What could derail your best laid plans for 2019? I recently had that discussion with our senior team—asking them what they see as the factors that are most likely to “surprise” the executive teams of specialty health and human service organizations. The three factors that topped our list were the effects of value-based reimbursement on the delivery system, a tightening labor market, and the growing gap in leadership team competencies. While these issues sound pretty proforma, there are some less obvious implications of these changes.
Growth In Value-Based Reimbursement: The Impact On Business Models & Referrals—The value-based reimbursement glacier is still slow moving, but it’s not showing any signs of stopping. From Medicare, to Medicaid, to health plans, to pay-for-success oriented social services, there has been a consistent uptick in the number of health plans that have adopted VBR and the volume of their reimbursement models that are shifting to VBR. A recent survey found that health plans’ use of value-based mechanisms has doubled since 2015, from 12% to 24% of all payments (see HFMA Executive Survey: Value-Based Payment Readiness). The impact of this shift on business models is clear: more limited volume-based reimbursement and more focus on performance metrics. My favorite observation came from OPEN MINDS Senior Associate John Talbot, Ph.D., who wrote:
There was a wide variance in provider organization readiness for the range of possible value-based payment models. Lack of readiness for value-based reimbursement will be very problematic for provider organizations already operating with very thin margins.
There is another impact of VBR contracting to watch out for—its effect on referrals to specialist provider organizations. Even if your organization is not participating in VBR, it is likely that referrals for many types of services will steadily decline as the proportion of payments covered by VBR is on the rise. First, organizations with VBR contracts are likely to backward integrate, developing their own services rather than referring out. And, VBR eliminates barriers to using less expensive care delivery models. Like the substitution effect of tech-enabled mental health therapy and case management, or more home-based services—from “hospital at home” and home-based physical therapy to traditional visiting nurses.
Tightening Labor Market: The Impact On Wage Rates & Turnover—The current labor market statistics affect all employers, with unemployment in the U.S. currently low. But there are some unique issues in the health and human service market. Current reimbursement rates are predicated on a large supply of inexpensive labor. There will be more demand for that inexpensive labor as the Bureau of Labor Statistics predicts that we will need one million more direct care workers by 2024 (see Workforce Problems? Technology As Strategy). A rise in wage rates and other compensation is inevitable. My favorite observation on this point came from my colleague Robert Kreider, OPEN MINDS Senior Associate and former Chief Executive Officer of Devereux, who wrote:
Demographic trends combined with wage pressures will require successful providers to use the most sophisticated search tools, continuously develop its brand, and provide excellent training and career paths, as well as increasingly use emerging technology such as robotics and monitoring systems, to improve labor efficiency at all levels of the organization.
But there is another big factor in workforce planning—the median length of time on the job in the U.S. is decreasing, and is currently at 3.9 years in health care, down from 4.1 years a decade ago (see Employee Tenure in 2018). This means that health and human service organizations need new models (and technology) to speed up the on-boarding process and support team members in becoming fully productive, more rapidly (see What Should Your Approach Be To Retaining Great Team Members?).
Growing Leadership Competency Gap: The Impact On Strategy Execution & Digital Dexterity—“Can you teach old dogs new tricks?” I couldn’t resist asking the question, and I think the answer is “yes.” But the other side of that equation is “what tricks?” I’ve written before about nimbleness and the need for executive teams to make decisions and act promptly (see Add ‘Speed’ To Your Treatment Tech Planning List, The New Cultural Competency: Ability To ‘Turn On A Dime’, and The New Cultural Competency: Ability To ‘Turn On A Dime’). But in addition to the ability to respond to changing market conditions quickly, executive teams also need a degree of digital dexterity—the “ability and desire to exploit existing and emerging technologies for better business outcomes” (see Digital Transformations Demand Digital Dexterity and 4 Steps To Develop Digital Dexterity In Your Workplace). This means the ability to use data for strategy and organizational transformation and the ability to use technology in re-engineering service processes and relationships with consumers and customers. These skills assure your organization is “fit for growth” (see Is Your Organization Fit For Growth?). But, to help your executive team morph into leaders they need to be in this changing market, they need a clear set of expectations and development. OPEN MINDS Chief Operating Officer Stacy DiStefano observed:
Provider organizations will also need to take a hard look at their leadership’s use of performance metric management and the use of technology. Are their leaders forward thinking, or risk adverse? Do they make routine decisions based on data dashboard or are they still creating meeting fatigue trying to build consensus on anecdotal success measures?
I think the most challenging roles of executives is delivering results in the present, while planning for the future. Developing and executing a strategy for success and sustainability are key, but executives also need to adjust that strategy in real time. Perhaps the best words of advice came from Theodore Roosevelt—”Keep your eyes on the stars, and your feet on the ground.”
For more, join me on June 5 at The 2019 OPEN MINDS Strategy & Innovation Institute for my keynote address, What Does It Take To Outlast The Disruptors? Building A New Strategy For A New Market. And immediately following, join OPEN MINDS Senior Associate Ray Wolfe, J.D. for his executive seminar, How To Develop A Strategic Plan: An OPEN MINDS Executive Seminar On Best Practices In Strategy, Portfolio Management, & Scenario-Based Planning.