The challenges confronting health systems and physicians over the next decade are staggering. Opportunities to reduce cost while improving patient care are manifest throughout the delivery system. Consider, for example, the opportunity to reduce readmission rates for Medicare patients. Elimination of the 18 percent of total Medicare admissions that are actually readmissions, while improving access to patient-centered medical homes, could reduce total hospital inpatient activity upwards of 25 percent. How and when (not if!) hospitals and physicians work together to address these challenges will vary by market and organization, but business as usual is clearly not an option. There will likely be some backward steps on the path to improved quality at lower cost. Effective leaders must address the fundamental behavioral and cultural changes required to effectively move from a fee-for-service to pay-for-performance delivery system.
We believe there are effective approaches and lessons for providers who are faced with the changing behavior of their stakeholders: their board, their staff, physicians and patients. Here are six lessons for bringing about the cultural change needed for success under pay-for-performance models.
1. Confront a new world. Most providers have not fully exploited possible efficiencies and economies of scale because they haven't had to. Payors provided needed revenue relief with regular increases in reimbursement rates. Community hospitals have been reticent to reduce staff and/or move inefficient or duplicated services out of the community during the past several years of community economic hardship. Providers must confront the economic realities of their new world and not assume that what has worked in the past will work in the future.
2. Look inward first. Health systems can get a jump-start on changing consumer behavior by altering health benefits for their own employees and their beneficiaries. Since many systems are self-insured, every dollar saved can go straight to the bottom line. As CEO David Tilton explains, AtlantiCare is doing just that with its engaged benefit plan, offering health system employees financial incentives for taking responsibility for their own health, such as receiving regular screenings and imposing financial penalties for failing to do so.
3. Focus on physicians. First and foremost, physicians should be seen as health systems' partners, not their customers. As both parties realize that the silo days are over and that they must work together towards common goals, a whole new culture can take shape. Introducing pay-for-performance collaboration with Medicare Advantage patients is a good place to start as Medicare physician fee schedules are already lower than commercial fee schedules, with many opportunities to improve the cost/quality equation for Medicare patients.
4. Don't forget the patients. Behavior change is needed not only within the walls of health systems and physician practices. Providers must become more active educators, helping patients see the benefits and tradeoffs of lower-cost, higher quality care. With technological advances, for example, many patients now expect high-end imaging as an almost routine test. Health systems need to do a better job determining when such tests are really necessary and manage patients' expectations accordingly. Patients without a regular primary care physician need to be persuaded that a hospital emergency room is no substitute for an ongoing relationship with a primary care provider. And in what might be the most sensitive, emotionally charged area of patient expectations, the healthcare system must address the spiraling cost of care in the last 180 days of life, where the U.S. far outspends other countries. Engaging patients in this transformation will be one of the most important elements of a health system's cultural shift.
5. Partner up with payors. New pricing and product strategies pursued jointly with payors represent a promising change in behavior that can lead to higher-value care. Whether it's bundled payments (where the entire team treating a patient for one episode of care shares one payment) or enrolling patients with chronic medical conditions in a medical home, these payor collaborations can produce lasting behavioral changes throughout the healthcare delivery system.
6. Turn competitive challenge into opportunity. As the pace of consolidation and competition quickens, natural organizational instincts may be to hang on to an old operating model that has been favorable and reliable. But there is another way to look at this type of destabilizing change. When forced to deal with cultural and competitive change anyways, what better time to introduce behavioral changes needed for a changing business model. Timing further complicates this change forward. Everything will not happen at noon on Monday. Movement towards the goal will surely be in stages.
In summary, whether change comes via market forces or as one large painful exercise in compliance with government regulations, it surely will come. The change will require a fundamental rethinking of an organization's entire business plan, or what we call a "big platform solution." Leaders will need not only the vision of what’s ahead, but also a precise understanding of how their operating model will change over what time period and, ultimately, what behavior and cultural changes will enable this new operating model. This strategy will allow healthcare organizations to successfully live in two worlds for a short while, and successfully transition to a high value future.
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