Growing in a Time of Economic Transition in Healthcare
It has almost become cliché to talk about the transition from volume to value in the healthcare industry, but there’s no denying that this shift has drastically impacted the economics of healthcare for both payers and providers.
The lifeblood of healthcare finance, fee-for-service, is being ushered out for value-based contracts. Business models built on the volume of care delivered are being redesigned to work in payment contracts aligned with quality of care metrics.
Healthcare organizations are forced into what Navvis defines as the “healthcare CEO paradox” – the forced choice between volume OR value. Shared savings programs will likely not replace volume. Quality scores will likely not replace market share.
Stop Putting Out Individual Fires
The May 4, 2017 passage of the American Health Care Act (ACHA) in the House of Representatives brought renewed light on the rising cost of healthcare in the country, with Warren Buffett stating, “medical costs are the tapeworm of American economic competitiveness” at his recent annual Berkshire Hathaway shareholders conference.
Unfortunately, the industry has focused on trying to solve this economic challenge the way it tries to solve most challenges – one problem at a time. We address readmission rates by leveraging skilled nursing facilities. However, up to 50 percent of readmissions are due to social determinate issues, not clinical ones. Rarely do we look at the whole equation.
To create transformational healthcare that achieves growth instead of reduction, we need to get to the source of the problem instead of addressing individual problems as we go. To be successful, we should systematically look at how we can improve quality and lower total cost.
One first step is for healthcare leaders under value-based systems to shift their emphasis from managing the population they see, to managing the patients they serve. This includes keeping people safe, supported, and healthy before, during, and after clinical care. This isn’t new, and many will remember the days of HMOs, an early attempt to align a wide range of healthcare services into a single organization to coordinate care and reduce costs.
The difference between the 1980s and today is that we now have data that spans across the care continuum to identify gaps and manage total populations. We now have providers that are incented to deliver high-quality, cost-effective care, and to enhance the patient experience.
We have the people, processes, and technology necessary to make this shift to unlock new sources of value and ignite growth across our industry. We do not necessarily need to produce new things, we can create value by strategically connecting the disconnected pieces.
Connecting the Dots – Four Areas of Opportunity
Significant work has been done to improve quality and efficiency in primary care and hospitals in the last few decades. As our population ages, and people are dealing with more chronic conditions, it is important to manage populations across all settings, including the home and community.
There are four areas of healthcare delivery that, if better aligned, can help payers and providers manage total cost of care, while improving quality, to drive meaningful growth.
1. The first is centered on managing aging populations more effectively. We spend a lot of time investing in strategies to keep senior populations healthy, but we struggle to manage the people that are really driving cost, those with multiple chronic conditions.
2. The second is the notion of managing an episode of care. Most think of episodes of care in relation to bundled payments issued by CMS or commercially. An episode of care is simply the overarching treatment plan that exists for a patient in pre-acute, acute, and post-acute settings, with or without a value-based payment construct.
3. The third is post-acute and home health care. Over 50 percent of the variation of Medicare spending is centered in post-acute care settings, and this is tied directly to the first area of opportunity with aging populations. Treatment protocols are not consistent, and patient costs are all over the map.
4. The fourth is community and social support. How do we keep someone healthy, functional, safe, and supported in their home, which is where they want to be, versus in a clinical setting? Caring for patients beyond a clinical setting is critical in avoiding readmissions and future issues, as well as in improving quality of life.
The power of focusing a strategy on these areas is their interrelated nature. Connecting episode management with a post-acute and home health strategy, which reduces variability for a Medicare patient, can be achieved for any type of treatment, not just those under bundled payments.
Driving Profitable Growth
In my view, we can drive profitable growth and revenue retention by improving clinical performance and building a world-class care model in any payment model. This involves:
- A care delivery model that improves quality and lowers cost, coupled with a network of physicians, providers, and facilities that can deliver patient-centric care.
- A payment construct that incentivizes the right physician behavior and that aligns primary and specialty care.
- A plan design that aligns patient/member and provider incentives, and encourages patients/members and providers to move in the same direction.
A world-class care model starts with a well-defined care pathway that aligns a data-driven, patient-centric care plan with integrated primary and specialty teams in acute and post-acute settings. From pre-surgery planning, to discharge, to home care, each step is coordinated, and each player is aligned through an integrated model with aligned incentives.
The beauty of this model is that you don’t have to be in a CMS episode of care contract to extract new value and drive growth. The infrastructure required to be successful in a mandated episode of care model is the same required to manage any episode, and to address the total cost of care for each patient.
A Win-Win Model: Value for Providers, Value for Payers
Hospitals and health systems that do this right will reduce quality issues, reduce the risk of hospital-acquired conditions, prevent readmissions, improve throughput and facility capacity, and reduce the overall cost of care.
This opportunity is not limited to hospitals or health systems. Health plans can share in the value by designing and facilitating a world-class episode and post-acute care model in partnership with hospitals and health systems in their markets. They can leverage these clinical care models within their care utilization management programs, network strategies, and benefit designs. They can improve HEDIS results and Medicare STARs ratings.
All stakeholders will be able to leverage this success to drive more growth, including attracting new physicians and specialists, and attracting new patients. They will also be able to align the care model to diversify their market position.
This is the power of AND, being successful in both fee-for-service AND performance-based payment models. Driving quality AND reducing cost. Improving patient care AND increasing revenue. Achieving volume-based growth AND value-based performance.
Organizations that take a systematic approach to addressing cost of care for their patients by focusing on episodes and post-acute care, and realigning care for Medicare patients, can free themselves from the direct impact of the changing healthcare economy. They can unlock new sources of value, take market leadership, and thrive.