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No Business—Especially Healthcare—Can Afford to Take "Baby Steps"

Rita E. Numerof, PhD, is the president of Numerof & Associates, a firm that helps businesses across the healthcare sector define and implement strategies for winning in dynamic markets. For more than 25 years, she has helped executives understand the implications of an evolving healthcare market. Working with leaders in the healthcare space, she has consulted with everyone from top academic and community hospital systems, payers, and Fortune 500 pharmaceutical, device, and diagnostics companies. She is the coauthor of several books, most recently, "Bringing Value to Healthcare: Practical Steps for Getting to a Market-Based Model" (2016).
Healthcare is an industry in transition, being slowly prodded along by ever-increasing public scrutiny over cost and quality. Unfortunately, this transitory phase feels endless, as the obvious solutions—ending fee-for-service and connecting payments to outcomes—seem to remain forever out of reach.

There have been many attempts at reform, most of which the industry has been able to resist. That’s because policymakers and would-be change agents have adopted a “baby steps” model of change with voluntary programs that provide little impetus for improvement and are forever vulnerable to pressure from industry lobbyists.

The latest move by CMS—a proposal to launch payment models that would hold providers accountable for outcomes by having them assume varying amounts of risk—is a perfect example. The programs would launch in 2020, but are voluntary. Even at the optimistic press announcement stage, they aim to get just 25% of Medicare patients out of fee-for-service systems. This is a goal wholly insufficient to meet the funding challenges of Medicare, which in 20 years is projected to consume almost 6% of the total US gross domestic product.

When a child is learning how to swim, they won’t learn by simply dipping their toe in the water. People don’t willingly put themselves in uncomfortable, sometimes scary positions unless forced to do so, and the same can be said for most organizations. That’s why little progress has been made toward providing truly value-based care, as our fourth annual population health survey unfortunately confirms. Despite being in agreement that population health is the future, most of these 500 healthcare leaders report their organizations are still clinging to the illusory safety of the status quo.

There are 3 reasons why the baby steps approach will never get us where we need to be: culture, complexity, and competition.

When programs are pilot-scale or voluntary, there’s insufficient motivation for change. There is risk in at-risk models of payment, but therein also lies providers’ greatest opportunity. By fully assuming risk, providers will be more inclined to commit to ensuring consistently positive outcomes. That commitment will quickly become ingrained in process and culture. Superior outcomes will follow and, despite what they may have once thought, so will better bottom lines. The right care for each patient at the most cost effective point in the care delivery system will cost less to deliver.

Another problem with the baby steps approach is that every new, voluntary program adds complexity to the overall system. This worsens hospitals’ administrative burden and opens the door for stakeholders to hyper-focus on minute details that matter little in the big picture. When this happens, providers are unable to focus on creating an environment that really supports risk-based arrangements, leading to potentially poor results with the voluntary model and discouraging further investments.

Finally, there’s only so long an industry can resist the external sources of change. If providers don’t start moving soon, they risk being on the losing end of competition spurred by innovative outside-sector disruptors. Companies like Amazon, Apple, and Google have recognized consumers’ concerns about high-cost, low-quality care as opportunity, and they’re gearing up to give patients what traditional providers have not. Health systems that commit to risk-based arrangements now will be much better positioned to compete with the industry’s new entrants than those lagging behind.  

The time is now for the industry to start connecting payment to outcomes in a way that goes well beyond experiments and pilots. Providers that hope to get ahead of both traditional and new competitors must be bold enough to take on risk and commit to creating a culture in which risk is mitigated, bottom lines increase and patients thrive.

This should be the goal of every healthcare provider. And if ensuring that patients receive high-quality, life-saving care at a price that they can afford really is the goal, providers won’t wait to enact inevitable change.

 
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