Healthcare providers are swimming upstream as expenses outpace revenue growth. And with the market swiftly moving to incent wellness, the complex reality of taking full accountability for the cost and health status of their patient populations is mounting pressure on an already fragile system. The undercurrent that is defining the way providers are compensated, modulating the delivery of care, and disrupting operating models is the inherent movement to risk-based payment. Without question, an organization’s success in identifying and driving financial improvement will hinge on how prepared it is to capitalize on the models created to support this movement.
Given their limited resources, providers may be tempted to continue enjoying the fruits of the fee-for-service world and improve margins by redlining the balance sheet, looking for pockets of savings or expenses to cut. However, one-off savings and improvement initiatives will not enable providers to meet the challenges of today’s environment, and this isolated approach can, at best, yield only incremental improvement that does not truly equate to high-value healthcare.
Today, the focal point of a comprehensive financial improvement plan needs to be the clinical operating model. This core competency will underpin efforts to optimize partnerships across integrated delivery networks to ultimately build new streams of revenue. As a healthcare improvement company founded by healthcare providers, Premier has a bird’s-eye view on turning industry challenges into strategies for success. When healthcare organizations such as the Premier members described in this column embrace complexities as opportunities, they stand to profit from the sector’s prevailing transformation. Progressive organizations are achieving the greatest value while taking smart steps to grow revenue in three key ways: standardization of care, partnerships, and integrated care delivery.
STANDARDIZE FOR HIGH-QUALITY, COST-EFFECTIVE CARE
If providers are measured and reimbursed according to outcomes, then clinical variation must drive how improvement opportunities are identified and prioritized. About a quarter of total healthcare spending in the United States is waste, with failure of care delivery and care coordination accounting for $130 billion to $240 billion (Shrank, Rogstad, & Parekh, 2019). The key to eradicating low-value healthcare is knowing exactly which interventions should be undertaken and which should not. Top organizations are prioritizing the removal of variation, establishing a performance improvement methodology, and enabling consistency by means of technology that ensures highly reliable care across the continuum.
To redesign the clinical operating model and sustain improvements, forward-looking providers are embedding clinical decision support (CDS) technology into the electronic health record. The aim is to intervene at the point of provider decision-making with evidence-based insights to drive seamless care and better outcomes. With CDS, clinicians are empowered to follow care pathways and models with proven results. As a result, they can make smart decisions faster. In fact, when Premier’s CDS technology embedded the American Board of Internal Medicine’s Choosing Wisely guidelines into the workflow, it saved nearly $1,000 per patient, shortened length of stay, and reduced the probability of 30-day readmissions (Heekin et al., 2018).
Concurrently, CDS eliminates waste and variation (in the form of inappropriate interventions and resources) from the system. The literature brims with examples of high-priced treatments that did not yield improved outcomes and often did more harm than good—findings that build on the mountain of evidence that the United States spends more on healthcare than any other nation without the corresponding benefits to our quality of life. Clinical variation remains one of the most intricate challenges that providers face in achieving quality and financial goals. Without technology enabling efforts to enhance and sustain care delivery, performance improvement results risk fading away.
It is also essential to acknowledge that performance improvement is not an insular science. Healthcare providers succeed when they join together to accelerate the design, testing, and adoption of evidence-based strategies that simultaneously improve quality, safety, and costs. Members of Premier’s quality and population health improvement collaboratives freely share data with one another and build new care models together, and they outperform others in federal value-based payment and shared-savings programs by nearly 30% (Premier Inc., 2018).
PARTNER WITH NETWORK PROVIDERS FOR BETTER RESULTS
A vital stimulus in successfully redesigning today’s clinical operating model is doing so to meet the new expectations of risk-based alternative payment models (APMs). Progressive health systems are capitalizing on APMs to achieve shared savings and bonus payments as a new source of revenue and are eyeing clinically integrated delivery networks as a vehicle to drive down the total cost of care. Providers that take on more risk in advanced APMs, for instance, are eligible for a 5% lump-sum bonus payment under Medicare’s Quality Payment Program. In addition, after 2025, Medicare will provide an extra pay bump if a provider is in a two-sided risk APM (i.e., one with both upside and downside financial risk).
Health systems that organize high-value networks to succeed in risk-based APMs hold enormous potential for innovation in healthcare and are rapidly becoming industry disruptors. As such, we are seeing increased proliferation of the direct-to-employer model in which a health system joins with local employers in risk-based contracts. These arrangements are enabling better returns for the health system while lowering costs for employers.
As examples, Adventist Health in Southern California began caring for Whole Foods employees in a direct-to-employer model in 2016, Henry Ford Health System unveiled its direct contract with General Motors in 2018, and Geisinger’s Center of Excellence model has long been an industry prototype. Not only are these models helping health systems and employers reduce costs, but the health systems are also gaining additional revenue in the form of incentives earned for dollars saved through high-quality care. As they secure market share, providers simultaneously create a better method for employers to ensure their workforce is healthier and more productive—making direct-to-employer contracts a comprehensive boost for the local economy.
Understanding the continuum of care, and the opportunities within, is key to success in the value-based world. Health systems that partner with payers, employers, and alternative care sites in these value-based care delivery and payment models have the added benefit of understanding total care costs. Accordingly, they are better able to link detailed revenue opportunities with clinical operating model redesign strategies, putting themselves in a better position to align their performance improvement goals with the evolving expectations of future risk-based payer contracts. For example, the Centers for Medicare & Medicaid Services implemented the Patient-Driven Payment Model in October 2019 for skilled nursing facilities, a value-based payment model that reimburses providers according to patient needs rather than volume of therapy services. Accountable care organizations that collaborate with high-performing skilled nursing facilities stand to gain as reimbursement changes incent more appropriate and coordinated care and ultimately yield cost-savings. As these types of models stimulate specific engagement efforts, health systems that have partnered with high-value acute care and post-acute care partners will come out in front.
OPTIMIZE INTEGRATED DELIVERY NETWORKS TO GENERATE REVENUE
Once an integrated delivery network is established, it can begin to explore current market dynamics and demands to determine revenue generation opportunities that go beyond risk-based payments and performance improvements. Premier members are building affiliate structures within clinically integrated networks, for instance, that are simultaneously saving money on supplies and creating a new stream of revenue. They are positioning their clinically integrated networks as new operating models and reimagining supply chain practices across the continuum of regional provider partners. One example of this approach is group purchasing across an integrated delivery network, which can allow smaller outpatient facilities that would not normally have access to a group purchasing organization (GPO) to enter into the health system’s GPO portfolio and, together, operate as a large supply-chain network. A smaller care site such as a skilled nursing facility can benefit greatly from accessing high-quality products at lower, GPO-negotiated prices, while the convening health system earns a cut of the savings. That is better cost management outside of the hospital and a revenue generator within it.
In addition, as the nature of collaboration and competition changes, high-performing networks are placing greater value on coordinated, team-based care versus care provided by individual players. They prioritize funds for family medicine and primary care clinics to invest in technology and leverage additional resources to optimize their operating models, such as adjusting their staffing models to reflect a richer skill set that supports a more coordinated model of care. Integrated delivery networks can also negotiate with payers on physicians’ behalf to better align reimbursement rates and achieve greater savings payments for both the health system and the practice.
On the ground, retail ventures exemplify growth through the capture of current patients. For example, outpatient pharmacies can target patients who fill one-off prescriptions and form rich and regular customer relationships with them. In direct-to-employer contracts, in particular, on-site clinics and pharmacies can incent usage and a lower cost of care. Once such on-site care locations are up and running, healthcare providers can build additional retail sites, bring in new patient populations by way of partnerships with local employers, or launch their own mail-order pharmacy service.
Without profit, we cannot move our healthcare mission forward. Rather than view the inadequacy of funding and sector disruptions as roadblocks, forward-thinking providers are harnessing their creativity and taking advantage of today’s evolving landscape and regulatory pressures. In doing so, they are at the forefront of change and are delivering new levels of convenience, simplicity, access, and total population health improvement. In this environment, it is not the strongest of the species that will survive, nor the most intelligent, but the ones that are most responsive to change.
Heekin A. M., Kontor J., Sax H. C., Keller M. S., Wellington A., Weingarten S. (2018). Choosing wisely: Clinical decision support adherence and associated inpatient outcomes. American Journal of Managed Care
, 24(8), 361–366.
Premier Inc. (2018, February 28). Premier Inc. quality improvement collaborative members outperform non-Quest hospitals by nearly 30 percent in realizing value-based payments
[Press release]. Retrieved from www.premierinc.com/newsroom/press-releases/premier-inc-quality-improvement-collaborative-members-outperform-non-quest-hospitals-by-nearly-30-percent-in-realizing-value-based-payments
Shrank W. H., Rogstad T. L., Parekh N. (2019). Waste in the US health care system: Estimated costs and potential for savings. JAMA
, 322(15), 1501–1509.