A Quick Guide To Healthcare’s Value-Focused, Data Driven Future [And What It Means For Your Business]
Over the next five years, the U.S. Healthcare system will experience one of the most dramatic shifts in its history. Overburdened by the tremendous expense of caring for an older and more acute population than ever before, the Center for Medicare Services has had no other option than to overhaul the basic reimbursement underpinnings of the entire system. Since 2000, the healthcare system has operated under the “Fee-For-Service“ reimbursement paradigm, under which providers were paid a set amount for every service they provided to patients. As you might expect in this volume-based payment model, this incentivized everyone in the healthcare system to over-provision care. In addition, it did not tie these payments to the actual quality and outcomes of the services provided. The effect of this system has been dramatic, with total Medicare spending growing 182% from 2000 to 2015 and spending per beneficiary growing 133%.
The Future Of Healthcare Will Be Focused On Value
This era of volume is rapidly coming to an end. Rather than being driven solely by amount of care provided, the future of healthcare reimbursement will be closely tied to the value of that care. The last several years have seen a massive shift to this volume-driven payment system, with an explosion in the formation of risk-based Accountable Care Organizations and Bundled Payments programs that each allow providers to capture the savings they create from more efficient use of care. With the introduction of the Value-Based Purchasing payments starting in hospitals, CMS has moved this type of system from being merely voluntary to being a condition for participation in the Medicare system. As they have seen the benefits and savings from this change add up, the Center for Medicare and Medicaid pledged to tie 90% of direct healthcare payments to value by 2018 through the Value-Based Purchasing initiative. They recently announced faster-than-expected progress towards this goal, with 30% of all Medicare payments now being tied to patient outcomes. Healthcare observers who initially saw this shift as a legislative fad should not kid themselves, as it is becoming more and more clear that this era of value is here to stay.
Under the new value-based care models implemented by Medicare, healthcare providers are eligible for bonuses if their patient outcomes exceed local and national averages and direct financial penalties if their care metrics lag behind. The definition of targeted patient outcomes will differ across different clinical disciplines, but they will all likely be focused towards encouraging low cost and preventative care and dis-incentivizing expensive and emergency care that tax medical resources. By directly paying for quality, CMS has put an ROI to care quality investments. While the old model of pre-set payment amounts forced strategic providers to optimize for patient growth and cost reduction through mass consolidation, this new equation will reward even those smaller providers who use innovative methods to outperform their competition. While keeping down costs will always be important for healthcare businesses in this low-margin industry, providers who want to succeed and grow in this new era will seek to utilize any clinical advantage they can find.
The Future of Healthcare Will Be Driven By Data
In this clinical arms race of value-based care, the strategic creation and utilization of high impact data insights will be the most powerful competitive advantage available. The last decade has seen a diverse set of industries from consumer advertising to airplane manufacturing be transformed by the power of data. By automatically monitoring key metrics and mathematically optimizing for intended outcomes, theses industries saw tremendous gains in efficiency, quality and overall productivity. In these industries, a company’s aptitude for and investment in data allowed them to significantly outperform their competition. This same shift is beginning to occur in healthcare.
As the first segment of the healthcare industry to be directly impacted by value based care, hospitals across the country have led the way in taking advantage of data-driven insights to improve patient outcomes. Utilizing the data from millions of aggregated patient clinical records captured across cloud-based electric health records, leading healthcare analytics firms like Health Catalyst and Truven Health have been able to create suites of powerful algorithms that accurately predict important clinical outcomes and make personalized recommendations. These insights are then delivered back through the health record to help notify caregivers of emerging issues and inform their clinical decision-making. Early-adopting hospitals who armed their staff with these insights as they deliver care gained a significant competitive advantage in managing their population risks, reducing wasteful spending and improving their clinical outcomes. As the penetration and effectiveness of these analytic technologies in acute care has increased, however, the use of these same insights is quickly becoming table stakes and expected by all the parties involved in the system.
This trend is certainly further along in the 24% of Medicare spending represented by inpatient hospitals, but it is quickly making it’s way to the rest of the industry. Already, many innovative Physician Practices, Skilled Nursing Facilities and Home Healthcare providers have begun to strategically adopt healthcare technology partners who can help them use data to gain an edge. Providers in these areas who would like to grow their businesses should take notice of the lessons learned in the inpatient sector and seek to position themselves as early technology thought leaders in their own markets in using this type of technology to improve care before some of their competitors beat them to the punch.
The Future Of Healthcare Is Now
These converging trends of value and data will have a tremendous impact on the healthcare industry. While the last decade of healthcare technology was focused on the transformation of information from the printed page to the digitized database, the next decade will be about connecting all of that data and aligning it towards patient value in order to provide better care at a lower overall cost. Together, these two shifts have the power to enable our nation’s entire healthcare system to meet the significant challenges of creating a more sustainable future. In the process, healthcare organization who can take a leadership role in understanding key value levers and using data to maximize performance on those outcomes will have a sustainable first-mover advantage on those that do not.
