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Cost Containment Corner - Critical value-based challenges

August 03, 2016
From the August 2016 issue of HealthCare Business News magazine

By Bob Lokken

The U.S. health care delivery system is moving toward a “value-based” payment method. The specific schemes will vary, but all will have two structural elements in common: cost control for those paying the bills, and improved patient outcomes, including quality, safety and service. These shifts will have a profound impact on health care systems. The nature of nearly all value-based payments is a zero-sum equation. Those who perform well in terms of patient outcomes will receive payments funded by a reduction in payments to those who perform poorly.

This dynamic will play out annually as the performance of the leading systems improves every year. The scale and scope of an organization will drive the strategies employed regarding risk, but at the heart of it all is a focus on patient outcomes and total cost of care. Systems that thrive during this transformation will be those that can execute these strategies with accuracy and speed. With the zero-sum nature of value-based care payments, health systems are facing the reality that they must not only execute, but that time is of the essence. Successful companies focus on several traits inherent to health care that challenge cost containment and the value-based care mandate. These challenges include:

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Change management
An efficient and effective change management process is especially difficult in health care. Yet the performance mandate inherent in value-based care delivery puts a survival imperative behind effective and continuous performance improvement. It is not just improvement, but the rate of improvement that matters.

Physician engagement
Clinical models not only need to be reengineered, but also deeply intertwined in the financial/business model. Thus, physician engagement and alignment — especially to the performance standards demanded by the payment system — are absolutely critical.

Irrational variation
With any complex ecosystem that operates primarily in silos, significant variation exists, in outcomes, in processes, in nearly every aspect of the system. We all know that such variation exists in health care, and some variation is warranted (primarily due to patient variability). But finding and eliminating irrational variation is “job one” in any effort to drive out waste, improve patient outcomes and secure cost savings.

Health care has always been a complex endeavor. But cost containment, as mandated by value-based care, takes this complexity to a whole new level: dozens of contracts, all with their own set of performance metrics; dozens of specialties which measure patient outcomes differently; thousands of physicians, care providers and support staff, all of whom need clarity and focus on new expectations and new definitions of what “performance” means.

Value-based care redefines accountability around measurable patient outcomes and overall cost controls. These new accountabilities cannot be handled in a centralized, command and control, manner. Value-based care is about moving to a patient-centric model and closing down the gaps in care, so the accountability is both distributed and shared.

About the author: Bob Lokken is co-founder and CEO of WhiteCloud Analytics, a leading provider of health care performance management solutions that help progressive health systems navigate the transition to value-based care.

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