From Horses to Horsepower
From the President
Joseph Fifer, FHFMA, CPA
At the turn of the 20th century, the Studebaker brothers were in the business of making horse-drawn carriages. In 1902, the company introduced its first automobile, an electric coupe, followed by the first gas-powered vehicle in 1904.
But for the next 16 years, even as the company manufactured automobiles, the Studebakers kept on making horse-drawn carriages. In fact, theirs was the only wagon company to successfully change production to automobiles.
Clearly, the Studebakers knew early on that their traditional product was destined to become obsolete-they just didn't know when the transition would occur. When it did, they were ready.
Providers today are in a similar situation. We know that the disease-oriented, volume-based healthcare system is destined to become obsolete. But it's hard to predict when the value-based system will attain critical mass. So some are tempted to hang on as long as they can, even though they realize this is not a question of "if" but "when." This is perfectly understandable; the fee-for-service model, which is fundamentally different from value-based payment, is still widely predominant. In the current environment, it can be difficult-almost counterintuitive-to commit resources to value-based payment.
On the other hand, a recent survey conducted by HFMA revealed that about one-third of finance leaders expect a significant portion of their payment to become value-based in the next 10 years. Clearly, we realize that change is coming. We also realize that this change will require new levels of cooperation and collaboration among financial and clinical leaders, including physicians, nurses, and other clinicians.
Phase 2 of HFMA's Value Project research includes five recommendations for action steps that value-oriented providers can take now, even as we continue to operate within a fee-for-service environment:
- Develop the four value-driving capabilities required to adapt in a new payment environment, as described in Phase 1 of the Value Project: people and culture, business intelligence, performance improvement, and contract and risk management.
- Embrace strategic agility for your organization-that is, develop the foundation to change course successfully, and sometimes quickly, as strategies evolve in a highly dynamic healthcare market environment.
- Seek alignment around a common set of value metrics. Our interviews in Phase 2 of the Value Project validated what many of us know intuitively: Chasing too many performance metrics at one time can diffuse focus and effectiveness.
- Explore strategic partnerships and opportunities with payers, employers, and patients in your service area. Identify and act on the strategic improvement opportunities that are most important to your patient populations.
- Prepare to differentiate the effectiveness of care provided by your organization within a value-driven, competitive marketplace. Be thoughtful about the value proposition you intend to offer purchasers.
Like the transition from horses to horsepower, the transformation from volume to value is not going to happen overnight. And predictions about timing are far from an exact science. But one thing is certain: As General Eric Shinseki (former U.S. Army Chief of Staff) once put it, if you don't like change, you're going to like irrelevance even less.
Publication Date: Monday, July 02, 2012