Over the last few days, both at The 2017 OPEN MINDS Strategy & Innovation Institute and in the days following the event, every discussion I’ve had has been all things strategy – shifting market (see Rethinking Your Strategic Competitive Landscape), integrated care coordination (see How The ‘Superutilizer Effect’ Has Driven Integrated Care & Changed The Mental Health Landscape), value-based reimbursement (see Taking A Functional Approach To Succeeding With Value-Based Reimbursement), technology and competitive advantage (see Finding Competitive Advantage In Consumer-Directed Health Information – Genomics & More), and marketing planning (see Marketing Is Strategy In Action). But some of the most challenges discussions have looked beyond the initial implementation of value-based contracts to the likely evolution of those agreements.
In my closing remarks (see There Is No “Plan B” Alternative To Value: Creating A Value-Focused Competitive Strategy In A Changing Market), I shared the view that the market model of value-based reimbursement was a bit like a steeplechase – a long race with some prominent hurdles along the way. These hurdles are really the organizational competency, culture, and infrastructure needed to success at various stages of maturity of the market. As we work with organizations on strategy, the goal is to move the organization from success in the current hybrid FFS/VBR market – to success in a mature VBR market.
The “Gate” – Improving Current Sustainability – Success with VBR arrangements assumes an organization has stable performance now. A ~5% margin, good process management and productivity, a 95+% success rate with revenue cycle management, a solid marketing plan in place, use of performance metrics to guide management throughout the organization, and more. The “basics” are critical both as the foundation for increasing complexity and to generate the margins needed to invest in new staff and infrastructure.
Hurdle #1 – Accepting Value-Based Reimbursement – The initial move to VBR is often a beta test or pilot project, built for replicability across multiple payers and health plans. New tech functionality, new team roles, and expanded metrics to monitor are part of that package, along with enough financial reserves commensurate with the risk assumption.
Hurdle #2 – Competing in a VBR Environment – Once the field gets past the stage of “pilot projects”, competition for VBR opportunities will increase. This will result in declining rates, based on the assumption that mature systems will use their technology and systems reduce the use of unnecessary services. But, as competition increases rate pressure, there are additional infrastructure needs.
Hurdle #3 – Sustainability Competing On “Value” – Finally, most markets get to some degree of stasis of rates and the competition shifts again to value. This is the era of “consumer sovereignty”, where continuous redesign based on customer input is the key to market share and sustainability. And, a customer-centric market demands new organizational skill sets, in both infrastructure and culture.
The evolution of health and human services away from a focus on cost-based/volume-based reimbursement – and the growing expectations of our customers (consumers, caregivers, and health plans) – are changing both the successful business model and the market role of many service provider organizations. This evolution is one that will (like in retail, banking, and publishing) create new winners.
For more on preparing for the change to VBR, join me on September 27 for the session, “Preparing Specialty Provider Organizations For Value-Based Reimbursement: An Overview Of Competencies Required For Success” at the The 2017 OPEN MINDS Executive Leadership Retreat, in Gettysburg, Pennsylvania. And, if you couldn’t attend this year? Be sure to check out our archived coverage on Twitter @openmindscircle – #OMInnovation.