Update on Healthcare Delivery

By Lukasz Mazur

It seems like most hospital executives see major changes in the way healthcare will be delivered and paid for in the next five years as providers and payers struggle to do more with less. Most of those executives, however, also believe that the fee-for-service-based business models they’re using now will be at least “somewhat sustainable” or fare even better in the face of new challenges brought on by healthcare reform. Despite the acknowledgement that huge changes are underway, a significant number of executives may be falling back on old reliable models in the face of uncertainty, rather than transitioning to value-based modelsWhy?

Here are the two common answers:

  • Too much work: Most healthcare systems are driven by fee-for-service. The transition to value-based models is viewed as complex, risky, difficult, and too much “hard work”. It requires clinical integration, new technology, which requires removing barriers, creating new concept of teamwork, and strategic position of leaders throughout care delivery. It also requires complex analytics to understand systems dynamics, markets, payment structures, patient needs, innovations, etc. So, the question is, who is really ready for it?
  • Leverage market position: Some hospitals can leverage their market position to maintain or increase payments from commercial plans. This strategy is less risky and less “hard work”. Also, most executives think there is lack of sustainability in the U.S. politics and economy making the transition, or speed of transition, to value-based models somewhat questionable.

I believe that hospitals executives must switch their mindset to improving care quality and access. The focus is usually on cost and revenue, but the best way to contain costs and revenue is to improve quality. From the 10,000 feet view, it means that hospitals should “shrink” in size, while “expand” their prevention capabilities. Hospitals should engage with communities, schools, and/or businesses to offer innovative prevention care plans at low prices; yet ensure profitability based on “economy-of-scale”. At the same time, hospitals should strive to minimize wasteful duplication of essentially the same wide of services, technology, staff, etc., which are typically delivered in a sequential, uncoordinated way with no regard for value. Finally, hospitals should offer SET PRICES (bundled amount for the entire pay cycle; could be adjusted by patient condition complexity), which would motivate them to not do more so they can be paid more.

Is this possible? I hope so. But it is definitely “hard work”.