Rapid acceleration of expenses combined with the reduction in reimbursements by payers has led to downward pressure on hospital margins. With an unwavering expectation to improve patient care, providers must do so at a lower cost. It’s imperative as the healthcare system transitions from a fee-for-service to a value-based system. At the heart of this historic shift is the concept of value in healthcare.

What is Value in Healthcare?

Michael Porter of Harvard Business School defined “value” in the healthcare sector as the “outcomes we achieve for the money we spend”. While there are varying opinions on the importance and methods of measuring specific costs or outcomes – there is alignment on the concept that VALUE = OUTCOMES / COST.

Understanding Outcomes. Defining value as the results from a customer (patient) perspective focuses on measuring the outcomes achieved, not the volume of services delivered. Patient outcomes are condition-specific and multidimensional – with no single outcome representing the results of care.

Understanding Costs. The sum of the parts equals the whole in medical conditions. The longitudinal history of care for a patient’s medical condition must be considered versus the cost of individual services.

Inherently, this new orientation of value is disrupting the healthcare industry. This fundamental shift means moving from a long-established system that rewards volume of visits, hospitalizations, procedures, and tests to a system that focuses on improving patient outcomes while lowering costs.

A patient-centered value perspective spans across time and providers. Measuring value requires new, more granular, more appropriate data to support relevant outcomes and costs. “Quality” measurement is moving from current process measures and clinical indicators to true outcomes. Cost measurement is moving towards tracking and measuring at the patient (or medical condition) level. Accountability (and financial risk) will be shared among all providers involved as ACOs and similar collaborative efforts become commonplace.

Delivering in a value-based care model requires a new strategy.

While healthcare inevitably progresses towards standards of measurements for value, hospital leadership is tasked with driving true “value” in a manner that improves outcomes while reducing costs; in concert with other providers. This is the aim in implementing healthcare change that delivers sustained value.

Healthcare is well-versed (and battle scarred) with the results and relative ineffectiveness of the standard cost-cutting playbook. Financial maneuvers without regard to outcomes has always been a risky business and the financial risks are greater than ever. Staff reductions are temporary. Without lasting quality and efficiency improvements, waste remains in the system. And value remains unlocked.

Consider these guiding principles for your organization’s strategy refresh:

  • Provider organizations will face steadily increasing pressure to take cost out of the system and improve outcomes while taking on increasing risk
  • Improving care does not always require higher-costs; outcome improvement and cost reduction are not mutually exclusive
  • Sustained financial resilience is achievable. The importance of driving fundamental and lasting operational improvements today is paramount to shaping a competitive future, particularly for independents.

Develop a roadmap to unlock value

Progressive value-based provider organizations are demonstrating that outcome improvement and cost reduction are not mutually exclusive. Similar to other highly regulated, complex industries that uphold safety and reliability as an imperative while still driving efficiency, the key to unlocking value is incremental but continuous improvement.

The value-based provider’s strategic roadmap must include:

  • A step-wise approach to more accurate cost measurement
  • Systematic assessment of and plan for performance on contract measures
  • Optimized resource utilization so that each member of the team performs at the top of their license
  • A focus on streamlined patient flow and improved experience

We get it; all of these things must be done while “keeping the lights on.” Your organization has a duty to your patients and their families and to your staff, regardless. That’s where we can help. For 20 years, Sense Corp has built a business delivering expertise with a practical perspective to our clients. We have proven successes with hospitals, PCPs and specialists to achieve and surpass goals in value based care.

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