Certain strategies long used by hospitals and health systems are becoming antiquated, and organizations that continue to employ them may find themselves trying to fit a square peg in a round hole.
Here are eight contemporary insights for hospital and health system leaders from the Advisory Board, which collected these ideas during its CEO Special Sessions.
1. Accept the idea that price/high reimbursement is no longer a strategy for growth. Previously, hospitals consistently received price increases that outpaced inflation. Four market trends are signaling the end of this strategy, according to the Advisory Board:
• Direct and implicit reimbursement cuts from the Patient Protection and Affordable Care Act and sequestration.
• Limited offsets from coverage expansion.
• The dilution of employer-sponsored coverage and increase in high-deductible health plans.
• Patient preference for low-cost sites of care, such as retail clinics.
2. Transition from extractive to productive growth. Hospitals can no longer rely on growth strategies that focus on consolidating their market position, locking up referral streams or demanding price increases. Instead, hospitals are entering a new era of what the Advisory Board calls "productive growth" — earning market share by attracting empowered purchasers. This includes:
• Network suppliers, such as physicians, post-acute providers and capital partners.
• Wholesale buyers, such as commercial payers, employers and physician accountable care organizations.
• Clinical shoppers, or physicians and patients making decisions about individual episodes of care.
3. Reposition growth as an output instead of as an input. Traditionally, hospital leaders often justified growth as an input. Growth advanced a larger cause, such as funding innovation or extending the hospital's mission. But under productive growth, in which purchasers selectively buy care in a competitive market, the Advisory Board says leaders should reposition their understanding of growth as output rather than an input. Hospitals that grow are doing something right; hospitals that don't are failing.
4. Create three complementary care models. Savvy hospital leaders understand the subgroups within population health. The Advisory Board says there are three:
• High-risk patients with complex diseases and comorbidities. This subgroup makes up about 5 percent of patients. Hospitals should take a comprehensive and proactive approach to care management to avoid high-cost acute-care services when possible.
• Rising-risk patients who may have medical conditions that are not under control. This subgroup makes up about 15 percent to 35 percent of patients. Providers should avoid unnecessary spending on these patients and keep them from becoming high-risk.
• Low-risk patients, who have minor conditions that are easily managed and account for 60 percent to 80 percent of patient populations. Hospitals should keep these patients healthy but loyal to the system when they need care.
5. Define population health goals. Develop a short list of actionable and measurable goals. They should be narrowly defined and unambiguous. Ensure each member of the organization understands how they contribute to the goals.
6. Ensure high-risk patients have care managers. The Advisory Board says high-risk patients' most important relationship is that with their care managers, not primary care physicians. Dedicated care managers can coordinate the diverse needs of high-risk patients, which span from clinical to nonclinical and may demand more help than PCPs can offer.
7. Manage "rising-risk" patients in the medical home. Nine risk factors, such as obesity and smoking, make a patient a fit in the rising-risk category. Hospitals should identify these patients and connect them to a medical home, which offers a balance of customized support and scale necessary to manage this population with limited resources.
8. Ensure access for healthy patients. Hospitals don't want too many encounters with their low-risk patients, but they must offer accessibility when the time for care comes. Hospitals also need to foster loyalty among these patients. "Mainly, you need to provide timely access to evidence-based preventative care," wrote the Advisory Board. "We've also seen organizations turning to patient portals to offer convenient options such as online scheduling and the ability to email a physician."
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5 Steps for Hospitals to Create a Rational Pricing Structure