How Healthcare Can Benefit from Good Design

Posted by Paloma Medina

Good design can create the foundation for health professionals to be on the same page.

In my previous post, I delved into the use of infographics and data visualizations in healthcare, with an emphasis on the patient as the audience. In this segment, we’ll explore how design can help get health professionals on the same page and on the road to productive collaboration.

Good design captures their attention: The first step in having health teams that hold common goals and strategy is to first get everyone on the same page about facts. Information dissemination for front-line workers and providers is a difficult task however because they are largely a mobile work force whose main roles keep them away from personal computer stations. More so than other professions, they are less likely to have the time to read through informational emails and text memos. Enter good design: A well-designed poster in the elevator, for example, trumps an email in two ways:

1. It brings the message to the place where they staff have time to absorb it

2. It captures staff’s attention and holds on to it just long enough to deliver the message

Smart design can thus engage the mind even when the message would otherwise be  less-than-exciting.

Good design rallies and inspires: Well-designed infographics, posters, etc. stimulate more than just one part of our brain. Within seconds, a great design can make us smile, enrage us, make us feel sadness and empathy, or just fill us with wonder and inspiration. By evoking emotions in us, the right visual language has the ability to motivate us towards action — action that could be anything from re-thinking our work flows to something as simple as reading an entire poster about medication side affects. This type of motivation and emotional engagement is what we need to get staff talking and caring about key health care issues.  Once staff are emotionally engaged, the hard work of creating shared visions, goals and game plans is, well, a little less hard.

Examples of good design with health professionals in mind:

The Unknown Killer
Another in a series from GE’s Healthymagination, this time in partnership with the creative agency JESS3.  A poster of this kind is a perfect platform from which to build buy-in around a performance improvement initiative. The design is instantly engaging — it’s use of color is lively and the design is clean. The effect is a poster that makes hospital-acquired infections (HAIs) interesting to read about – quite an accomplishment indeed! An improvement to this poster might be to have icons or imagery that highlight the comparison between HAI deaths and breast and prostate cancer deaths – a powerful fact that could use an equally powerful graphic besides a bar graph.

Fosamax: Just the Facts

An excellent example of how a poster can pack a wallop of information without overwhelming the senses – this “Just the Facts” poster is aimed at updating providers on new information on a medication (in this case, it was for a medication that was in pre-recall stages).

Why this poster works:

- The color palette is calming and simple: Blues and beiges are the only colors used — shading and text size are instead used to bring key items forward and move secondary information to the back

- Icons are used to build empathy: The usual text heavy, small-font list of side-effects in medication ads and pamphlets dehumanizes the effect that these symptoms have on patients’ lives. Providers are more likely to consider the implications of side effects on their individual patients when imagery is used. A great example of the power of images is the simple but emotive “Stomach pain” icon.

What’s Happening on a Night Shift?

Arm nurses and health professionals with information, follow it up with empowering quality improvement infrastructure, and you have a recipe for targeted performance improvement. This night shift infographic uses three-dimensional illustration to “walk” the viewer through the dangers on the night shift.  There are some flaws in the poster design — some numbers are confusing as to what they relate to and the flow chart could be much clearer. That said, this is still a great example of how we can turn data into a story by contextualizing the information into a place or scenario. This results in increased engagement, information comprehension and retention for the viewer.

Relating back to our work: What information-rich message do we have that needs to be conveyed to providers? Would investing in a few poster prototypes result in something that busy staff members would be more likely to feel engaged with? As a side benefit, could a well-designed poster add color and contribute to a better aesthetic in staff areas, rather than the posting of drab memos?

We do not need to hire a designer or firm to create great materials — we can move away from text-only communication to a design approach by simply learning from this field (or collaborating with it) and incorporating the successful elements of good design into in-house created pamphlets, posters, and web pages.

Next Up: In my next post, I’ll share some example of health infographics and data visualizations that target health policy makers and analysts as the key audience.

Paloma Medina is an MPA HPAM 2012 candidate with a specialization in organizational coaching and development. Her background is in homeless health care, community development and design.

2011 Lewis and Jack Rudin New York Prize for Medicine and Health

Posted by Dean Ellen Schall

It was such a treat to be at the New York Academy of Medicine (NYAM) last month to see John Billings, director of the Health Policy and Management program at NYU Wagner, receive the Lewis and Jack Rudin New York Prize for Medicine and Health. The award recognizes healthcare professionals for promoting public awareness of challenges facing the New York City health community. In her opening remarks, NYAM President Jo Ivey Boufford, my predecessor as dean of NYU Wagner, described Professor Billings as “the ‘go-to’ researcher who is able to deal with public policy issues in a practical way.”

NYU Wagner has set an aspiration for our faculty—to undertake research that changes the way people think and act on important public issues. Billings’ ongoing work on the complex challenges involved in health care delivery does exactly that and does it brilliantly. While NYAM previously gave this prestigious award to medical practitioners, they now confer it on administrators, policymakers, and researchers as well. It’s especially rewarding to see an academic honored for the impact his research has had on the rapidly changing landscape of health care.

After Dr. Boufford’s welcome, New York State Health Commissioner Nirav Shah introduced Professor Billings, highlighting his capacity to use analytics to solve tough problems. He said, “If it takes great analytics, John is probably involved.”

Billings’ talk, “Population Health: Improving Health of Vulnerable Populations,” documented inequalities and disparities in health outcomes. He addressed the need for structural reform to create incentives, including financial ones, to motivate the various actors in the healthcare system so that we address the needs of vulnerable populations more effectively.

The luminaries in New York’s health care world were well represented and served as an impressive testament to John’s impact and reputation. It was particularly moving to have Jack Rudin there. Jack and the Rudin family are preeminent civic leaders and have supported so many important causes and institutions, including NYU and NYU Wagner, so generously.

Professor Billings’ speech was an indication of why so many students so eagerly line up to take his classes. He asks tough questions, challenges the status quo, and brings sophisticated analytics to bear on issues that go to the heart of some of our biggest challenges.

Ellen Schall is Dean and Martin Cherkasky Professor of Health Policy and Management at NYU Wagner

“My Boss, Ms. Healthcare: Leadership in Action”

Posted by Jacob Victory

I embrace the theory that leadership is an action-step. And I also think that bosses are an interesting species. It is sometimes hard not to notice themes when colleagues and friends who work in pharmaceutical firms, nursing homes, home health care agencies, hospitals, health care law or managed care organizations describe their bosses. “I need a leader, not a boss!” proclaims one close friend. “She’s a busy regulatory expert who can’t operationalize anything,” says one colleague. Another quips, “I can’t find him. He’s always focused on preparing board documents and is not interested in the day-to-day details.” Yet another smirks, “My boss is so overwhelmed putting out fires and worrying about reimbursement cuts that she rarely provides any direction—so I make the decisions that she needs to make for me!”

One synthesized it succinctly: “Healthcare has too many busy leaders who are focused on changing regulations or survival.” Indeed, healthcare insurance coverage, utilization, care delivery and reimbursement structures are evolving (I won’t use the word “changing”). As a service industry, healthcare is solely about people helping people. What help do our leaders need to manage their people, who can then help others to make this industry churn?

Since most of us work in the health care industry, let’s for a moment assume that we all share the same boss. We’ll call her “Ms. Healthcare” (I say “Ms” strictly based on personal experience, as I’ve had 11 bosses in my career thus far and nine have been women). Ms. Healthcare walks into her office every morning and faces: 1) Clinical staff shortages; 2) Changing regulations; 3) Chronically ill patients who need more coordinated care; 4) Reimbursement that increasingly does not cover expenditures; 5) An inquisitive board who seeks solutions; and 6) Management staff who fear self-implosion if they receive another project to manage—without resources. Let’s also assume that Ms. Healthcare has developed a short-attention span, is anxious, doesn’t espouse project management, and is continually faced with the same six issues I list above.  And with phone calls and meetings that clog her calendar all day, it can seem like it’s an endless cycle. (Luckily, patients continue to be served.)

Ms. Healthcare, being of awesome power and might, feels she can conquer everything. She is bright, hard-working and dedicated. Indeed, Ms. Healthcare has a lot to offer. She is continually chipping away at ensuring efficiencies, new care models, staff development and patient care. I’ve learned a lot from Ms. Healthcare, too. She’s taught me to think at a high-level, that building relationships are key and to have high expectations of myself and others. But let’s consider some easy leadership tips I’ve learned in my own experiences leading people, programs and projects and what I’ve observed in the experiences of others that she can follow to make her day even more productive. If I was her coach, I’d advise her to:

1.  Go to your computer. Find the delete key. Cancel 50% of your meetings. You don’t need them.

2.  Get a pen. Make a list. Prioritize your objectives. Do we really need all those projects completed simultaneously?

3.  Grab the phone. Call your direct reports. Check-in. Do you know how much a “How’s it going?” can re-energize your staff? And how much thinking has been done on staff development and succession planning?

4.  Find a clinician. Ask him what he needs. Are you prepared for what he might say?

5. Call a politician. Invite them to take a tango lesson with you. Could you dare your government to seek your input?

Now, you may think that the five points above are droll or too simplistic. My next five blog postings will address each respective tip in a bit more detail.  Blog postings thereafter will address the other healthcare issues that Ms. Healthcare faces. Leadership is indeed a verb, an action-step. I firmly believe that it can be easy only if its simplest tasks are mastered.

Jacob Victory, an NYU-Wagner alum, is the Vice President of Performance Management Projects at the Visiting Nurse Service of New York. Jacob spends his days getting excited about initiatives that aim to reform and restructure health care.  He’s held strategic planning, clinical operations and performance improvement roles at academic medical centers, in home health care and at medical schools. Jacob also exercises the right side of his brain. Besides drawing flow charts and crunching numbers all day, he makes a mean pot of stew and does abstract paintings, often interpreting faces he finds intriguing.

7 Billionth Birthday Raises Public Health Concerns

Posted by Errol Pierre

The world reached an important milestone on Monday, October 31st. The UN reported that there are now 7 billion people on the planet. Marking such a milestone was no easy task. Every second approximately 4 births and 2 deaths occur worldwide. That makes it nearly impossible to zero in on the exact number of people at any given time. Nonetheless in a symbolic gesture the UN celebrated this achievement with a press conference held by Secretary-General Ban Ki-Moon. There were also several coordinated festivals around the world celebrating the births of children on Monday in a sign of solidarity.

Danica May Camacho of Manila, Philippines was one such birth. She was born minutes before Monday but close enough to be bestowed the wonderful honor of being a ‘7 billionth baby’.  Her celebration was joined with fanfare from news cameras, photographers, and well wishers but other concerns lingered in the delivery room. Danica May was born premature. At 5 pounds and 8 ounce, she joined the other 13 million babies worldwide that are born too soon every year. Obstetrician & Gynecologist know all too well that premature birth is the leading cause of newborn deaths in the world.  Ironically, November 17th marks World Prematurity Day. So in just a few short weeks, March of Dimes and other organizations will participate in a robust international awareness campaign about Danica May’s plight.

There have been strides over the years to lower infant mortality but the averages are still too high. A 2011 report from the UN listed the worldwide infant mortality rate at 42 deaths for every 1,000 births. Luckily for Danica May, rates vary wildly and differ by country and region. The Philippines is well below this average with only 21 deaths per 1,000 births. However that is still 700% higher than countries like France, Germany, Japan, and Israel, which have some of the lowest rates in the world hovering around just 3 deaths per 1,000 live births.

And this is only half of the problem. About 40% of infant mortality can be attributed to premature births. The remaining 60% are caused by many other risk factors and socioeconomic conditions. Danica May has a 44% chance of growing up in poverty being born in the Philippines increasing the likelihood that she will have issues with access to food, shelter, education, clean water and healthcare. Higher income countries fair better but wide disparities within those countries still exist. Say Danica May were born in the United States for example. Her chances of growing up in poverty decrease in half to 22%. However, if she were Black or Hispanic, those chances only decrease by a quarter to about 35%. Understandably, money is a factor. The Philippines only spends 4% of its GDP on healthcare compared to the United States which spends closer to 17%.  But more money does not always correlate to more quality. Every single country in the world with a lower infant mortality rate than the United States actually spends less money as a percentage of GDP on healthcare.

These issues point to a much larger concern about our planet and its readiness to handle 7 billion people; let alone more. We are on pace to celebrate the 8 billionth baby by 2025. Public policy and health professionals dare to wonder if the world can accommodate the needs of so many humans. On Monday, Nozipho Goqo gave birth in Johannesburg, South Africa to a child which joined Danica May in recognition from the UN as another ‘7 billionth baby’. She named her child, Gwakwanele, which in Zulu means “enough”. Goqu might be right.

Errol Pierre works at a large insurance company focused on business development, sales, and strategy for employee benefits. He is currently pursuing a degree in Health Policy and Management with a specializing in health finance. He can be reached at

In the Journals: Obesity and Diabetes

Posted By Jan Blustein

Many of us believe that our neighborhood environment affects our health.  However, proving that this is so — and quantifying the environment-health link — is difficult.  That’s because we in some sense “choose” where we live.   Those who are able to live in healthy environments may have other advantages (such as healthier, better educated parents).  Those who live in less healthy neighborhoods may be otherwise disadvantaged.

An article in the October 20th issue of The New England Journal of Medicine tries to isolate the effect of neighborhood environment from neighborhood “choice.” Authored by economist Jens Ludwig and colleagues, the study draws on the experience of thousands of low-income families that participated in an experiment run by the Department of Housing and Urban Development (HUD) in the early 1990’s.  Called “Moving To Opportunity” [MTO], the experiment allowed families to enter a lottery in which some received housing vouchers that would allow them to move to low-poverty neighborhoods, while others did not receive vouchers.  The families have been followed by a set of research teams for more than a decade.

Ludwig and his colleagues looked at rates of obesity and diabetes – two conditions that are strongly linked with poverty and poor neighborhoods.  Not surprisingly, they found that families that had received vouchers lived in better-off neighborhoods.   However, they also found that adults in those families were somewhat healthier.  While there was no difference in obesity in by voucher status (BMI >= 30; 57.5% for the voucher group and 58.6% for the no voucher group), there was a significant difference in extreme obesity (BMI >= 40; 14.4% for the voucher group and 17.7% for the no voucher group), and diabetes rates (16.3% for the voucher group and 20.0% for the no voucher group).

While this tends to confirm our impression that neighborhood environment matters, it doesn’t tell us how environment affects health. Wealthier neighborhoods may offer healthier food options, contact with healthier peer role models, or less stress.  What is perhaps most striking about the experiment is the relatively small magnitude of the effects.  Rates of obesity and diabetes are high in this low-income sample, regardless of the opportunity afforded by the voucher. Health is a complex and cumulative outcome, and neighborhood is but one contributing factor.

Ludwig J, Sanbonmatsu L, Gennetian L, Adam E, Duncan GJ et al.  Neighborhoods, Obesity and Diabetes — a Randomized Social Experiment.  The New England Journal of Medicine.  2011:365:1509-19.

 Jan Blustein, Professor of Health Policy and Medicine at Wagner, teaches courses in statistics, program evaluation, and research methods. Her own research focuses on the dynamics underlying differences in health and health care among older Americans with chronic illnesses.   She can be reached at


Alleviating Our Value Deficit

Posted by Elaine Purcell

Fortunately, cutting healthcare costs is hardly a partisan issue. Especially during this time of economic downturn, policymakers and taxpayers alike are looking to cut costs anywhere they can. Regardless, where and by how much these expenses should be cut remains a major point of contention among policymakers across the political spectrum. Given the increasingly high costs associated with the healthcare system, it is not surprising that government healthcare programs have become low-hanging fruit for budget cuts—less than two years after the enactment of costly healthcare reform legislation.

Following the passage of the Affordable Care Act (ACA) of 2010, the Department of Health and Human Services reported that the bill would increase total national health expenditures by more than $200 billion from 2010-2019. In a statement by the Congressional Budge Office (CBO) in May 2010, they stated: Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.

ACA’s prospects of cutting costs may appear grim. In 2010 alone the United States spent$2.6 trillion on healthcare – over $8,000 per American. For more than 30 years now, healthcare costs have been growing at a rate 2% greater than the general economy. As an additional portion of the U.S. population gains insurance through expanded government healthcare programs, can we actually afford this new legislation?

A simple answer to this question is derived from basic financial principles: in order to achieve a return on an investment, one must actually make an investment. Nevertheless, the stakes are high and the nuances lie in how to not only achieve a return, but the greatest return from our $200 billion/year investment in the healthcare system.

To achieve the greatest return, we cannot only focus on reducing costs – we must strive to also improve quality. Ranked by the World Health Organization as the highest in costs but 37th in overall performance, the U.S. healthcare system is evidently experiencing a ‘value-deficit,’ which is truly at the crux of our nation’s healthcare problems.

One of the strongest themes pervasive throughout ACA is the generation of more information. More information on the top hospitals and the best doctors. More information on the medications that are most effective for treating certain conditions and patient populations. More information on how health plans’ benefit packages compare to others. According to basic market principles, additional and more accessible information will drive competition, which in turn, will force the suppliers of healthcare services to lower their costs and improve quality.

Regardless, in order to achieve greater competition, healthcare consumers must also change their behavior. They need to better understand their purchasing decisions. It’s ironic that with a commodity as priceless as good health, so many patients passively accept or deny treatments and services provided based on limited information. Patients must have the gumption to research their condition and choose providers or medication based on unbiased and comprehensible information.

Nevertheless, due to the nature of healthcare insurance, few patients are cognizant of healthcare costs. To alleviate this moral hazard, the financial burden must be extended to either the patient or the provider. ACA focuses primarily on the provider through carrot and stick approaches, such as pay-for-performance (P4P) programs, which reward physicians for providing the best care. Further, P4P penalizes physicians for over- providing care, thus making them more accountable for costs associated with the care they deliver.

To alleviate moral hazard on the patient side is more complicated and risky. Healthcare consumers are often more price elastic than one would predict, given that they currently lack the information and training to predict the consequences of foregoing certain preventive measures and early interventions. Nevertheless, applying co-payments on certain procedures and not others (such as mammograms) may encourage patients to be more wary of the amount and type of healthcare they consume.

Ultimately, the simplest equation for alleviating the value-deficit is this: costs divided by quality. Although this is undoubtedly more difficult to achieve than simple division, this basic equation should be the basis for solving the problems of our healthcare system.

Elaine Purcell is a second year graduate student in Wagner’s Health Policy and Management Program focusing on Healthcare Management and Administration. Prior to Wagner, she worked in Washington, DC analyzing healthcare policy during the passage of national healthcare reform.

The Hook

Posted by Jacob Victory

I recently bought a pair of trousers. The cloth was fancy, the pleats were perfection and the pants actually had lining. “Swanky,” I thought to myself, and I got excited about the discounted price; so I bought it—without trying it on because I’m a lazy shopper and found my size quickly. Excited about the purchase, I didn’t think about the pants until I had to wear it a couple of days later.  Yet, my enthusiasm waned; when I slipped on the trousers I had a wrestling match with the pants hook in order to button the pants. It did not hook properly and despite my strong intentions, multiple attempts and raised eyebrows, the hook won and I gave up. Defeated, I slipped into an older pair, grabbed my keys and took the train to have breakfast with one of my mentors.

On the train ride to work after my breakfast—elated at having had an hour’s worth of advice, encouragement, playful banter and savory hash-browns—my mind obsessed about the pants hook.  While I dislike purchasing clothes, I had found a great pair of fitted and expensive (albeit discounted) trousers. But that blasted hook prevented me from wearing it. Annoyed, my mind reflected back to my breakfast conversations and I was thankful that I had one mentor who, despite his modest rolodex and retirement from health care 10 years ago, understood me, listened to the questions I asked, and offered his years of experience, observations, and input on how I should focus on what I seek, delegate the rest, and look forward to all that a successful professional and social life has to offer. “He’s got me hooked on every word he says,” I recall thinking. And, just as the train conductor announced my stop, it struck me that “hook” was the morning’s theme.

On one hand, I had a fancy pair of trousers with the perfect cut and material but it was useless to me because I could not hook it up properly. On the other hand, I had a modest man of modest means offering me a tanker’s weight in wisdom & encouragement—and had me hooked for more. I believe in mentorship. If you’re a looking for a mentor, here are eight points to consider:

1.       Seek mentors who listen more than they speak. They are often the wisest.

2.       Do not solely focus on seeking the most powerful, well-liked or well-positioned person you can find. The best advice or opportunity is not always offered by those in “high” places.

3.       Once you identify someone, never ever (ever) ask, “Will you be my mentor?” It can be off-putting and tainted with obligation. Instead, consider asking them out for coffee or a phone-chat by asking: 1) “There is an issue on which I would love your advice,” or 2) “I’d love to hear about your background and thoughts on (insert topic here).” Anyone who allocates their time and lavishes advice on you will, in time, become your mentor.

4.       Find that “hook,” or that connection or particular commonality that bolsters your relationship.

5.       Carve out time to build a relationship, as this is 90% of the task.

6.       Consider their time valuable.

7.       Realize that some people are not inclined to teach, to give advice or lend their time. If you receive a polite “no,” thank them anyway and move on.

8.       Lastly: enjoy it, as feedback is a gift.

Jacob Victory, an NYU-Wagner alum, is the Vice President of Performance Management Projects at the Visiting Nurse Service of New York. Jacob spends his days getting excited about initiatives that aim to reform and restructure health care.  He’s held strategic planning, clinical operations and performance improvement roles at academic medical centers, in home health care and at medical schools. Jacob also exercises the right side of his brain. Besides drawing flow charts and crunching numbers all day, he makes a mean pot of stew and does abstract paintings, often interpreting faces he finds intriguing.

Accuracy is Only Half the Battle

Posted by Paloma Medina

In healthcare, as in most fields, the only thing better than accurate data is accurate data that reaches the right audience — i.e an audience that can turn that data into action/ change/ impact. How good is a comprehensive data set if it remains locked away in the academic realm? However, transforming data into information that shifts paradigms and moves key people into action requires a distinctly different skill set than assuring the accuracy and relevancy of the same data. Consequently, it is not surprising that the people involved in collecting and making sense of raw data are not the same as the folks thinking about how data can achieve maximum impact. Furthermore, these two types of people, the data wranglers and the designers, tend to occupy different spaces. Though this is slowly changing, the two camps traditionally have gone to different schools, worked for different companies, read different magazines, etc. Wagner for example, is teeming with data wranglers (and thankfully so!).  We have a wealth of analysts, evaluators, aggregators, statisticians and general data enthusiasts who bring a wealth of data management experience into the classroom. What we may be missing in our midst are the designers, the ones who are interested in questions such as:

-How do we turn this data into easy-to-reference knowledge?

-What new audiences could our data reach?

-How can we make our data compete with all the other information our audience is bombarded with?

-What makes data useful, digestible, intriguing?

-Can data motivate and inspire?

In healthcare, these questions become incredibly relevant — whether we are administrators interested in training 200 providers in a new procedure or we are program evaluators attempting to create a better way to collect patient feedback. Considering design in our work increases its efficacy because it takes into account what designers know – that just because it’s important doesn’t mean anyone is going to notice or care. Turning data into something people will pay attention to and easily absorb is about so much more than accuracy and relevancy. Good data design taps into aesthetic theory, psychology, anthropology, sociology, branding strategy and so much more. This is precisely what designers can bring to the table.

My question, then, is:

How might the healthcare field benefit from increased collaboration with the design field?

Great strides are being made in this arena. I propose to explore them further in upcoming weeks. I encourage you to continue the conversation with colleagues, and to email me your questions, tips, and links.  For now, I leave you with this:

Paloma Medina is an MPA HPAM 2012 candidate with a specialization in organizational coaching and development. Her background is in homeless health care, community development and design.

What Is My Company Worth – Part I

Posted By Joel Wittman, MS,MBA

Given the uncertainty created by Obamacare, health care companies have begun seeking consolidations through mergers and acquisitions as one of their future survival strategies.

This question of the value of a company frequently arises in conversations with owners, principals, and management of health care entities.  “Sure I’d sell my business.  Sure I think that we’d make a powerful team.  One question, though: How much is the business worth?”  The short answer is – it all depends.

To begin to understand the value of a company, the fundamentals of value must be explained.  A correct standard of value has to be established.  Fair market value fundamentals are based on the average price for the average buyer with neither party compelled to buy or sell and both parties being informed of the relevant facts.  Consequently, fair market valuations are typically at the lower range of the market.  Investment value fundamentals, however, are based on a specific price for a specific buyer and are based on an investor specific basis.  Ergo, value is extremely buyer dependent.  A company is worth what a buyer is willing to pay for it.  It’s like a home plate umpire in baseball.  The batter lets a pitch go by and then asks if it was a ball or a strike. The umpire’s answer: “It’s nothing until I make the call.”  It’s the same with the value of a business – it is worth what a buyer is willing and able to pay.

It is not my intention to be facetious about this topic but there is not a clear answer to the question.  There are common valuation techniques that establish parameters and metrics for valuing businesses.  Among these techniques are the calculation of the Net Book Value of a company, the use of Public Market Comparables, the creation of a Discounted Cash Flow model favored by financial buyers, the use of Comparable Transactions of similar companies if the data is available, and ,the most common metric,  the application of a Multiple of Earnings (after the appropriate level of earnings has been established – but that’s for another time).  Which leads to the question of how are multiples established?  Remember, value is extremely buyer dependent: one buyer may be inclined to assign a higher multiple to earnings than another buyer based on the first buyer’s reasons to complete an acquisition.  However, the range of multiples can be tied to the level of risk the buyer is willing to tolerate to “make the deal.”  Each buyer has a specific rate of return they would like to achieve from their investments.  An acquisition is another form of investment and can this investment earn a return comparable to, or greater than, other investment opportunities.

The range of value and assignment of a valuation metric is dependent on the risk of the investment.  The risk reflects the buyer’s required rate of return.  The lower the perceived risk, the higher the value metric; the higher the risk, the lower the metric and, intuitively, the lower the price.  However, there are determinants of risk that are specific to a company and can be managed by the company.  Among these are having:
•    diverse referral sources (the more, the better; the company is not overly reliant on one or two sources for its revenue stream)
•    a diversified product and revenue mix which can lead to a more predictable revenue stream
•    a diversified payer mix – don’t be too susceptible to changes in reimbursement
•    the influence of managed care on the company’s revenue stream – This typically
leads to lower reimbursement.  If a client of a medical staffing company ( such as a hospital) receives a large portion of its reimbursement from managed care payers they are less able and willing to pay full amounts for your company’s services.
•    middle management strength –  One of the most harmful things that you can indicate to a prospective buyer is that “you are the business” and that it cannot function without you.  Buyers are justifiably concerned that there will be a precipitous decline in revenues post transaction if this exists.  It is imperative to develop your management staff to the level of being able to function in your absence.
•     knowledge of your current business trends.  Is yours a stable and growing business that presents lower risk to a buyer?  What are the business trends in your marketplace?
•    knowledge of your competitors – Are they aggressively soliciting business? How many competitors are there in your market?  The fewer the number of competitors, the more predictable is your company’s revenue stream.
•    efficient accounts receivable management – This provides a snapshot of your operating infrastructure and management capabilities to a buyer.  The lower your company’s bad debt expense and days sales outstanding (the average time it takes to convert a sale into cash), the more predictable is your revenue stream, the lower is the perceived risk to the buyer, the higher valuation metric can be assigned to your business. Management and control of these company specific determinants of risk to the extent possible will increase the potential purchase price of a company.

Read my post in next month’s blog to learn about what strategies to implement to enhance the value of an M&A transaction.

Joel Wittman is an Adjunct Associate Professor at the Wagner School of Public service of New York University.  He is the proprietor of both Health Care Mergers and Acquisitions and The Wittman Group, two organizations that provide management advisory services to companies in the post-acute health care industry. He can be reached at

Medicaid Health Homes – The New York Story – Part 1

Posted by Professor John Billings

New York, like most states, is moving rapidly to implement a new initiative to provide care coordination/management to high risk Medicaid patients.  Stimulated by the 90-10 federal match rate that was established in the Patient Protection and Affordable Care Act, the New York Health Home Initiative is initially targeted at more than 700,000 Medicaid recipients who have at least two chronic conditions or a serious and persistent mental health condition.  In 2009, New York spent more than $8.7 billion for these patients, and the goal of the initiative is to improve health outcomes and reduce costs through improved care management and coordination that lowers rates of hospitalization and emergency department use.

In New York, the Medicaid program will pay a monthly fee to a “Health Home” to manage and coordinate care for each qualifying patient.  The fee is expected to range from about $50-$350 per patient per month depending on the level of risk as determined by the patient’s CRG acuity score and predictive modeling on the risk of a hospital admission in the next 12 months.  As currently envisioned, for patients enrolled in managed care, the fee will paid to the managed care plan where the patient is enrolled, and the plan will determine where the “Health Home” will be located and how the care coordination fee will be distributed.  For fee-for-service patients, the state has asked for submission applications from providers interested in qualifying as a Health Home, and the state will assign patients to a Health Home based on prior outpatient utilization patterns (based on a “loyalty” analysis), or based ED/inpatient use or geographically for patients with no recent outpatient utilization.  The program will be implemented in three phases beginning with 12 counties (including Brooklyn and the Bronx) in January, 2012, with an additional 14 counties expected in April, 2012, and the remaining 35 counties expected in June, 2012.  For further information on New York’s plans, see:

From a policy perspective, this initiative and its roll-out are of significance along multiple dimensions.  First the level of interest among providers has been enormous – the State received more than 200 letters of intent for applications to become a Health Home, with more than 90 in New York City alone.  Of course, with new money on the table in a time of Medicaid cutbacks, perhaps that’s not all that surprising.  But of more policy import is the extent to which the letter of intent process generated an unprecedented level of dialogue among medical, behavioral health, and social service providers, many of whom had no prior history of interaction.  Again, perhaps this is not so surprising – these are complex patients, with multiple conditions, often with a history of substance abuse or mental illness, many with housing problems, and many isolated with little or no social support structure.  Some potential applicants went solo or brought and handful of providers and community based organizations together.  But most applicants listed scores of medical provider organizations, behavioral health providers, social service providers, and other community based organizations, with four from New York City listing more than 100 organizations coming together for a potential Health Home application.

On one level, watching this diverse group of providers crawl out of their silos and begin to talk about what would be needed to coordinate the health and social needs was quite exciting.  But it also demonstrates the extent to which the current “system” is fragmented, with little integration within the medical care sector, but also little existing coordination (forget integration) between and among medical care providers, behavioral health providers, and community based organizations interested in the health and welfare of this vulnerable population.

This response also illustrates some of the challenges facing prospective Medicaid Health Homes (and the rest of health care services for that matter).  What will it take to be successful?  Optimally Health Homes would have the following capabilities and characteristics:

  1. A multidisciplinary approach for individualized needs assessment and care planning for participating patients;
  2. Integrated/organized/coordinated health and social service delivery system;
  3. Some sort of care/service-coordinators/arrangers, with a reasonable caseload size, a clear mission (to improve health and to reduce costs), an ability to engage and build trust with the patient, and a capability of respond to non-medical issues/needs
  4. Core IT and care coordination support capacity to track patient utilization in close to real time and to mine administrative data to help target interventions/outreach, provide feed-back to participating providers, and to examine utilization patterns that will allow continuous improvement and re-design intervention strategies;
  5. Ability to provide real time support at critical junctures, including ED visits (to help prevent “social admissions”, hospital discharge (to help develop effective community support/management planning), and or patient initiated contact for help for an emerging crisis; and
  6. Incentives/reimbursement policies to encourage and reward “effective and cost efficient care”, most notably to reduce hospital admissions and ED visits.

And how much of this currently exists?  How much is achievable in the short run?  Well, items 1 and 3 seem do-able.  The care coordination fee can help support the needs assessment and the costs of care coordinators.  The rest, not so much.  The biggest challenge will be coping with the fragmented medical, behavioral health, and social service delivery non-system.  It’s fine to come together on a letter of intent (talk remains fairly cheap) – it’s another matter to actually function as at least a quasi-organized, coordinated “system”.  The challenges of exchanging data among the non-integrated Health Home participants will be also daunting – just sharing and updating a patient care plan is likely to be difficult for some orgnaizations.  Assuring that the care coordinator knows in real time that a patient is in the ED or about to be discharged from the hospital present much bigger challenges, especially for the 30% or more Health Home patients not currently enrolled in managed care.  Of course, when the Medicaid card is swiped, Albany knows, but getting that information to the Health Home and its care coordinator is not currently including in the planning.

And what about incentives?  Clearly hospitals have the most to lose here, since the goal is to knock out hospital and ED visits.  In a managed care world where the hospital is included in some global capitation arrangement, incentives are somewhat aligned since the hospital can share in the savings.  But that sort of arrangement is relatively rare for most of managed care, and for fee-for-service patients, it is not existent.  Some form of shared savings arrangement for the Health Home Initiative is contemplated by the State, but currently it is just that:  contemplated.  Progress here will be critical to success of the initiative.

And as to success, what do we know about similar initiatives?  Well, another important policy issue related to Health Homes is that once again we are embarking on a major initiative without much evidence that it is likely to work.  It certainly sounds good on paper – care coordination makes sense and there is plenty of evidence that a lot of hospitalizations and ED visits are preventable/avoidable.  But less is known about how to do the preventing and avoiding.  This faith-based approach to policy making is actually pretty typical for Medicaid and most of health care.  Think back over the last 10-15 years for the last great Medicaid initiative:  enrollment of massive numbers of Medicaid patients in managed care.  What did we know about the effectiveness of managed care in improving outcomes and reducing costs then?  About as much as we know now for Health Homes.  And what do we know about how Medicaid managed care has worked so far:  shockingly little on some dimensions.

What is a bit frustrating on Heath Homes is that New York currently has an initiative that looks and smells a lot like Health Homes:  the Chronic Illness Demonstration Project (CIPD).  A monthly fee is paid to six demonstration sites to coordinate and manage care for fee-for-service patients at high risk of future hospitalization.  There is even a shared savings pool for projects that actually reduce costs (after including the costs of the intervention care coordination fee).  Unfortunately, the federal funding for Health Homes came along before we know how well and for whom CIDP is working.  We are going from a demonstration with a couple thousand patients to a ramp-up that ultimately may involve more than 700,000 patients.  Pretty classic.

This is not to say moving ahead with the Health Home Initiative is a bad idea.  The State has moved forward in a refreshingly open and transparent way, trying to keep the health community well-informed and trying to respond where possible to concerns of those likely affected as it rolls out the initiative.  And new federal money is new federal money.  And more coordination can’t be a bad thing.  And getting a broad range of medical, behavioral health, and community based social services providers to work together is fabulous, and it may stimulate more lasting and broader integration or at least coordination among these providers.  Perhaps even the first baby steps toward something that feels like an Accountable Care Organization?  One can only hope.  But what is fairly certain is that things are likely to get a bit messy along the way.  With the magnitude of change required to make Health Homes work, no one will get it all right the first time.  The goal should be to learn as much as possible along the way.  And it is important the State remain flexible and make necessary adjustments as the initiative is rolled out – the speed at which the initiative is being implemented should not be allowed to foreclose opportunities to encourage more lasting and fundamental change.  But stay tuned, it will be an interesting ride.

John Billings is an Associate Professor of Health Policy and Public Service, and the director of Wagner’s Health Policy and Management Program.  His research focuses on understanding  the nature and extent of barriers to optimal health for vulnerable populations.  He can be reached at