Harmonizing Healthcare

December 5, 2017 Michael J. Alkire

Each player in the healthcare industry is like a musician. On their own, each can perform a lovely solo. But much like musicians, when we work together in unison and strive for excellence with each other’s support, we can create a song that has the power to get us up on our feet or grab us by our heartstrings.

Whether that’s primary care physicians and specialists collaborating, encouraging multi-disciplinary teams to work together, sharing data that allows for new treatments or entering unique partnerships, such as payer-provider risk sharing – our industry thrives when we work in harmony.

The problem is, there are fundamental fault lines that stop us from being effective.

Our industry has competing incentives that pit different sectors against one another and a political environment overwrought with uncertainty. We operate locally, making learnings and best practices difficult to scale, and while we are rich in data, we are poor in insights.

Aligned Incentives

We have a national imperative to better manage the cost of healthcare services. Yet, most healthcare providers are only paid for maximizing volume. With a foot in each canoe of value-based care and fee-for-service, these two motives are at odds with one another. They set up a zero-sum game, where someone wins only when someone loses.

Rather than play this zero-sum game, wouldn’t it be better if we were all paid based on the value we delivered? If we could all play together, united behind a shared goal of total cost management – and in the process, earn the money to maintain our missions?

We’ve seen the value of this alignment in bundled payment models where clinicians work together with stakeholders that touch a patient across an episode of care, including supply chain representatives, post-acute care providers and payers. One great example of this is Southwest General Health Center, a Premier member in Ohio with 350 beds. As part of the voluntary Bundled Payments for Care Improvement initiative, they have earned nearly $800,000 in savings payments since 2015. In addition, 30-day readmissions at Southwest General have decreased by 21 percent and 90-day readmissions have decreased by 20 percent.

When financial win-win situations are created, we put everyone at the table to work together toward the same goals, helping to bend the healthcare cost curve, improve outcomes and create healthier markets.

Competitive Friction

Fixing incentives goes a long way toward the end goal of total cost management, but only if the rest of the market is functioning properly.

And that’s not happening right now, particularly in pharmaceuticals, where a lack of competition is wreaking havoc on the laws of supply and demand.

Manufacturer consolidation, marketplace exits, and issues with raw material suppliers all combine to create a fragile market. In many cases, such as for generic injectables, we have just one or two companies left. So if anything goes awry, costs can skyrocket and product availability shrinks.

The solution to this challenge has to be based in common business practice. We need to make these markets attractive, money-making sectors that compel suppliers to compete to drive value. This can be done by giving suppliers guaranteed volumes, just-in-time planning and reliable demand forecasts. For example, by “sourcing to specification,” Premier works with hospital clinicians to document the product attributes that are medically necessary, and then works with a manufacturer to create a product that only includes those features. This helps to bring stability to manufacturers and can reduce the incidence of shortages in the market through long-term contracts, demand forecasting and API agreements.

When we fix the incentives and smooth out unpredictability in the supply chain, we can drive down costs and reduce shortages.

Insights on Total Cost and Quality

Unhealthy markets thrive in obscurity. It is difficult to drive real, sustainable change without data and insights on total cost and quality trends. But performance insights can be difficult to obtain.

For instance, even in a local market, there may be dozens – even hundreds – of post-acute care providers, making physician datasets hard to come by. And because of this lack of data comparing outcomes and cost effectiveness of care, it is challenging for many clinicians to know if post-acute care providers are delivering the high-value, cost-effective care they expect.

The truth is that variation in care is significant. For those in the fee-for-service camp, this can mean higher penalties for readmissions and hospital-acquired conditions. For those in bundled payment or shared savings arrangements, the financial impact can be even more significant.

That’s why we need better, cleaner data and analytics that can reach across the continuum to measure cost and quality down to the setting and individual provider. For instance, meaningful data on cost and quality outcomes as it relates to high-value implant usage among peer organizations can help leaders assess the true value of these products. This can narrow options to those that truly improve patient outcomes at the best price. In addition, this intelligence is crucial to understanding performance benchmarks, providing a foundation for providers to pinpoint standardization opportunities for critical resources, like blood, and in clinical care within inpatient and outpatient settings.

Spread and Scale

At the end of the day, we need comprehensive data, integrated analytics, evidence-based insights, healthier markets and aligned incentives to help doctors discover better treatments and improve the health of our communities. That’s the only way we are going to solve the financial challenges that impact families, businesses and our national budget. However, we need to recognize that these common problems are best tackled together, harmonizing with each of the individual instruments we play.

Author information

Michael J. Alkire

Michael J. Alkire

Chief operating officer at Premier, Inc.

I’m a healthcare executive from Ohio who helps healthcare organizations provide higher quality care at a better cost. When I’m not working you’ll find me spending time with my family, likely at one of my children’s sporting events.


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