From Volume to Value: 10 Essential Strategies for Navigating the Healthcare Shift

From Volume to Value:
10 Essential Strategies
for Navigating the
Healthcare Shift

© 2020 Health Catalyst
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From Volume to Value: 10 Strategies
As a country, we are confronting many
options and philosophies regarding
accessible and affordable health insurance.
Our choices include supporting state and
national insurance exchanges, eliminating
the individual mandate, repealing the
Affordable Care Act, advancing Medicaid
block grants, creating Medicare for All,
modifying the Medicare program to enroll
all who want it, and more.

As our communities debate the merits of
these alternatives and the leaders who
promote them, as a nation, we must
eventually confront an issue not often
broadly discussed in the mainstream:
…the significant
challenge underlying all
insurance options is an
increasingly unaffordable
healthcare services
delivery system.

Amid these challenges, the healthcare
industry is in limbo between value- and
volume-based payment models, as
unaffordability pushes a shift to value,
but the current environment still supports
volume.
To survive economically, health systems
must understand the factors driving and
sustaining both payment models as well
as strategies to balance value succeed
as value replaces volume.

A Consistent Rise in the Cost of Care Delivery
The consistent rise in cost of care delivery
is well documented.
For many years, the annual cost of
healthcare services has increased at a
rate greater than that of general inflation
and of the U.S. economy.
As a result, healthcare expenditures as
a percent of GDP now approach 18
percent—more than doubling from 8
percent of the 1980s when health
insurance was far less of an issue.

Many factors contribute to the consistent rise in cost,
but a few elements are critical drivers:
Demographic trends
End of life services
Care variation and suboptimal care
Prolific introduction of unproven technologies
Failures to match healthcare services and teams
Care systems that can’t reliably share data
And, perhaps most importantly, a care system
that does not effectively engage the individual
in maintaining or improving their health status.
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With the social factors and healthcare
services environment persisting for
decades, healthcare service capitalism
has thrived under service payment
systems incenting more care—known
as fee for service (FFS).
But as a designed byproduct, the FFS
model drives more service, more fees,
higher costs, and more GDP consumption.

Stemming the Rising Tide of Cost:
Alternative Payment Models
To stem this rising tide of cost, the largest
purchasers of health services, the federal
and state governments, have for years
constrained FFS payment increases at
rates below those of other purchasers.
Other large purchasers (e.g., large
employers and commercial insurers)
have become increasingly frustrated
with the pricing gap between fees paid
by the governments and those they,
and everyone else, pay.
These other purchasers are in turn
demanding lower rates.
.

Yet, despite these payment rate pressures,
healthcare costs have continued to rise,
implying more healthcare services at
suppressed rates.
In any event, healthcare organizations have
experienced significant margin pressures in
recent years despite total healthcare costs
continuing to rise.

Provider margin pressures under FFS will likely continue to
intensify as fee increases continue to trail expense inflation
for the foreseeable future.
Alternative payment mechanisms
will gradually become more
attractive to providers.

Alternate payment mechanisms including
value-based care (VBC) payment models have
been introduced. They are not new—CMS
began emphasizing VBC in about 2008.
The VBC adoption rate, however, has been
slow. Provider success rates have been slower.
But to effectively address the total cost
challenge, a mechanism that deemphasizes
care volume through alternative, outcomes-
based models seems imperative.

Furthermore, providing an alternative path
for viable provider margins seems not
only likely but critically necessary.
Providers have the training, skills, and
experience to effectively address most of
the critical cost drivers outlined above.
They should be rewarded for doing so.

The Shift from Fee for Service to
Value-Based Care: Slow but Inevitable
CMS has been a strong advocate for VBC,
importantly, through both Republican and
Democrat administrations.
Since the latter 20th century, CMS changes in
payment methods have driven health services
industry payment changes.
For example, cost reimbursement, prospective
payment, fee schedules, and resource-based
relative value system were all original designs
of CMS the industry later adopted.

While it’s increasingly hard to imagine VBC
payments not becoming the more prevalent
means of provider compensation, adoption
remains slow.
FFS mechanisms will not go away quickly
and remain materially important to provider
financial success today.

A fifth of the world’s largest economy is built
based on FFS models. Change of this scale
takes time.
Recognition, creation, and adoption of new key
capabilities and competencies will have fits
and starts for sure. Expect it.
But success under VBC systems will be
achieved. And increased rates of VBC
adoption will follow.

Ten Strategies for Balancing Value with Volume
As healthcare makes its shift towards VBC, organizations must carefully
navigate a balance of FFS and VBC payment. Ten strategies will be critical:
1. A member perspective
2. Cautious investment in hard delivery assets
3. Accelerated investment in digital infrastructure
4. Innovative digital engagement solutions
5. Pricing concessions
6. Aligned Incentives
7. Network management
8. Payer-provider trust and collaboration
9. Clinician and administrative alignment
10. Physician leadership and accountability

1. A MEMBER PERSPECTIVE
Increasingly measure market share in new
members, not patients.
As health systems are more and more paid
for managing populations, it becomes less
productive to count patients.
Recruiting and retaining members into care
systems and products will be important as
well as the cultural shift towards population
health it implies.

2. A MEMBER PERSPECTIVE
Carefully examine investment that builds delivery capacity in general.
Think telemedicine and digital engagement versus patient
facilities and exam rooms.

3. ACCELERATED INVESTMENT IN DIGITAL INFRASTRUCTURE
Invest in a cloud-based analytics platform (e.g., the Health Catalyst® Data
Operating System [DOS™]) that can provide and/or support the following:
Real time or near-
real time data on
member and
provider activity.
Data-driven care
redesign.
Predictive
modeling—
intervene to guide
members away
from acute care
episodes to more
effective and
timely preventative
primary care.
Disciplined unit
cost management.
Model and
benchmark
operational
efficiency in all
care and support
settings.
Quality
measurement
tools and
outcomes
reporting.

4. INNOVATIVE DIGITAL ENGAGEMENT SOLUTIONS
Leverage technology and integrate care team
redesign to strengthen member relationships,
engagement, and health system brand.

5. PRICING CONCESSIONS
Establish competitive pricing to position health
system services with engaged, savvy consumers
expecting and demanding transparency and a
total value proposition.

6. ALIGNED INCENTIVES
Align physician, management, and
team member compensation incentives
to reward value and advance the
drivers of success under VBC.

7. NETWORK MANAGEMENT
Build an effective and efficient care
system network and then keep member
care in the network.
A care system truly providing optimal
value will be well integrated in both
process and information.
Members will benefit, clinically and
financially, from being cared for in the
care network.

8. PAYER-PROVIDER TRUST AND COLLABORATION
Build payer-provider collaboration. The resultant
trust will benefit all parties and is critical to
increase the adoption rate of VBC.
Equitable, transparent, and fair payer contracts
are foundationally necessary. Providers must
perform on the value metrics and absorb the
financial pain when they don’t.
Payer partners must share information on a
timely basis and acknowledge the economic
benefits of VBC to the health plan extend
beyond the members of a particular contract.

9. CLINICIAN AND ADMINISTRATIVE ALIGNMENT
Develop a governance structure to bring clinicians
and administrative leadership together to design
strategy and build VBC management infrastructure.
Leadership and clinicians work together to
design incentive pools to create the right
risk/reward for their networks.
Vigorously monitor performance against
benchmarks by reporting on opportunities,
outcomes, and results, with a dedication to
driving transformation by rewarding great
performers and incentivizing those who
can do better.

10. PHYSICIAN LEADERSHIP AND ACCOUNTABILITY:
Identify and develop physician leaders.
Vigorously monitor system and individual
physician performance against benchmarks
by reporting on opportunities, outcomes,
and results, with a dedication and
resolve to driving transformation.
Reward great performers and leaders
and incentivize those who can do better.

Strategy, Partnerships, and Data Build Stability
Amid Economic Uncertainty
Healthcare payment models will continue the
inevitable march to value.
Persistent affordability challenges and
population trends will ensure a continuously
evolving and increasingly challenging
landscape.
A capitalistic economy, in which rules change
for everyone, creates a market opportunity.
Organizations who develop the competencies
for success under the new rules most quickly
will hold a competitive advantage over those
who don’t.

Strategy, Partnerships, and Data Build Stability
Amid Economic Uncertainty
While health systems can’t prudently commit
wholesale to VBC, those who cling too long
to FFS place at risk their long-term viability.
As a result, organizations must build
strategies to increase their clinical,
operational, and financial agility and
promote sustained investment in
competencies critical under VBC while
continuing to balance value and volume.

For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

More about this topic
Link to original article for a more in-depth discussion.
From Volume to Value: 10 Essential Strategies for Navigating the Healthcare Shift
Value-Based Care: Four Key Competencies for Success
Jonas Varnum, Population Health Management Consultant
From Surviving to Arriving: A Road Map for Transitioning to Value-Based Reimbursement
Dan Unger, Senior VP and General Manager, Financial Transformation Business
The Medicare Shared Savings Program: Four Tools for Better Profit Margins and High-Quality Care
Will Caldwell, MD, MBA, Senior Vice President and Executive Advisor
Millions Saved: Complex Care Coordination Reduces Total Cost of Care
Health Catalyst Success Story
The Key to Transitioning from Fee-for-Service to Value-Based Reimbursement
Bobbi Brown, MBA, Senior VP; Jared Crapo, Senior VP, Integration

Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Duncan brings over 30 years of experience as an integrated health system CFO and senior
management leader. His most recent role was Executive Vice President, Chief Administrative Officer
and CFO of Allina Health, a $4.0 billion not-for-profit integrated health system based in Minneapolis. In
his seven years as CFO at Allina Health, Gallagher was instrumental in establishing the health system
as a national leader in navigating the shifting healthcare payment model from fee-for-service to one
based on value and care quality. In the process, Allina demonstrated that the shift is better for patients,
and can be financially viable for health system.
In 2014, Allina pioneered the outsourcing of Allina’s $10 million, 70 FTE analytics department through a unique
partnership with Health Catalyst. Leveraging the intellectual property of both partners while driving sharper focus, this
arrangement ties Health Catalyst’s profit from the relationship to the delivery of measurable cost savings tightly
aligning Allina’s success with its that of its partner. Gallagher played a central role in the formation of this strategy and
led the development and negotiation process In 2016, Gallagher led a forward-looking strategy development process
with the Allina senior management and its Board of Directors, shifting its system strategy and creating an Allina health
plan serving the Twin Cities market, supported and enabled by the deep expertise and strong payor platform of its
health plan partner, Aetna. While at Allina, Gallagher was recognized by the Minneapolis Business Journal as 2016
CFO of the year. Before Allina, Gallagher spent 10 years as Executive Vice President and Chief Operating/Finance
Officer with Des Moines-based Unity Point Health, a $4.1 billion integrated health system. Gallagher previously served
as a Partner with KPMG. His educational background includes an undergraduate degree from the University of South
Dakota, and Master of Business Administration from the University of Minnesota’s Carlson School of Management.
Duncan Gallagher, President of Donegal Advisory Services

Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Health Catalyst is a mission-driven data warehousing, analytics and outcomes-improvement company
that helps healthcare organizations of all sizes improve clinical, financial, and operational outcomes
needed to improve population health and accountable care. Our proven enterprise data warehouse
(EDW) and analytics platform helps improve quality, add efficiency and lower costs in support of more
than 65 million patients for organizations ranging from the largest US health system to forward-thinking
physician practices.
Health Catalyst was recently named as the leader in the enterprise healthcare BI market in
improvement by KLAS, and has received numerous best-place-to work awards including Modern
Healthcare in 2013, 2014, and 2015, as well as other recognitions such as “Best Place to work for
Millenials, and a “Best Perks for Women.”

From Volume to Value: 10 Essential Strategies for Navigating the Healthcare Shift

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