SESSION 2:
PANEL PRESENTATIONS

Lessons From The Electronics Industry

Bruce A. Mueller

Collaboration raises questions about benefits and challenges in health care as in any high-tech industry in which change occurs frequently. Health care is no different from business or industry in the need for collaboration. In health care, however, change is not occurring as fast as it is in the manufacturing segment of the electronics industry.

Collaboration began in the electronics industry more than two decades ago because it was necessary to make substantial improvements in technology. Today, manufacturers whose products are in competition on the shelves of retail stores are collaborating on a next generation, fourth generation, or fifth generation of technology. In the electronics industry, as in any fast-changing industry, most of what is proprietary is old technology, not current or future technology, so that sharing proprietary information and technologies is not a competitive threat.

There have been many failures in the pursuit of quality. Motorola had three different programs to try to improve quality. We learned that it was not until customers were brought in and asked about quality that things began to change. There is still an arrogance that permeates health care, however. Often those in the health care industry believe that they know what consumers want without listening to them. As a result of this misperception, few discussions of quality improvement include consumers when services are designed.

In addition to including consumers in quality improvement efforts, Motorola began to share data with other companies. Dramatically higher quality and lower costs were the result. The lower the costs dropped, the more value Motorola was able to incorporate into the instrument or end product, the more value the consumer received, and the more the consumer trusted the product. This cycle of improvement and increased value and customer loyalty by consumers is an important lesson that health care organizations could emulate.



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--> SESSION 2: PANEL PRESENTATIONS Lessons From The Electronics Industry Bruce A. Mueller Collaboration raises questions about benefits and challenges in health care as in any high-tech industry in which change occurs frequently. Health care is no different from business or industry in the need for collaboration. In health care, however, change is not occurring as fast as it is in the manufacturing segment of the electronics industry. Collaboration began in the electronics industry more than two decades ago because it was necessary to make substantial improvements in technology. Today, manufacturers whose products are in competition on the shelves of retail stores are collaborating on a next generation, fourth generation, or fifth generation of technology. In the electronics industry, as in any fast-changing industry, most of what is proprietary is old technology, not current or future technology, so that sharing proprietary information and technologies is not a competitive threat. There have been many failures in the pursuit of quality. Motorola had three different programs to try to improve quality. We learned that it was not until customers were brought in and asked about quality that things began to change. There is still an arrogance that permeates health care, however. Often those in the health care industry believe that they know what consumers want without listening to them. As a result of this misperception, few discussions of quality improvement include consumers when services are designed. In addition to including consumers in quality improvement efforts, Motorola began to share data with other companies. Dramatically higher quality and lower costs were the result. The lower the costs dropped, the more value Motorola was able to incorporate into the instrument or end product, the more value the consumer received, and the more the consumer trusted the product. This cycle of improvement and increased value and customer loyalty by consumers is an important lesson that health care organizations could emulate.

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--> Antitrust Regulation Robert F. Leibenluft, J.D. George Eads commented that organizations should not hide behind the antitrust laws as an excuse for not collaborating to improve quality. This is good advice; and as Clark Havighurst, who gave an excellent summary of the applicable antitrust laws, indicated, collaboration efforts generally can be carried out in a manner consistent with the antitrust laws. Organizations should make sure, however, that they are complying with the antitrust laws in substance and not just in form. A number of imperfections in the health care market could be addressed by collaborative efforts, including initiatives aimed at measuring quality and collecting data. In regions where providers contract with many plans, such efforts may be particularly worthwhile. It is important, however, to draw the distinction between collaboration that attempts to deal with market failures so as to make the market work better and joint efforts that attempt to supplant market competition. The latter course can be done lawfully under the antitrust laws only by federal or state governments or by private entities under active government supervision pursuant to a clear government policy to supplant competition. Of course, it is also permissible for organizations to lobby and petition the government to take certain actions (including actions that might limit competition). When examining the actions of private parties, the antitrust enforcement agencies consider whether the collaborative efforts likely will have the effect of creating efficiencies and promoting competition or, whether they will likely have the effect of stifling competition and working to the detriment of consumers. Collaborative activities among competitors, including information sharing and standard setting, are common in many industries and do not raise serious antitrust concerns. For example, efforts to gather and interpret physician data, jointly perform outcomes studies, and develop practice guidelines, all can be procompetitive, and indeed the federal antitrust enforcement agencies have explicitly provided guidance on these issues in their Statements of Antitrust Enforcement Policy in Health Care.45 Actions to exclude providers from plans to achieve better quality or more cost-effective care are also generally acceptable, provided that they are unilateral efforts. However, agreements among competitors to adhere to standards, for example, with respect to what types of medical services are covered or which providers should be included in a network, can raise significant antitrust issues since such joint action limits consumer choice and is less likely to be necessary to achieve efficiencies. Thus, plans should make such decisions independently, without agreement with other competing entities. Also problem- 45   Department of Justice and Federal Trade Commission. 1993 Statements of Antitrust Enforcement Policy in Health Care. Online. (URL:http://www.ftc.gov/reports/ hlth3s.htm). Accessed, June 10, 1998.

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--> atic is the sharing of information on competitive issues, such as the prices to be charged or the services to be offered in a market. Aside from the legal issues, there are sound policy grounds for avoiding agreements among firms related to quality of care. There is much to be learned about how to measure and achieve health care quality. Procompetitive collaboration and information sharing can serve to increase such knowledge and help make the market for quality health care work better. In addition, vigorous competition among health plans can provide strong incentives to improve quality. On the other hand, agreements across plans can result in the dulling of incentives to develop new ways to measure or improve quality. The Limits Of Competition Paul B. Batalden, M.D. If cooperation for the improvement of quality among competing managed care organizations is to be seriously advanced as a worthy idea, it is likely to require perseverance because giving voice to the importance of cooperation among competitors in the current U.S. health care situation can seem naive to many and even self-defeating. Thomas Gilovich46 as described several reasons for the persistence of self-fulfilling prophecies like, ''cooperation doesn't make sense in a competitive health care system:" First, negative prophecies, such as "we cannot cooperate," are more readily confirmed; second, for prophecies that have a kernel of truth, such as "it is hard to cooperate and compete," that kernel tends to be exaggerated; third, prophecies that seem to be self-fulfilled, such as "because it is so hard for competitors to cooperate, very little meaningful cooperation can be identified," can have the effect of discouraging future actions. Nevertheless, cooperation in several areas seem to make sense. First, cooperative efforts seem to make sense when the science is compelling. For example, when providers agree on a treatment choice, there are no antitrust constraints. Such a process simply identifies the conditions under which an action ought to occur. Second, cooperative efforts make sense when competitors realize that they are common customers of a supplier, as well as competitors. As Bruce Mueller said, one of the things that health care organizations must learn is how to be more mature competitors, and they must understand the importance of recognizing that at any one time organizations are competitors, suppliers, and customers. The health care industry has not typically thought of health care providers as suppliers. Health care is an indirect activity in which the competing suppliers of care must realize that 46   Gilovich, T. How We Know What Isn't So: The Fallibility of Human Reason in Everyday Life. New York: The Free Press, 1991.

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--> they need to work in a common environment and should take action to help make that a better environment by offering choices to consumers. A third opportunity for cooperative efforts makes sense when adverse outcomes occur rarely and competitors want to use scientific methods to help guide improvement. Good examples are conditions for which the mortality rates are less than five percent. It is difficult to conduct studies of these rare conditions in most health care organizations in a statistically varied way. Organizations could work cooperatively to do research and change the ways in which they care for such patients. For example, collaborative research on persistent left ventricular failure after coronary artery bypass grafting is an activity that could benefit competing organizations and the community. Cooperative efforts may make sense when there is only one delivery system, as is the case in many rural areas. Such circumstances pose considerable costs in setting up alternative systems and pose a risk that newly developed alternatives will take resources out of a community. Government invitations to cooperate may be essential to encouraging cooperative activities in these areas. The Medical Director's Perspective George J. Isham, M.D. Clark Havighurst's reassurance that market paradigms as embodied in antitrust laws would condone, not oppose, many forms of collaboration among competing health plans is reassuring. Competition in health care is not new. It has existed at the provider level in the pre-managed care era and continues among physicians, physician groups and hospitals to this day. What is new is the extent of competition at the managed care organization level in individual regional markets. As individuals are enrolled in health plans in large numbers the potential for new forms of cooperation in improving quality of care is made possible. With these new possibilities come new questions about whether these possibilities bring the potential of antitrust violation. The Havighurst discussion is a helpful guide in sorting out these questions. In the Twin Cities metropolitan area, three companies divide approximately 75 percent of the health plan market. Whenever these companies meet they must be careful not to discuss issues that would violate antitrust laws. They therefore often consult with legal experts to assure themselves that this requirement is met. One troubling conclusion from the Havighurst analysis permits group agreement among competitors to set standards but not to follow them. In health care, the common good or public health can be improved, if effective interventions are implemented universally, even by competitors. As Havighurst points out, however, this is not an acceptable defense under current law. Pediatric immunization is an example. The agreement not only to set, but also to follow

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--> common standards, may help us better performance on key public health measures and better treatment for common chronic conditions, such as hypertension and diabetes mellitus. Redundant requests to physicians and other providers of care by managed care organizations to implement commonly accepted standards such as appropriate infection control procedures in private physician offices, can and should be simplified by common programs that promote the accepted standard and require compliance with it. I believe there is a difference between social purpose of health care and other forms of commerce that may justify some changes in antitrust laws for health care. We must make sure legal mechanisms are available to competitors to cooperate in such areas where the common good justifies it. There are new opportunities for promoting both new forms of competition and new forms of collaboration in health care. Competition on price, and quality as documented by standardized survey and measurement tools, is being encouraged at the level of provider care systems in Minnesota and New York. Organized, risk bearing, provider care systems are emerging from a cottage industry of individual entrepreneurial health care professionals. Opportunities for collaboration exist in furthering public health and in conducting research. On the public health side, a common immunization registry would fulfill the need to monitor the immunization status of a population as well as assist competing health plans to monitor and improve the immunization status of the populations they enroll. From a research perspective, collaboration offers the opportunity to increase the effectiveness of care for patients with rare conditions undergoing experimental therapy.