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Good Bye Volume; Hello Value: Transition to Collaboration in Healthcare

Good Bye Volume; Hello Value: Transition to Collaboration in Healthcare September 14, 2016

Marketing, research and business development consultant in healthcare, human services and senior living.

health care transitions change lessons

The US spends far more on healthcare  than other developed nations and by most measures the results are subpar. There have been many efforts to slow the rise in healthcare costs and improve value, such as utilization controls, prequalification for services, incentives for lower-cost alternatives and a variety of other mechanisms. Most of these efforts have not succeeded.

Healthcare expenditures: US & OECD
Healthcare expenditures: US & OECD

There is almost no argument that the United States’ healthcare delivery system is inefficient, that it delivers poor value for the money spent, and among the most frequently cited causes for this are fragmentation and lack of collaboration between and among providers. In a new set of initiatives to control costs and improve value, the Centers for Medicare and Medicaid Services (CMS), the agency responsible for approximately 65% of healthcare spending the United States, has now set its sights on a new goal.

Follow the money!

By the end of 2016, 30% of Medicare payments will be based on value, rather than fee for service (the dominant current model for payment), and the CMS has set the goal of 50% by 2018. This change is intended to both slow the increase in healthcare spending in the US, and to improve the value of services provided. These changes will lead the way for other payors and intermediaries.

The transition from “volume” based payments (fee-for-service) to “value” based payments is momentous. For decades, more services provided to patients or “consumers”, translated to higher provider payments. Several new models being piloted by CMS not only limits the amount paid for an entire episode of care, but the amount paid is intended to cover all providers.

Healthcare managers in every segment are struggling with how to adapt to this extraordinary goal. The only way such a transition can be accomplished is for providers in the various segments to cooperate and collaborate. From the outside looking in, this seems obvious. If Mrs. Smith is admitted to the hospital because of a fractured hip requiring surgery, then is transferred post operatively to a skilled nursing center for rehabilitation, and then back to her residence with home healthcare and some rehab equipment, logic suggests that this entire “episode” would be coordinated – but the facts are anything but logical. Mrs. Smith would be exposed to at least five different regulatory and payment pathways, none of which is coordinated with the other. Moreover, she would be exposed to at least three, and potentially four different pharmacy formularies for (in many instances) the same medicines.

innovation stops hereWithout attempting to restructure any of these regulatory or payment systems, CMS has pointed to the goal and told all these distinct providers that it expects collaboration.

 Tower of Babel

These systems never intended to cooperate. Regulations between and among hospitals, home health agencies, home medical equipment suppliers, nursing homes, pharmacies, home and community-based services, transportation, and others are not designed for collaboration. The many agencies which develop and enforce rules for both delivering and paying for services speak different languages, have different systems and codes which  in many ways prevent cooperation!

Organizations which have historically operated in their own isolated segments will be required to collaborate in order to achieve the value-based payment goals set by CMS. Even more challenging, providers, which have been competitors, will have to learn to collaborate in order to avoid penalties, to continue to survive and not be excluded from “preferred provider” networks. CMS is leaving the “how” of this transition up to providers and intermediaries, and have only pointed to the horizon. The risks are great, to say the least. The historic fragmentation of healthcare is built into everything we do – from regulations, to payments, to the very language we use to describe the services performed. In this vertically partitioned environment, how can differences be bridged, allowing the level of cooperation and collaboration, which will quickly be necessary?

Mind the Gap – Bridging the Divide

Managers in a wide array of organizations will soon need to reach collaborative decisions about the best or “ideal” care for a particular patient.  For example, deciding if Mrs. Smith should be referred to a nursing center for rehabilitation, or if she can be safely referred to home are not discussions which have taken place between and among hospitals, nursing centers, home medical equipment suppliers and home health agencies (“actors”). Rather, each actor has competed for its slice of the patient’s economic pie, striving only to maximize its own benefit. Hospitals will be penalized $528 million for readmissions in the next fiscal year. These penalties are often the direct result of not having cross-continuum, collaborative discussions. Because of these penalties, the conversations have started!

There is also an urgent need to develop more sensitive and predictive local models built on data, rather than national statistics, competitive position or anecdote alone. Healthcare providers must learn to use data in order to deflect the drive of intermediaries using cookie-cutter approaches to care utilization. For example, why would Mrs. Smith, the postoperative hip replacement patient, receive 20 days of nursing center rehabilitation in Chicago, and only five days in Boston? These variations are real, and occur too often. In an attempt to control these variations, intermediaries contracted with CMS enforce rigid rules on care delivery, which are not based on dialogue with the care providers, but rather on models derived from national or regional statistics. If the hospital, nursing center, medical equipment supplier and home health agency work in closer communication about Mrs. Smith, they could be more assertive with her intermediary, making the case for the most appropriate level of care, rather than a cookie-cutter, one size fits all approach.

Steps to the Dance: Take Your Partner By the Hand …health care transitions change lessons
The steps to develop a cross-continuum collaborative for care are far from intuitive, and have been undertaken by only a few organizations. Programs and approaches which effectively manage care between and among discharging hospitals, post-acute care providers, home and community-based services, for example, are rare. And too often they don’t succeed in producing the efficiency or productivity hoped for, and so they are not sustainable.

To survive and thrive in a value based payment environment, providers must quickly learn new approaches, develop deep and lasting collaborative relationships and do so in a way that preserves the best of the care and support they provide patients, clients, end-users and  consumers.

But how? How do we build collaboration where there is currently intense competition and secrecy? How can we create teams that are efficient, productive and sustainable?

There are models for creating these collaborative relationships, and there is evidence that when undertaken correctly, they succeed. Contact us today – Stackpole & Associates can help you and your colleagues reach the level of sustainable collaboration needed today and demanded tomorrow.

The rewards of this undertaking will be realized only by those organizations which step forward boldly and agree to engage fully.

Please let us know how we can help.

[1] Loehrer, S., McCarthy, D., Coleman, E. Cross Continuum Collaboration in Health Care: Unleashing the Potential. Population Health Management. 2015

Marketing, research and business development consultant in healthcare, human services and senior living.

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