Fishermen know that when a storm is brewing, the fish are biting.
It’s a calculated risk: When is it time to heed those storm clouds, stop reeling in the fish, and take shelter? The sky looks ominous, but maybe the storm will hold off a bit longer.
Healthcare leaders are making the same calculus. They know the value-based payment storm is coming, but fee-for-service revenue is still strong, and that storm doesn’t seem imminent just yet.
As I wrote in my May column, some healthcare leaders are reluctant to experiment with value-based care and payment models before they are compelled to do so. Yet experiments are vital because value-based business models will eventually take shape based on the results of those experiments. One rationale for delay is that—except in the case of provider-sponsored health plans—value-based savings will accrue to health plans, not providers. The argument is basically this: Why should health systems invest resources in reducing the cost of care when they’re padding health plan profits in the process? Health systems already provide millions of dollars in charity care to patients; they’re certainly not in the business of subsidizing health plans.
Point well taken. But there’s another way to look at it. Efforts to improve value that reduce short-term revenue should be considered not “acts of charity” but “acts of strategy,” according to Thomas H. Lee, MD, chief medical officer of Press Ganey Associates, and Laura Kaiser, FACHE, executive vice president and COO of Intermountain Healthcare. Lee and Kaiser identified three strategic elements common to such decisions:
- Using process improvements to enhance quality of care, which fosters pride and teamwork, thereby reducing employee turnover
- Deciding that improving value is more important than short-term fee-for-service revenue, because a business plan based on value is right for patients
- Choosing not to game the system by targeting patients in contracts that would yield financial rewards, thereby trading losses in some contracts for increased patient loyalty, greater professional pride, and a forward-looking strategy
In other words, when value-based care principles are applied across the board—not just to patients covered by risk-based contracts—patients, physicians, and employees in caregiving roles all stand to benefit.
But the fact remains: In a fee-for-service environment, a health system’s bottom line suffers when value-based care innovations reduce volume, and health plans often reap the rewards. In the long term, the business model will change and incentives will align—well, they may align. If the market doesn’t shake out with incentives aligned across the board, the providers that figure out how to align them will win the business, in part because of what they learned in the process. So when Medicare pursues value-based payment more aggressively, the providers that have practiced it will be poised to succeed. The others may find that the value-based payment storm has finally arrived and it’s overwhelming their boats; they stayed out fishing too long.
Follow Joe Fifer on Twitter: @HFMAFifer
From the President’s Desk
Joe Fifer expands on his ideas in his June column.