Volume and Value in Healthcare Models

Are you ready to capitalize on opportunities for healthcare transformation?

Published: Wednesday, March 16, 2016 - 17:59

Bundled payments. Volume-to-value. Cost accounting. Process improvement. Patient engagement. Population health. Organizational leadership. These are more than just the newest industry buzzwords: They’re the trends that will compel the healthcare industry to transform its business model. They will affect every healthcare entity, from solo physician practices to hospitals to suppliers, and everyone in between.

Are you ready to capitalize on the opportunities or are you hoping the trend will just go away?

I challenge you to think about your future as a healthcare organization from a new perspective. We’re past the point that “healthcare reform” is an appropriate term for what’s taking place. We are radically changing the paradigm in which we’ve operated for years. We are, as an industry, transforming healthcare, and I believe the winners and losers will be determined by the actions they take now. I also believe that early adopters have a huge advantage going forward, and those who are determined not to adapt ultimately will not stay in business.

My basis for making such a bold statement is the change inherent in a shift from volume-based to value-based compensation models. Let me explain. The goal of healthcare transformation is to improve population health. Theoretically, as people in your community get healthier, they will need fewer visits to your facility, but they may need new services such as wellness programs, social services, or access to fitness and nutrition programs. If you continued to operate in the old model with fewer patient encounters, you’d find it difficult to earn enough to maintain your profitability.

In the new model, compensation is based on the value or quality of the treatment. You must be able to prove that your organization delivers high value. You must be able to quantify quality. You must be able to report patient outcomes. If you can’t, your reimbursements will decrease until you can no longer keep the doors open.

Internally, you must be able to identify and optimize your most profitable revenue centers. To do that, you need to know what care really costs. You must be able to evaluate the ROI of every patient interaction. You also must address the needs of chronically ill patients who are heavy users of your services. All of these challenges require data that are accurately collected, analyzed, and reported.

I think there are several keys to preparing your organization for the coming changes so that you remain viable and competitive. They are:
• Improve outcomes for all patients, especially those who are “heavy users” of your facilities.
• Recognize that collecting and analyzing specific types of data is necessary to improving quality outcomes—not collecting more data, but collecting and analyzing data that inform critical decisions.
• Realign physician incentives by designing appropriate compensation models and enlist participation from physician leaders.
• Establish cost accounting as an element of the new business model.
• Determine accurate ROI to quantify financial investment in healthcare delivery improvement.

The job ahead is difficult, and transformation is hard to plan. The HORNE healthcare team is dedicating our next eight blog posts to issues that are vital to your success. We will share our experiences, as well as the successful strategies healthcare organizations use across the country. We will discuss the special challenges you face in patient engagement, leadership development, and collaboration across departmental silos. We’ll suggest solutions that others are using effectively.

The future of successful healthcare organizations is rooted in the “triple aim”: better care for individuals, better health for populations, and lower costs for healthcare overall. We’re excited about the possibilities the future holds and want to contribute to your transformation. Join us in the discussion.

About The Author

Katherine Watts

Katherine Watts is the partner in charge of healthcare services for HORNE LLP. She leads a team of certified public accountants and healthcare consultants providing services to physicians, medical groups, hospital systems, ambulatory surgery centers, and other healthcare organizations as they develop strategies to meet today’s market demands. Watts provides healthcare, consulting, and taxation services.