More on Strategic Planning

Hospitals and health systems struggling to deliver value-driven care risk financial future, report says

Organizations can address these obstacles through a transformation that can lead to a competitive advantage and better health outcomes for patients.

Jeff Lagasse, Associate Editor

Competing priorities and regulatory uncertainty are making it difficult for healthcare organizations to transition from fee-for-service to fee-for-value, according to a new report released today by the Ernst and Young LLP Advisory Health practice.

The report details insights from a national survey EY conducted with 700 qualified healthcare professionals. It presents prominent factors that are challenging health organizations' performance and growth, and notes that organizations can address these obstacles through a transformation that can lead to a competitive advantage and better health outcomes for patients.

For the healthcare industry to remain sustainable, four main challenges have to be overcome, the report said. The first is the escalating cost of care delivery, which is being driven by inefficiencies rife within the system.

Yele Aluko, MD, an executive director in the advisory health practice at EY, a former hospital system physician-executive and a co-author of the report, said inefficiency can range from redundancy and repetitive procedures to potentially avoidable hospitalizations, as well as a lack of coordination in chronic care management.

[Also: Smaller practices invest in costly transition to value-based care]

"These symptoms are all from a fee-for-service culture," said Aluko. "We need to reign in the cost of care, and that becomes a challenge. An example would be the lack of standardization around the devices that are used to replace joints. All of these devices work -- do they all work as well as each other? Does the more expensive one last twice as long? What's the reason? Changing that culture now is one of the obstacles that's affecting the switch to value-based care."

The culture shift this required isn't easy to achieve. To effectively make the transition, Aluko said an organization's entire workforce needs to be onboard, and that starts with understanding why the switch to value needs to be accomplished.

"Consumers are demanding value, they're demanding an understanding of costs and outcomes," said Aluko. "They're not getting it. That is the 'why.' We need to be aligned around that from a strategic understanding. We need to get people on board. There is an imperative for industry change."

Change begins, he said, with creating an ecosystem in which standardized metrics can be easily identified and leveraged. Providers need to deliver high clinical quality, a high level of metrics and a robust patient experience, and do it all within the optimal cost of care.

[Also: 'Slow and steady' philosophy should rule volume to value transition, HFMA ANI expert says]

"We have to get physicians aligned around the fact that standardized behavior is expected, and that clinical outcomes will be measured, and there will be financial risk for not delivering value," said Aluko. "That is done through the deployment of clinically integrated networks … and using measurement protocols. Management is efficient, redundancy is eliminated, resource consumption is understood."

Another essential factor in the transition is the reduction of medical error, which can often be attributed to physician burnout. Burnout isn't a new phenomenon, having been an issue for decades, but Aluko said the problem has gotten worse over the past several years; physicians are often overworked, working longer hours, or perhaps being asked to see more patients due to declining reimbursement. Whatever the reasons, it creates a toxic environment, and that translated into poorer consumer satisfaction. And if a system can't deliver on consumer satisfaction, its prospects for a shift to value are all but doomed.

Standardization, meanwhile, is lacking for a number of reasons, according to EY. Many healthcare systems have been cobbled together through acquisitions, and as new parties entered their respective systems they brought with them their own cultures and behaviors, as well as legacy systems that don't necessarily communicate with each other.

[Also: MACRA shows CMS is all-in on value]

Smaller organizations are at a disadvantage when it comes to making the switch to value, said Aluko, largely due to a lack of resources -- which are needed to acquire the technology necessary to make the transition feasible. Partnerships may be the key to overcoming these odds.

"The strategic thought in larger organizations tends to be more mature and more in line with contemporary trends and insights," said Aluko. "From a strategic standpoint the larger organizations have an advantage, and from an execution standpoint they also have an advantage."

The smaller groups, he said, "have to understand exactly what their capabilities are, and develop partnerships. They could be considered candidates for acquisition."

Twitter: @JELagasse

Show All Comments