Hospitals that can manage costs, coordinate care, stop ‘leakage,’ and engage consumers have a better chance to succeed.


Hospital leaders are carefully watching the healthcare industry’s transformation from volume-driven care to value-based care. But while most leaders understand the basics, many are uncertain about how to guide their organizations through this transformation.

The good news is that focus will pay off. Healthcare leaders can guide the development of a value-based organization by concentrating on a handful of key priorities. Below we have described a list of seven strategies that we call the “levers” of value-based care, ranging from advanced cost management to comprehensive data aggregation.

This is a sample article from HFMA's Strategic Financial Planning newsletter. Learn more and register.

Three Forces

Before we discuss the seven “levers,” readers should understand the three powerful forces that are shaping healthcare today:

The demand for cost control. It is no news that all providers today are under pressure to slow the overall rise of healthcare spending. The demand for cost control is coming from every direction—the government, employers, and patients themselves. As a result, all C-suite efforts to prepare for value-based care must directly or indirectly support reduction in costs, utilization, and waste.

The development of new payment models. Alternative payment and reimbursement models have emerged as a means not only to control costs, but also to incentivize higher quality. Although payments are still triggered by a care event or encounter, providers have opportunities for additional reimbursement based on reducing the cost of care, achieving shared savings, expanding their clinical focus, and introducing new care delivery models. The government is projecting that alternative payment models will account for 30 percent of all Medicare reimbursement in 2016, rising to 50 percent by 2018 (see the exhibit below).

Alternative Payment Models Growing
Alternative Payment Models Growing

The new paradigm of healthcare consumerism. Historically, physicians and hospitals have provided services based on patients’ acute medical needs. Under value-based care, providers have a compelling need to proactively manage patient health. This means connecting with consumers at every point in the health continuum—not only during and after the healthcare episode, but even before consumers become patients. This change is revolutionizing healthcare’s traditional “bricks and mortar” strategies. Increasingly, provider organizations are competing based on quality performance, experience management, and expanded access (see exhibit below).

The New Paradigm of Consumerism
The New Paradigm of Consumerism

These forces have the potential to significantly limit the financial performance of provider organizations that are unprepared for change. On the other hand, understanding these forces will help healthcare leaders plan strategic initiatives that are critical to success in the years ahead. We call them the seven strategic “levers” of value-based care.

Advanced cost management. High-performing organizations are bringing down the cost of care by re-engineering clinical and business processes. Hospitals, which typically represent the largest component of total health spending, have significant opportunities to reduce costs through process redesign and other advanced strategies. One underappreciated opportunity is proactive capacity management. Many hospitals and health systems are deploying capacity planning techniques combined with real-time analytics to create a dynamic care environment that quickly adjusts to changing patient demands.

To tackle today’s capacity challenges, organizations need to incorporate holistic solutions to chronic issues such as long length of stay, misalignment of discharges to admissions, inconsistent or misdirected patient placement practices, and variation driven by surgical schedules to reduce variation. Hospitals and health systems around the country are implementing these methodologies and have realized sustained cost reductions and efficiency improvements.

Hospital of the Future
Hospital of the Future

Full-spectrum care coordination. Value-based organizations are also devoting significant resources to coordinating care across the entire healthcare continuum. Key components include enterprisewide care models, care protocols, disease management programs, and longitudinal patient records. Care coordination supports strong performance under value-based contracts by enabling proactive utilization management, which reduces costs by minimizing redundant services. One large health system in the Midwest is using care coordination to proactively manage high-risk diabetic patients and incorporating innovative virtual care models to follow-up with patients to ensure compliance with their prescribed clinical pathway. Coordination of care also allows organizations to identify and manage high-risk populations, leading to optimal cost management and improved outcomes.

Integrated provider network. A critical prerequisite of value-based care is a strong network of providers that includes physicians across multiple specialties, hospitals, post-acute providers, and ancillary services, such as home health and therapy capabilities. High-performing, value-based organizations build comprehensive networks of provider services that support domestic usage of the network, minimizing outmigration of care.

An integrated provider network enables healthcare leaders to build an organized system of clinically integrated care. The broader and stronger the organized system of care, the greater the opportunity to manage costs and influence clinical outcomes. A well-developed system of care also sets the stage for optimizing the patient experience.

Top-to-bottom incentive alignment. Healthcare leaders must also develop incentives that promote the cultural transformation required to build a value-based organization. Incentive distribution models can help align the provider network with organizational goals, including financial goals incorporated into value-based contracts. But financial incentives are not the only priority. For example, leading systems now provide care management support with powerful analytic capabilities that help influence provider performance. The entire support structure helps providers see the organized system of care as the key to providing optimal care for their patients and the best opportunity for financial success.

Fully leveraged domestic services. As organizations enter value-based contracts for managing the care of populations, it is important to keep patients within the organized system of clinically integrated care. Why? When patients are referred outside the network or simply migrate to other providers, the organization’s ability to manage costs and influence quality dramatically decreases. The service redundancy associated with patient leakage is a significant contributor to medical spend waste. If leakage happens, value-based organizations should focus on expanding needed services in order to more fully coordinate care, influence patient health, and manage the entire spectrum of costs. It is also important to build a referral tracking process to quickly identify patients who migrate out of the network and initiate steps to bring them back in.

Modern consumer engagement. Given the importance of keeping patients within the organized system of care, many value-based organizations are implementing consumer engagement concepts. These include expanding patient access points, proactively reaching out to patients for chronic disease management, connecting with individuals through social media, and helping patients navigate the care continuum. The key is to connect with the consumer before he or she becomes a patient. These and other “person-centric” consumer engagement strategies can help drive optimal care and utilization. Leading organizations are also promoting their value proposition directly to healthcare consumers. In the near future, high-performing organizations will focus more on consumer loyalty than patient satisfaction as the indicator of customer service success.

Comprehensive data aggregation. Underlying all the strategic levers noted above is the ability to leverage data. Capturing clinical and financial data from information systems remains a significant challenge, but leading healthcare organizations have built data governance and information management strategies that are providing advanced analytic capabilities. Multidisciplinary data governance allows organizations to identify information needs, drive analytics initiatives, coordinating data in definitions, integrating with workflow and managing many of the requirements to leverage data and build analytics. These capabilities are key to driving both care improvement and cost savings, enabling healthcare leaders to manage performance under value-based contracts.


Daniel J. Marino is executive vice president, GE Healthcare Camden Group, Chicago, Ill., and is a member of HFMA’s First Illinois Chapter.

Publication Date: Monday, July 11, 2016