The American Hospital Association, in partnership with Kaufman, Hall & Associates and the Health Research & Educational Trust, has released a report offering step-by-step guidance to healthcare providers making the transition from fee-for-service to value-based care delivery systems.
Here are four transitional steps included in the report.
1. Lay the foundation. The first step in the financial planning process for value-based care is to conduct a comprehensive capital position analysis. According to the report, this involves a review of historical financial performance, qualification of current debt capacity, definition of capital requirements, identification of expected liquidity needs and the determination of other key areas of cash uses.
2. Prepare baseline financial projections. Hospital and health system executives should project their organizations' financial trajectory before considering major initiatives, according to the report. The report recommends that providers be conservative in their projections and account for expected challenges.
3. Incrementally test the effect of major strategies. Once they have a sound baseline projection in place, providers can test out transitional initiatives, such as cost restructuring and potential partnerships. Hospitals and health systems should quantify the impact of each initiative independently as well as in various groupings to determine the optimal course of action for financial sustainability.
4. Evaluate the risk of planned strategic initiatives. After identifying the strategic initiatives they plan to undertake, providers should conduct sensitivity and scenario analyses, according to the report. This will allow them to examine the range of possible outcomes and assess risk parameters. "Healthcare leaders who understand the risks associated with their strategic financial plan can establish appropriate key performance indicators to monitor performance, as well as specific action plans to address any deviations in performance related to that risk in years to come," the report states.
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