Leonard Friedman, an associate professor of health care administration at Oregon State University, and Jim Goes, managing partner at Cybernos, LLC in Eugene, will be honored in mid-March by the American College of Healthcare Executives, who will present them with the 2003 Dean Conley Award for the organization's top research paper, "Why Integrated Health Networks Have Failed."
"To be charitable, most IHNs haven't completely failed, with a couple of glaring exceptions of major systems in Boston and San Francisco that crashed and burned," Friedman said, "But on a national level, they definitely have under-performed. They haven't lived up to the promise of high quality and lower cost."
Friedman and Goes decided to find out why. They began talking with hospital administrators, board members, physicians, and others around the country and discovered the problems fell into two categories: IHNs had structural problems and functional problems.
"The major structural problem relates to information systems," Friedman said. "Most health care networks are at least 10 years behind the rest of the world because their requirements are so varied and complicated. They may need, for example, to computerize 30 years of patient records, yet maintain patient confidentiality by restricting access to those who need it. So they're always playing catch-up.
"Add to that the needs for ever more complex imaging and diagnostic technologies," he added, "and you begin to understand the problems." Moreover, the authors say, most networks haven't aligned their financial systems, their supply chains, or their accounting among their various enterprises.
But the functional failures of networks are even more important, they argue.
"As we talked to people nationally, it was repeated over, and over, and over to us: When you go from a single organization to a network, you need to create a new culture to attend to the fears and issues people have," Friedman said. "It may be a fear of change, it may be turf issues, it may be job security. For whatever reason, most IHNs have failed to create a successful new culture.
"Most of their focus is on the financial side of the equation," he added. "But the networks that are the most successful focus on the people issues as well as the money."
Friedman says balancing the dollars and human resource issues takes visionary leadership, and clear and open communication. "When you do things right," he said, "the results can be spectacular. Samaritan Health Systems is a good example of a small network that has made its service better and probably gained some efficiencies at the same time by merging and growing."
Health care, obviously, is big business. According to Friedman, about 14 percent of the United States' gross national product is related to health care, which has a $1.4 trillion price tag annually. In Oregon, it's also big business, he added, citing figures that show 20 percent of Deschutes County's economy is tied toward health care.
"Oregon has gone through a significant realignment of health care delivery." Friedman said. "Instead of the 60 or 62 stand-alone hospitals we had a few years ago, you see a handful of systems including Kaiser, Legacy, Providence, Samaritan and Peace Health. Everything is available to patients under one roof - or, at least, one corporate name.
"In time, it may turn out to be a good model," he added. "But the jury is definitely still out."
Friedman said the evolution of the health care industry began in 1982 with changes in reimbursement rules that shifted payment from a retrospective fee-for-service model to a prospective payment model. That drove many health care providers together and to a certain extent began standardizing costs for treatments.
After hospitals began to merge, the new consortiums began seeking to purchase and control various auxiliary services from laboratories and imaging equipment, to nursing homes, other long-term care facilities and even insurance carriers.
The modern "integrated health networks" were born.
Friedman said IHNs have tried to buy groups of physicians in another effort to lower costs. So far, he said, it hasn't worked well. "Physicians are worried about their patients, not the business side of health care," Friedman said. "Getting physicians to think of themselves as part of a system of care is incredibly difficult. The other side of the equation is that leadership hasn't always offered them a place at the table.
"That is part of the 'new culture' that needs to be established," Friedman added. "Trying to achieve a common vision is never easy, and not always pleasant."
By Mark Floyd, 541-737-0788
SOURCE: Len Friedman, 541-737-2323
Journal
Frontiers of Health Services Management