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Healthcare "Excellence" Will Only Come from a Better Business Model

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).
Consumers’ dissatisfaction with our current healthcare system has existed for years, yet we still hope and pray it gets better.

Instead of waiting for the industry to fix itself, some employers—whose health plans allow most Americans to afford healthcare services—have taken matters into their own hands. They’ve chosen to dedicate substantial time, money and resources to uncover which providers have the highest-value health outcomes. And considering how opaque and user-unfriendly the industry is, the vast majority of American employers, especially small ones, haven’t taken on such an effort.

Walmart is one of the brave few. It partnered with a third party to create an imaging network to perform MRI and CT scans for its employees, and very recently opened its own pilot primary care clinic in Georgia, with the intent to expand across the country. It also has a Centers of Excellence program, which identifies those healthcare providers most likely to give employees top-of-the-line care for certain medical conditions or surgeries. Employees who go to one of these providers pay zero out-of-pocket costs.

As a result, “excellence” has become a distorted term. All healthcare delivery organizations want to use it as a descriptor for themselves, which explains an effort I was recently made aware of: One health system retained a management consulting firm—its own group purchasing organization, no less—to save $120 million over a 3-year period. The name of this latest project? “Accelerating excellence.”

This is eerily reminiscent of healthcare trends that occurred in the ‘90s, when hospitals and health systems engaged consultants to make cost-cutting efforts under similar euphemisms instead of building the internal disciplines needed to maintain cost efficiency and make meaningful quality improvements. Cutting costs, while important in any business, should never be confused with overall business “excellence”—unless the business differentiator is to be the “lowest-cost provider.”

“Excellence” doesn’t come solely from targeted efforts at extracting wasteful spending. True “excellence” comes from health systems making fundamental changes to the way they do business, namely by adopting a market-based model in which costs are connected to quality and providers are therefore held accountable for the outcomes they produce.

We wouldn’t be seeing this half-baked pursuit of excellence if providers would have implemented the core disciplines needed for high-value operations years ago.

Simply put, if patients had been put before profits from day one—paying for care on the basis of its quality—we wouldn’t have many of the delivery issues we see today: sky-high and inconsistent prices; no way to easily see what kind of care patients receive and at what cost;  and surprise “balance bills” from patients receiving treatment from out-of-network providers even though they made the conscious, responsible decision to visit an in-network hospital.

The good news is that it’s not too late to change course. A consumer-centered, market-based model with transparency in cost and quality, accountability with payments tied to outcomes, and real competition based on easily available, consumer-friendly data is the answer we’ve been waiting for.

This model is at the heart of population health management—delivering the right care, in the right setting, at the right price. It improves care coordination, eliminates disparities by addressing social determinants of health and increases accountability. Acute care is reduced in the presence of preventative programs, overall healthcare spending shrinks and “healthcare” finally becomes more than just “sick care.” That is excellence.

So, rather than hyper-focusing on the good and crossing their fingers that consumers will overlook the bad, or creating short-term plans solely to save money, health systems should do the following:
  • Diversify healthcare offerings by contracting with innovative outside players
  • Develop clear processes for these entities to meet contractual obligations
  • Establish better, more transparent relationships with payers and employers
  • Develop compelling data-based stories that illustrate the value of new products and services
  • Identify, collect and analyze data to support value claims 


If excellence is the goal, health systems can’t drag their feet on this any longer—patients have waited far too long. In today’s competitive marketplace, providers can’t keep hesitating to move away from antiquated approaches of care delivery. If they want to seize a competitive advantage, they must change their business model to provide patients with the cost-efficient, high-quality care they expect and deserve.

 
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