5 Concepts on Healthcare Reform to Master Now

The train has left the station when it comes to changes in healthcare, according to Frank Tiedemann, veteran healthcare CEO and CEO of Salient Strategy for Healthcare, a healthcare consulting organization, and Arthur Sturm, president of SRK, a Chicago-based healthcare consulting company. Healthcare reform is moving forward, regardless of the outcome of the presidential election in November, and Mr. Sturm and Mr. Tiedemann are afraid that the healthcare industry has not taken the need to transition seriously. "We're concerned with urgency," Mr. Tiedemann says. "There's a real need to take this seriously."

A parallel can be drawn between what is currently happening in healthcare and what happened in the photography industry not long ago. Kodak was the leader in photography before digital options became popular, and now they are struggling in the new market. "It's because they waited too long to adapt," Mr. Tiedemann says. Kodak did not want to give up their old business model and embrace where the market was going. Mr. Tiedemann and Mr. Sturm say that is what is happening in healthcare — hospitals are afraid to let go and step into the future of healthcare.

Mr. Tiedemann and Mr. Sturm are the authors of a recent white paper, "Panic, Plan, or Act: 10 Concepts to Master Now For Healthcare Reform." Here, they go into detail on five of those concepts.

1. Start experimenting now. There is no one secret plan for every hospital to follow that is guaranteed to lead them to success under healthcare reform. "We're suspicious of anyone that offers one 'secret sauce' that is guaranteed to work everywhere," Mr. Tiedemann says. "What works in downtown Manhattan won't necessarily work in rural Texas."

Instead of offering a one-size-fits-all solution, they urge hospital executives to commit to experimenting with what works for them and their staff. "Doing the same thing is a recipe for mediocrity," Mr. Tiedemann says. "Hospitals need to let go of what they know and grasp the unseen."

And if hospitals try something new that does not work for them, they need to identify it and move on. "Healthcare is a culture where it is hard to admit to making mistakes, so bad ideas limp around for years," Mr. Tiedemann says. "Instead, we need to find the failures, bury them and move on."

2. Know that payment reform is a fluid concept. "Hospitals love structure," Mr. Tiedemann says, "but the reality is that payment reform is an ecosystem." The ecosystem has a developed into many options of how hospitals and physicians will get paid for their services.

While it seems that many hospitals are moving towards ACOs, Mr. Tiedemann and Mr. Sturm say that hospitals should experiment with different payment options, such as bundled payments and more, and find what works for them. They also note that what is happening now in payment reform will most likely change by 2014, furthering the need for experimentation to find what works.

3. Understand the changing role of physicians. Under reform, healthcare is moving from an era where high producing physicians generate profit to an era where they will become costly for hospitals. "This move will be painful for hospitals and physicians," Mr. Tiedemann says. "Those physicians are the ones who made the hospital what they are today." Therefore, hospital executives need to educate their physicians and help them adjust.

They also need to find the new "physician superstars." Mr. Sturm and Mr. Tiedemann say that hospital executives should seek out primary care physicians who will manage population health and who adopt the role of telling specialists what they want for their patients. "It might take a new generation of doctors with different expectations that are committed to quality, not to business," says Mr. Tiedemann.

4. Differentiate your value from competitors. The authors say that value might offer the most unrealized opportunity of healthcare reform.

There are two buyers in healthcare: wholesale and consumer. Both groups differentiate value differently, and Mr. Sturm and Mr. Tiedemann say it is important to find a way to marry the two and differentiate the hospital on what the buyers find valuable.

In their white paper, the authors urged administrators to forget their own preconceived notions of what customers perceive as value. Instead they recommend testing or experimenting with new and different formulations of quality and cost propositions. The authors are weary of cutting services down just to reduce prices. Instead, they say to identify areas that may sacrifice front end margin for a larger margin stream later, such as keeping on a nurse navigator instead of eliminating the position in a service line The analysis will be different for each organization.

It is important to find what is valuable urgently, though, because reform will bring in approximately 30 million new consumers into marketplace soon.

5. Master relationship management strategies. As hospitals move toward population health management, it is important to find ways to maintain the health of patients and help people with chronic conditions to manage them properly.

One way to do that is through relationship management strategies, which are already being used by other industries, in order to lead customers logically from one experience point to the next. For example, when people buy a cell phone from a website, the site suggests accessories they might need for the phone, like a charger or a protective case. The same strategy can be transferred to healthcare.

"In healthcare, the point wouldn't be to sell more products, but instead to guide patients to appropriate care," Mr. Sturm says. For example, relationship management strategies can be used to remind women to schedule their annual mammogram or people over 50 to get a colonoscopy. This way, the hospital is creating loyalty and managing population health at the same time.

For a free copy of the full white paper, visit www.srksolutions.com/white-paper.cfm

More Articles on Healthcare Reform:

Hospital and Health System Strategy in 2012: 6 Key Initiatives
Harvard Business Review: "Health" at the Center of Future Healthcare Business Models
Ideas Into Action: 3 Hospital CEOs Talk Strategy Going Into 2013

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