. That’s because they’ve relaxed their minds and, lo and behold, good ideas pop out. There is great value produced from the focused mind, but there is also great value generated by the unfocused mind. Once you’ve clarified an issue you want to resolve or an outcome you want to achieve, mentally let it go. Get away from your work. Take your family on a vacation, even if it means checking into a local hotel on an inexpensive night or going to a movie.

GET AWAY FROM WORK! (Did that help clarify my advice for you?) Amazingly, you will find that better ideas will come to you the farther away you get from the issue or desired outcome.

Have the Courage to Avoid Busywork

With the best of intentions, people love to ask, “So what have you been up to lately?” During a recession, the respondents to this question seem to be on the defensive to an even greater degree than usual and want to make sure that everyone knows how hard they are working. So the tendency is for the respondent to create a massive amount of busywork so that no one will ever think he or she is not a hard worker.

Remember that business is not about “busyness” but rather about “creating and delivering value to customers that improves key results in sustainable ways.” The best way for you to create and deliver this type of value is NOT to fill your day up with busyness. The best way is to carefully preserve your energy and then place it on the fewest things that will have the greatest positive impact on creating and delivering great value for your customers.

Use Pit Stops Wisely

One of the biggest management insights I gained from studying professional auto racing is that there are three key strategic moments in every auto race. They occur during caution flags, turns in the track, and pit stops. The way in which the drivers use these three key strategic situations invariably determines who wins and who loses the race. For a far more in-depth document on the idea that vacations drive better results, I encourage you to read Chapter Six called Use Pit Stops Wisely from The Management 500, which you can get by clicking here: http://www.thecoughlincompany.com/The_Management_500_ch6.pdf.

The Shack

A friend of mine named Karen encouraged, inspired, motivated, ok she pestered, me to read a book called The Shack by Wm. Paul Young, and I’m so glad she did. Before I recommend this book, let me give you two warnings: one, it begins with a profoundly sad story, and, two, it is a deeply spiritual book. Having said that, the reason I’m recommending this book in this article is that the concept of the shack is exactly the point I’m trying to get across in this article.

The main character in The Shack endures a long-term great sadness and finally decides to return to a place called “the shack” where he can regain himself. This is exactly what I’m encouraging you to do. When you have been under enormous stress you simply have to get away from the pressure or it will eventually break you.

If this recession has created enormous stress in your life or if you’ve worked so hard that you need time away, then I believe you mentally need to go to a “shack”, a place away from work and home and community responsibilities, where you can regain perspective on your career, your life, your purpose, and so on. As the main character in the book did, I believe you will come back with an extraordinary and renewed sense of focus in your home and work life. And that renewed focus, which paradoxically happens as a result of intentionally becoming unfocused, will ultimately drive better business results for your organization.

Patrick Lencioni

Maybe it was just the kind of kid I was, but I’m guessing that most children are constantly reminded by adults to be more efficient. Maybe not exactly in those words. More likely it comes in the form of phrases like “don’t be late”, “use your time wisely”, “don’t waste money” or even “turn off the lights when you leave a room”.

And while it’s difficult to argue with a parent’s or teacher’s or coach’s motivation for instilling these principles in the youngsters they’re responsible for, there comes a time in life—especially in certain situations—when those very traits become problematic. One of those situations is the call to innovation or creativity.

I’ve become convinced that the only way to be really creative and innovative in life is to be joyfully inefficient. Again, maybe it’s just my personality, but I’m guessing it applies to most of us whose jobs or lives involve dreaming up or improving on new ideas. And this makes sense. Asking someone to be both creative and efficient reminds me of that quote from Einstein: “You cannot simultaneously prevent and prepare for war.” The two activities are fundamentally opposed to one another.

Efficiency requires that we subdue our passion and allow it to be constrained by principles of logic and convention. Innovation and creativity require us to toss aside logic and convention, even without the near-term promise of a payoff. Embracing both at the same time seems to me to be a recipe for stress, dissonance and mediocrity, and yet, that is exactly what so many organizations—or better yet—leaders, do.

They exhort their employees to utilize their resources wisely and to avoid waste and redundancy, which makes perfect sense. They also exhort them to be ever-vigilant about finding new and better products or processes, which also makes sense. And yet, combining these two perfectly sensible exhortations makes no sense at all, and only encourages rational, responsible people to find a middle ground, something that is decidedly neither efficient nor innovative.

So what are leaders, who want both, to do? First, choose their poison; decide which of these two characteristics are truly more important and live with the consequences. And when you simply have to have both, create skunkworks efforts which allow a small group of people to be joyfully inefficient. No guilt. No confusion. No hesitation. And keep them largely separate from their efficient peers, at least until they’ve developed their ideas and are ready to share them.

But whatever you do, don’t chide creative, innovative people for their inefficiency. And try to avoid throwing faint praise and backhanded compliments at them (e.g. “I guess you creative types just aren’t capable of hitting a deadline or staying on budget”). Few people have the self-esteem and courage to continue being inefficient when others are calling them out as being flaky, irresponsible and unreasonable. If we’re serious about innovation, we have to celebrate—yes, celebrate—the inefficiency of the people who we rely on for new ideas, even if it means they are late for meetings, they waste a little time or money and they leave the lights on when they go home.

Jerry Yudelson

In his article for the Union Real Estate Investment AG, Hamburg, Germany, Jerry Yudelson demonstrates how the business case for green buildings rests on five legs: economics, risk management, marketing, government relations and employee relations.

The business case for green buildings rests on five legs: economics, risk management, marketing, government relations and employee relations. Most people look only at the economic benefit of savings on energy costs, neglecting the mounting evidence that green buildings return higher rents, offer faster letting, secure greater occupancy and generate higher resale value. In an economic environment where quality is foremost, green buildings offer higher quality at modest additional cost. Green buildings also reduce a variety of risk factors, including marketing, financing and securing political authorization to develop. They also offer greater public relations and marketing benefits, assistance with stakeholder relations and, perhaps most importantly, provide a positive story to tell to employees of development firms, thereby aiding in recruiting and retaining key employees. While the economic slowdown and global financial crisis is likely to affect overall commercial construction significantly in 2009 and 2010, the green building movement is likely to continue to gain market share over the next five years.

The Business Case for Green Buildings

Rowan Gibson

At many companies, the term “innovation strategy” refers simply to an agenda for new product development or a technology roadmap for R&D. This is like picking up a single leaf in the forest and calling it a “tree”. Innovation strategy is not merely about the next product launch or patent registration. It’s about exactly how your company intends to become (or remain) a world-class innovation champion. Let’s face it, not many organizations have so far managed to build a deep, enduring capability for innovation—one that consistently drives profitable revenue growth and that delivers a strong competitive advantage over the longer term. This should be the highest goal and purpose of any innovation strategy.

The real strategic issue facing every company is this: How are we going to create growth and shareholder value in the future? Sounds like a simple question. But organizations have had a wide variety answers at their disposal over the last few decades. For some, the solution was “going global”, or “cutting costs”, or “improving quality”. For others, it was “raising productivity”, or “offering the best customer service”, or “standing out with excellent product design”. Today, however, these traditional strategies are running out of steam. They no longer offer very much potential for driving growth and wealth creation over the longer term. As marketing expert Steve Yastrow put it in a recent blog, they have become nothing more than ‘basic business hygiene—the “brushing your teeth” of running a company’.

There is a growing realization around the world that organizations have only one strategic option left for delivering growth, company value, market share and competitive advantage. And that’s radical innovation – in products, services, technologies, processes, cost structures, marketing strategies, and business models. However, an honest assessment of the business landscape reveals that radical innovators are still very few and far between. When you pick up a copy of Forbes or BusinessWeek, you inevitably find yourself reading about the usual suspects – a small handful of innovation champions like Apple, Google and Gore. It simply seems incredibly difficult for all those other companies out there to make the transition from innovation laggards to innovation leaders. And that’s why there’s an urgent need right now for organizations to develop a corporate innovation strategy – a blueprint for building, sustaining, and managing an enterprise-wide innovation capability.

Nancy Tennant, co-author of Strategic Innovation, and former global vice president of innovation at Whirlpool, the appliance giant, says that an innovation strategy should encompass “a wide range of actions that assimilate, incorporate, internalize, and imbue the entire fabric or lifeblood of an organization with the mind-set and skills of innovation.” At the core of this strategy must be a broad-based vision of innovation embedment—a vision that is created and owned by the top team, that is accessible to all levels of the organization, that is both feasible and flexible, that can guide decision making, and that can be clearly and easily communicated. It must be based on a highly systemic view of the organization – a sense of connection, interaction and integration between all of the various parts of the system – where the whole is much greater than the sum of its parts. And it must enable each and every employee to understand the link between their own individual performance and the attainment of the company’s strategic innovation goal.

Once this vision is in place and widely shared across the company, the next imperative is to turn strategy into action by making the necessary stepwise changes to leadership commitment and accountability, organizational infrastructure, management processes and policies, resource allocation, knowledge management, employee contribution, rewards and recognition systems, competence development programs, measurement and reporting systems, cultural values, and so on. All of these organizational components need to be hardwired into the company’s innovation strategy.

“But stop”, you say. “Is all of this actually possible?” Can companies really make the gargantuan leap from boring to breakout, and from insipid to inspired? Consider an encouraging example.

When Whirlpool’s former CEO Dave Whitwam set out to define his company’s global innovation strategy back in 1999, he chose to call it “Innovation from Everyone and Everywhere.” This was a huge aspiration, considering that at the time Whirlpool had 68,000 employees in 170 countries, as well as 50 manufacturing and technology research centers around the globe. But Whirlpool rose to the challenge, and today the company has become a best-practice model for the embedment of innovation as an enterprise capability across a large, global organization.

The key objective of Whirlpool’s innovation strategy was to help every single employee to think outside the traditional “white box” of home appliances, and imagine exciting, customer-relevant solutions that create new wealth for the company. The outcome has been a stream of breakthrough ideas for products and businesses that have come from all over the Whirlpool organization—ideas that have delivered value to consumers in ways never before seen either at the company or in the industry. As a result, Whirlpool has seen a steep upturn in its annual revenues from innovative new products. In the three years between 2003 and 2006, for example, these revenues rose from $78 million to $1.6 billion (a figure over twenty times higher). And the whole strategic transition has made a massive contribution to growing Whirlpool’s overall revenues and profits.

Today, the company has well over five hundred projects in its innovation pipeline, representing expected future revenues of $3.5 billion. And, having witnessed the power of Whirlpool’s innovation strategy firsthand, current CEO Jeff Fettig is planning no change of course in the future. He told BusinessWeek, “If we keep innovating we’ll keep growing.”

What Whirpool’s example amply demonstrates is that it is entirely possible to turn an “old-line” industrial organization into a catalyst for continuous, break-the-rules innovation. But it can’t be done piecemeal—an innovation reward program here, a corporate venture fund there, or a few days of brainstorming somewhere else isn’t enough. Rather, a company has to be willing to recalibrate its whole organizational system around the paradigm of innovation. And that is never going to happen unless it develops a wall-to-wall, top-to-bottom, “soup to nuts” innovation strategy.

Rowan Gibson is a global business strategist and an expert on radical rethinking. He is also the bestselling author of  Innovation to the Core and Rethinking the Future. More information about Rowan Gibson’s speaking availability can be found at Speakers.com.