Many recent efforts to reform healthcare appear to merely add layers of bureaucracy without fixing the underlying problems. The industry needs a fundamentally new business model - one which incentivizes provider and consumer behaviors to achieve measurably better health outcomes at lower cost. While all stakeholders must be engaged in order to make any realistic changes, this new model specifically requires providing consumers with meaningful outcome information, in order to make good cost/benefit choices and ensure they are receiving real economic and clinical value. Even though we have an uphill battle in transforming healthcare, there are at least some innovative private sector efforts devoted to managing costs and improving outcomes that should be seen as beacons for further change.
Imagine a future where consumers ask questions about the price and outcomes that healthcare systems deliver - not questions about the cost of one MRI versus another, but about all the costs to treat a pregnancy or an orthopedic procedure. As I discuss in my upcoming book, Healthcare at a Turning Point, these areas are relatively easy to calculate, as they have a defined beginning, middle and end. It is now generally understood that the amount and types of care required for some conditions can be anticipated; and therefore, a total cost for treatment can be established.
These predictive care paths - and the outcomes they achieve - are the true "product" of hospitals and physicians, not each procedural detail. Considering the goals of healthcare reform, this implies that - like manufacturers - investments in "R & D" (e.g. new approaches to care delivery) will need to become part of the new business model. Differential pricing is then based on the quality of outcomes produced. As such, these "products" can be audited for quality, just as products of pharmaceutical and medical device manufacturers get audited. This ultimately provides the necessary transparent data on health outcomes and patient experience for a truly patient-centered focus of healthcare delivery.
One specific example where the private sector implemented such innovative methods comes in the area of cancer care. Cancer Treatment Centers of America (CTCA) has taken the lead in providing a comprehensive, integrated diagnostic evaluation and treatment plan for the four major types of cancer (i.e. breast, colorectal, prostate and lung) for a fixed fee and in five days or less. They are poised to provide treatment for selected cancers on a fully transparent, bundled price basis.
Reducing practice variability - and understanding the causes of it - is essential to any attempt at bundled payment. At the heart of its model, CTCA established consistent evaluation protocols. With a transparent, fixed total "price" for an evidence-based course of evaluation associated with outcomes, there is no incentive to provide additional, unnecessary care. Significant administrative efficiency can also be achieved, moving away from the cost-accounting minutia of the current system - which consumes provider time and encourages upcoding abuse. Most importantly, patients understand what will happen in their care because the process and price are transparent and they are actively engaged in healthcare decision-making.
Organizations like CTCA will continue to be successful to the extent they understand the key drivers of cost and variability associated with outcomes. Through unique care approaches, they can also define essential economic and clinical components of value - to both patients and payers. Care models need to be used to guide the development of the evidence required to demonstrate better outcomes and define commensurate value for the price. More importantly, these models will be the basis for setting a higher bar in the industry, redefining the quality metrics that could be used as a comparator between institutions.
Healthcare delivery organizations must anticipate and be prepared to meet the inevitable demand for better care at lower cost. There is a gathering storm of reduced reimbursement and shrinking margin, but there is also an opportunity to grow share and preserve margin for innovative market leaders.
Merely defining a care path and corresponding price won't result in growth or improved outcomes. Differentiated care and a commitment to delivering more value as defined by the healthcare consumer will be key to success. The market share winners in this environment will be those providers who can define and deliver on better health outcomes.