Against the Odds: How this Small Community Hospital Used Six Strategies to Succeed in Value-Based Care

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What is the future of Obamacare? What will happen to the U.S. healthcare system if or when it’s repealed and replaced? What will Trumpcare look like? What’s the future of value-based care? For any healthcare organization that has paused in building its value-based platform because of uncertainty in the administration, it might help to know that it doesn’t matter who the president is. Hospitals need to keep their sights on the Triple Aim—providing topnotch care, controlling costs, and improving outcomes—regardless of who’s in the White House or controlling Congress. It might also help to know that amid all this uncertainty, and with a handful of other economic and environmental odds stacked against it, one small medical center in the rural south is excelling at this transition.

Shifting from Fee-for-Service to Fee-for-Value

It can be said that value-based care puts hospitals in the business of intentionally losing business. Improving quality and reducing costs should lead to greater efficiency of care, preventing readmissions, and generally keeping populations of people healthy and out of the hospital. This is great for the health of patients; not so much for the health of healthcare. But it can be a win-win situation for all involved.

As fee-for-value (FFV) quality and cost control incentives are incrementally layered on top of fee-for-service (FFS) incentives, hospitals need to fill the inevitable volume and revenue gaps. The challenge is how to do so when volume alone is no longer grounds enough for reimbursement. Healthcare delivery systems must now think about how to thrive in both FFS and FFV worlds.

Working with Payers

Payers steer their customers to top-performing hospitals. Top-performing hospitals are those that have created a culture of improvement by minimizing waste, reducing costs, improving outcomes, and figuring out how to sustain the gains. But assuming that payers will automatically take notice of these achievements could be a mistake. It requires active pursuit of every opportunity to partner with them.

Many hospitals recognize that, although they have expertise in many areas, negotiating with payers may not be one of them. What’s the best way to engage with payers? What kind of metrics are valuable to them? What kind of arrangement will get more volume into the system? Some healthcare organizations have the internal structure necessary to support this work, but many third-party companies provide strategic services around the FFS to FFV transition and how to engage payers. Either way, the key is to be prepared.

Six Fundamental Strategies that Lead to FFV Success

Hospitals and healthcare systems of every size, in every geographic region, and in every socioeconomic setting can successfully transition from FFS to FFV despite significant government changes. One relatively small medical center has made great strides in this transition. It’s southern, rural location puts it in a very FFS-oriented environment, yet this hospital has been eager to move into the value-based market even though, because of its small size, one bad outcome in a risk-based contract could be financially disastrous. What makes it so confident that it could succeed under a FFV model and convince payers to go there with it? Here are six fundamental strategies that have contributed to its current success and will continue to position it as an outcomes improvement leader.

1.) Use Leadership and Team Structure to Support Improvement

Hospital leadership, especially C-level executives and the board, understand and support the need to be proactive in changing the way medicine is practiced. They understand how to be profitable in a FFV world while continuing to invest in the best technology, recruit the best physicians, and raise the quality of care to best standards.

Leadership is aligned and the team structures are in place to support improvement and the shift to FFV. There is a clear mission and vision from the very top that’s effectively communicated throughout the system. The message is clear about where the organization is going and leadership expects everyone associated with the organization to be aligned with the message. However, not everyone needs to be involved in care transformation for it to be meaningful and effective. Deming had a theory when it came to changing the culture in an organization that, if N is the number of people in the entire organization, then only the square root of N needs to be activated to affect change.

The hospital hires and retains people and other resources that have its shared vision. Everyone from employed and non-employed physicians to hospital vendors must support the message.

Cross-functional transformation teams with project-based workgroups drive the mission to transform care and focus on the Triple Aim. They have the access and tools to assess service lines throughout the hospital while balancing their concentration on costs, quality, and patient experience.

C-level officers are standing members of the transformation teams and help align the resources and staff needed to promote the vision. The teams work their way down the priority list, first picking the low-hanging fruit. Clinical, technical, or financial staff can be on the teams as ad-hoc members, as long as they help achieve the goals. They included kitchen staff when they were tailoring cafeteria and room service menus. Transformation teams are willing to reach everywhere in the hospital to find contributors with an understanding of a particular process or the ability to provide the necessary support to make an intervention successful.

2.) Drive Down Costs

Any healthcare system on a journey of care transformation needs to reduce costs. This hospital has a cost accounting system to support improvement and give visibility into where the money is going. It had practiced Lean and Six Sigma for a long time, but now addresses other areas, like waste and variation in the way physicians practice, as well as materials management and physician ordering of preference items. The hospital uses a financial management explorer application to see the materials used in the OR by physicians. It gathers surgeons and OR nurses to talk about which items are not being used so they can standardize surgical kits.

For example, one orthopedic surgeon was showing much higher costs than everyone else because, although he was ordering the same implant, it was from a more expensive, unapproved vendor. He was required to either match the cost or use the approved vendor. This came about only by having detailed visibility into the costs.

3.) Reduce Unnecessary Waste

In the process of improving quality and patient satisfaction as part of meeting the Triple Aim, the care transformation team discovered that the hospital was performing biopsies on 100 percent of C-section deliveries. This was in the bylaws of the hospital so it wasn’t something that could just be stopped, but by bringing it to light, it was able to change the bylaws. There was no need for this procedure on otherwise healthy women. Now the pathology is performed only if maternal indication is present and the hospital saves $40,000 in costs every year. This was unnecessary waste in the system and could only be identified by looking at the process, understanding it, and getting input from everyone involved.

4.) Encourage the Learning Organization

This hospital is a learning organization in that it shares knowledge. If someone is performing a particular surgery well, then it’s shared throughout the organization through lunch-and-learn and town-hall type meetings, and the medical executive committee. The administration has created the structure to automatically share knowledge among clinicians.

One improvement project was around reducing costs in anesthesia. During joint replacement surgery, the hospital has gone from using general anesthesia to using spinal anesthesia, which reduces length of stay (LOS) and patients can ambulate more quickly after surgery. The cost of spinal anesthesia is less expensive, so this reduces costs and improves patient experience and outcomes. This was shared with the care transformation group to see where else it could be applied. This example is demonstrative of a true learning organization: the hospital uses data for learning—not punitive purposes.

5.) Prioritize Patient Education

Payers pay attention to patient satisfaction scores and won’t steer volume toward a hospital if scores are low. Through surveys, patients gave feedback to this hospital that they were not being educated well enough about what to expect during and after surgery. In response to this feedback, the hospital created patient education packets and added classes, and some procedures now require patients to attend a pre-surgery or post-op class with their caregivers. Patients feel more educated about their procedures, which has reduced LOS and improved patient experience scores.

6.) Track Data and Outcomes

The patient satisfaction scores are visualized in a tool so clinicians can see how they are doing. There’s a tool around each of the care transformation groups. Part of being able to improve is knowing what the baselines and goals are, then using visualizations to drive the interventions.

The hospital uses Activity Based Costing, a tool that helps it lower costs, improve profitability, and negotiate better contracts with payers. Other tools, like Department Explorer: Surgical Services and Supply Chain Explorer, provide insights to improve operational efficiencies, reduce waste, and lower costs.

Value-Based Care Requires Setting and Keeping the Course

In 1862, Abraham Lincoln, in his second annual address to Congress, made a statement that is as applicable today as it was in history: “The dogmas of the quiet past are inadequate to the stormy present.” This quote typifies what hospitals should be doing right now, not only as presidencies change, but also as they strive to stay relevant and involved.

Thriving under value-based care is a matter of establishing an internal culture and practices that can be achieved regardless of the political climate. Healthcare organizations may find themselves trying to weather a big storm as they make the transition, which requires doing things they haven’t done in the past, such as executing the six strategies outlined above.

The hospital in our article would have suffered financially had it not been prepared. Given that it’s an independent among all the vertical and horizontal integration taking place across the country, this is a huge accomplishment made possible by putting the Triple Aim at the center of everything it does. Health systems of any size, in any geographic location, with any socioeconomic influences, can also achieve FFV success by providing superior care, controlling costs, and proactively engaging payers to drive volumes to become part of a sustainable healthcare model.


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