The knowledge worker is dead, long live the strategic worker.

We are in the midst of a secular shift in labor which is being driven by both rising interest rates and technology.  As I’ve already shared, physicians are not immune to either of these forces.  Envision has recently filed for bankruptcy and ChatGPT is going to have a profound impact on radiologist certification and value (coauthor Lincoln Berland).  The era of the “knowledge worker”, promoted by the 1960’s leadership guru Peter Drucker, is likely dead.  As physicians are largely knowledge workers (radiologists particularly so) is time to reinforce how we can create value.  My niece is a perfect case study.    

When I finished high school in 1990, public school superintendents trumpeted their college acceptance rates (with no follow-up on how many actually finished).  The message was if you didn’t go to college then you were a second-class member, you didn’t belong, you were a failure.  Today, not a moment too soon, this perception is changing.  

My niece Libby, for whom the traditional classroom was never attractive, has been fortunate enough to have the option to obtain her EMT certification during her last two years of high school.  She will graduate with a tangible skill which is desperately in need within our communities, a strategic long-term win-win deal for taxpayers.  During a recent practical ride-along with a local EMT squad she helped pick a woman off the floor and place her broken arm in a sling.  The feedback of “Oh, this is the first time I haven’t been in pain in hours,” is invaluable to a student like Libby.  For someone like myself who tries to help faceless patients at the edge of K-space and immunotherapy, it is also a lesson in humility.

As Libby graduates, she reached out to me to learn where she could buy a stethoscope.  Having two that haven’t been touched in 20 years, I offered her the one given to me at my medical school matriculation.  It will be infinitely more useful in her hands than it ever was in mine.  

This tangible tool being passed through the generations is also a signpost for our changing labor markets.  It will anchor Libby to a sustainable career by physically attaching her to the human beings who need her help.  Because of this tangible tether, she cannot be outsourced to AI nor is she at risk of being seen as too expensive as the cost of capital rises and some white-collar knowledge workers can no longer generate marginal value.  Her EMT certification is a gateway to future certifications as a medic or registered nurse, levering her value in our community for the taxpayers who have helped educate her.  Her certification is more valuable today than some bachelor degrees being handed out four years into the future. 

The labor teaching our children, responding to emergencies in our communities, fixing our plumbing and building homes, supplying our food, and working in recently onshored factories will be in demand.  Their jobs won’t be static, but will be there.  The rest of us, like Libby’s college bound twin, need to embrace the fact that the knowledge worker is dead.  We must become more strategic in our approach to our future careers.  We need to understand value, and iteratively ask ourselves whether we are delivering value.  In other words, we need to develop the professional sustainability skills that Libby is launching with.  

The knowledge worker is dead, long live the strategic worker.  There are several ways to be strategic in our workplaces, and one is our human networks.  Tangible tethers to other humans, like the stethoscope or a physical product delivered to a neighbor, will be difficult for either technology or rising capital costs to displace.  Strategic workers will recognize this fact and actively strengthen those networks.  

It’s [Still] The Prices, Stupid

Inefficient markets create price differentials for identical goods. These price differentials frequently occur among markets dominated by oligopolies. Taking advantage of market pricing inefficiencies is known as arbitrage. Commodity traders frequently arbitrage by buying low and selling high. In inefficient markets for perishable goods, such as airline tickets, hotel rooms, or medical imaging, there is no opportunity to re-sell these goods. Thus consumers of these goods, such as health insurance companies, will attempt to buy at the lowest possible price to maximize value. Today we see many apps and websites, such as Expedia, that engage in improving these markets in airline and hotel industries. Stroll Health is one company attempting to scale this behavior to medicine.

Our current Hospital Outpatient Department (HOPD) payment schedule is one example of an inefficient market where identical CPT codes are priced very differently based on whether they are provided in a grandfathered hospital outpatient department or a freestanding outpatient medical center. Hospital accountants will justify this higher payment schedule by attributing social expenses such as police and training programs. Other HOPD supporters will claim they deliver relative value through higher quality (outcomes) that justifies (often disproportionally) higher prices. Yet increasingly “illusions about value: that we know what it means and can measure it, that the same things matter to all patients” are being voiced.

If the value numerator (outcomes) in healthcare is increasingly viewed as subjective and difficult to measure, we are left with no choice but to default to quantifiable metrics such as price and access. Policy discussions along the dimensions of price and access tend to make academicians anxious, as they fear “commoditization” of healthcare; but ironically the academic bastions of board certification and Maintenance of Certification have already made healthcare fungible, fungibility being one of requirements of a commodity. While commoditization continues to be used inappropriately in the medical field, it is time to accept that much of what physicians do is best differentiated by price and access, certainly not geography.

Hospitals, with support from organized medicine, are clinging to geographic HOPD structures in-order to boost their revenues. This strategy is not sustainable long term as markets and prices tend to be efficient. Sticky prices tend to equilibrate. Arbitrage often disappears.

Future healthcare strategy, or the creation of sustainable competitive advantage, must focus on customers; that is the needs of patients, providers, and payers. Access to compassionate and meaningful patient centered care, with respect for patients’ or their employers’ financial wellbeing is what the marketplace craves. The current trend of consolidation and monopolistic pricing practices from hospital systems may fail if patients become willing to travel or new competition enters a market. Thus, hospitals and medical societies who wrap their strategies around unsustainable market inefficiencies will face difficult futures as customers increasingly find value exclusively in price and access to services.

Yet as networks become increasingly narrow, access as an operational priority will fall away. Strategy will be distilled to price. To paraphrase political strategist James Carville “It’s the [prices], stupid.” Healthcare leadership can no longer ignore fundamental economics or our national mood of economically motivated political populism. Leaders who cling to grandfather’s HOPD business model will find themselves struggling as the working middle class becomes increasingly price sensitive in all markets. As the healthcare economy consumes a disproportionate amount of blue-collar employers’ and employees’ income, the sustainable strategy is to provide a fair price. Finally, because of narrow networks and limited substitution effect, any paranoia regarding perfect competition and a “race to the bottom” in healthcare is not likely to happen.

2017 was a hard year for retailers who could not match Amazon’s strategy of aggressive prices and ubiquitous access.   There is nothing special about hospitals and organized medicine that differentiates them from the failing brick and mortar retail sector. One hundred seven year old retailer L.L. Bean understood the central tenant of business, whether dealing in boots or biopsies, when he stated, “Sell good merchandise at a reasonable profit, treat your customers like human beings, and they will always come back for more.”