Short-term Cost for Long-Term Reward
 
            Lee and Kaiser have written an article called “Turning Value-Based Health Care Into a Real Business Model.”[1] They start by looking at specific examples where four health care systems changed their clinical processes in ways that cost them money due to a loss of volume-driven revenue, but that improved patient outcomes in measurable ways. For example, Intermountain Health Group has made mental health screening a routine part of its primary care operations, which has increased per-member-per-month (PMPM) cost by $22, but has reduced annual cost for each member by $115 due to reduced ER and other utilization. Whether this is good or bad, of course, depends on whether you are paying the bill or sending a bill with some expectation of payment.
            While acknowledging that each of the four case studies they cite represent short-term increases in cost and/or decreases in revenue: “we see a compelling business case for acting now to achieve value-based care without worrying about when the market will make the shift.” The advantages cited include sustainability, experience in managing risk, relationship building, and lack of alternatives.
            Three of these are fairly straight forward. Sustainability, in their view, is competing for more patients on the basis of quality and service. Experience in managing risk means, among other things, adopting the viewpoint of the payer and achieving financial goals by saving money, as opposed to spending money. Lack of alternatives means a recognition that the tide is turning and providing low value care will ultimately prove a failing business strategy. The final one, relationship building means “learning to collaborate with stakeholder groups [which] takes time. Health systems are seeking closer alignment with physicians and other staff (whether or not they employ them) who can help to a achieve higher value in an evolving marketplace. Relationships must also be cultivated with social service agencies, government, and other provider organizations to address the complex medical and social needs of underserved populations, which often incur the highest costs.” This is an entirely new area of endeavor for most health care organizations. Developing joint agendas and plans for cooperation will take a long time and effort, and are not likely to produce additional revenue.
Lee and Kaiser fail to mention these examples are noteworthy mainly because they are uncommon. And in all four cases the organizations were financially secure enough to make the “investment” in improving care even without a definable “ROI.”
          For the practicing physician, these issues may seem to be “above my pay grade” or theoretical. However, I remain convinced we need to participate with the decision-makers at our local institutions as they grapple with these issues. The decisions being made are going to either facilitate or impair your ability to care for your patients soon. Also, your training and experience are going to be critical for both formulating the questions and the answers to the challenge “what should we be doing and how should we be doing it.”
Let me give you a clinical example. Suppose you have a patient with a potentially life-threatening condition, but one that is not likely to become manifest for several years. Surgery is an option, but has considerable short-term risk. Few good studies provide an evidence base to make a clear  recommendation, so the choice is up to the patient.  How is the patient to decide?
          Those who study variation in health care utilization and expenditures will say you lead the patient to the preferred option based on what is done in your community. It is undoubtedly true that how we frame the discussion can and does lead some patients to infer what we “really think” they ought to do. But I suggest the major driver is the patient’s perceptions of short and long-term risk—the patient’s perception of how they are doing now, their likelihood of being alive and in good health with or without the proposed intervention, and their fear of death determine their choices.
In economic terms this is equivalent to the time value of money proposition, which goes like this. “I will give you $1 now, but if you wait a year, I will give you $10.” Of course you can vary both the amount and the time interval, but what you will do is define thresholds where either the time is too long, or the difference in dollars is too high so that most subjects will take one or the other option. Now money is less emotionally fraught than dying, so you might argue this is a false analogy, but it is one that is commonly made.
          Your clinical experience dealing with the tradeoff between short term risk and somewhat nebulous long-term gain is a great analogy for the challenge facing health care organizations today.  How much can I afford to invest in redesigning care? How soon do I need a payoff? If I lose the gamble, will the organization go broke, thereby harming all stakeholders? If I don’t gamble, will the organization go broke, thereby harming all stakeholders?
Many of today’s senior administrative leaders entered the field 30 or more years ago, when the challenge was to manage the biomedical explosion. Then the challenge was how to bet on those new procedures and drugs that would yield a payoff. Going broke was a theoretical, but not a practical risk. Dealing with the risk of going broke is new and different for your administrators, but not really for you.  Can you help them arrive at a good decision?
 
29 October 2016


[1] Lee TH, Kaiser LS. Turning Value-Based Health Care into a Real Business Model. 24 October 2016. Accessed at http://catalyst.nejm.org/turning-value-based-health-care-into-a-real-business-model/.

Further Reading

New Leadership Skills for Physicians
David Brooks has identified highly valued skills in the modern world.  The good news is that physicians already use three of them.

On Strategy
 A central question for healthcare organizations as they face the future is what is our goal?  While taking care of patients might seem the obvious answer, it is the one that is usually not considered.

The Case for Physician Leadership
Why the successful healthcare organization of the future must find a way to create physician leadership if it is to achieve the IHI Triple Aim.

What Hospitals Are Doing
How are hospitals and health systems responding to change? An AHA survey provides some insights, but suggests few are really working to improve the function and resiliency of their teams, and are thus likely to fail in attaining their strategic objectives.

What Business Are We In? 
All healthcare organizations have both a clinical and a business function.  The proper balance is crucial for success.