Value—not volume—is the key to increasing profitability. But effective strategies are needed to build a broad—and loyal—patient base.
At a Glance
Hospitals seeking growth in a value-based environment should consider adopting three strategies to broaden their patient base, build loyalty, and offset declining patient volumes resulting from clinical efficiencies:
- Expand network and influence across the healthcare continuum.
- Engage in revenue models to monetize value from improved efficiencies.
- Introduce new, accountable-care-based insurance products.
The long-standing business axiom “If you’re not growing, you’re dying” applies to health care now more than ever before. Provider organizations should not only reexamine their current growth strategies, but also rethink what it means to grow in this rapidly changing environment.
Much as the home computing market increased sales by shifting its selling strategy from desktops to laptops to tablets, so must the healthcare industry adapt to meet changing market demands for convenience, quality, and value. Although the end goal remains the same—to provide the highest standard of care—the best way to achieve that goal will undoubtedly continue to change dramatically.
In the past, strategies for growing hospital revenue were rooted in bricks and mortar. As long as hospitals were adding more inpatient beds and building more facilities, they could perform more procedures and generate fee-for-service (FFS) revenue. But the rules of the game are changing. Driven by the realities of escalating costs, downward rate pressures, and the growing prevalence of chronic conditions, an increasing number of providers are moving away from FFS payments in favor of value-based financial models aimed at reducing unnecessary interventions and hospitalizations while improving quality and lowering costs.
If implemented successfully, these value-based models may actually reduce the number of procedures required for some patient populations and change the type of visits, procedures, and tests needed for others. Instead of a FFS model incenting providers to bill more services, newer models reward organizations based on how well they improve the health of entire populations, manage chronic conditions, enhance the patient experience, and expand their patient base. This new face of growth is replacing the industry’s historical focus on encounter-based medicine with an approach that requires coordination across the healthcare continuum.
To effectively embrace this more coordinated care model and offset lower volume, providers should adopt three strategies, some of which may be completely new to them.
Strategy No. 1: Expand Network and Influence Across the Healthcare Continuum
Health systems can control a greater portion of healthcare dollars and build loyalty by limiting the need for patients to seek care elsewhere. One of the easiest ways to keep patients in network is to expand the number of primary care physicians, specialists, and locations affiliated with the system. Evening and weekend hours help to enhance accessibility and offer patients added convenience.
When health systems enhance access to a defined group of available physicians and provider locations (especially for employees participating in their self-funded health plan), their patients receive quicker, more convenient care. The resulting improved continuity of care can enable physicians to catch problems before they become acute (saving money to the plan in the long term) and get employees back to work more quickly. By developing stronger relationships with community physicians, health systems also can improve the likelihood that these physicians will be a source of referrals and admissions. Moreover, as health systems gain greater visibility and control, they can increase retention of their in-network patient population as part of their growth strategy.
Another important aspect of network expansion is acquiring, partnering, or contracting with ancillary providers across the continuum of care, including rehabilitation facilities, behavioral health providers, skilled nursing facilities, long-term acute care hospitals, and hospice/palliative care providers. With a network of providers that spans the diverse range of patient needs, health systems can improve patient retention and enhance consumer preference.
Despite a widely held, but inaccurate, perception that complicated contracts and detailed incentive structures are necessary for physicians to participate in a network, the promise of growth, reduced risk, and the ability to reach a broader patient population may be enough to attract physicians to a new or limited network.
Strategic considerations. A large health system based in the mid-Atlantic partnered with another provider group to begin building a clinically integrated network (CIN) in 2012. In less than a year, the CIN grew to more than 900 physicians, with limited financial incentives for participation.
The first step was to send a letter to local physicians describing the benefits of working with a large health system, including the opportunity to improve quality and better serve the surrounding community. Physicians did not receive any type of employment status or stipend for participating, and those who chose to join were not restricted from participating in other CINs. About 300 physicians opted to join the network following the initial mailing.
A second mailing a few months later further described the benefits of participation and explained that the approximately 11,500 members of the health system’s employee health plan would be charged lower copays when seeing physicians in this developing network. Encouraged by this new potential patient opportunity, an additional 400 physicians signed on, and the health system was able to meet its original goal of 700 physician participants.
A third and final effort, involving phone calls and in-person visits, prompted an additional 200 physician members to sign on.
Strategy No. 2: Monetize Value from Improved Efficiencies
A second approach for maximizing revenue in a value-based climate is for providers to participate in gain- and/or risk-share contracts with payers. When coupled with a robust patient engagement strategy, these kinds of contracting mechanisms help to monetize the value derived from new care models.
Collaborating with payers to align cost, quality, and patient satisfaction goals is an important first step toward achieving the shared savings that result from improved health outcomes. Incentives focused on specific quality and efficiency measures are paid to providers who help patients stay healthy and avoid more extensive care. Although actual metrics vary from contract to contract, they often mirror federal measures from the Healthcare Effectiveness Information and Data Set (HEDIS) and the National Quality Forum. Metrics may include targets such as:
- Increasing the number of patients that receive preventive care and screenings
- Improving the management of chronic conditions
- Reducing avoidable hospital admissions
- Reducing hospital readmissions
- Minimizing avoidable emergency department visits
To achieve the best possible returns, providers should contract with multiple payers over multiple years and take advantage of federal programs, such as the Medicare Shared Savings Program (MSSP), along with a range of commercial insurance agreements that offer similar rewards and incentives. This approach enables providers to earn even more revenue while allowing time to reengineer care delivery processes.
Once these contracts are in place, robust and consistent monitoring can help pinpoint where opportunities for improvement lie. Such opportunities may include reducing medical/surgical bed-days or improving access to primary care providers for high-risk populations. Claims data, along with specific clinical and financial analytics, can give organizations a more complete picture of overall patient and network performance, help them identify when patients received care outside of the network, and provide them with valuable insight into how to improve retention.
Often, patient-engagement and care-management tools can help close these gaps. Patient portals, social networking tools, and smart phone applications used for such purposes as scheduling or preregistering appointments all work together to increase in-network benefits. By making the care experience more convenient and more personal, providers can help boost satisfaction, retain their existing patient base, and attract new patients. In the end, attributing more patients to the network can translate to greater efficiency and more top-line growth.
Strategic considerations. When a large, integrated delivery system entered into a shared savings agreement with one of its commercial payers in 2011, it opted for an attribution model that shares dollars if the actual paid per member per month (PMPM) is better than the market trend (i.e., target).
Now well into its second year of participation in the agreement, the health system is rapidly working toward achieving the performance goals required to share in savings. During the first year, average membership reached about 14,000 people, and the PMPM savings were nearly $4.60. In the second year, the average membership grew to 15,500 people, and PMPM savings were over $2.10, just shy of the target.
Although the health system has not yet received any financial payouts through shared savings, its executive leadership recognizes that signing the shared savings agreement is just one step in its accountable care journey. The organization is already benefiting from cost reductions resulting from the increased efficiencies of a more coordinated care model. The multiyear shared-savings contract also is helping to establish a foundation for future revenue growth. As the organization continues to invest the time and effort required to successfully transition from reactive, encounter-based care to a more proactive, value-based approach, it is primed to demonstrate significant PMPM improvements—and garner additional revenue—in the coming years.
Strategy No. 3: Introduce New Accountable-Care-Based Insurance Products
Beyond generating income through increased efficiencies and shared savings, healthcare organizations can also capture growth and control more revenue by introducing new accountable-care-based insurance offerings in the local marketplace. These products should appeal to employers and consumers and take the form of a cobranded health plan, a hospital-owned health plan, or a joint venture with a commercial insurer.
Insurers and provider organizations can design health plans to help keep patients in network and better manage costs. Traditional approaches, such as copay and deductible differentials, significantly help to improve network retention, particularly when coupled with effective member communications that explain the benefits of choosing an in-network provider.
Another important step in designing the health plan product is to fill any holes that may exist in the network of physicians and service offerings. With the right mix of subspecialty or sub-acute providers, networks can meet a wide range of patient needs while also strengthening loyalty.
Competitive pricing is another way to deliver more value and secure a competitive advantage, particularly in large, metropolitan markets. For many provider-led health plans, this strategy means not only finding the right price point, but also equipping employers and consumers with all of the tools they need to accurately compare available insurance options. Armed with a better understanding of how quality-based care models work, potential buyers can make smarter, more informed purchasing decisions. As consumer-driven, high-deductible health plans soar in popularity, consumers assume greater financial responsibility for their care and become just as receptive as employers to messages about quality and cost.
To keep patients in network—especially in highly competitive markets—plan sponsors should strike a delicate balance between hard tactics, like financial incentives and network designation, and softer ones, like exceptional customer service and accessibility to care management and wellness programs. Organizations can improve engagement, deliver a more positive patient experience, and enhance outcomes by connecting patients and their families to resources for better managing their care. For example, a care-management program that simplifies the in-home treatment of diabetes may help create more meaningful interactions between patients and their providers—and ultimately help to build loyalty.
Strategic considerations. A large, multistate health system recently increased use of its health system providers from 59 to 70 percent through a messaging campaign designed to educate members on how to receive maximum benefits. The campaign included:
- Printing messages on explanation of benefits (EOBs) to remind members that using in-network physicians and facilities is the most cost-effective
- Listing in-network provider names first in directories
- Placing pop-ups on care managers’ screens, prompting them to tell members that they can realize the best benefits by using in-network providers
In 2011, two large health systems—one in the Midwest and one in the Southwest—introduced similar cobranded health plans with the same commercial insurer. One grew its membership to 3,900 in the first year and 9,400 in the second. The other’s membership did not surpass 300 in the first year. Even after accounting for variations in local market conditions, several factors surfaced that affected each one’s success.
One factor was competitive pricing. Aside from determining how the new product should be priced to attract more patients, organizations also should consider how competitors will respond. In some instances, competitors may immediately drop their prices, eliminating the organization’s price advantage, which could significantly limit its ability to grow membership in the short term.
Network configuration was another factor. The most successful products are supported by a network of physicians that consumers want to access. Recruiting a broad range of physicians— including primary care and specialty providers—is an important first step. Making it easy for individuals to seek care from these providers further increases an organization’s ability to attract and retain a higher share of a population’s patients.
A third factor was product value. Because any new accountable care product will face fierce competition in the local marketplace, it is critical to clearly communicate the value proposition in a way that is easily understood and remembered by potential buyers, whether that is access to care management services or a more coordinated approach to patient care.
In addition to competitive pricing, network configuration, and product value, a health system’s leaders must believe in the system’s ability to deliver better, more efficient care, better access, and a better experience. To ensure success, they also should be able to share that vision fully, transparently, and with a sense of urgency to its key constituencies—physicians and producers.
Preparing for a Value-Based Future
Sustainable growth strategies are critical for survival in the transition from fee-for-service to fee-for-value. Providers can prepare for the value-based future now by investing in new capabilities and technologies that support key goals, such as:
- Attracting and managing a higher number of patients
- Controlling a greater portion of patients’ healthcare dollars
- Building loyalty among patients and families
Guided by the right leadership, organizations of all sizes can create a culture that embraces these changes and promotes true clinical and business transformation. Leaders who communicate a clear vision, work in concert with physicians, and leverage the expertise of partners who know what it takes to be successful will be well positioned to achieve the Triple Aim of high-quality care, greater efficiencies, and improved patient experiences.
Although these changes often take months to implement and years to mature, setting the groundwork today will enable providers to reap the financial, clinical, and operational benefits of value-based models for many years to come.
Although not all markets, hospitals, or health systems experience the impact of value-driven care in the same way, all can benefit from enhanced value. Larger, multihospital systems may develop delivery networks and supply intellectual capital, staffing, and technological capabilities that smaller organizations may not be bale to access. Smaller community hospitals can be key network participants and contribute to a broader market strategy, closing the access and capability gaps that larger systems may have. Regardless of size, all providers can improve access to high-quality of care and monetize the value they create.
Sasha Preble, MBA, is vice president, Integrated Solutions, Accountable Care Solutions from Aetna, Chicago.
William W. Wachs, CPA, CVA, formerly with Aetna, Chicago, is a member of HFMA’s First Illinois Chapter.
Starting Down the Path to Sustainable Growth
Health systems that are interested in developing an accountable care strategy but are unsure of where to start often take the first step by developing pilot programs for their employees. Because these organizations typically self-fund their employee benefit plan, they already retain the savings they generate in performance-based arrangements.
Testing strategies to enhance operating efficiencies, increase patient retention, and improve engagement in lower-risk settings allow health systems to gather data on what works—and what doesn’t. Armed with valuable insights into what improvements prove beneficial, organizations can make adjustments and enhance such programs as wellness and care management initiatives. Furthermore, the dialogue this strategy creates with physicians—including data, information, new knowledge, and actionable process changes—will prove valuable when contracting with a larger, more commercial population.
Successful pilot programs and the infrastructure that supports them can give health systems both the credibility and the competitive edge they need to launch a broader, more coordinated and proactive approach to care.
Publication Date: Monday, March 03, 2014