From the President

Clarke_web

Richard L. Clarke, DHA, FHFMA

We live in uncertain times-more so than at any point in my healthcare career.

The new healthcare reform law creates much uncertainty about the financial impact of expanded coverage, payment cuts, new payment systems, and accountable care organizations. The economy continues to follow an uncertain path, with stubbornly high unemployment creating an even larger pool of uninsured persons. And the results of the November mid-term elections will increase uncertainty at national, state, and local levels as both major political parties jockey to push their respective agendas. Given this environment, strategic planning has become strategic guesswork.

But some guesses are pretty sure bets, even in this uncertain environment. For one, it is clear that the rate of revenue increase for providers and health plans will not keep up with the current rate of cost increases. This belief was overwhelmingly shared by the approximately 80 financial and other leaders from across the country who recently attended HFMA's fourth-annual thought leadership retreat.

And given the continuing push by government and private purchasers of care to use value-based payment systems, it is clear that value will become the standard of measurement for care delivery. Again, most of the attendees at HFMA's thought leadership retreat shared this belief.

So a strategic focus on value is more likely to position an organization for success in uncertain times than trying to guess which way the political winds will blow or when the economic recession will abate.

But what strategies will enhance value? How does a healthcare organization position itself as a high-value provider?

The answer is to focus on the primary components of value-quality and cost. Value is generally viewed as quality divided by cost. That is, as quality increases at the same cost, value increases. Or as quality remains constant while cost reduces, value increases. It is important to note, however, that value also is defined as "relative worth." Healthcare organizations that are working on improving both quality and cost will increase their relative position and may surpass competitors who simply focus on either quality or cost.

According to participants in HFMA's thought leadership retreat, raising quality and lowering cost are best accomplished through evidence-based process improvement. American manufacturing and service industries learned this fact after years of global competition.

At the thought leadership retreat, Jonathan Perlin, MD, chief medical officer of HCA, put the challenge this way: "We know what to do in a fee-for-service environment. But we can't wait too long to determine strategy for a value-based environment, or we will be in an incredibly unstable position." Strategies that focus on process improvement in clinical and administrative areas in order to improve relative worth, or value, will position a healthcare organization for success. This is strategic planning in uncertain times.

Publication Date: Monday, November 01, 2010

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