In this blog series and companion eBook, Aligned Incentives: How Employers, Payers, and Providers Can Partner to Fix Healthcare, we unpack the role each of these sectors must play to help create the sustainable healthcare system fixes capable of renewing the U.S.’s reputation as one of the most innovative, effective, and affordable healthcare delivery systems in the world.
All three sectors can drive improved healthcare system value, but they also cannot do it alone. In this series, we examine what the health system needs from each sector, what each sector needs from the health system, and how together they can chart a path forward to change healthcare for the better.
In Part I of this series, we explored the role that employers play in delivering healthcare transformation. Part II discussed the work to be done in the Payer sector of the industry. In this final blog, we turn our attention to providers, the individuals and organizations that deliver healthcare services to patients. In this scenario, providers include hospital systems, provider networks, care clinics, etc.
# Providers’ Role in Delivering Change
What do providers need from the health system? Providers need payment structures that reward them for care model innovations that keep patients healthy and minimize breakdowns in the care continuum.
What does the health system need from providers? The health system needs to develop and implement new care models that deliver better coordination, quality, value, and access for patients. The site of service, the deployment of technologies, and the makeup of care teams are a few considerations for care model innovation.
If better value is to be created within the health system, this sector is where the rubber meets the road. Employers and payers can invest in whatever strategies they want, but without actual changes in how patient care is delivered, the industry as a whole will be stuck on the same treadmill of changing health plans, antiquated benefits, and inconsistent low-value health system performance.
I spoke with Dr. Kathryn Schabel, an orthopedic surgeon at Oregon Health & Science University, and associate professor of orthopedics and rehabilitation. Dr. Schabel and I have worked together in the past to deliver the kinds of care model innovations mentioned in this blog. She knows the challenges of delivering better care within a misaligned industry incentive structure.
If you pay hospitals and practitioners more for more work, they are going to do more work. The emphasis is on more. – Dr. Kathryn Schabel, Oregon Health & Science University
She says the need to change is well-understood between practitioners and health system leadership, but there is a lot of inertia behind the current configuration of healthcare delivery. The work to be done is complex, and it touches virtually every component of the health system.
# Why does the current health system configuration deliver such poor value?
No single example can capture the myriad ways in which the configuration of the health system is designed to deliver sub-optimal outcomes, whether that is in cost, quality, or experience. To focus in, however, let’s look at an example of how a health system with constrained access, disparate insurance coverage, and high levels of regulation often delivers care in a way that badly mismatches the patient’s needs and the health system’s resource intensity response.
For the nearly 29 million American adults who do not have health insurance, the best options to access care are often an over-capacity, under-resourced safety net clinic or a hospital’s emergency department (ED). The latter is an accessible option because of the 1986 EMTALA law, which requires anyone coming to an emergency department to be stabilized and treated, regardless of their insurance status or ability to pay. As a result, a pragmatic choice for under-insured individuals is to seek care at an ED, even in non-emergency situations. Unfortunately, EDs are at least 10x more expensive than urgent care visits. When these high-cost services are delivered and hospitals know they will never be reimbursed for that care, those high costs are shifted to the broader healthcare ecosystem, meaning those losses must be made up through profits from other payers.
We should be completely clear, however, that this isn’t simply an “uninsured problem”. Commercial payers are also trying to figure out how to incentivize members to seek care in appropriate care settings, and incentivize providers to design their health systems to create appropriate ways of accessing the health system. In June of 2021, United Healthcare stepped back from a proposed policy that was designed to do this, after receiving significant public resistance from the American Hospital Association (among others).
For years, providers have been bracing for the coming wave of care model transformation demands, but unfortunately, care model shifts have not moved fast enough. Following the passing of the Affordable Care Act (ACA), the Centers for Medicare & Medicaid Services (CMS) has leveraged their buying power to reshape the behaviors their payment models incentivize for Medicare and Medicaid populations. Many of the concepts and payment models that have been discussed in this series are already being tested as Center for Medicare and Medicaid Innovation (CMMI) programs and mandates. But the fact that this needed care model transformation has been signaled for a long time doesn’t change the fact that change is really hard in this industry.
Providers are in a tough position. Suppliers and brokers of devices and pharmaceuticals demand high costs, often from a monopolistic market position for a given product, as do many of the in-demand professionals who work for healthcare-providing organizations. So, controlling costs is a never-ending problem for these organizations. Historically, comfortable margins on surgical care and inpatient services are what allow health systems to manage a positive margin overall. But, if the needed changes to the care model call for a shift to lower-cost outpatient settings, and careful utilization management in length of stay and ancillary services, how can health systems make that shift if these changes will mean less revenue? This is why health system leaders have for years felt like they are standing with a foot in two different boats and those boats are drifting apart.
# The work to be done
For an industry so large, so siloed, and with so many egos in the mix, delivering change requires a careful balance of thoughtful planning, bold action, careful change management, dogged persistence, and pragmatic flexibility. Let’s consider some of the inter-related levers and competencies that health systems can use to deliver better care at lower costs:
Patient care setting. One of the primary drivers of excess costs in our healthcare system is a misallocation of the site of care—relative to the optimal level of care required. The ED scenario above is one such example, but this is also common in scenarios where a virtual visit or telehealth visit could effectively replace a more-costly visit, an outpatient surgery could replace an inpatient surgery, or a lower level of intensive care or NICU care could effectively replace a more-expensive service level.
Partnerships and health system consolidation. A growing trend over the decades, consolidation within the healthcare system can make sense for a host of reasons, including the site of care conundrum described above. At least in theory, a comprehensive (large) health system can more efficiently allocate resources, consolidate back-office functions, and facilitate better care coordination across the delivery system. Of course, health system consolidation can have an anti-competitive impact, and these activities are (accordingly) closely regulated.
Care coordination. Health systems are increasingly investing in care management resources and technology to ensure a “warm” transition for patients as they move through the care continuum. Whether it is moving within a health system from a primary care provider to a cardiologist, or moving across health systems from a complex inpatient surgical stay at one hospital to a care team hundreds of miles away, patients desperately need good communication, information sharing, and coaching from their providers. Breakdowns in care coordination are among the primary contributors of avoidable complications. Hospitals must find the most effective mix of clinical and support staff, along with technology and connectivity, to support patient care transitions. This work can be heavily reliant on securely sharing information, and the interoperability mandate from the federal government has served as an accelerant for these technological advancements.
Team building. Changing care models means changing care team dynamics. It is no secret that the healthcare professions (and the expertise, personalities, and egos they attract) create complicated dynamics within care teams. There are power structures, there are hard-wired expectations, and emotions can be powerfully strong because the stakes are so high for patients under the team’s care. Changing healthcare delivery has to be among the most interpersonally challenging kinds of professional change that exists in the workplace. To successfully deliver this change, trust must be built, the evidence must drive decisions, conversations must drive toward consensus, and the best interest of the patient must be prioritized ahead of all other considerations.
Analytical Capabilities. An informed care model redesign cannot be developed without an opportunity assessment. Where is the opportunity to drive down variation or utilization? What are the common factors among patients who experience poor outcomes or high costs? For decades, hospitals have often relied on a variety of benchmarking resources to answer some of these questions by looking at the quality outcomes or financial performance of similar patient populations at similar peer institutions. Certainly, these kinds of analyses can yield insightful assessments, but some of the most impactful interventions in my career have come from a hard look at variation within the health system’s patient base.
For example, looking at claims cost variation (often in partnership with a payer) provides a view into where avoidable utilization happens, particularly when that utilization occurs outside the walls of the health system performing the analysis. In other words, claims allow a broader scope of analysis. Or consider an internal review of cases that had poor outcomes or costs: what did those patients have in common? Was it a surgical technique or an implant? Were certain social determinants involved that might be driving the outcomes? Perhaps the patients were discharged to the same post-acute facility? Finding these answers involves savvy data analytics, investment in the resources to support clinical informatics, and a commitment to collecting data—be it social determinants, patient-reported outcomes, or strategic partnerships that can enable powerful claims analysis.
# Investing now is an investment in future rates of return
Investing in new care delivery strategies now can ensure a longer-term strategy for success in uncertain times. And there are a host of present-day benefits to delivering rapid change, including improved quality measures and a diversified revenue stream for health systems. Regarding diversification, consider that capitation payment models can provide a financial buffer against the risk of downswings in patient volume, as many providers experienced throughout the COVID-19 pandemic. Most health system leaders know that such benefits exist, and that new payment models will continue to drive volume into arrangements that shift risk to providers. Ultimately, the most successful organizations will find strategies to both a) take a leadership position in innovating the care model for alternative payment model populations, while b) maximizing their volume and throughput for fee-for-service populations. Ultimately, large clinically integrated health systems with strong ambulatory surgical capabilities—whose services span the continuum of care—will likely find themselves best positioned to make this transition. But they may also be forced to partner with, or compete against, start-up services that are actively seeking to disrupt the status quo in niche corners of the industry.
# Pulling it Together
Healthcare provider organizations, above all other sectors of the industry, must deliver the necessary changes to fix the system. To do so, they need the right strategies and partnerships, strong data and analytics capabilities, thoughtful people and change efforts, and project support that can bring external best practices, implementation expertise, and the focused capacity to define and deliver innovative programs. Keeping the patient at the center of care model redesign efforts ensures that better access, better experience, better outcomes, and better value are within reach.
# 4-Part Blog Series:
- Part I Intro - The Work to Be Done
- Part II - Employers’ Role in Delivering Change
- Part III - Payers’ Role in Delivering Change
- Part IV - Providers' Role in Delivering Change
