How we can turn value-based expectations into reality

While examples of value-based innovation clearly exist in the market today, nation-wide adoption has been slower than many of us would have hoped.

There are multiple complex reasons for this, but for the sake of simplicity, I will address three of them.

1. Business models vs. services. In healthcare we talk a lot about services, but we typically don’t talk enough about business models, which encompass much more than just individual services. Business models include revenue and pricing models, operating strategies, enabling technologies, and staffing models, among others. To create and fund transformative new business models, we need to do more than just add or subtract a few new services.

Here's an example to help illustrate the difference: A more incremental services expansion approach would be to add a transportation service to ensure that patients can get to their appointments in the current model. A new business model approach would be to rethink the entire access question altogether by entering into a pre-paid risk-based contract and launching an engagement solution powered by artificial intelligence coupled with a complete set of virtual capabilities.

While there is clearly a need for both new services AND new business models, without more of the latter we will likely continue to see only incremental, as opposed to game-changing, improvements.

2. Care and payment misalignment. There is a powerful and inseparable connection between innovative care redesign and innovative payment reform. To change the way that health systems provide care at scale, we also need to change the way we pay for care at scale. If not, the most progressive organizations will also be the most penalized by current payment systems.

As leaders for higher quality and more efficient health care systems, we must continue to believe that assuming broader financial risk is a key enabler to achieving a better, more responsive, care delivery system. Taking on the right types of health care payment risk can create a virtuous cycle of innovation—one that rewards, instead of penalizes, those providing higher value care (and in some cases less care); as some of the most progressive models of value-based care are not easily implemented under the current payment models.

Additionally, it's important to note that not all alternative/risk-based payment models accomplish the same objectives. Therefore, we should begin by taking a step back and asking ourselves a very important question: What problem am I trying to solve?

By answering this question, we can determine which of our underlying business models needs to change, and, as a result, which of our payment models must also change. Different payment models solve different problems. For instance, bundled payments are a great way to integrate an episode of care and reduce variation in the post-acute setting; however, if the primary problem is potential overutilization of the service itself, bundled payments are not likely the best solution. Choosing the right payment model is essential, but that does not cover everything.

3. Managing complexity of supportive components. When designing value-based models, other business functionality must change as well. For example, the way organizations compensate physicians, prioritize and measure efficiencies and process improvements, design EMRs, and perform multiple other administrative and support functions. It's about much more than the overall care and payment models themselves, it's also about the many other supportive components to make it all work. It takes a coordinated team effort to effectively manage risk.

Organizations must also have scale within their respective patient populations if they want to successfully assume more risk. The greater the number of patients covered in a risk arrangement the higher the absolute risk, but the lower the relative risk. Significant outliers in a small population can dramatically skew results, which can make small scale pilots quite risky on a relative risk basis. As an industry, we need more larger-scale, programmatic approaches tackling head on the core gaps and challenges of our current care delivery model.

When it comes to scale, partnerships are also essential. Even for the largest incumbent health systems with significant scale, it is important to realize that sizeable portions of every healthcare dollar is spent outside any one system – even for those with their own health insurance plans. There is simply not a mergers and acquisitions strategy big enough to meet the entire needs of a population. When you are taking on risk, a coordinated network of partners is absolutely needed.

Lastly, to drive all of these elements is it critical to identify the key group of engaged team leaders or "champions." To help, we need to ask: "Which progressive clinicians feel the most limited by the current systems in place today?" and "Which ones are passionate enough to push for real change?" Think of the individuals who keep producing solid and innovative ideas expected to produce significant savings, but who keep running into the problem of "we don’t have a CPT code for that."

Overall, I am an eternal optimist regarding the potential for macro industry change. Our leaders and numerous partners are innovative, committed, and hard-working. By building truer business models, transforming the way we get paid, and managing the key supportive components in concert with one another, we can truly deliver better, more compassionate, and higher quality value-based care for our patients.

More articles on leadership and management:

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