Moving Beyond a Value Gap to a ‘Value Potential’ By Richard L. Clarke, DHA, FHFMA
President and CEO
Healthcare Financial Management Association
Now more than ever, value in healthcare must be viewed from the eyes of the purchaser.
We’ve reached a point in our country where the rising costs of care are outpacing improvements in quality of care, creating a “value gap” that healthcare providers are struggling to address. It’s not surprising, then, that purchasers – patients, employers, government agencies, and health plans – increasingly want to know what they can expect to receive for what they are paying for care. And although many providers may be efficient at cost reduction within certain components of their delivery systems, if the purchasers are not experiencing these benefits, these providers will have missed the value equation.
So how can we reach our “value potential” in an environment of healthcare reform and payment reform? Recently, HFMA invited 100 thought leaders in healthcare finance to a conference in Washington, D.C., to generate ideas regarding how our nation’s healthcare system can move beyond a value gap to a value potential. The consensus was that healthcare providers need to become better at managing relationships with purchasers and other providers in progressing toward a value-based model of care delivery – and in developing the key competencies needed to succeed under value-based business models.
Capabilities for Value-Based Success
HFMA’s Value Project has defined four key capabilities for closing the gap between quality and cost and making the transition to a value-based business model:
Developing a culture with stronger collaboration, communication, and accountability between
finance and clinicians
Enhancing the organization’s ability to collect, analyze, and connect accurate quality and
financial data to support decision making
Using evidence-based care processes to reduce variation in care
Measuring, assessing, and mitigating risk
These strategic capabilities are interwoven. A culture of collaboration, creativity and accountability is supported by meaningful performance metrics. These performance metrics drive sustainable improvements in quality and cost, with risk capabilities that vary according to each provider’s role in the healthcare ecosystem.
Throughout HFMA’s recent thought leadership retreat, participants shared their perceptions of providers’ progress in developing these capabilities and the strategies that providers should incorporate now to prepare for a value-based business model.
Fifty-seven percent of participants believe that in the face of reduced Medicare and Medicaid payments, the most realistic response on the part of providers would be to reduce costs to maintain margins, rather than increase rates to private payers. This is a sign that providers are working on designing systems that will curb the rate increases that payers have experienced, and it’s a positive step toward moving away from a value gap to a value potential.
Forty-five percent of participants predicted that within the next 10 years, providers will accept performance-based risk on more than half of overall payments. This will involve managing patients and processes to take on a greater share of risk in the delivery of care – and participants’ response to this question says a great deal about the capabilities that healthcare organizations believe they have and will have to manage risk in the future.
There was a strong consensus among thought leadership participants that the costing data, from a user perspective in healthcare, are not very good: Sixty-one percent of participants believe decision makers at most provider organizations would say costing data are only sometimes accurate, timely, appropriate, and reported in a useful manner.
Stronger relationships – with patients, in engaging them in managing their health; with purchasers; and with providers – also will be critical to providers’ success under this new business model, participants agreed.
Making the Transition
As I talk with my colleagues throughout the healthcare industry, there is a sense that the industry will move forward with progress toward a value-based business model regardless of what happens with the Affordable Care Act. There is also the sense that it has never been so difficult to be a healthcare finance professional – but it’s also a really invigorating and exciting time for finance professionals. We all know that our healthcare delivery system is not sustainable in its current form – that it has to change, and that we have to be part of that change. And we know that the changes ahead will improve healthcare in our country.
Dr. Richard Clarke is president and chief executive officer of the Healthcare Financial Management Association (HFMA), Westchester, Ill. He has held this position since June 1986. Dr. Clarke is a past Chair of the Commission on Accreditation of Healthcare Management Education, having served in various capacities for that organization since 1997. He is also a former chair of AHA Financial Solutions, Inc. (a wholly owned subsidiary of the American Hospital Association). Dr. Clarke holds an instructor faculty position in the Department of Health Systems Management at Rush University in Chicago and the MBA in Health program for the University of Miami in Coral Gables, Fla.
Morehead Memorial Hospital is located in a secluded, rural area in North Carolina and has had limited access to new technologies. The case management staff at the hospital was using InterQual® evidence-based clinical criteria in book form. Eventually, it was built into a semi-automatic system that offered limited access to criteria manually embedded in its HIS system. Because staff had no formal training in the proper use of the criteria sets, there was variance in compliance, accuracy and how data was applied.
Proof of the need for improvement in the interpretation of criteria was Morehead’s high observation rate, which was around 32% in 2008. The high rate signified that patients were being assigned to observation when it may have been more appropriate to discharge them from the ER or admit them for inpatient care.
Morehead addressed the challenge by implementing the online version of the criteria set to automate the review process, streamline workflows and provide a more efficient patient tracking process. At the same time, it enlisted McKesson in providing in-depth training on applying the criteria. An additional online solution enables the evaluation of consistency and compliance in how case managers apply the criteria.
Some physicians direct patients to the ER when they are unable to see them during office hours, creating long wait times. “By extending the hours of the ER case manager and using the automated criteria,” said Renee Angiulli, RN, BSN, MHA, CCM, director of case management at Morehead Memorial Hospital, “we have increased the number of patients getting the right level of care by referring patients whose needs could be better met to another location.”
As a result, of the changes, Morehead’s initial review rate increased by 20%, decreasing the incidence of patients going to the floor with the wrong status. In addition, Morehead’s observation rate dropped 60% to an observation rate of 19.3% in 2010. Reducing observation days helped avoid unnecessary care and expense while ensuring revenue from appropriate hospital admissions.
Previously, St. Luke's practice
data was located in silos.
Cross-continuum data
integration now offers a clearer
view to address the future of
healthcare reform.
Cowherd Family Medical
Center used its EHR to
improve the population health
of its patients. The practice
received a top score from
CMS and $75K in P4P funds.
Sky Lakes Medical Center
implemented a variety
of strategies to increase
revenue and reduce costs —
and ultimately improve the
bottom line.
Analytics provides a pathway to
success in preparing for
value-based reimbursement
via process improvement that
integrates clinical and financial
metrics across the enterprise.
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