Value Isn’t Working

HC FrustrationVALUE. I have written quite a bit in this space over the past three-and-a-half years on the role of value in healthcare and how it has been purported to be used as an effective public policy tool. Just type in, “value” on the search box to the right and 10 such posts will appear for your reading pleasure. But I haven’t written about value in the context I am about to now.

Earlier this week Paul H. Keckley, Managing Director of the Navigant Center for Healthcare Research and Policy Analysis, posted The Meaning of “Value” in Healthcare to the Health Care Blog.  In that post he argues rightly that the significant shortcoming of value as a driver of anything in healthcare is that it is not being defined by end users – i.e., patients, or consumers as it were. In stark contrast to what I have advocated in the past I would go beyond that.

Keckly muses of a system where consumer-driven healthcare is manifested in the dissemination of knowledge and information that empowers rational decision-making and the efficient allocation of resources. Where he stopped short – whether by omission or design – was to suggest the best means of achieving that nirvana. I will pick up the ball and take it a little further.

It is not enough to advocate for consumer-driven empowerment as the means of leveraging value in our healthcare system.  We must also recognize the stark reality that current healthcare policy – and in particular, the Affordable Care Act – is a tremendously effective impediment to achieving that empowerment.

I remain as convinced as ever that value – Porter’s axiomatic assertion that outcomes over cost will drive achievement of the IHI’s Triple Aim – is key to delivery system improvement. But I am terribly disillusioned that value can be effective in a system that is controlled in such a manner that it is determined artificially and arbitrarily by the likes of academics, bureaucrats, administrators and consultants.

Alternative payment models – and the care delivery models that are being developed in response to the artificial financial incentives they are offering – are doomed to ultimately fail because they lack the inert ability to leverage value as it is perceived by the individual consumer, one person at a time. By failure I do not mean they will be soon to go away – but they will not achieve the shared goals referenced above. Disagree?

  ~ Sparky

Healthcare 2014: The Untrends List

One week into the new year, and here I am already probably tearing at the limits of content relevancy, thinking about how to write something meaningful on what to look for in 2014. What are the emerging industry trends and drivers that healthcare executives need to understand and reflect in their 2014 strategic planning? What’s the competitive landscape going to look like? How will diverging synergies of clinical partnerships impact silo management tendencies? How many overused business school concepts can be stuffed into a blog post?

To be candid, I really wanted to write something here that was keen on unique insights and observations. That had a lofty air containing pearls of wisdom. But the more I thought about what to write the more daunting became the effort of where to start, what to include and how to organize my thoughts without losing you to confusion and boredom in the first paragraph.

And being confused myself under the weight of my inability to organize that thinking it dawned upon me that I was tripping over the most common intellectual obstacle: failure to accept that too often our desire to embrace the complex hides our fear of accepting the wisdom of simplicity.  And that reminded me of the scene below between Billy Crystal and Jack Palance in City Slickers. It epitomizes the challenge we have in accepting simplicity.

Curly’s One Thing

So what’s the ONE THING that healthcare providers need to focus on in 2014? Easy answer: the same thing they needed to focus on in 2013. And 2005. And 1919. VALUE. But just as our understanding of life can be both simple and difficult – so too can learning to strategically position a healthcare organization around value.

The concept of providing value is ancient.  Yet the ability to create, deliver and capture value is an increasingly important – and contextual – competitive advantage when resources become constrained at the same time demand is accelerating. Value-based pricing and cost reimbursement models are only a part of the value-driven healthcare paradigm. It’s the small top part of the value delivery pyramid (or perhaps iceberg is a more fitting analogy).

Critically important to understand is what the patient values. And even more important is accepting the processes that patients use for determining and comparing relative value does not easily lend itself to linear thinking or evidence-based protocols. Similarly, the individuals who create and bring value to patients cannot be made to fit into standardized care delivery machines. And understanding how they assess and compare relative value is every bit as important in creating a competitively superior healthcare offering.

Healthcare providers are increasingly being asked to share in the risk of care delivery economics. I know that must sound ironically distasteful to many, since they have already for centuries borne the ultimate risk of patient outcomes. But on the whole, I believe it’s an oddity of our healthcare financing system – not a perverse entrapment designed to reallocate resources away from production – that seeks to align the incentives of multiple participants around value.

If, however, that understanding is ultimately manifested in just measuring and promoting value – without creating and delivering value – value-driven pricing and reimbursement models will necessarily fail, whether that’s payment bundling, ACOs or medical homes. But – those organizations that learn to create and deliver value by strategically positioning themselves in lieu of the industry migration toward integrated care delivery will survive whether those new models succeed or not.

So my list of trends and drivers for 2014 is simple: value, value & value.


What’s Your Performance Improvement Strategy?

If you are a post-acute/long-term care provider still sitting on the sidelines waiting for a clearer understanding of how Healthcare Reform is going to impact your organization’s future, well then all I can say is, “Good luck with that – let me know how it works out for you.”

In an article published this past weekend (Medicare Seeks to Curb Spending On Post-Hospital Care), Kaiser Health News’s Jordan Rau reported on the wide variability in Medicare spending on post-hospital care across the county – and the attention that it is getting from CMS. Attention that is quickly turning to targeting: as in even more deeper cuts in reimbursement.
Several of the examples included:

Medicare recipients in Connecticut are more than two-times more likely to be admitted to a nursing home than residents in Arizona.

Medicare spends an average of $8,800 on a patient’s home healthcare in Louisiana – while spending $3,800 in New Jersey.

The rate at which beneficiaries receive post-acute services covered by Medicare in Chicago is three times the rate in Phoenix.

And the aggregate economic impact of variability in per capita spending is substantial. As the growth in post-65 age cohorts continues to accelerate both the inherent cost contribution (demand) as well as cost-push inflation (a result of seeking to satisfy that demand with scarce resources) is increasing. As reported in the Kaiser article, Medicare spending on PA/LTC, “has grown at 5 percent a year or faster in 34 of the nation’s 50 most populous hospital markets in recent years.”

The article goes on to describe the perceived reasons behind the variability that has captured CMS’s attention:

Misaligned incentives: Hospitals have not historically been economically impacted by the consequences of post-hospital care delivery, while PA/LTC providers have been incentivized to drive utilization based upon maximizing reimbursement rather than the appropriateness of the setting.

Information asymmetry: Very often PA/LTC referrals are a function of personal relationships and familiarity between those responsible for discharge planning and those responsible for marketing available beds.

Provider ambiguity: The evolution and confusion that today characterizes post-acute care services and settings (and the impact technology is having on care settings – e.g., telemedicine) often impairs market competition.

Lack of care coordination: While post-discharge readmissions have captured the popular media’s attention because of the ACA payment penalty, it’s the underlying lack of care coordination between acute and PA/LTC providers that results in cost inefficiencies extending well beyond avoidable readmissions.

These concerns, taken together with other indicators of potential waste and inefficiency (please refer to the article cited), will drive tremendous pressure in the years ahead to lower Medicare post-hospitalization expenditures (thus the chainsaw metaphor). How PA/LTC providers address these pressures will mean the difference between staying in business – or not.

When thinking about performance improvement as a vehicle to address this challenge remember this: more than any other singular criteria, successful PA/LTC organizations that survive the next decade will have learned to trade on value. Value in healthcare is quite simply the patient’s satisfaction with the care delivery experience divided by the cost to provide that experience (with the notable understanding that a patient’s satisfaction is typically augmented by their families’ satisfaction). With or without the Affordable Care Act, that is where the industry is headed.

But what does it mean to, “trade on value?” To help Pub visitors begin thinking about that I have provided a few fundamental questions that you might want to ponder – or discuss with colleagues:

  1. What’s most in demand?
    If Medicare, Medicaid and private insurers were to evaporate tomorrow, what core service offerings that you provide would be the most likely to still generate revenue? What distinguishes those services from others?
  2. Where do we fit in the care continuum?
    Forget the fancy charts and graphics of think tanks and consultants showing you where you fit. Think about the patients you care for every day from the perspective of their overall care experience: where does your organization provide the greatest value to that patient’s recovery along the care continuum?
  3. Who wants to work with us?
    How do potential partners in your market determine their value? Based on that understanding, can you enhance their value? What are the risks that you would lower it? Can you effectively address those risks?

  4. How do we protect and enhance our core value?
    In healthcare, more than any other industry, the innate ability to produce value is primarily attributable to direct caregivers. What should you be doing today to ensure you protect that most valuable resource? And what should you be doing tomorrow to help those caregivers increase the value you provide to patients?