Next Generation ACOs Cut Medicare Spending

Next Generation ACOs (NGACO) have been associated with model-wide reductions in spending without declines in quality, according to a new report from CMS. Based on their first performance year (2016), the participating NGACOS reduced Medicare spending by approximately $100 million.

 

The savings appeared to be associated with reductions in hospital and skilled nursing facility costs.

 

One analyst noted that these results show that the NGACO program “actually does what Medicare was hoping it would do around the cost and quality of care.” (“Next Gen ACO Savings Could Bolster Medicare ACO Changes,” HFMA Compass, August 27, 2018)

 

An independent study confirmed that most of the spending decline resulted from post-acute care spending, mostly skilled nursing facilities. Also, the number of inpatient hospital days as well as nonhospital evaluation and management visits dipped. Annual wellness visits increased 12 percent.

 

These authors noted that the NGACOs were continuing to develop their approaches to an evolving model in the program’s first year and may improve on their initial results. For instance, specific approaches allowed three NGACOs also to cut home health spending. Their findings suggest that there are multiple pathways across various care settings for ACOs to total lower Medicare spending. (“Next Gen ACO Savings Could Bolster Medicare ACO Changes,” HFMA Compass, August 27, 2018)

 

Some industry experts believe that the results in the CMS report confirm that ACOs that take downside risk tend to perform better than those in upside-only risk models.

 

CMS has proposed a rollout of a replacement for the Shared Savings Program to Pathways to Success, where the 516 existing Medicare ACOs must switch into one of two tracks and take on downside risk within two years. (See last two iProtean blogs.)

 

Many provider organizations have resisted the proposed rapid movement to Pathways to Success, noting they need more time in the upside-only models. The new report, however, gives policymakers more evidence to point to should they decide to finalize their proposals despite pushback from these provider organizations.

 

But requiring ACOs to move to downside financial risk in 2019 would cause more than 70 percent of those that responded to a May 2018 poll conducted by the National Association of ACOs to leave the program. (See last two iProtean blogs.) It has been suggested that upside-only ACOs who have not invested in the needed infrastructure or have not derived shared savings will leave the Shared Savings Program. (“Next Gen ACO Savings Could Bolster Medicare ACO Changes,” HFMA Compass, August 27, 2018)

 

 

 

Doing More with Less—The Cost Imperative, is now in your library. This advanced Finance course features Marian Jennings, Dan Grauman and Nate Kaufman. They discuss the issue of cost versus growth, traditional and innovative cost-cutting strategies, rationalization of services and the board’s role.

 

Our upcoming advanced Mission & Strategy course, Due Diligence on Deals, features Dan and Marian who discuss the pitfalls and advantages of due diligence during mergers, consolidation and partnerships.

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

Possible ACO Overhaul Causes Concern

CMS has proposed an overhaul of the Accountable Care Organization (ACO) program, to take effect July 2019. The Medicare ACO program, called the Medicare Shared Savings Program (MSSP) would have a new name, Pathways to Success. It would require the 561 existing ACOs to switch to one of two tracks and would mandate that they take on downside risk within two years.

 

ACO advocates predicted the overhaul could cause massive departures from the program. (“ACO Advocates Issue Warning About Program Overhaul,” HFMA Compass, August 13, 2018)

 

CMS administrator Seema Verma noted in a press release: “Medicare cannot afford to support programs with weak incentives that do not deliver value. ACOs can be an important component of a system that increases the quality of care while decreasing costs; however, most Medicare ACOs do not currently face any financial consequences when costs go up, and this has to change.” (CMS Proposes “Pathways to Success,” an Overhaul of Medicare’s ACO Program, CMS.gov Newsroom)

 

Here are the components of the new ACO program:

 

Basic Track

  • Begins as a one-sided model for new participants
  • After two and a half years, transition to downside risk
  • Downside risk at its highest level would allow organizations to qualify for advanced alternative payment model (APM) track of MACRA
  • Existing ACOs in Track 1 of the MSSP would start downside risk within one and a half years of the July 19 start date

 

Enhanced Track

  • To be based on existing MSSP Track 3
  • ACOs from Track 3, 2 or 1+ would be barred from the upside-only phase of the Basic Track.

 

Both CMS and ACO advocates expect the revamped Medicare ACO program to result in fewer ACOs. CMS estimated that the number of Medicare ACOs could decline by a net 109 over the next 10 years. “The overall drop in expected participation is mainly due to the expectation that the program will be less likely to attract new ACO formation in future years,” CMS officials wrote in the rule. (“ACO Advocates Issue Warning About Program Overhaul,” HFMA Compass, August 13, 2018)

 

The National Association of ACOs warned that this will cause more than 70 percent of ACOs that responded to its recent poll to leave the program.

 

And hospital advocates were not optimistic that the new approach would draw in new hospital participants. For example, the American Hospital Association issued a written statement expressing its concern: “For hospitals and health systems, and other providers that want to come together to provide the highest-quality care for patients, the proposed rule would create barriers to entry in transitioning to value-based care.” The tightened time frame to downside risk would not leave enough time to form the “new and different contractual relationships” and strategies to align hospitals and other providers in risk-bearing models.”

 

Read the proposed rule here:

 

Read the CMS press release here:

 

Read AHA’s written statement here:

 

Doing More with Less—The Cost Imperative, is now in your library. This advanced Finance course features Marian Jennings, Dan Grauman and Nate Kaufman. They discuss the issue of cost versus growth, traditional and innovative cost-cutting strategies, rationalization of services and the board’s role.

 

Our upcoming advanced Mission & Strategy course, Due Diligence on Deals, features Dan and Marian who discuss the pitfalls and advantages of due diligence during mergers, consolidation and partnerships.

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

CMS Proposed Rule Will Cut Medicare Spending by $760 Million

CMS recently released its proposed rule for changes to the Outpatient Prospective Payment System (OPPS) for FY19. In addition to a proposed 1.25 percent increase in hospital OPPS rates for FY19, CMS wants to reduce payment for hospital outpatient clinic visits at off-campus provider-based departments to 40 percent of the OPPS rate.

 

The “site-neutral” policy change will largely offset the OPPS rate increase by cutting payments by 1.2 percent, according to a CMS fact sheet. CMS estimated it would cut $760 million in FY19 Medicare spending. The clinic visit is the most commonly billed service under the OPPS. (“Medicare Proposes $760 Million 2019 Hospital Cut,” HFMA Compass, August 1, 2018)

 

CMS stated that it is proposing the payment cut for provider-based department clinics because of hospital purchases of physician practices. It claimed that the hospitals’ objective in these purchases is to earn higher payment rates by designating the practices as off-campus provider-based departments.

 

The industry has responded quickly.

 

  • America’s Essential Hospitals: “Today’s proposed rule for Medicare outpatient payments would make bad policies worse, impose draconian new cuts that jeopardize healthcare access for millions of vulnerable Americans, and undermine the foundation of support for our nation’s healthcare safety net.”

 

  • The American Hospital Association: “We will urge the agency to revise these punitive policies so that hospitals can continue to provide the highest quality health care.”

 

(Both quotes from “Medicare Proposes $760 Million 2019 Hospital Cut,” HFMA Compass, August 1, 2018)

 

In its fact sheet, CMS explained its rationale as follows:

 

“. . . changes that would encourage site-neutral payment between sites of services and make healthcare prices more transparent for patients so that they can be more informed about out-of-pocket costs. . . [the] proposed rule would further advance the agency’s priority of creating a patient-centered healthcare system by achieving greater price transparency, interoperability, and significant burden reduction so that hospitals and ambulatory surgical centers can operate with better flexibility and patients have what they need to become active healthcare consumers.” (CMS proposes Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System changes for 2019 (CMS-1695-P), CMS.gov, July 25, 2018)

 

A summary of other proposed changes follows:

 

  • Extension of 340B Medicare payment rate to 340 B drugs furnished in non-grandfathered provider-based departments
  • New drugs and biological products to be paid at the rate of the wholesale acquisition cost plus 3 percent (a 50 percent reduction)
  • Changes to the patient experience measures specific to three metrics related to pain communication
  • Changes to the Outpatient Quality Reporting program including removal of 10 measures
  • A 2 percent increase in ASC rates for CY19.

 

Included in the proposed rule was a CMS solicitation for comments on the following:

 

  • Whether providers and suppliers should be required to inform patients about charges and payment information for healthcare services and out-of-pocket costs
  • Suggested changes to encourage interoperability of electronic health records or other ways to share data between providers
  • Whether CMS should revise the Conditions of Participation to require interoperability

 

Comments on the proposed rule are due by Sept. 24, with a final rule expected by around Nov. 1.

 

Read the CMS fact sheet here.

 

Read the 2019 Hospital Outpatient Prospective Payment System (OPPS) proposed rule here.

 

 

 

The Volume to Value Paradox advanced Quality course, featuring Nate Kaufman, Marian Jennings and Dan Grauman, is in your library. These experts discuss their perspectives of moving from volume to value, the pitfalls to avoid, how to involve physicians, the impact of consolidation and scale on value and the overall challenges of inserting value into the reimbursement formula.

 

Our upcoming course focuses exclusively on costs and both traditional and innovative approaches to cost reduction. Look for it soon in your library!

 

 

For a complete list of iProtean courses, click here.

 

For more information about iProtean, click here.  

Competition and Value Lead CMS Policy Priorities

The head of CMS outlined the agency’s policy shift to competition and choice in a recent interview.  Seema Verma noted, “Coming incentives will encourage Medicare beneficiaries to shop among providers, with those that have the lowest prices and deliver better-coordinated care gaining a competitive advantage.” (“Public Poll, Verma Reject Single-Payer,” HFMA Compass, July 27, 2018)

 

Specific points made in her interview include:

 

  • “Patients are the most valuable force in our healthcare system to create value,” emphasizing the need to cater to patients, “not providers.”
  • All levels of CMS should drive a system where providers compete for patients.
  • Pricing and clinical outcomes’ transparency is required to allow patients to shop; e.g., posting online the full chargemaster price list
  • Patients should be able to access and share their electronic health record—CMS has suggested that providers may be required to share all patient’s electronic health records as a condition of participation in Medicare.
  • CMS will “double down” on value-based payments.

 

She also noted that the president “believes competition is the key ingredient to drive down healthcare spending.” (“Public Poll, Verma Reject Single-Payer,” HFMA Compass, July 27, 2018)

 

Value-based Care Models

 

Ms. Verma criticized the Obama administration’s approach to value-based care models. She listed three specific shortfalls:

 

  1. The models overlooked the patient—providing incentives for providers but neglecting to empower the patient.
  2. Most payment models were set up to encourage consolidation in the marketplace. She noted that consolidation actually reduces competition.
  3. The models did not go far enough to make providers responsible for their own budgets.

 

She criticized one-sided risk models and claimed that “those are not the most effective way.” She said the industry needs models that will encourage the provider to take responsibility for the budget.

 

To increase Medicare provider participation in value-based payment arrangements, she said she plans to waive more program integrity rules and offer new models for primary care physicians. (“Public Poll, Verma Reject Single-Payer,” HFMA Compass, July 27, 2018)

 

 

 

The Volume to Value Paradox advanced Quality course, featuring Nate Kaufman, Marian Jennings and Dan Grauman, is in your library. These experts discuss their perspectives of moving from volume to value, the pitfalls to avoid, how to involve physicians, the impact of consolidation and scale on value and the overall challenges of inserting value into the reimbursement formula.

 

Our upcoming course focuses exclusively on costs and both traditional and innovative approaches to cost reduction. Look for it soon in your library!

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

Advocates Want CMS to Increase APM Options for Clinicians

The recently released “massive” Medicare physician proposed payment rule included a “surprise” projection that alternative payment model (APM) participation may decline. Provider organizations are planning member briefings on the rule. (“Providers Examining Why APMs Are Expected to Stall,” HFMA Weekly News, July 23, 2018)

 

The proposed rule continues the implementation of revisions to physician payment including the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Under MACRA, physicians are paid by Medicare either through the Merit-based Incentive Payment System (MIPS), advanced APMs or an exempted class.

 

The vast majority of physicians continue in the exempted category, and MIPS participation is expected to slowly increase. “But provider advocates were surprised to see that Medicare expects clinician participation in APMs to stagnate or decline in FY19.” (“Providers Examining Why APMs Are Expected to Stall,” HFMA Weekly News, July 23, 2018)

 

CMS estimated that between 160,000 and 215,000 clinicians will earn APM bonuses of 5 percent of their Part B payments in FY19. That range was a decline from FY18 projections of 185,000 to 250,000, which CMS estimated in the previous physician payment rule.

 

“We are disappointed in the stagnation of the number of providers projected to be in Advanced APMs in 2019 compared to previous years,” said an executive for the National Association of Accountable Care Organizations

 

An executive from the Medical Group Management Association (MGMA) agreed and noted that MGMA will ask CMS to reverse the declining enrollment by creating more APM options for clinicians.

 

Although CMS officials didn’t address why they expected APM enrollment to stagnate or decline in FY19, some analysts offered possible explanations:

 

  • A combination of tightening qualifications for clinicians seeking the APM bonus and a lack of new models in which they can participate
  • A lack of new or returning accountable care organizations (ACOs); advocates have expressed concern that CMS has not issued guidance for starting the application process for ACOs to renew or launch in 2019—this typically happens in May
  • A lack of agency follow through on strengthening APMs, including ACOs
  • A lack of new physician-led models— the Physician-focused Alternative Payment Model Technical Advisory Committee was expected to review, assess and propose physician-proposed models to vastly increase the number of APMs and allow many more physicians to qualify for APM bonuses; however, no such models have been accepted or implemented by HHS

 

List of Current Models

 

Currently, physicians can qualify for the APM bonus if they meet participation requirements for the following models in FY19:

 

  • Next Generation ACO model
  • Comprehensive Primary Care Plus (CPC+) model
  • Comprehensive ESRD Care model (two-sided risk arrangement)
  • Vermont All-Payer ACO model
  • Comprehensive Care for Joint Replacement Payment model (CEHRT track)
  • Oncology Care Model (two-sided risk arrangement)
  • Medicare ACO Track 1+
  • Bundled Payments for Care Improvement Advanced
  • Maryland Total Cost of Care model (Maryland Care Redesign Program; Maryland Primary Care Program)
  • Medicare Shared Savings Program Tracks 2 and

 

 

Read rule here:

 

(Source: “Providers Examining Why APMs Are Expected to Stall,” HFMA Weekly News, July 23, 2018)

 

The Volume to Value Paradox advanced Quality course, featuring Nate Kaufman, Marian Jennings and Dan Grauman, is in your library. These experts discuss their perspectives of moving from volume to value, the pitfalls to avoid, how to involve physicians, the impact of consolidation and scale on value and the overall challenges of inserting value into the reimbursement formula.

 

Our upcoming course focuses exclusively on costs and both traditional and innovative approaches to cost reduction. Look for it soon in your library!

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here. 

An Argument for Growing High-Value Service Lines

Hospitals/systems may be considering the pro’s and con’s of growing their service lines, even as they grapple with cost reduction strategies. Experts have noted the many benefits including increased patient volumes, improved health outcomes, increased market share and improved physician loyalty. If hospitals/systems focus on high-value service lines, a key benefit would be a significant return on investment and financial growth.

 

Objectives of high-value service line growth include:

 

Optimizing limited resources.  By focusing on specific services lines that show the greatest growth potential, hospitals/systems can allocate resources to achieve the greatest effect in driving revenue. The best candidates for growth potential would be identified. Then, through use of data analytics, specific strategies could be developed to improve and market the service line.

 

Driving patient satisfaction. Most U.S. cities have multiple hospitals vying for “healthcare provider of choice” for the community. To compete effectively, hospitals/systems should have effective, even aggressive strategies for attracting the consumers they want and providing them “with an exemplary experience.” Patients want “prompt service tailored precisely to their specific needs, with personalized customer service.” (“How to Grow High-Value Service Lines Effectively,” hfm Magazine, July 2018)

 

Healthcare organizations that achieve high rates of patient satisfaction realize financial benefits, according to a 2016 study by Deloitte. The authors reported that hospitals whose patients rate their experience as “excellent” have higher profitability than those with lower ratings. (Engaging with Tomorrow’s Patients: The New Health Care Customer, Deloitte, 2016)

 

Achieving lifelong relationships with patients. Marketing experts note that it’s costlier to acquire new customers than retain them. Patients who remain involved with a healthcare organization over long periods of time are for all intents and purposes repeat customers. (“How to Grow High-Value Service Lines Effectively,” hfm Magazine, July 2018)

 

Having a reputation for service-line excellence is one of the best ways to foster patient loyalty. Expertise in high-value fields often is the initial draw for patients. It creates the opportunities for the organization to engage patients and, through service excellence, high satisfaction that ensures they will continue to bring business into the organization. (“How to Grow High-Value Service Lines Effectively,” hfm Magazine, July 2018)

 

 

 

The Volume to Value Paradox advanced Quality course, featuring Nate Kaufman, Marian Jennings and Dan Grauman, is in your library. These experts discuss their perspectives of moving from volume to value, the pitfalls to avoid, how to involve physicians, the impact of consolidation and scale on value and the overall challenges of inserting value into the reimbursement formula.

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

CMS Reveals New Stance on ACO Risk Contracts and Medicaid Limits

No Medicaid lifetime limits and a hard stance on ACO risk contracts highlighted CMS head Seema Verma’s talk at the American Hospital Association’s recent annual meeting.

 

“We’re determined to make sure that Medicaid remains the safety net for those who need it most,” Verma said. “To that end, we have determined we will not approve Kansas’ recent request to place a lifetime limit on Medicaid benefits.” (“Verma draws the line on Medicaid limits, ACO risk contracts,” Modern Healthcare, May 7, 2018)

 

Healthcare providers have urged CMS to deny Medicaid benefits limits proposed by some states, noting it would significantly increase hospitals’ uncompensated-care costs, as many low-income beneficiaries cycle on and off Medicaid due to unpredictable hours and wages.

 

ACO Risk Contracts

 

ACOs that have taken on risk have saved money, but those in upside-only tracks (no risk) appear to be increasing Medicare spending, according to Verma. ACOs that started in the Medicare Shared Savings Program’s Track 1 in either 2012 or 2013 are supposed to move to a risk-based model by their third contract periods, which begin next year.

 

“The presence of these upside-only tracks may be encouraging consolidation in the marketplace, reducing competition and choice for our beneficiaries,” she said. “While we understand that systems need time to adjust, our system cannot afford to continue with models that are not producing results.” (“Verma draws the line on Medicaid limits, ACO risk contracts,” Modern Healthcare, May 7, 2018)

 

A significant majority (82 percent) of Medicare Shared Savings ACOs has enrolled in upside-only tracks. These ACOs say they need more time without risk because Medicare Shared Savings Program regulations have changed considerably since the early years and ACOs are just now operating successfully.

 

A recent survey by the National Association of ACOs found that many ACOs would quit if they were required to take on risk next year. (“Many Medicare ACOs would quit rather than face risk next year,” Modern Healthcare, May 2, 2018)

 

Verma’s stance may mean there will be an exodus from Track 1, policy insiders said.  One analyst noted the CMS focus on risk would mean a much smaller ACO program that loses less money.

 

Late last month Verma wrote to the National Association of ACOs that “risk-reticent ACOs move to the newly created Track 1+ which has a lower shared loss rate (30 percent) compared to Tracks 2 and 3. (“Verma draws the line on Medicaid limits, ACO risk contracts,” Modern Healthcare, May 7, 2018)

 

But an executive at the National Association of ACOs noted provider concerns about moving to Track 1+ because the shared savings rate is not any higher than Track 1. (“Verma draws the line on Medicaid limits, ACO risk contracts,” Modern Healthcare, May 7, 2018)

 

 

The Board’s Role in Leading Through Transition, iProtean’s latest advanced Governance course, now appears in your library. It features Karma Bass and Marian Jennings on issues such as dealing with uncertainty, new elements for evaluating the CEO, prudent risk-taking, critical questions, recommended practices, destination metrics and changing over time.

 

Coming soon: The Volume to Value Paradox featuring Nate Kaufman, Marian Jennings and Dan Grauman.

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

Internalizing Enterprise Risk Management

As the healthcare market expands and evolves, the inherent risks also are increasing. These risks include:

  • The shift from volume to value
  • The rise of the consumer and expansion of consumer options
  • New payment models
  • Mobile strategies
  • New entrants
  • An aging population
  • Continued political and regulatory uncertainty

 

Whereas hospitals/systems have traditionally done well at risk identification and assessment, analysts wrote in a new report from the Healthcare Financial Management Association that “The industry has been less proficient at prioritizing and managing risk.” To do better, healthcare providers must invest more in building effective enterprise risk management (ERM) capabilities. (“ERM: Evolving From Risk Assessment to Strategic Risk Management,” HFMA’s Healthcare Finance Strategies, April 25, 2018)

 

“By giving an organization insight into how to take the right risks at the right time, an effective ERM program can help the organization more successfully execute its strategic imperatives,” the analysts wrote.

 

Key Components

 

Regardless of the initial ERM maturity level in the organization, an important starting point for developing the program begins with clearly defining or reviewing the program’s purpose and value proposition for key stakeholders. This exercise will help determine whether the current program is effectively serving the organization and is well positioned to drive the level of change needed while managing risk in a dynamic and complex environment.

 

The organization should create a risk culture and governance in alignment with its strategic planning process and build out risk processes with the support of governance, risk and compliance (GRC) technologies.

 

The five key components of the program include:

 

Building a risk culture.  Identifying, understanding and managing risk should be a priority and responsibility of all members of the management team. Risk topics should be part and parcel of day-to-day operations discussions as well as committee meetings and executive team discussions.

 

“Organizational risks should be defined more broadly than simply as events that result in challenges and issues that must be avoided. It is important that all stakeholders within the hospital or health system understand both the risks and opportunities presented, and the uncertainties that need to be balanced to make an informed decision on whether to pursue the opportunity.” (“ERM: Evolving From Risk Assessment to Strategic Risk Management,” HFMA’s Healthcare Finance Strategies, April 25, 2018)

 

Formalizing risk governance. The board, senior management and functional management should have specific roles within the risk-management process and recognize their active roles within the risk-governance process. They should be accountable for their participation in the process, and guides and protocols should be created to clearly define when and how issues of risk are to be escalated.

 

Aligning ERM with strategic planning. To achieve greater alignment to the organization’s strategic planning process, organizational leaders should leverage the results of the risk assessment to promote a discussion around the implications of the risk profile. These conversations ultimately should lead to integration of the ERM processes within key functions such as planning, mergers and acquisitions, and program management for strategic initiatives.

 

Standardizing the risk management process. A standardized risk management process relies on data analysis to define the qualitative and quantitative impact of risk on an organization’s ability to accomplish its strategic initiatives and execute its day-to-day business decisions. Organizational leaders should review all risk scenarios to understand the implications of changing business models, industry events and trends and the interrelatedness and combined impact of risk. Using this information, as well as risk appetite, risk management professionals can incorporate the changes over time and drive further resource allocation discussions.

 

Leveraging GRC technology to capture and coordinate risk management activities. As the risk environment evolves, enhanced and more sophisticated tools help to support an advancing risk management process and improve coordination of core risk management activities. These tools provide greater access to shared data and information across the organization and improve resiliency. (“ERM: Evolving From Risk Assessment to Strategic Risk Management,” HFMA’s Healthcare Finance Strategies, April 25, 2018)

 

 

 

The Board’s Role in Leading Through Transition, iProtean’s latest advanced Governance course, now appears in your library. It features Karma Bass and Marian Jennings on issues such as dealing with uncertainty, new elements for evaluating the CEO, prudent risk-taking, critical questions, recommended practices, destination metrics and changing over time.

 

Coming soon: The Volume to Value Paradox featuring Nate Kaufman, Marian Jennings and Dan Grauman.

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

What Is Value?

Continuing with excerpts from recent interviews with our experts, Marian Jennings and Nate Kaufman talked about moving from volume to value, and what that means to them.

 

Interviewer: What is Value?

 

Nate Kaufman: Value relates to the fact that the benefits being provided are worth the cost. The question that a healthcare provider needs to ask when they’re referring to value is, “How are we going to be sustainably differently better?” Or, “How are we going to be worth the cost?”

 

If healthcare services are not worth the cost or not sustainably differently better, they are all the same. And if they are all the same, they are just a commodity. All that matters is price.

 

There are four benefits in healthcare: appropriateness, outcomes, service and access. And then, of course, there’s cost. To be a high value provider, essentially one has to make sure that wherever a patient receives care, that care will be appropriate. The outcomes will be optimal. The service will be consistent and excellent, and most importantly, the patient can get in to see the provider when they need to see them. And that all this will be packaged in such a way that it will be done at the best possible cost. That’s a high value provider.

 

At this point, very few healthcare delivery systems have been able to organize themselves in such a way that they can present a high value delivery system to the market and differentiate themselves from others.

 

Value means different things to different components of the healthcare system. For example: for a purchaser of healthcare, two critical elements are appropriateness and outcomes. For the patient, who can’t judge appropriateness and outcomes, the primary area of value are service and, most importantly, access. Access drives patient choice in healthcare. Now, of course, cost is an important component, but for the most part, access is the primary driver of market share today when it comes to patient choice.

 

Marian Jennings: Value is a ratio or a relationship between quality as measured by the consumer compared to or divided by the cost as measured by the consumer. So why did I add that language, “by the consumer?” The consumer can be the patient, the consumer can be the insurance company or the consumer can be your physicians. As we move into the future, it will be increasingly important to focus not just on volume— that is, how many patients come through our system—but whether we can demonstrate a distinctive value proposition.

 

For patients, we actually know what matters to them. On the quality side, they define quality as number affordability timely access to services, clinical expertise, convenience and the ability to communicate with clinicians electronically (this will become increasingly important over time).

 

So, if we think about value from a consumer perspective, they are looking at affordability, as part of quality in the numerator, and then they’re looking at cost in the denominator as part of the ratio. So we can drive value up by offering more of the attributes they’re looking for or we can drive it up by reducing cost, which helps us both with the affordability question and with the overall ratio.

 

Interviewer: What are your thoughts about moving from volume to value?

 

Nate Kaufman: I don’t believe we are moving from volume to value, I think that is a gross misconception. I do believe value is important but I believe the reason it’s important is because value will drive volume, and volume will drive revenue income and market share. I think we will always be rewarded in some form or fashion by the volume of care we provide. But it is value that will drive that volume to our organizations and our providers.

 

Marian Jennings: When thinking about volume and value, there is a preconceived notion that more volume drives greater value. That can be the case, but it’s certainly not always the case . . . counting on scale to deliver value just because you’re bigger is not really objectively borne out. That doesn’t mean it can’t be borne out. It doesn’t mean that over time larger organizations can’t drive best practices in a way that actually improve value, but just thinking if we merge and get bigger, we will have more value to the people in our market is probably unrealistic.

 

 

 

 

The Board’s Role in Leading Through Transition, iProtean’s latest advanced Governance course, now appears in your library. It features Karma Bass and Marian Jennings on issues such as dealing with uncertainty, new elements for evaluating the CEO, prudent risk-taking, critical questions, recommended practices, destination metrics and changing over time.

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.

Corporate Interest in the Delivery of Care

Now that the iProtean Symposium has concluded and we have a rich source of new material from our experts for the upcoming courses, we will from time to time feature select abstracts from our experts’ interviews. Subscribers will see new courses such as Health Care: We Have a Problem; Doing More with Less; Due Diligence on Deals; Alternative Sources of Revenue; Physicians and Value/Risk-Based Reimbursement; Involving Finance in Strategic Planning; Physician Burnout. Our experts include Dan Grauman, Marian Jennings, Nate Kaufman, Anne McGeorge and Brian Wong, M.D.

 

Today’s feature is from Dan Grauman and his thoughts on the recent interest by corporations in taking on healthcare.

 

Interviewer: Why is corporate America seemingly interested in taking on healthcare? Whether it be Amazon, Wall Street or Berkshire Hathaway or CVS/AETNA?

 

Health care continues get a lot of attention on a national scale by corporate America. Primarily this is because how significant a percentage of our economy goes to healthcare—nearly 20 percent. This includes hospitals, physicians, health insurers, pharmaceutical companies, medical device manufacturers, etc.

 

So when you have an industry that big and there’s disruption and change, all of which characterize our industry, there’s also opportunity. At the same time, large employers for years have been concerned about the cost of healthcare, the cost of the premiums that they have to bear for their work forces. So these large employers are paying attention as purchasers of healthcare services; they want to influence the delivery system and make sure it’s providing care in the most efficient way possible. They want to pressure the insurers and the pharmaceutical companies that are in the middle, if you will, and at the same time corporate American thinks it can do it better if it gets involved in a more meaningful way.

 

The new disruptive technology-driven companies are very sophisticated in terms of supply chain and other business processes and they look at their core competency and expertise and ask, “What if we translate and deliver this and apply it to healthcare delivery? Perhaps we can help this industry do better and at the same time help ourselves.

 

Interviewer: Will they better manage care and cost than the traditional players: hospitals, physicians and insurers?

 

There has been a long-term debate and discussion about whether anyone could help hospitals and physicians practice medicine in a better and more efficient way. Are the physicians, who have so much control about what care is rendered and how it’s delivered, the only ones who could really change the delivery of care?

 

The traditional model has been for health insurers, by threatening to deny payment for certain types of care, to try to influence care. It hasn’t worked very well and one of the well-known facts is that there are significant variations across the country in how medicine is practiced. There may be some valid reasons for some of those differences, but some of the differences are so stark that it doesn’t really make sense.

 

But the fact is that if you look at the way a particular disease or healthcare problem is handled in one market versus another across the country, you see significant variations. And the argument goes that if corporate America—the Amazons and Berkshire Hathaways and Googles—could reduce those variations and get more consistency about how medicine is practiced, then care and cost would be more favorable.

 

 

 

The Board’s Role in Leading Through Transition, iProtean’s latest advanced Governance course, now appears in your library. It features Karma Bass and Marian Jennings on issues such as dealing with uncertainty, new elements for evaluating the CEO, prudent risk-taking, critical questions, recommended practices, destination metrics and changing over time.

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.