I'm a big fan of Michael Porter, but his latest piece, "The Big Idea: Creating Shared Value,"  left me a bit flat. The premise of the article is that our capitalist system is currently “under siege,” with the public blaming business for social, economic, and environmental problems. In order to legitimize business in the public’s eyes, Mr. Porter and his coauthor, Mark Kramer, propose that corporations shouldn't just focus on profits– they need to create "shared value," which they define as: "policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress."

The authors go on to say that the idea of corporations creating "shared value" will start to blur the lines between for-profit and non-profit entities. And while I understand their point, I don’t think that this "shared value" concept is the big idea that is going to revitalize capitalism – for a few reasons…

#1. "Shared value" is already an innate concept in organizations where the management lives where they work. If you live in the community where your company operates, you are always concerned about advancing the economic and social conditions surrounding you. The problem arises when there is no connection to the community. Whether you’re dealing with absentee landlords of real estate or corporate entities, it's hard to care about what you never see and people you'll never meet.

#2. The issue of “shared value” isn't what is going to blur the lines between for-profit and non-profit organizations. That distinction is strictly an issue of repatriation of profits—do profits go to shareholders or are they reinvested?  There are many mercenary non-profit organizations that have as little "shared value" as their for-profit counterparts.

#3. We will never have "shared value" in publicly-traded companies. Executives of publicly-traded companies won't be in the positions long if they don't maximize quarterly earnings—a goal that can never be consistent with advancing "economic and social conditions in the communities in which it operates."

In theory, I am a huge supporter of the "shared value" concept that Mr. Porter and Mr. Kramer forward.  But in practice, I think we can all recognize that it will take more to "legitimize" business.

I've had a hard time putting the current unemployment data into context based on my own experiences – at OPEN MINDS, we've been on a hiring frenzy…and having trouble getting responses to our ads. Then, one Sunday morning a couple months ago I was watching Laura Tyson in an interview on ABC's This Week with Christiane Amanpour, and I had a flash of revelation. Ms. Tyson, former Chair of the President's Council of Economic Advisers during the Clinton Administration, said that "unemployment for those with college educations is now 4.5 percent." She went on to cite Bureau of Labor Statistics data that for those with less than a high school diploma, the seasonally adjusted unemployment rate was 13.8 percent during July. For those with a high school diploma but no college, the rate was 10.1 percent.

After thinking about that data, I have a new take on the unemployment situation. We have a structural unemployment problem, which is how labor economists refer to a mismatch between the skills of the people who of are out of work and the skills needed for the jobs that are available. And what this really boils down to is an education problem. A fundamental part of the long-term solution to our high unemployment rates is to improve our education system at every level – not only improving the graduation rates from high school and college, but also increasing the academic rigor of those programs. While it is certainly a valid point that "not everyone should go to college," given this employment situation, we also need to think of improvements to non-college technical/vocational training programs. Those training programs need to be relevant in the current context of a global economy and focused on areas with growth-potential that can provide a continuous living wage.

Diving deeper into the nationwide unemployment statistics and the prominence of the education attainment-aspect of the numbers led me to wonder what the implications of this situation would be for individuals with cognitive and mental disabilities. While assistive technologies are increasingly available to facilitate completion of advanced degrees by individuals with physical disabilities, disabilities that interfere with the thought processes are more punitive. In an economic environment where advanced degrees and related skill sets directly correlate to economic well being, the challenge of independently maintaining economic viability is becoming more and more insurmountable for these individuals.

I thought the best summary of the situation was in an article by Steven Pearlstein, The Bleak Truth About Unemployment. Mr. Pearlstein notes: "Somewhere between the rantings of the Republican right, which is peddling the nonsense that excessive government spending is to blame for high unemployment, and the Democratic left, which clings to the false hope that another helping of fiscal stimulus is all that is needed to get millions of Americans permanently back to work, is this stubborn reality: The loss of 8 million jobs reflects problems that are largely structural, not cyclical, which means they won't be brought back by fiddling with a magic dial in Washington that controls how much the government spends."

As Americans are pushed to develop a better-trained and more highly-educated workforce, the employment space for individuals with cognitive and mental disabilities will get smaller and smaller – leaving a population that will struggle to find a viable place in the fast-paced global market economy that we are heading towards.

They say health care is recession-proof. But, that's not exactly the case. The health and human services sector has proven to be both recession-resistant and a recession laggard. And—if U.S. governors are right—the start of the ‘recession’ in the health and human service sector will begin on July 1, 2011. The fiscal year that begins in July will be “the most difficult to date,” according to a survey of 45 states released at the winter meeting of the National Governors Association.

States must find a cumulative $18.8 billion to balance their budgets in remaining months of the current fiscal year, and in fiscal 2011, an estimated $53.6 billion in shortfalls awaits, according to the survey. For governors, Medicaid is one of the top budget issues. Medicaid spending for fiscal year 2009 was $335 billion, an increase of 7.8 percent over the previous year. Enrollment increased 5.4 percent in fiscal year 2009 and will grow 6.6 percent in fiscal 2010. Additionally, 3.3 million more people were enrolled in Medicaid in June 2009 compared to the previous year—the largest one-year increase to date.

If you haven't started your management strategy for this time of economic freefall, now is the time. For starters, employ a three-prong recession management strategy consisting of short-term cash management, business development, and preparing for the post-recession marketplace.

For more, check out:

• Prepare for the Emerging Post-Recession Marketplace: Five Management Best Practices for Organizational Sustainability
• Anticipating Emerging Post-Recession Market Models: Consumer & Payer Demands for Behavioral Health & Social Services

Ready or not, tech-enabled consumerism continues to morph the relationship between professionals and the consumers they serve. I've written before about both the move to on-line ratings services for health care professionals (RateMDs; RevolutionHealth; Vitals.com; DrScore.com; HealthGrades.com; MDNationwide.org; ConsumerHealthRatings.com; and Rehabio) and the on-line web sites that sell excess professional capacity by the minute (ETherapistsOnline; MyTherapyNet; WebAddictionTreatment.org; and AsktheInternetTherapist.com). These categories of health care marketing organizations represent something akin to American Idol and HOTELS.COM in the health and human market space. Well, the push of technology is taking this one step further—we now have the progeny of when eBay meets health care.

The eBay of health care may soon be PriceDoc.com. The company just received a U.S. patent on its soon-to-be-released system for on-line bidding on health services which will, according to their press release, make "PriceDoc.com the only online site where patients can "make an offer" for healthcare services with verified providers." The initial focus of PriceDoc is consumers who are uninsured, underinsured or seeking elective procedures with provider organizations and professionals who accept cash or credit card payments. (The service categories on their web site include dental, medical, vision, cosmetic, mental health, weight loss, allied health, and alternative health.)

You may think this type of purchasing model couldn't change the health care space. But don't forget eBay, founded in 1995 selling office equipment and plane tickets; had 250,000 transactions in 1996; and by January 1997 the site hosted 2,000,000 auctions. Bottom line? We can’t rule anything out when it comes to which tech trends will shape the sector. Stay tuned.

I was heartened to see that the Senate version of the health care reform bill would set the medical loss ratio for health plans at 85% for large group plans and 80% for small group and individual plans, and that the House set everyone's rate at 85%. The original proposal by Senator John D. Rockefeller of West Virginia had the ratio at 90%—a number rejected as unrealistic.

And, the reform bills have a penalty clause built in for insurers failing to hit the prescribed medical loss ratio (MLR)—they have to rebate the difference to their customers. See "To Your Health: How Congress plans to get insurers to spend money on actual health care" by Slate writer Christopher Beam. For major insurance companies, this wouldn't change much. The average MLR of for-profit insurance plans offered to large employers is about 84%. Small employers, or companies with 50 or fewer workers, have an average MLR of 80%. But, in the individual insurance market, the MLR is around 70%.

While this is a great start, I think 80% is too low. And, the devil is in the details, so to speak. The reform bills are still defining what exactly 'health care spending' is—a critical set of definitions. Stay tuned

The health care reform bill tug-of-war currently happening between the House and Senate is too much for many of us to keep up with. I took interest with an article in Slate by Christopher Beam that includes a hit-list of those health care reform issues that still need to be ‘hammered out’ in the final bill. His six issues include:

• The exchanges—while the House bill would create a national exchange, the Senate bill would create a series of state-based exchanges. There’s no happy medium. It is either state or national.
• The mandates—what will be the real penalty for not buying health insurance? The House bill would charge a 2.5% tax on all income above the filing threshold ($9,000/individuals or $19,000 for couples), while the Senate bill would impose a flat penalty, which itself fails to acknowledge the wide variance in American income levels and their ability to pay up. The employer mandate is a big one as well; will employers pay an 8% tax on total wages or levy a $750 fine per employee? Who will be eligible for exemptions?
• Medicaid expansion and subsidies—the House bill would make Medicaid available to individuals earning up to 150% of the poverty level, while Senate bill would expand it 133%. The differences are in the subsidies, in that the House bill provides far more support for families at or below 300%, while the Senate bill seems to focus more on middle income families between 300% and 400%.
• CHIP—key questions posed by Beam: “Does Congress really want to end the Children’s Health Insurance Program and push kids into exchanges and Medicaid, as the House bill would do? Or does it want to extend CHIP until 2015, as the Senate bill would do?
• Narrowing the ‘donut hole’—the gap in Medicare coverage known as the ‘donut hole’ is addressed far more in the House bill, which phases it out altogether by 2019 by ‘filling’ it with money from the pharma industry. The Senate bill would only close the gap halfway (and only temporarily).
• Paying for it—the House would levy a 5.4% surtax on individual income above $500,000 while the Senate would tax plans that cost more than $8,500 for individual and $23,000 for a family; Senate would also tax indoor tanning services (yes, seriously).

As our eyes dart back and forth between this legislative ‘volley,’ I will be interested to see how flexible the House and Senate are on certain issues—and which issues they refuse to compromise on.

An article in the November 30, 2009 issue of The New York Times sparked my thinking, once again, about the high attrition rate of behavioral health and social service organizations. The article, "Less Diversity in Supervisors of Foster Care” cites the statistic that under the watch of John B. Mattingly, appointed in 2004 to head New York City’s Administration for Children’s Services, the number of foster care agencies has dropped from 43 to 33.

A little later in the article, Fatima Goldman, executive director and chief executive of the Federation of Protestant Welfare Agencies, observed that the cause was just a lack of time for agencies to develop the management infrastructure needed for the current environment. “There just hasn’t been time for some agencies to build the core infrastructure to survive such a dramatic shift that’s occurred over the last few years, especially the overall economic downturn…That is the nail in the coffin for so many organizations.”

Talking about ‘time’ alone as the demise of many of the non-profit organizations isn’t dealing with the ‘whole picture’. There are a few other factors:

• Inability (or unwillingness) of public purchasers to measure and compare the performance of their contract organizations—have transparency in performance and make future referral, rate, and contracting decisions on that performance data
• View of the leadership of the organizations in the field that management capabilities are not integral to continuing their service mission; this has been permitted to exist by public purchasers for years and reinforced by the good intentions of management teams.

Time is now an issue for many organizations in the field. They have, indeed, waited too long to put in the management systems—financial, IT, planning, development, etc.—that they need to make it through the next decade.

The report in USA Today was brief, but its implications leapt off the page for me:

“In the eight states that report monthly tax figures, collections from July through September declined an average of 8.3 percent from a year earlier. Even in places where there's been an income tax increase, such as New York, collections still declined. This comes after there was a 15 percent nationwide drop in tax collections during the first six months of the year.”

With health care in general (and behavioral health and social services in particular) dependent on state financing, I think the ‘end of the recession’ is nowhere in sight – despite the pronouncements of economists. Look for reductions in Medicaid (reduced eligibility, reduced service coverage, reduced provider fees, and more risk-based contracts) and cuts in state-funded services (mental health, addictions, child welfare, juvenile justice, prison health, senior support services, etc.) as the reality of tax collections cause state governments to open up their budgets once again.

If you’re a manager of an organization providing health services or social services – or a county commissioner – the pending tax shortfalls will have the biggest impact on your work. Now would be the time to develop a contingency plan.

For more on planning and managing in these harsh economic times, check out:

• On the Money - The Key Financial Challenges Facing Nonprofits Today - and How Grantmakers Can Help
• The Wolf is at the Door: The Global Economic Crisis and the Public Sector
• Surviving & Thriving in a Recession: A Management Blueprint for Health & Human Services
• Changes in Health Care Financing & Organization: Impact of the Economy on Health Care