Volume to Value: Hospital CEOs Sense Shift in Healthcare Business Model

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Hospital leaders at Huron Healthcare’s annual Healthcare CEO Forum concurred that the era of the volume-based business model for healthcare is coming to a close. With the United States’ national health expenditure projected at nearly 20 percent of GDP by 2019 and reimbursement from all payers shifting to an accountable care model, moving to a value-based business model will be imperative for hospitals and health systems.

“The entire country will benefit from a healthcare model that incentivizes value – instead of volume – while focusing on wellness and preventative care," says Curt Whelan, managing director Huron Healthcare. “It promises to make healthcare more affordable for patients and payers as well as to improve quality and reduce waste. It’s a classic win-win."

• Moving from Volume to Value: Making the New Healthcare Business a Reality

While healthcare reform initiatives may be pushing providers toward developing more affordable value-based care, no one can predict how long it might take to fully transition to this new model. The uncertainty was a source of concern and frustration among the CEOs at the Forum.

“We are definitely moving toward fixed or bundled payment and away from making margin on volume. The old strategy is quickly becoming the high cost/low margin strategy," shares Dan Wolterman, president and CEO of Memorial Hermann in Houston. “Unfortunately, we get to run these two opposing strategies simultaneously. You can live in two business models for a while, but not forever."

• Risks of Two Simultaneous Business Models

Operating in two business models is difficult for any hospital, but it’s especially risky for stand-alone community hospitals.

“It’s clear that the current volume-based business model will become obsolete; it’s unclear how soon the new value-based business model will take effect. Operating simultaneously under two business models is unsustainable," states John Tiscornia, managing director, Huron Healthcare. “Expectations for value-based care and payment for that care must come into alignment for hospitals to be able to sustain their operations."

• Accountability Bridges Gap

Part of making the shift to delivering high-value, affordable care – optimal outcomes at a lower cost – is to create accountability at every level. However, if hospitals are expected to be accountable for delivering high-value care and managing population health at fixed costs, they must be reimbursed in ways that make that model financially sustainable.

“We will have to move to an ‘accountability model’ with a focus on relevant levels of care and getting out in front of big expenses by taking responsibility for population health," says Michael Eesley, chief executive officer at Centegra Health System in Illinois.

Attendees at the Huron Healthcare CEO Forum represented a broad range of organizations, from larger multi-hospital systems to smaller community hospitals, across urban and rural communities. The CEO Forum report shares valuable insights on transformative leadership and innovation from the CEO attendees, and from experts outside the healthcare industry. Key themes discussed included Moving from Volume to Value, Changing the Care Delivery Model, Physician Relationships and Cost Containment.

Leading Through Transformation: Top Healthcare CEOs’ Perspectives on the Future of Healthcare, Insights from the Huron Healthcare CEO Forum is available for PDF download at www.healthcareCEOforum.com.

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