Strategies to Help Your Hospital Win at Value-Based Population Health Management

January 22, 2016

// By David Wildebrandt //

David WildebrandtThere’s no denying it: Value-based population health management is here to stay. But how can hospitals best manage the transition from a fee-for-service approach to treating sickness to adopting one that focuses on keeping patients well in the first place? The reality is that there’s no one strategy to win this new game but rather multiple ways to make the chips fall in the most desirable way.

Rethinking the “Old” Way of Doing Business

As a former hospital system president, I can tell you that until recently, hospitals thrived in a “sick care” role. In other words, the hospitals’ economic engines and business models have been fueled by the volume of sick patients treated. For decades, hospital success has been defined by volume metrics and top-line revenue growth. This is further evidenced by the abundance of strategies centered on grabbing market share and a maniacal focus on increasing admissions.

Accompanying these strategies has been the evolution of a leadership team whose members have been valued for being growth-minded dealmakers. Thus, when the economic foundation is turned upside down, this generation of leaders finds its skill set exposed, and what happens is the beginning of an acumen shift in health care leadership.

Moving Toward Capitation

In 2014, the American Hospital Association conducted an online survey of board chairs and C-suite executives from health systems across the country, receiving 1,078 responses from more than 400 hospitals. More than half of respondents estimated that 20 percent to 40 percent of hospital payments will be capitated over the next five years, and more than 20 percent of respondents estimated that 40 percent to 60 percent of the hospital payments will be capitated. To put that in perspective, today less than 10 percent are capitated.

These responses demonstrate that board chairs and C-suite executives are not contemplating “if” but are more focused on the “when” of value-based payment.

Most organizations still have one foot on the dock (fee for service) and one on the boat (value-based reimbursement). As the boat pulls away, they will have to go all-in or be left behind. This has forced many organizations to scramble for partners and to answer the “build, buy, or partner” question.

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