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What's Causing Providers' Slow Shift to Value? A Deeply Ingrained 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).
There are myriad reasons why providers have yet to adopt the risk-based arrangements that add value to care delivery, 2 of the latest claims being a lack of adequate data and quality-measure incentives. 

However, statements like these largely reflect resistance. Most have more data than they realize, and they have the capacity to design and develop quality outcome incentives that matter. Like other sources of resistance, these claims represent opportunities for providers to point fingers at someone or something else rather than take an internal look at their own operations against the requirements of a different, better approach.

They are also scapegoat attempts to cover up one fundamental, industry-wide problem: an inefficient business model that’s become so deeply ingrained, providers simply can’t fathom how else to do business.

This is quite problematic, as establishing healthcare leaders’ agreed-upon future—value-based care—will require a mindset shift of this very magnitude. It will require us to abandon much smaller attempts to entice leaders to put more revenue at risk, and most importantly it will require widespread adoption of a market-based business model. 

To date, many of the federal “pushes” toward value have more so resembled “nudges” toward progress—small, incremental requirements that policymakers hope will encourage traditional industry players to begin to imagine a different future. For example, earlier this year, CMS required hospitals to publish their rates (eg, chargemasters). Many hospital executives pushed back, noting that most patients don’t actually pay what’s in the chargemaster and that as a result, the rates wouldn’t be an accurate reflection of those negotiated with commercial payers.

The key point here is that there has been little financial transparency in an industry that also lacks transparency in clinical outcomes. CMS did not establish or enforce rules on the consumer-friendly readability of the chargemasters, and only a few in the industry took the initiative to publish meaningful, transparent data. 

CMS also introduced 5 business models earlier this year, through which providers’ financial well-being would be at least partially dependent on their patients’ well-being. Unfortunately, all were voluntary.

Where CMS and payers of similar stature are concerned, efforts like this—which tend to toe the very critical line of change but never quite cross it—aren’t all that surprising. Larger organizations stand to make a great impact, but only if they are able to overcome the political, cultural and financial constraints that naturally come with their size.  

Change is easier executed on an individual level, and as such, it’s from individual health systems and providers that the industry will move to value in a timely manner. The work Dr. Bill Wulf at Central Ohio Primary Care Physicians is doing is just an example. Central Ohio Primary Care Physicians offers private pay/concierge-type medicine for Medicaid patients, and this high-value process is actually far less complex and confusing than traditional ways of billing for care. The traditional way involves charging patients for each individual service or procedure with little regard to whether those prices reflect their true worth.

Breaking away from fee-for-service requires that providers prioritize the very same principles that make up a market-based business model: transparency in cost and quality; accountability in payments tied to outcomes; and competition.

When we talk broadly about each of these principles, and especially when we talk about moving to a new business model, providers who are comfortable with the status quo are taken aback by such a seemingly massive undertaking. But when they look at the specific elements needed along the path, suddenly the notion of healthcare moving to a market-based model becomes far more realistic and within reach.

Suddenly, providers see that the greatest barrier to value-based progress isn’t data, quality measures or the absence of forceful federal legislation. It’s themselves and the broken business model they cling to.

Once providers wrap their head around this fact, they will want to embrace a new way of ensuring accountability and transparency in outcomes.  They will want to stop holding onto a dying model and start taking action, establishing the pillars of a market-based model to the mutual benefit of themselves and their patients. 

 
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