This book is a compelling and thought-provoking analysis of critical choices facing health care leaders. It offers a detailed prescription for stakeholders on how to proceed and how to implement genuine accountability at each stage of care management. The authors are seasoned consultants who espouse 3 fundamental realities.
First, health care business models for each sector-hospitals, physicians, pharmaceutical and device manufacturers, employers, patients-must adapt to new market realities or be eclipsed by more customer-focused service providers, including new entrants such as Wal-Mart, Walgreens, and CVS. Stakeholders must rethink their business models and challenge assumptions about their markets, their customers, and their products and services.
Second, sustainable business strategies must be informed by an accurate diagnosis of how we got to where we are today. The book cites plentiful evidence that most industry leaders, including current government-sponsored reform initiatives, do not understand what has driven cost escalation and poor quality or how to remedy it. In fact, most of the "fixes" have merely added further complexity, inefficiencies, and higher costs without improving quality or outcomes.
Third, meeting customer needs must be at the heart of new business models and product design efforts. Consumer choice is ground zero for health care delivery and that means providing easy-to-understand information and transparency on price, quality, outcomes, and service. The authors spell out what this means operationally for each sector. It boils down to providing "value for money" rather than a misplaced focus on branding that is not connected to clinical outcomes and price.
The book begins with an optimistic "Vision for Tomorrow" that presents a fundamentally different future in 2023 that what the industry is struggling to change today. There is better coordination of care and more accountability for health outcomes, more choice for consumers and more competition among providers and insurers, and fewer restrictions and fewer procedures. Business models have been repurposed and financing mechanisms have changed. The latter point is central to the book's thesis and the market-based mantra of "better health outcomes at lower cost."
The chapter heralds increased transparency, reliance on evidence to determine which tests are necessary, and more collaboration between patients and physicians.
Numerof and Abrams stress that a market-based model for health care is necessary precisely because we are not getting better care for less cost. Neither physicians nor patients have a stake in the cost side of the equation although they are the critical decision makers. Without such a market-based approach, costs will not be tamed.
Providers have assumed a production mentality that results in overutilization, uncoordinated care, and poor quality. The authors attribute this to payment not being tied to quality and cost management. Despite the efforts of accreditation organizations, hospitals have not meaningfully improved quality or their value proposition. All stakeholders are "at fault" including consumers who demand drugs and procedures whether their physician recommends them or not. Such an entitlement mentality must be replaced with meaningful financial incentives and information for consumers to make cost-benefit decisions on their own.
Over the past decades, payers have devised payment systems that lack any alignment with better care or reduced costs. In fact, payers (and especially government) have created new administrative cost burdens and a cost-accounting approach that is divorced from better care or reduced costs.
Another central theme of the book is that for a market-based approach to work, there must be accountability for the cost consequence of decisions. At present, providers and consumers are driving unnecessary utilization and costs. The absence of accountability has stimulated stakeholders to test more, treat more, and consume more health services with little incentive to save costs. Health outcomes have not improved despite higher and higher spending.
One of the most interesting anecdotes in the book, that illustrates a mark-based model, involves the Amish population in Oklahoma who do not have health insurance. When they seek medical care, they ask for a list of anticipated costs, question the need for the treatment or procedure, and look for a provider willing to give them the best price. Then they respectfully negotiate a price, including asking for a discount for payment in advance.
Employers are in a position to demand transparency and accountability for outcomes on behalf of employees. Progressive employers are cited for selecting providers who demonstrate both transparency and accountability as a compelling value proposition. Furthermore, employers can use their purchasing power to force change and reward innovation by demanding bundled pricing that is tied to outcomes. Companies such as Boeing and Lowe have moved in that direction to better anticipate their costs.
Health Care at a Turning Point reiterates that just lowering costs is not enough. The objective is to demonstrate economic and clinical value. This suggests a fundamentally different business and clinical model for the industry that offers the consumer meaningful choices about medical decisions, selecting providers, treatment settings, convenience, and price. The authors believe that this can be achieved, in part, through increased competition.
The authors note that until recently clinical intervention and quality have not been linked to payment. If mistakes were made in a hospital, they made more money by fixing the mistakes such as medication errors, hospital-acquired infections, inappropriate readmissions, and falls. CMS's intent not to pay for such "never events" is a welcome signal that establishes a link between payment and outcomes.
Hospitals come in for special scrutiny because of how difficult it is to implement new strategy and business models in such diffuse structures. The management infrastructure in most hospitals is oriented to performing technical tasks rather than meeting strategic business challenges. Managers are rewarded and promoted on the basis of strong technical skills and their ability to execute within the existing hospital system. Too often they lack the managerial and financial skills to drive change through the organization. Creating a management infrastructure that supports change is a critical step for hospitals to remain competitive.
Hospital C-suites must take control of defining their outcomes or someone else will. This also means shifting the hospital's focus on gross clinical effectiveness to a focus on cost-effectiveness because, as the authors point out, cost-effectiveness includes quality of life (or quality-adjusted life years).
Health care delivery organizations are urged to pursue 4 key strategic and defensive responses, particularly in relation to quality metrics promulgated by CMS and insurers.
* Insulate against the impact of the shrinking pie (diversify sources of revenue through direct payment for services such as walk-in retail clinics and premium accommodations in the hospital)
* Position to benefit from cost savings (develop treatment protocols with manufacturers on the basis of CMS "criterion standard" approaches for clinical treatment)
* Anticipate changes to the reimbursement scheme (broaden focus beyond targeted disease states such as cardiovascular disease, cancer, diabetes and osteoarthritis; implement organizational changes needed to redeploy acute care assets to ambulatory and lifestyle intervention services)
* Optimize treatment protocols (adopt new technologies only if they improve outcomes and decrease costs and eliminate those that do not; develop standardized practices on the basis of specialty society guidelines)
The book takes a dim view of Accountable Care Organizations in terms of impacting quality or costs. However, the importance of broad accountability is stressed and 5 important initiatives to achieve it are suggested.
1. Establish key process metrics (costs by procedure, patient cycle time to key behavioral milestones) to manage cost variability and improve efficiency.
2. Establish meaningful quality and outcome metrics to make performance matter.
3. Develop predictive care paths that reflect evidence-based medicine and improve clinical performance across the continuum of care (vs narrow episodes).
4. Develop competencies and incentives that drive increased accountability across the continuum and establish performance expectations and incentive structures to ensure greater ownership for performance.
5. Take steps to facilitate provider coordination by developing IT and system integration capabilities that allow providers to communicate with each other more seamlessly.
Numerof and Abrams are far more optimistic about the potential of bundled payment models to shift provider activity toward value-based payment and away from the pitfalls of fee-for-service. They see bundled payment as the next step in improving quality and reducing cost because it is connected to outcomes and focuses on appropriate utilization.
Health care executives who want to prepare for bundled pricing models should take the following steps:
* Examine their current economic and clinical value proposition (strengths and gaps).
* Identify cost drivers in key services (clinical, technical, and process elements).
* Develop predictive care paths (impact on costs and outcomes; patient-centered and consumer-centric).
* Collaborate with payers (economic and clinical value of each service in the bundle; key differentiators).
* Continuously monitor and update bundled services (internal monitoring for compliance and external review).
Payers present a unique challenge in transitioning to different payment models that reward clinical effectiveness and cost reduction. To move to a different model, there must be a bridge from executives committed to bringing about change to personnel in the organization that execute agreements with providers and adjudicate claims. The latter are incented to perform in the old model. Yet, they must move beyond simply rolling up CPT codes and putting the risk back on the provider.
Insurance companies, payers and providers must actively collaborate in the development of bundled pricing and create the necessary infrastructure and trust to do so. This includes understanding what providers value and finding ways to make those elements part of the deal as to enable them to change the way they deliver care.
One of the most important elements of partnering on bundled payments is paying for predictive care paths and the outcomes they achieve. This is the essential hospital and physician "product" that payers should focus on rather than each procedural detail. Furthermore, these products can be audited for quality just as pharmaceutical and medical device manufacturers are audited. Unlike fee-for-service and capitation, care paths address the industry-wide disconnect between quality and cost. They ensure a better standard of care than the Joint Commission on Accreditation of Healthcare Organizations.
Throughout Health Care at a Turning Point, the authors consistently advocate for "a simplified market-based solution that puts patients at the center, requires transparency of cost and outcomes, and ensures that primary care physicians would play the critical role of healthcare quarterback on behalf of their patients."
The authors do not find this point of view reflected in current health care reform efforts. Moreover, top-down approaches to complex policy problems are doomed to failure. Likewise, previous reform efforts exacerbated the problems they were intended to fix since such initiatives did not improve either efficiency or performance.
Instead, the authors make 4 substantive recommendations for policy makers to improve health care delivery.
First, require accountability from primary care providers and patients for prevention, health maintenance, health education, and primary care. As the foundation for this care model, primary care providers are responsible for educating patients as well as coordinating care among other caregivers.
Second, require accountability from specialists focused on the care continuum, cost efficiency, and increased quality of needed services. Specialists comprise the second tier in this model and are rewarded for delivering tightly integrated quality care.
Third, require institutional accountability, focused on delivering better outcomes at lower cost, coordinated by primary care physicians. As the third tier in this model, hospitals and specialty care organizations are responsible for monitoring and managing progress toward integrated care among providers who are already committed to demonstrating accountability.
Fourth, promote coordination across community agencies, reinforcing prevention, health maintenance, and disease management. Responsibility for engaging and empowering consumers should be reinforced at the community level by hospitals and physician practices as well as by private and public sector entrepreneurs.
The authors believe that a market-based model incorporating these 4 principles would foster community-wide accountability in the health care delivery system rather than relying on a particular institution to unilaterally drive change among various types of providers.
The road map for change hinges on reprising the role of the consumer. The book emphasizes the need for more personal choice and recognizes that the market is moving from a wholesale model to a retail model. The latter focuses on the individual consumer.
Consumer choice involves not only why, where, when, and how it is rendered, it also includes transparency on costs and quality. The mix of these factors constitutes the "new normal" of value-based purchasing. This presents enormous challenges for an industry that historically has resisted change, but it also offers an unparalleled opportunity for market leaders to develop consumer-centric business models and services.
Numerof and Abrams offer a road map for sustainable market reform with remarkable clarity and vision.
-Peter Boland, PhD
President
Boland Healthcare
Berkeley, California