Healthcare Stakeholders Must Adapt to Value or Perish

Healthcare has gone through a number of major shifts and changes since the mid-1980s, starting with the advent of managed care. However, under healthcare's current iteration -value-based care - realignment by stakeholders across the board is required in order to succeed.

The basic business model underlying healthcare's transformations over the past 30 years has been transactional, or volume-based, and primarily managed through clinical reviews and payment schemes. Under this model, physicians and other stakeholders are rewarded per transaction. The problem with the volume-based model has been that it rewards care services on demand, albeit through a middle-manager (the payer), and leads to the overutilization of care, with no acknowledgement of the need for efficiency. In response, healthcare costs have escalated to an unsustainable level.

The shift to value-based healthcare over the past 10 years represents a fundamental shift in the delivery/payment paradigm. In some value-based care payment models, such as an Accountable Care Organization (ACO), a network of doctors and hospitals share financial and medical responsibility for providing coordinated care to patients, limiting unnecessary spending while meeting benchmarks for quality, risk, utilization, and outcomes.

Many early ACOs have reported good outcomes, albeit within small, contained projects. But now that Medicare Shared Savings Program ACOs have been extrapolated to broader populations - populations without easily categorized risk - successes have not been as easily realized. In fact, a CMS report from earlier this year suggests that nearly half of Medicare ACOs have realized no savings at all. In fact, many ACOs have failed entirely.

At Pepperdine Graziadio, we teach that before any organization can change, people within the organization must change their behaviors. For ACOs to succeed, all stakeholders must adapt and meet the expectations of a value-based healthcare delivery system or risk perishing.

Value-based care requires major shifts in the actions of providers, administrators, and actual network systems to accomplish the "Triple Aim.". Here are three ways that the primary healthcare stakeholders can shift their behavior to succeed in value-based healthcare:

Patients must view themselves as care consumers instead of recipients of interventions. This requires a fundamental shift in the way we, as patients, think about health care - going from a passive role, under the care of a treating physician, to that of an active consumer.

Patient centricity requires engagement and action. Consumers must be aware of their health status and proactively take action to maintain optimal health. For example, we're all aware of the need to eat well and exercise. But as healthcare consumers, a commitment to a healthier lifestyle can also minimize the possibility of conditions such as high cholesterol that must be treated and managed, or debilitating falls that can result in costly hospitalization and extensive rehabilitation.

Even a concerning lab result should generate an internal dialogue: Why is it low (or high)?  What do I need to do about this?  This engaged consumerism will keep individuals healthier and produce great satisfaction within the delivery system.

Physicians need to embrace continuous, real-time learning in value-based care and adopt new health tools. Ten years ago, providers were resistant to use EHRs to capture and store patient records; now it's hard to find an office that relies on antiquated paper-based records. Similarly, providers should turn to data-guided care, which is based on optimal outcomes and efficiencies.

Increasingly, data-guided care is "cognitive," using metrics and data profiles from larger care populations to create actionable individual treatment plans. Data diagnostic technology can identify gaps in patients' medical records and supplement those gaps with missing laboratory data, providing a real-time report that alerts physicians to clinical, quality, or diagnostic issues. This not only facilitates appropriate care, but also helps stakeholders align incentives, meet quality and outcome benchmarks, and maximize reimbursement under value-based care.

Data can also be used by health systems to benefit public health. Imagine the possibilities if an ACO could identify an at-risk population - say, a population at high risk for diabetes - and proactively provide nutritional care, prevention tips, and early screening.

Finally, administrators need to develop a strategy to ride out short-term instability, letting the healthcare system refortify itself and recognize long-term profitability. Long-term planning is necessary for health systems to ride the change in business performance. As the CMS report shows, ACO success is predicated on improving quality and cost simultaneously. Such changes don't happen overnight. Risk management is a long game that pays off in the far term. Administrators who properly manage cash flow and are experienced making financial projections will be best prepared to manage systemic transition when income changes. As proof, one needs only to look back at the change from indemnity insurance to managed care. More than 4,000 providers couldn't handle the transition and went under as managed care gained steam.

Ultimately, the biggest barrier to the transition from volume-based to value-based care is not a redesign of logistics, finance, or operations, but rather the ability of stakeholders within the system to change their way of thinking and functioning. Once that paradigm shift takes place, we will be closer to achieving the promise of value-based healthcare.

Gary Mangiofico, Ph.D., is executive professor of leadership and management for Pepperdine University Graziadio School of Business and Management. The third annual Pepperdine Graziadio Future of Healthcare Symposium will be held in Los Angeles in March 23^rd, 2017.