Beginning in 2013, the Centers for Medicare & Medicaid Services (“CMS”) will begin a program of penalizing hospitals that have higher than expected 30-day readmission rates. The program is called the Hospital Readmissions Reduction Program and the penalties will be in the form of reduced Medicare payments that will make already stressed hospital CFOs think long and hard about alternative career choices (a great article on the CMS program can be found HERE). Because they can, it is widely expected that commercial payers will jump on CMS’ readmission penalty bandwagon. The result: further financial pressure on already strapped hospitals nationwide.
According to hospital research, consulting and IT firm The Advisory Board:
“As economic pressures place budgetary pressure on federal and state governments, employers, and individual citizens, the outlook for provider pricing growth is weakening. At the same time, a constellation of forces continue to drive hospital expenses upward, further straining margins. And through it all, the rising prevalence of chronic disease threatens to crowd out high-margin procedural volumes with less profitable medical cases, thereby undermining the surgical-to-medical cross-subsidy almost all hospitals depend upon for margin stability. The potential impact of these forces is daunting…financial modeling indicates that, without intervention, the typical hospital could face as much as a 19 percentage point drop in operating margins over 10 years.”
CMS has targeted hospital readmissions as enemy number one because unnecessary hospital round trips after discharge are one of the biggest contributors to high healthcare costs. CMS estimates that they currently spend over $15 billion on hospital readmissions, of which they believe $12 billion to be unnecessary and preventable; the numbers are only increasing as the baby boomers age into Medicare at a rate of over 7000 per day. It’s kind of like if you gave your kid an allowance paid in five $1 dollar bills and they promptly flushed 4 of them down the toilet right before asking you for an increase in their allowance. As we say in venture capital, not a sustainable business model.
Many believe that a primary reason for unnecessary hospital readmissions is lack of coordination of care post-hospital discharge, amplified by poor communication among caregivers. One in three patients aged 21 and older, discharged from a hospital to the community does not see a doctor within 30 days of discharge and in many cases a patient’s primary care physician may not even know they have been admitted. As a result there can be poor compliance with necessary aftercare, medication errors, and patient confusion about what symptoms to watch out for that might lead to a negative spiral.
Enter Janssen Healthcare Innovation, a newly-established team within Janssen (a Johnson & Johnson Company) with a goal to empower healthcare consumers and modernize healthcare delivery. Janssen Healthcare Innovation, in conjunction with the National Transitions of Care Coalition, has launched The Janssen Connected Care Challenge to seek approaches that will improve the patient’s transition from hospital to home, improve patients’ direct engagement with their care and recovery and enhance physicians’ connectivity to patients during the recovery process after hospital discharge. The Challenge is particularly focused on finding technology-enabled solutions that improve information sharing between hospitals, patients, care givers and community-based doctors to close the communication and coordination gap.
Janssen Healthcare Innovation will award a total of $250,000 to entrepreneurs with the best solutions for improving hospital care transitions. Submissions in the Connected Care Challenge will be reviewed by what Janssen calls “a panel of distinguished visionaries and practitioners in the areas of innovation, technology, care transitions and healthcare” who have agreed to act as judges for the contest. I am telling you all of this because I am one of the judges (the rest to be announced shortly). No word yet as to whether I get to wear black robes and bang a gavel Judge Judy style.
The Janssen Connected Care Challenge will provide three lucky and, more importantly, smart innovators with $50,000 each for development of their concepts as well as mentorship from industry leaders to take their concept to the next level. From the three finalists, one group will be awarded an additional $100,000 to develop their solution for commercialization. As they say in Vegas, winner, winner, chicken dinner.
Get ready, because the time to participate is short. Here is the schedule for participating in the Challenge
- March 25, 2012 – Last day to submit an entry. Yes, that is very soon.
- April 10, 2012 – Judges will award the best 3 concepts $50,000 each. Finalists will be announced.
- April – May, 2012 – Three finalists will be provided advice and mentorship directly, or indirectly, from Janssen Healthcare Innovation in topics such as user experience, business modeling, and technology architecture for the purpose of supporting the finalists in creating a prototype of their concept. The areas of mentorship will be determined by the finalist concepts.
- May 2012 – Three finalists will take part in a Demo Day to describe their solution before the judges. The demonstrations will also be streamed to the general public via a live webcast for one week.
- May 23, 2012 – Winner will be announced and awarded $100,000 to develop their concept for commercialization.
I know from the pile of business plans sitting on my desk that there are many entrepreneurs out there who have great ideas about how to tackle the hospital readmission problem. I hope that all of you with an interest in this challenge and an idea about how to solve it will visit the Janssen Connected Care Challenge website right now and take this opportunity to do well by doing good.