Transforming healthcare service delivery from a volume-driven, fee-for-service reimbursement environment to value-based care involves undertaking the very challenging balance between maintaining profitability in the old paradigm while being disrupted by a new one. The underlying dynamic in this transition is that we need to move from a system designed to heal sick people to one that keeps people healthy. Inevitably, this will mean less demand for healthcare delivered by hospitals and specialists. This change threatens to reduce revenues and profits for these providers just as new care models require capital investment. In this article I will discuss the paradigm shift currently underway in healhcare and identify the ups (and downs) that are likely to occur as the process continues to evolve.
It is no secret that the industry as a whole is trying to figure out how to cross the chasm from volume-based care to value-based care. The part that folks are still trying to figure out is how to do it in the most logical and least disruptive way possible. What we are finding is that, as much as healthcare system executives want to be operating in the future, they realize that they cannot move forward too quickly without incurring significant financial risk (reduced fee-for-services volumes). At the same time, their moving too slowly also creates risk. As a result, they are moving forward cautiously, one step at a time.
Today’s health systems are experiencing the classic innovator’s dilemma as described by Harvard Business School professor, Clay Christensen: they struggle to invest in a future model which is designed to reduce volumes for fear that it will reduce the profitability of their current fee-for-service business.
For some, that activity means becoming more efficient first in the fee-for-service world where changes can be made to reduce payor and patient yield leakage, reduce or variabilize the cost to collect and generally improve productivity— all in the spirit of preparing the foundation to be able to get to the future in a stable fashion. Historically, hospital systems have been very siloed. Within the revenue cycle, there are multiple components: patient access clinical documentation and health information management, and the back office components, all of which are often run very separately. In the fee-for-service world, these silos have created efficiency in specific but isolated functions; as the industry moves toward to a population health focus, however, organizations must be able to connect data horizontally along the continuum of the patient’s experience — first for one episode of care and, ultimately, between episodes of care. Even in the fee-for-service world, though, this horizontal structure can be valuable for identifying and systemically resolving defects,- thereby driving higher revenues and lowering the cost to collect. As a result, organizations in a fee-for-service environment can begin to build a foundation, and earn the requisite investment capital required to transform their systems for value-based care.
Moving to value-based care will require a 180 degree about face for the industry. Healthcare industry spokespeople note that much of the industry is very much ingrained in its current habits and generally resists change, but the Affordable Care Act (ACA) is proposing adjustments to the way things have been done in the past. As much as physicians want to do the right thing — want to provide quality care, want to operate at the top of their license — we have a reimbursement system and an industry culture that historically has striven to obtain more volume and not more value. There will have to be a fundamental shift in how people think about the interplay between healthcare and economics.
Work at Accretive Health Moving Toward Providing Value-Based Care
Accretive Health in Chicago has done work training physicians in the area of accurate diagnosis and coding, doing so to reach the goal of providing value-based care. Historically, physicians have not considered coding an important or even relevant aspect of patient care. In fact, as we move to providing value-based care we are finding that complete and accurate coding proves foundational to planning for global capitation reimbursement, risk stratification and care coordination, all key components of a population health program.
Recently, we at Accretive Health were providing training to a group of 200 physicians. We asked how many of them treated patients with diabetes. They all raised their hands. We asked how many treated patients with diabetes who also had complications. Again, all of them raised their hands. Then we asked how many have coded for those complications. No hands went up. We need for them to realize that it is not just about the reimbursement; it is also about how they can proactively take steps to predict certain behaviors or complications in their patients and ensure that their patients are getting the care that they need — not just from that physician but from any other healthcare professional who could potentially play a part in keeping that individual healthy and out of the hospital. As an industry, we have missed that critical piece of the equation, and we have to retrain our healthcare professionals to see the bigger picture and understand the importance of looking beyond what is right in front of them.
Some folks think that bigger and better technology is needed, but the reality is that there is plenty of technology for sale in the industry. The key is making sure that it is being used in the most effective way possible. We need to do a better job of using that technology. We also have to stop thinking of healthcare as a system for fixing sick people; instead, it needs to be a system that keeps healthy people healthy and prevents sick people from getting sicker. The entire industry hinges on treating the sick, which we certainly need to do, but that shouldn’t be our primary focus. If it is, then there is something fundamentally wrong with the way we are doing business.
Who will struggle the most making this fundamental transition?
Big academic medical centers, like Stanford, may avoid population health as long as possible. Then there are places like Santa Clara Health System, a county hospital in California which serves as a safety net hospital for the disadvantaged community. Santa Clara is struggling as a result of the expansion of MediCal and will be forced by virtue of economics to go into population health because it cannot afford to operate under fee for service or even managed Medicaid because it is losing money. Organizations like Intermountain Health have the benefit of a very homogenous and generally healthy population, so they are less likely to struggle with the transition.
Another pocket of healthcare that cannot be overlooked is the ever-dwindling area of non-hospital-affiliated physician groups. Hospitals are buying out physicians as fast as they can, but there are still a number of physician groups out there, many of whom are facing declining reimbursement. They are starting to realize they could enter into a population health program and directly benefit economically. They are the ones who are the easiest to make the jump to population health, and I think you will see pockets of primary care physicians around the country doing this, which in turn will put pressure on hospitals to adopt a value-based population health service delivery strategy in the near future.
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