An integrated method to deliver affordability through a portfolio approach focused on optimizing, repositioning, redesigning and reimagining

Affordability has long been an issue in healthcare, but the problem has only worsened. Permanent solutions are needed to bend the healthcare cost curve in the United States.

During a Huron-sponsored virtual roundtable on May 17, 2021, as part of Becker's Hospital Review 11th Annual Meeting, Huron managing directors Rick Roycroft and John Poulin discussed market trends and opportunities, introduced an approach to cost transformation and led a discussion among healthcare leaders from across the country.  

Five key takeaways were: 

  • Healthcare spending, affordability and unit costs of care remain major issues. Mr. Poulin shared data showing U.S. healthcare spending of $3.8 trillion, which is about 20 percent of GDP. As costs have risen, employers' budgets have become swamped, causing employers to pass on more costs to consumers. While the United States provides some of the best care in the world, it performs poorly on key quality measures. Among the many factors impacting U.S. healthcare spending, the main driver of higher cost is the increase in the unit cost of care. 
  • To break the cycle, health systems need to think and act differently. "It is an ecosystem-wide problem," Mr. Poulin said. He explained that providers engage in episodic performance improvement but over time, projected costs continue to rise faster than reimbursement rates, putting pressure on margins and "eroding the financial solvency of the organization." "You have to focus on bending the cost curve," Mr. Poulin said, with an emphasis on "more permanent, longer-term solutions" that take shape over a two- to four-year horizon.  
  • Huron has developed a method focused on a cost transformation portfolio. Just as investors have portfolios, Huron recommends taking a portfolio approach to cost transformation. In this portfolio there are A, B and C initiatives. "A" initiatives seek to optimize. They are short term and largely internally focused. "B" activities focus on repositioning overhead structures. "C" efforts — which seek to fundamentally redesign and reimagine — aim to change system economics by redesigning the care model. A good portfolio combines A, B and C activities. "This idea of redesigning for affordability," Mr. Poulin said, "is really about permanently altering the delivery model, clinically, operationally and financially, around the consumer market and system needs."
  • Early experience designing for affordability yields several instructive lessons. These lessons include the criticality of data and analytics in establishing a portfolio that can drive significant affordability improvement, the need to incorporate consumer insights in redesign efforts, the importance of fundamentally redesigning care by disrupting current provider-centric models and the requirement that providers make organizational change at the enterprise level. 
  • Redesign and reimagine appeals to health system leaders, who are wrestling with their strategic plans. "Many of us had a strategy, we had a plan, and that was thrown up in the air with COVID," a health system leader from the Midwest said. "We're trying to figure out how rapidly we can get back to that plan and where it needs to be modified." Others described using this unique moment to rethink their customer experience, physical infrastructure and technology investments. It is also a time to reassess whether to outsource and/or offshore. "The task is to reshape the footprint of an organization to be nimbler, leaner, consumer driven and positioned for frictionless change," Mr. Roycroft said.

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