Tuesday, August 11, 2009

WAR GAMES

War Games?

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An interesting article appeared in iHealthbeat during the past month. iHealthbeat is a part of the California Health Foundation www.chcf.org and also publishes on the internet at www.ihealthbeat.org

The article points out what ‘we’ are up against with the coming health care reform, and the massive infusion of capital into health IT.

Several clips from the article:

War Game Forecasts Future of Electronic Records

by Leonard M. Fuld and Kim Slocum

Dateline: April 3, New York, N.Y.: Microsoft makes a play for Allscripts, then failing that attempt, pursues Kaiser Permanente to create an exclusive EHR-PHR agreement with the pre-eminent managed care behemoth. Allscripts independently cuts a deal with a large health care company to expand its sales force to aggressively penetrate the 80%-plus physicians who currently do not use EHRs."

Almost none of this has happened yet -- except within the confines of a war game used to stress test company strategies in the rapidly changing electronic health records industry. This war game, "The Battle for Healthcare Information," took place this spring, employing savvy health care-experienced business school students from Columbia, Kellogg, MIT and Wharton business schools. They formed teams, representing a variety of EHR players: Allscripts, Kaiser Permanente, McKesson and Microsoft.

image War Game Defined

What is a war game? It's a disciplined series of exercises designed to stress test company strategy.  It does so by introducing today's economic reality and constraints rolled together with fact-based background on all the players, mostly competitors

A key point when considering staging a war game or strategy game: Do your homework. You need to do research on each of the companies whose roles you will play or test during the exercise

Another important echo comes in the comments on blogs reporting on the game. Doctors, hospital administrators, software designers and a large mass of patients have reacted strongly. Many patients are nervous about privacy issues. Doctors both fear the administrative burden and the potential distancing from patients that this technology will bring. The technology community admits that existing systems will not stand yet cannot see who can break down these tech walls, preventing true universal adoption of EHRs and PHRs.

 

The article diverges into areas not germane to this post.

Much of what this article discusses in regard to Health IT also applies to health reform.

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Do providers and hospitals need to play more ‘War Games”? Without this strategizing no one can tell or even prophecy about unintended consequences of health reform. Because each segment of the health care industry plays to it’s own unique players, health reform may not have it’s intended consequences.

Will the changes increase the number of primary care providers? Will the changes reduce over-utilization.

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Will it equalize reimbursements between primary care providers and specialists? Will bureaucracy be reduced? How will insurance companies react to legislated and mandatory rules forbidding cherry picking, waivers and exclusions, and discriminatory premiums?

Health reform is a big ticket item, complicated and will have many repercussions.

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It's important to get the political issues, assumptions and ghosts regarding the "fearsome" competitor on the table in advance.

The health care industry is a highly regulated segment of the economy and has demonstrated in the past it’s unique reaction to market pressures.

clip_image002Porter’s five force analysis (see above) can well be applied to the forthcoming changes being proposed for health care. Porter referred to these forces as the micro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models have been able to make a return in excess of the industry average. In other words one cannot generalize about issues. Those who plan strategically with the forthcoming changes will profit immeasurably.

Undoubtedly this will also apply to healthcare, pharma, hospitals and payors. Universal payor at first glance would seem to eliminate the vagaries of the ‘marketplace”, however it is also problematic adjusting to short and long term changes.

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