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Posts Tagged ‘Mergers and acquisitions’


37th Annual J.P. Morgan HEALTHCARE CONFERENCE: #JPM2019 for Jan. 8, 2019; Opening Videos, Novartis expands Cell Therapies, January 7 – 10, 2019, Westin St. Francis Hotel | San Francisco, California

Reporter: Stephen J. Williams, PhD

The annual J.P. Morgan Healthcare Conference is the largest and most informative healthcare investment symposium in the industry, bringing together industry leaders, emerging fast-growth companies, innovative technology creators, and members of the investment community.

 

Joe Biden

Joe Biden on the Fight Against Cancer

Former Vice President of the United States joined the J.P. Morgan Healthcare Conference to discuss cancer initiatives.

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Bill Gates

Bill Gates on the Current State of Global Health

In his keynote address at the annual J.P. Morgan Healthcare Conference, Bill Gates spoke about the state of healthcare around the world.

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CEO Anne

Anne Wojcicki on Disrupting the Healthcare Industry

The CEO of 23andMe discusses at the J.P. Morgan Healthcare Conference how her genomics company is activating the power of the consumer.

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  1. Another packed house as panel including Saurabh Saha, & Alexis Borisy discuss the rewiring of R&D for the digital age at Exec Bfast

Novartis Talks Move to Cell and Gene Therapies at JPM

Novartis logo on outdoor wall

Denis Linine / Shutterstock

Following a strong post-hoc analysis of mid-stage data in the fall of 2018, Novartis announced this morning the company’s experimental humanized anti-P-selectin monoclonal antibody was crizanlizumab granted Breakthrough Therapy Status by the U.S.Food and Drug Administration (FDA).

Crizanlizumab received the designation as a treatment for the prevention of vaso-occlusive crises (VOCs) in patients of all genotypes with sickle cell disease (SCD). VOCs, which can be extremely painful for patients, happen when multiple blood cells stick to each other and to blood vessels, causing blockages.

The designation was awarded following results from the Phase II SUSTAIN trial, which showed that crizanlizumab reduced the median annual rate of VOCs leading to health care visits by 45.3 percent compared to placebo. The SUSTAIN study also showed that crizanlizumab significantly increased the percentage of patients who did not experience any VOCs vs placebo, 35.8 percent vs. 16.9 percent.

The FDA designation came one day after the Swiss pharma giant laid out its map for a future of success, sustainability and, if things work out, respect from consumers. In an interview with CNBC Monday, Novartis Chief Executive Officer Vas Narasimhan noted that the company is looking to become an entity that doesn’t draw its profits from treating disease, but will make money by providing cures. He pointed to the moves Novartis has made toward gene and cellular therapies that have the potential to cure patients of various diseases in what many researchers hope could be a “one-and-done” treatment. Narasimhan told CNBC that cures are what society wants and that is something they will value. The challenge will be determining the payment system.

As an example, the company is eying potential approval of a gene therapy for spinal muscular atrophy (SMA), a fatal genetic disease marked by progressive, debilitating muscle weakness in infants and toddlers. Novartis’ gene therapy Zolgensma is expected to be approved by the FDA this year and could have a price tag of between $4 and $5 million. While significantly high, non-profit SMA groups have already suggested that the gene therapy treatment could be more cost-effective than Spinraza, the only approved SMA treatment on the market.

During its presentation at J.P. Morgan, Novartis pointed to the moves it has made as the company pivots to this future of gene and cell therapies. The presentation noted that over the course of 2018, the company made several deals to sell off non-essential businesses, such as the $13 billion sale of its share of a consumer health business to partner GlaxoSmithKline. Not only that, but Novartis also made significant acquisitions to reshape its portfolio, including the $8.7 billion acquisition of AveXis for the SMA gene therapy. The deal for AveXis wasn’t the only gene therapy deal the company struck. Novartis began 2018 with a deal for Spark Therapeutics’ gene therapy Luxturna, a one-time gene therapy to restore functional vision in children and adult patients with biallelic mutations of the RPE65 (retinal pigment epithelial 65 kDa protein) gene.

In his interview with CNBC, Narasimhan said the company is about “platforms,” which also includes radio-ligand therapy. The company forged ahead in that area with two acquisitions, Advanced Accelerator Applications and Endocyte. Radiopharmaceuticals like Endocyte’s Lu-PSMA-617 are innovative medicinal formulations containing radioisotopes used clinically for both diagnosis and therapy. When the Endocyte deal was announced, Novartis noted the field is expected to become an increasingly important treatment option for patients, as well as a key growth driver for the company’s oncology business.

Other posts on the JP Morgan 2019 Healthcare Conference on this Open Access Journal include:

#JPM19 Conference: Lilly Announces Agreement To Acquire Loxo Oncology

36th Annual J.P. Morgan HEALTHCARE CONFERENCE January 8 – 11, 2018

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Allergan, Pfizer Deal Goes Through with Allergan Bigger Than Pfizer: But at What Cost to R&D?

Curator: Stephen J. Williams, Ph.D.

Just recently this site had a post entitled Pfizer Near Allergan Buyout Deal But Will Fed Allow It? 

Now, as Bloomberg reports the international deal between Allergan and Pfizer has gone through, resulting in a tax inversion and nary a discouraging word from the US Federal Government (their blessing for future tax inversions?).  And as Bloomberg Go guest speculate finally it may spark Congress to do something about it, or perhaps not.  For details see Bloomberg transcript below:

 

Pfizer Inc. and Allergan Plc agreed to combine in a record $160 billion deal, creating a drugmaking behemoth called Pfizer Plc with products from Viagra to Botox and a low-cost tax base.

QuickTake Tax Inversion

Pfizer will exchange 11.3 shares for each Allergan share, valuing the smaller drugmaker at $363.63 a share, according to a statement Monday. That’s a premium of about 27 percent above Allergan’s stock price on Oct. 28, before news of the companies’ discussions became public. Pfizer investors will be able to opt for cash instead of stock in the combined company in exchange for their shares, with as much as $12 billion to be paid out.

The transaction is structured so that Dublin-based Allergan is technically buying its much larger partner, a move that makes it easier for the company to locate its tax address in Ireland for tax purposes, though the drugmaker’s operational headquarters will be in New York. Pfizer Chief Executive Officer Ian Read will be chairman and CEO of the new company, with Allergan CEO Brent Saunders as president and chief operating officer, overseeing sales, manufacturing and strategy.

The deal will begin adding to Pfizer’s adjusted earnings starting in 2018 and will boost profit by 10 percent the following year, the companies said. Pfizer’s 11 board members will join four from Allergan, including Saunders and Executive Chairman Paul Bisaro.Pfizer dropped 2.1 percent to $31.51 at 9:34 a.m. in New York, while Allergan fell 2 percent to $306.17. The combined company will trade on the New York Stock Exchange.Pfizer said it will start a $5 billion accelerated share buyback program in the first half of 2016. The deal is expected to be completed by the end of next year.

Unprecedented Deal

Pfizer, based in New York, makes medications including Viagra, pain drug Lyrica and the Prevnar pneumococcal vaccine, and Allergan produces Botox and the Alzheimer’s drug Namenda. Together, barring any divestitures, the companies will be the biggest pharmaceutical company by annual sales, with about $60 billion. The deal will be unprecedented on many levels. It’s the largest acquisition so far this year. It’s the largest ever in the pharmaceutical world, eclipsing Pfizer’s purchase of Warner-Lambert Co. in 2000 for $116 billion. And if the new company is able to establish itself abroad for a lower tax rate, a controversial process called an inversion, it will be the largest such move in history. The U.S. Treasury Department has increasingly targeted such strategies, most recently announcing new guidance on how it will value assets owned by U.S. companies that undertake inversions. The U.S. has the highest tax rate for businesses in the world, at 35 percent, and is one of the only countries to tax corporate profits wherever they are earned. Previous moves by the U.S. Treasury have derailed other proposed inversions, including AbbVie Inc.’s plan to buy Ireland’s Shire Plc for an estimated $52 billion. Pfizer and Allergan’s deal appears structured to avoid the tax inversion rules.

Read has already reached out to lawmakers in both houses of Congress, including Senate Majority Leader Mitch McConnell, and is calling the White House Monday, according to a person with knowledge of the matter. His pitch is that that the deal will help the companies invest in more innovative drugs and that Pfizer Plc would have 40,000 U.S. employees at the close of the transaction.

Facilitate Split

An agreement may also facilitate the widely discussed potential for Pfizer to reconfigure itself by splitting the newly enlarged company into two: one focused on new drug development, the other on selling older medications. Pfizer said Monday it will decide on a potential separation by the end of 2018. Pfizer earlier this year bought Hospira Inc., the maker of generic drugs often administered in hospitals, in a transaction valued at about $17 billion. The deal bolstered Pfizer’s established-drugs business, which combines strong cash flow and slow growth. Allergan itself has been recently transformed, created through an acquisition by Actavis Plc that kept the Allergan name. The company agreed to sell its generics business to Israel’s Teva Pharmaceutical Industries Ltd. for about $40.5 billion and has been on a buying binge of its own. It now has more than 70 compounds in mid-to late-stage development.

But What About Pfizer R&D?  Will that be put on the Back Burner?

A little while ago this site posted a talk given by Pfizer on their foray into personalized medicine in

11/19/2015 8 a.m. Building a Personalized Medicine Company & Keynote: President, Worldwide R&D, Pfizer Inc. 11th Annual Personalized Medicine Conference, November 18-19, 2015, Harvard Medical School

Here Pfizer had emphasized its commitment to discoveries in the personalized medicine area however the emphasis on worldwide may have been a hint of what is to come.

Just a few days ago Allergan CEO wrote a guest post in Forbes  (edited by Matthew Herper)

Allergan CEO Brent Saunders: Here’s What I Really Think About R&D

There has been a lot of discussion about my views about pharmaceutical research and development. Let me cut to the chase. I’m pro-R&D, but I don’t believe that any single company can corner the market on innovation in even one therapeutic area. It doesn’t mean they shouldn’t do basic research where they have special insights, but even then they need to be open to the ideas of others. Innovation in healthcare is more important than ever. Other companies have had success with different models based on different capabilities, and we applaud every new drug approval. Here at Allergan, we’ve adopted a strategy we call “Open Science.” It is based on a simple concept: Sometimes great ideas come from places where they are least expected.

Allergan’s CEO goes on to stress innovation centers around academic centers such as in Boston and an emphasis on Alzheimer’s research and development but is this just shop talk or is there a agenda and strategy here?

It is known that Allergan has not felt that building big labs to support an R&D strategy was in their best interests but Derick Lowes Science blog In the Pipeline shows the changes in feeling about R&D, that Allergan is in fact pro-R&D they just don’t feel it is in their best interests to do it “in house”. (see Come to Think of It, Brent Saunders Likes R&D, Too! and the comments)

And check out CEO Saunder’s Twitter feed which gives some insight into his feeling on in house R&D.

Retweeted

on a R&D approach that can deliver big for patients.

This is all very interesting and might mean, with the size of this deal and that Allergan owns 40% of Pfizer, a massive sea-change in the way big pharma conducts R&D, possibly focusing on smaller “open-sourced” smaller players.

Our Open Science approach allows us to strategically invest in innovation and be more nimble so that we can increase our R&D efficiency. It has led to a robust pipeline of experimental medicines. We currently have 70 mid- to late-stage programs in the pipeline, and since 2009, we have successfully brought 13 new drugs and devices to the market.

It also allows us to invest in areas that other companies have abandoned, like central nervous system (CNS) treatments. In CNS, clinical development costs are higher, and market approval probability is lower. But treating these disorders can bring hope to patients of all ages. According to the Centers for Disease Control & Prevention, one in 68 children has autism spectrum disease. Alzheimer’s affects one in three people over the age of 85, based on data from the Chicago Health and Aging Project. Yet despite the 634 current open clinical trials for these diseases, there are no approved medicines for autism’s three core characteristics, nor drugs that treat Alzheimer’s underlying disease or delay its progression.

Other related articles published in this Open access Online Scientific Journal include the following:

On Allergan

https://pharmaceuticalintelligence.com/?s=Allergan

On Pfizer

https://pharmaceuticalintelligence.com/?s=Pfizer

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Pfizer Near Allergan Buyout Deal But Will Fed Allow It?

 pfizerallergan

 

Reporter: Stephen J. Williams, Ph.D.

From Bloomberg Business

Pfizer Inc. is in advanced talks to buy Allergan Plc for as much as $380 per share, according to people familiar with the matter, valuing the Botox maker at as high as $150 billion — if the U.S. government doesn’t get in the way of the drug industry’s largest-ever deal.

See Bloomberg’s QuickTake: Tax Inversion

There has been 51 US company tax-inversion based relocations since 1982 with the rate picking up in the last 3 years (from Bloomberg Data). Many of these inversions in recent years have involved large pharma companies.

The companies aim to announce an agreement as soon as Monday, the people said, asking not to be identified because the discussions are private. The price being discussed is $370 to $380 per share, two of the people said. However, the U.S. Treasury Department’s letter on tax inversion deals, released on Wednesday, could delay the final agreement and change the terms of any transaction, another person said.

Pfizer shares sank 1.5 percent to $32.80 and Allergan fell 1.4 percent to $306.37 at 9:57 a.m. in New York on speculation that the deal could be hampered by the Treasury’s letter, which said the department is reviewing ways to address overseas acquisitions and plans to issue guidance later this week.

Pfizer has tried but hadn’t succeeded, in the past, to complete a merger, supposedly for a tax inversion. The latest attempt was the failed attempt to buyout British based AstraZeneca in 2014 for $117 billion. When Pfizer makes a buyout employees of Pfizer and the purchased company generally acknowledge that layoffs will ensue (from FiercePharma UPDATED: Pfizer’s post-megamerger cost-cutting record? 51,500 jobs in 7 years).

More posts on Pharma Deals and Mergers on this Open Access site Include

Pfizer offers legal guarantees over AstraZeneca bid

Medical Devices Industry: Investment Facts and Industry Prospects

14:00PM – 10/1/2014: Conference Workshop “Conundrums and Conflicts in Licensing & M&A Deals” @14th Global Partnering & Biotech Investment, Congress Center Basel – SACHS Associates, London

Profits versus R and D: Shifts in the Research Culture – US vs Global Markets

 

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Risk Factor for Health Systems: High Turnover of Hospital CEOs and Visionary’s Role of Hospitals In 10 Years

Reporter: Aviva Lev-Ari, PhD, RN

High Turnover of Hospital CEOs: A New Risk Factor for Health Systems and Bond Investors

With a 17% CEO turnover rate and a record-setting $20 billion downgrade of not-for-profit healthcare debt, attention to the cultural fit of hospital CEOs is more important than ever, reports Phillips, DiPisa & Associates

The fit of a CEO with an institution’s culture can have a direct impact on patient care, and a poor fit can be financially catastrophic.

Chicago, IL (PRWEB) July 11, 2013

Already facing growing pressure to contain costs, jockey for market position, and manage physician groups, top executives at not-for-profit health systems are increasingly being evaluated by bond-rating agencies for patient care outcomes. Driven by new Medicare guidelines and Affordable Care Act regulations that require hospitals to track patient “fitness”—including readmission rates, quality of care and satisfaction surveys—the focus on the fitness of CEOs is intensifying even as turnover is spiking.

At 17 percent in 2012 (compared with about 14 percent in the private sector), the CEO turnover rate is already at near-historic highs and “may continue to increase,” says Thomas C. Dolan, former president of the American College of Healthcare Executives. The risks of executive failures are growing as well, with implications for a system’s ability to attract investors for its bond offerings.

The fit of a CEO with an institution can have a direct impact on patient care, and a poor fit can be financially catastrophic. A badly matched CEO can cost an institution tens of millions of dollars in direct costs and exponentially more in indirect costs associated with ratings downgrades that increase the cost of financing, physician, patient and staff attrition, delayed or halted programs, service expansion, and innovation. Once a hospital loses its competitive advantage and access to affordable financing, it’s difficult to recover.

Health systems—and bondholders—are already reeling from the financial consequences of leadership problems. Moody’s Investors Service downgraded a record-setting $20 billion of not-for-profit healthcare debt in 2012—a 213% jump from 2011—citing “management and governance issues,” “more competition… and weakened or negative revenue growth” as three main drivers, according to Carrie Sheffield, a Moody’s associate analyst.

A significant risk to investors right now is leadership instability. “A successful CEO helps define the culture and strategic direction of an organization,” says Mark Melio, Founder of Melio & Company, LLC, a financial advisor to not-for-profit healthcare institutions. “Mergers and acquisitions in healthcare are currently at an all-time high. Investing in innovative ways to improve outcomes and quality of care while managing expenses will continue for the foreseeable future. A capable CEO’s leadership in navigating these challenging times and making critical decisions has never been more important.”

For example, a successful not-for-profit health system in the southeast suffered a downward spiral at the hands of a tyrannical CEO whose personal ambitions conflicted with those of the health system. In less than four years, three senior executives resigned, staff morale plummeted, and poor acquisitions left the system without the financial resources to keep up with its competitors’ technological advancements and labor cost adjustments. As a result, physicians were leaving for the competitors, and the patients followed. Ultimately, the system’s failing financial health jeopardized its bond covenant obligations, triggering a ratings downgrade.

The system brought in a new CEO who fit with its culture. He stabilized the organization, restored its reputation, galvanized the staff, and stopped the revolving door of senior executives, leading the system from the brink of failure to a position of financial strength worthy of a ratings upgrade.

With CEO fitness now thrust into the spotlight, more investors will be scrutinizing a health system’s patterns of progress in construction and service-expansion projects, in regular technological upgrades, in the stability of its staff, in growth in patient numbers, and improvement in patient outcomes as potential indicators of the cultural fitness of the CEO. Evidence of a negative shift in patterns will compel investors to reevaluate the overall health of the institution.

Health systems are beginning to respond with greater urgency to the crisis by paying closer attention to cultural fit to reduce CEO turnover and sustain growth—a trend that will continue as organizations seek to regain or maintain financial stability and positive bond ratings, and seek to restore or reinforce investor confidence. Deliberate attention to CEO fit is now, and will remain, critical for the success of not-for-profit health systems and for their investors.

About Michael Corey

Michael Corey is a partner at Phillips, DiPisa & Associates and a former hospital senior executive. He specializes in senior-level executive recruitment for community healthcare systems, academic medical centers, medical group management, associations, and leadership for not-for-profit organizations.

Contact:

Michael Corey
Phillips, DiPisa & Associates
312-620-1010
mcorey(at)phillipsdipisa(dot)com
Connect with Michael Corey on LinkedIn

About Phillips, DiPisa & Associates

Phillips DiPisa is a retained executive search firm serving the healthcare industry. Ranked as one of the top healthcare recruiting firms in the country, Phillips DiPisa is known as Leaders in Recruiting Leaders by its growing base of clients across the country, drawing on a national pool of candidates. For more information, please visit

http://phillipsdipisa.com/.

SOURCE

http://www.prweb.com/releases/2013/7/prweb10910847.htm

 

Forbes, 7/24/2013 @ 10:03AM 

Dave Chase

Dave Chase, Contributor

I power/cover disruptive innovators reinventing healthcare.

What’s The Role Of A Hospital In 10 Years?

Dr. Eric Topol was named #1 Most Influential Physician Executive in Healthcare of 2012 by Modern Healthcare so his views are closely watched. In addition to his role as a cardiologist, geneticist and author of the Creative Destruction of Medicine, he’s also the Editor-in-Chief of Medscape (WebMD’s leading physician offering). Every health system CEO I’ve spoken with readily admits that we’ve essentially had a hospital building bubble with an over-capacity of 40-50% of hospital beds as we shift from the “do more, bill more” fee-for-service system to the “no outcome, no income” fee-for-value era.

Topol has gone on the record stating that in the future, the only real reason to have hospitals is for their Intensive Care Units if digital medicine is adopted. His recent tweet of his vision was provocative comparing it to Wired’s vision. Despite the widely held view of over-capacity and alternative scenarios such as Topol’s, I have yet to hear about the health system board thinking in these terms. With the board’s fiduciary responsibility to think further out than the CEOs since their tenure usually outlives CEO tenure, is this not a dereliction of their duties?

While some healthcare leaders may dismiss Topol, his ideas aren’t without precedent. In Denmark, they realized that most people weren’t having their end-of-life wishes met — generally speaking people want to be with family and friends at home while being warm, dry and pain free.  A shift in approach shifted the norms from well over half of people dying at hospitals, to 92% dying at home according to their wishes. A mix of remote monitoring, video conferencing and house calls enabled this. This also happens to be far less expensive — not an insignificant point in these budget-constrained times.

“History doesn’t repeat itself, but it does rhyme.” – Mark Twain

Lessons From Newspapers For Health Systems’ Immense Challenge

Health system CEOs and board have an immense challenge I have heard described as the equivalent of going down a rough river with one foot in one canoe called fee-for-service (FFS) and their other foot in another kayak called fee-for-value (FFV). The objectives of FFS and FFV are diametrically opposed and puts hospitals in an untenable situation. For example, in one they operate like a hotel wanting to have heads on beds maximizing occupancy. While in the other, a hospitalization represents a failure in the system to be avoided.

In theory, a non-profit health system board has an easier decision to make since topline revenue shouldn’t matter as much as long-term economic sustainability. Thus, they could make decisions that would harm their topline revenue as long as it was economically sustainable. Unfortunately, health organizations are dooming their innovation to failure the way they are going about their reinvention.

While no analogy is perfect, health system boards would be well advised to study what newspaper industry leaders did (or perhaps more appropriately, didn’t do) when faced with a dramatic industry change. Turn back the clock 15 years and the following dynamics were present:

  • Newspaper leaders knew full well that dramatic change was underway and even made some tactical investments. However they didn’t fundamentally rethink their model beyond window-dressing.
  • Newspapers were comfortable as monopoly or oligopoly businesses allowing for plodding decisions. Their IT infrastructure mirrored the plodding pace with expensive and rigid technology architectures.
  • Newspaper companies bought up other newspaper chains and took on huge debt.
  • Owning printing presses was a de facto barrier to entry allowing newspapers unfettered dominance.
  • Depending on one’s perspective, it was the best of times or the worst of times to be a leader of local media enterprise.

Before they knew it, owning massive capital assets and the accompanying crushing debt became unsustainable. The capital barrier to entry transformed into a boat anchor while nimble competitors dismissed as ankle-biters created a death-by-a-thousand-paper-cuts dynamic. Competitively, newspaper companies worried only about other media companies or even Microsoft MSFT +2.24%, but their undoing was driven by a combination of craigslist, monster.com, cars.com, eBay, and countless other substitutes preferred by the majority of their customers. In addition, there were easier ways to get news than newspapers. Generally, the newspaper’s digital groups were either marginalized or unbearably shackled so that the encumbered digital leaders left to join more aggressive competitors. The enabling technology to reinvent local media didn’t come from legacy IT vendors who’d long sold to newspaper companies, but from “no name” technologies such as WordPress, Drupal and the like.

The parallels with health systems today are clear. Consider the present dynamics:

  • The handwriting is on the wall for health systems but there is little evidence that organizations are aggressively moving at a scale corresponding to the enormity of the change.
  • Health systems have been aggressively gobbling up other healthcare providers and frequently taking on debt to finance the growth. Concurrently, health systems often have capital project plans that equal their annual revenues even though no expert believes the answer to healthcare’s hyperinflation is building more buildings. Consider the duplicative $430 million being spent in San Diegoto build two identical facilities just a few miles apart as Exhibit A of the problem. Studying other countries that shifted from a “sick care” to a “health care” system, more than half of their hospitals closed. They simply weren’t needed or appropriate.
  • Until recently, complex medical procedures always took place in an acute care hospital setting. Increasingly they are being done more and more in specialty facilities that can do a high volume of particular procedures at a signifiantly lower cost. With “hospital at home” programs proving to be move effective than regular hospitals for an increasing number of procedures, Topol’s view of only needing hospitals for ICUs starts to come into view. Company-sponsored Centers of Excellence programs are rapidly growing with companies ranging from Boeing to Lowes to Pepsico to Walmart further obviating the need for duplicative infrastructure for non-emergent surgeries. The byproduct is making every community hospital in competition with Mayo and Cleveland Clinic with inferior outcomes in most cases. [See graphic below]
  • Just as newspapers were implementing multimillion dollar IT systems while nimble competitors were using low and no cost software to disrupt the local media landscape, health systems are similarly implementing complex systems to automate the complexity necessary in a multi-faceted system. Meanwhile, disruptive innovators are implementing new models at a fraction of the cost and time. For example, it’s well understood that a healthy primary care system is the key to increasing the health of a population. Imagine if a fraction of the billions being spent by mission-driven, non-profit health systems on automating the complexity of the old model was redirected towards the reinvigoration of primary care. They’d further their mission and lower their costs. Of course, they’d likely see revenues drop but presumably maximizing revenues isn’t the mission of a non-profit. See Health Systems Spending Billions to Prepare for the “Last Battle” for more.
  • The plodding pace and scale of innovation at most health systems isn’t up to the enormity of the task. The vast majority of health system innovation teams are constrained by how they have to fit innovation into an existing infrastructure. That approach rarely, if ever, leads to breakthroughs, as its true intent is to make tweaks to a current system rather than a rethink from the ground up.

Innovator's Prescription

New Wave of Disruptive Models in Healthcare

Image is courtesy of Jason Hwang, M.D., M.B.A.  Executive Director, Healthcare of the Innosight Institute and co-author of The Innovator’s Prescription.

Compared to newspapers, the scale and importance of the challenge is far greater for health systems so they must aggressively take action or risk their future viability.

Rx for Healthcare From a Newspaper Industry Executive
In the midst of the newspaper industry disaster, there is one notable bright spot from an individual who has gone against the conventional wisdom that newspapers are doomed to fail. His name is John Paton and he’s reinventing local media. Highlighted below are some of what he’s done to turn a bankrupt (creatively and financially) enterprise into a profitable, dynamic and rapidly growing enterprise attracting the all-stars of the industry such as Jim Brady. It hasn’t been without continued challenges as he transparently reports on hisblog.

There has been an expression in traditional media that analog dollars are turning into digital dimes. Rather than lament that, here’s John Paton’s response:

“And it is true that print dollars are becoming digital dimes to which our response at Digital First Media has been – then start stacking the dimes. All of that requires a big culture change. A change that requires an adoption of the Fail Fast mentality and the willingness to let the outside in and partner. Partnering is vital to any media company’s growth whether it is an established media company or start-up. We are going to marry our considerable scale with start-up innovation to build success.”

It’s worth noting that those “digital dimes” are often more profitable than the “analog dollars” of the past because much less overhead is required. It’s well understood that hospitals are shifting from revenue centers to cost centers so it behooves healthcare provider leaders to adopt new models that are well-positioned to be profitable in the fee-for-value era.

The following is John Paton’s 3-point prescription for reinvention that led to a 5x revenue increase and halving of capital expenses. This resulted in his organization going from bankruptcy to $41 million of profit in two years.

  1. Speed to market: One new product launched per week.
  2. Scaling opportunity: Sourced centrally, implemented locally. Ideas can come from all over. Identify the best ideas/people from all over.
  3. Leverage partners: Feed the fire hose of ideas from outside.

Unfortunately, before John Paton was able to affect this level of change, scores of newspaper employees lost their jobs while traditional newspaper executives dawdled. It is the rare leader that can create the sense of urgency necessary to affect this scale of change before the enterprise is a hair’s breath from extinction. It might be one of those tough-as-nails nuns running a health system that isn’t concerned about bonuses that refocuses their mission from growth to health. As the old oil filter ad says, “you can pay now or pay later” – of course, the cost is much greater if change is delayed. The only question is whether health system leaders will have the courage to make the change before the inevitable hurricane hits with full force.

Applying Reinvention Lessons into Healthcare
Listed below are some ideas and examples of how this approach can be applied to tackle the enormous challenge facing health system leaders. The wave of disruptive innovation is building with pioneers such as WhiteGlove Health and Qliance forging new territory and then others putting their own twist on it.

[Disclosure: The company where I’m CEO, Avado, provides Patient Relationship Management technology for some of the organizations mentioned which is why I have a view into their projects.]

Fresh, Outside Perspective is Imperative
As John Paton brought in outside advisors such as Jeff Jarvis and Jay Rosen, health systems would be well-advised to do the same. They can go a step further and partner with innovators driving new models. They can be project managers or partners. One example is Dr. Rushika Fernandopulle founded Iora Health and was highlighted in now-famous The Hot Spotters article linked to in The Hot Spotters Sequel: Population Health Heroes. Iora Health has partnered with hospitals such as Dartmouth-Hitchcock. From reports I hear, their CEO is using Iora Health to catalyze change amongst his medical staff as they can see a modern delivery model in action that is unencumbered by the flawed fee-for-service model.

Like local media executives in the late 90’s, healthcare leaders can view the present time period as either the best or worst time to be in their role. The health system leaders who believe it’s the best of times would do well to ask themselves “What Would John Do?” John Paton demonstrates how a strong leader can reinvent and reinvigorate a lumbering giant turning it into a dynamic organization.

SOURCE

http://www.forbes.com/sites/davechase/2013/07/24/whats-the-role-of-a-hospital-in-10-years/

 

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