Value Over Volume — Healthcare's New Mindset

It is clear that healthcare reform favors a consolidated healthcare industry. Beginning with the landmark Institute of Medicine publications — "Crossing the Quality Chasm" (2001) and "To Err is Human" (1999), — followed by the passage of the Patient Protection and Affordable Care Act in 2010, it has been clear that sustaining the healthcare industry meant restructuring payment models that would facilitate the restructuring of the care delivery system, eliminating excessive and wasteful spending from the system and paying for value of services, not volume of services. It is believed that the development of integrated delivery systems is the platform on which the restructuring of the industry will be possible.  

In nearly every industry segment consolidating efforts are observed — hospitals purchasing hospitals, physician organizations being purchased by both hospitals and insurance plans and industry device and pharmaceutical providers consolidating operations and sales forces to better align with the new healthcare order. The consolidation of the healthcare industry is no longer a trend. The pervasiveness of the consolidation is reflective of the changed and still changing nature of the structure of the healthcare industry. Cardiologists have not only been affected by the trend, but have led the way. Perhaps due to the hospital-based nature of the clinical specialty and the hospital's economic dependence on cardiology as a determinant of its financial success — coupled with hospital payment incentives largely focused on cardiovascular incentives and significant economic pressures on the cardiology practice — cardiovascular physicians in systems and towns, large and small across the country, are now employed by their hospital partners.

Integration or consolidation of cardiologists into the hospital, whether by employment or some other means, conceptually has many promises. First, integration has and will stabilize cardiologist's income, thereby assuring the presence of cardiologists in the market. As cardiologists become employed by hospital systems, typically, the risk of annual increasing practice expense and collection risk from patients with no viable means to pay for services rendered is transferred to the hospital. But, more importantly, when provider fragments are aligned, the integrated delivery approach promises that both hospital and physician performance from a quality, operations and financial perspective are enhanced. For clarity, the overriding goal of integrating the hospital and cardiology practice organizations is to create value for patients by leveraging the multiple resources and talent perspectives harbored within the two organization types. It is important to note that integration does not necessarily mean physician employment, though this is the most common model.

The belief is that although the organization's structure and culture are significantly different, the multiple perspectives and talents — that inherently see the world in different ways — are materially important in optimizing the performance of the merged organization. Progressive programs, whose aligned vision and commitment are to create a better performing cardiovascular enterprise, will surely prevail in the face of changing and heightened demands of our healthcare environment. However, doing so is clearly occurring incrementally where first the transaction of integration is completed, followed by a stage of cultural integration until finally a real rolling up the sleeves, working-together kind of integrated approach to clinical care across all environments is actually achieved. It is clear that until cultural integration has been achieved, whether by culturally integrating the practice and the hospital or culturally integrating multiple physician practices involved in an integration or some combination of both, that the the ability to create value in the cardiovascular enterprise (whatever it is) is thwarted.

Integrated program governance structures generally appear to operate on a similar and basic premise. However, the clinical scope, nature and degree of leadership from both the physician and the administrative perspective and the degree of authority and autonomy, as well as focus of efforts and improvement are widely variable. It appears as if those programs that  have pursued the vision to create a governance structure that spans both hospital and physician office environments have also structured real authority and responsibility within those structures. Additionally consistent is the leadership and management infrastructure design that pairs physicians and administrators in dyad relationships throughout the infrastructure.

As has been consistent with previous surveys conducted by MedAxiom dating back to 2010, employment is the dominant model of integration and generally physician compensation increases post integration. Most physician employment models remain predominately productivity based with work relative value units as the measure of productivity. However, as more and more programs are discussing the impacts of payment reform in which it is expected that bundling, value-based purchasing and population based payment mechanisms will substantially change the reimbursement environment, new productivity models and compensation models are being developed and evaluated.

Failure to leverage integration to create value for the system and value for patients will only ever be  expensive. In the pursuit of creating value, savvy administrators and physicians alike understand "the disquieting truth," expressed by Arnold Relman, MD, former editor of the New England Journal of Medicine and professor emeritus of medicine and social medicine at Harvard Medical School. In his editorial published in The New York Review of Books, entitled  “The Disquieting Truth,”  Dr. Relman explains that in the United States healthcare expenses related to physician services accounts for about 20 percent of the total healthcare cost. He goes on to explain, however, that in treating patients (ordering tests, prescribing medications, providing and prescribing treatments and therapies and guiding patient decision making), physicians influence (and often control) 100 percent of healthcare's expenditures. As the healthcare system pursues the reduction of 30 percent of its cost out of the system, integrated health systems must partner with physicians to be successful.

Programs are pursuing the creation of value by examining the care delivery system cost structures, reimbursement appropriateness and quality performance. Development of an operating lens(es) such as Lean and Six-Sigma are commonly being deployed as new management paradigms and performance systems are being developed. Although most commonly, integrated programs pursue both quality and cost initiatives, they typically emphasize one initiative type over the other. It is expected that as cardiovascular enterprise infrastructures mature, they will commonly comprehensively examine, design-for-win and pursue the clinical, strategic, financial and operational aspects.    

Suzette Jaskie is president of MedAxiom Consulting and the executive vice-president of MedAxiom. Ms. Jaskie was the CEO of West Michigan Heart and Wisconsin Heart and Vascular in Milwaukee prior to her current position. She also previously served as the executive director of the Frederick Meijer Heart and Vascular Institute, for Spectrum Health System in Grand Rapids, Mich., that governs and manages the cardiovascular service line for the regional health system. Ms. Jaskie has a master's degree in business administration from the University of Hartford and a bachelor's of science degree from the University of Wisconsin.

More Articles on Clinical Integration:

Early Lessons Learned in Healthcare Integration
3 Stages of Hospital and Physician Practice Integration
4 Contemporary Issues in Hospital, Physician-Practice Integration

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