1. EXECUTING ON VALUE
A R O U N D T A B L E D I S C U S S I O N
W I T H G O V . M I C H A E L L E A V I T T
BY JENNIFER A. WILLIAMS

2. Reprinted with permission. All rights reserved.
Healthcare Executive
JULY/AUG 2016
33
When it comes to the move toward value-based pay-
ment, “You can fight it and die; you can accept it
and have a chance; or you can lead it and prosper,” says
Michael O. Leavitt, former governor of Utah, former secre-
tary, U.S. Department of Health and Human Services, and
founder and chairman, Leavitt Partners, Salt Lake City.
Leavitt, who spoke at ACHE’s Congress on Healthcare
Leadership this past March, led an exclusive small-group
discussion at Congress with leading healthcare executives
representing 12 hospitals and health systems, each of
which have achieved varying degrees of success in moving
away from fee-for-service payment toward adoption of
value-based business models. The conversation was
moderated by Rulon F. Stacey, PhD, FACHE, who now
serves as managing director, Navigant Leadership
Institute, Navigant Healthcare, Minneapolis, and is a
former ACHE Chairman.
“There are moments we all have as senior leaders—career
inflection points; defining moments for which we will be
remembered no matter how well or how badly they turn
out,” Leavitt told healthcare executives during the ACHE
roundtable discussion. The transition away from fee-for-
service payment toward value-based business models is
one such moment, he said.
Since leaving HHS in 2009, Leavitt says he has spent
much of his time examining the shift away from fee for
service toward payment models that reward high-quality
care, improved outcomes and reductions in the cost of
care delivery. He’s come to the conclusion that “misper-
ceiving how quickly [the move toward value-based
business models] is occurring is dangerous”—and the way
in which healthcare’s senior leaders lead their organizations
on the value journey will ultimately be their legacy.
What can healthcare executives learn from Leavitt and
leaders of progressive hospitals and health systems
about what it takes to advance their organization’s
value readiness—and what action steps should executives
be taking now to lead their teams and their communities
on this journey? Four takeaways from ACHE’s roundtable
on value stand out.
No. 1: The momentum for value is strong enough that
there is no turning back. “The move away from fee for
service toward value-based business models is a massive
change, and I am persuaded that it is happening, it is
going to continue to happen and that it is, in fact, accel-
erating,” Leavitt told roundtable participants.
Consider that the federal government was 11 months
ahead of schedule in transitioning 30 percent of
Medicare payment to value-based business models by
the end of 2016, achieving its goal in January 2016; the
government is now focused on transitioning 50 percent
of Medicare payment to value-based payment arrange-
ments by the end of 2018. Meanwhile, new Medicare
Part B payment models are being tested that will dra-
matically change how prescription drugs, which totaled
$457 billion in 2015, are reimbursed in hospitals. And
the Centers for Medicare & Medicaid Services is testing
bundled payments for fee-for-service Medicare hip- and
knee-replacement patients, an initiative that is expected
to save $343 million over five years.

3. EXECUTING ON VALUE
Reprinted with permission. All rights reserved.
When the tipping point in the transi-
tion away from fee-for-service models
occurs, “We will see systems compet-
ing on the ability to deliver care in a
systematic way,” Leavitt says.
Leavitt and his team at Leavitt
Partners have identified 26 factors
that determine how quickly the
transition away from fee-for-service
payment occurs in any given
market. These factors include:
• Success of early accountable care
organizations in a given market
• Vertical consolidation among payers
• Level of integration/hospital sys-
tem growth in a market
• Physician employment
relationships
• Presence of restricted networks
• Physician supply
• Availability of inpatient/
outpatient healthcare IT
Knowing how to perceive the
speed with which this is occur-
ring in your marketplace is a vital
and important key to success.
“Monitoring the pace of the move toward value in your
market is critical,” Leavitt said. “I would not want to
be a board member who gets caught behind the curve
on this.”
There are three critical questions healthcare executives
should ask as they consider how to navigate the value
journey and at what pace, Leavitt said:
• Will value actually replace volume? “Answer that ques-
tion wrong and it will be a very significant moment in
your career,” Leavitt told roundtable participants.
• If it is going to happen, how
quickly will it occur in my
market?
• Do my organization and its
partners possess the competen-
cies that are required to succeed
in a value-based world?
Progressive leaders—those who
saw the early signs of transition to
a new payment model and worked
with their boards and their teams
to develop plans of action—view
the work ahead as “a tremendous
opportunity to fix some of what’s
broken in the industry,” according
to a CEO from the East Coast.
In one large, integrated delivery sys-
tem, “Our process of learning is accel-
erating as we begin to understand the
many nuances of delivering value-
based care,” the system’s CEO said.
“The lead time is significant because
we needed years of a learning curve to
prepare for this transition.”
No. 2: The value-readiness of
most organizations could be
characterized as “very poor,” CEOs for leading
health systems agree. “I see a lot of systems that lack
readiness for the move toward value, and as a nation, we
lack readiness,” Leavitt told healthcare executives during
the ACHE roundtable discussion.
One participant shared that in his state, “There are only two
organizations that have gotten their arms around this,” and
both are large systems. Across the rest of the state, efforts to
experiment with value-based models or to use data informat-
ics to redesign care delivery for improved quality, outcomes
and cost “don’t exist,” the CEO said.
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JULY/AUG 2016
34
“Monitoring the pace of
the move toward value in
your market is critical. I
would not want to be a
board member who gets
caught behind the curve
on this.”
GOV. MICHAEL O. LEAVITT

4. Reprinted with permission. All rights reserved.
A first step toward value is to define the competencies
required to succeed under value-based payment models
and the extent to which an organization is capable of
meeting the requirements of these models, Leavitt said.
For example, “Being able to assess your own risk
capacity and that of your partners is an important
task,” he said.
Transformation also requires leaders to break through
cultural barriers to improving value—both inside
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ABOUT ACHE’S ROUNDTABLE ON VALUE
ACHE’s CEO Roundtable on Value, held during ACHE’s Congress on Healthcare Leadership in March 2016, presented a
unique opportunity for a select group of healthcare CEOs and other healthcare executives to discuss one of the most pressing
issues facing our field: the transition from a fee-for-service care delivery model to a value-based model of care.
“These are certainly challenging times for all of us as we address the changes ahead, especially the leadership con-
cerns and policy implications,” said Rulon F. Stacey, PhD, FACHE, managing director, Navigant Leadership
Institute, Navigant Healthcare, Minneapolis, and a former ACHE Chairman, who moderated the event. “It is our
hope that programs like this will continue to advance and strengthen healthcare leadership.”
ACHE plans to host similar events in the future, based on feedback from participants at the inaugural roundtable
event. The following healthcare leaders participated in ACHE’s Roundtable on Value:
Anthony A. Armada, FACHE, executive vice president
and chief executive, Western Washington, Providence
Health and Services, Seattle
Deborah J. Bowen, FACHE, CAE, president and CEO,
American College of Healthcare Executives, Chicago
David R. Brandon, FACHE, president and CEO,
UnityPoint Health, Dubuque, Iowa
Christine M. Candio, RN, FACHE, president and
CEO, St. Luke’s Hospital, St. Louis
Michael D. Connelly, FACHE, president and CEO,
Mercy Health, Cincinnati
Michael H. Covert, FACHE, president and CEO,
St. Luke’s Health, Houston
Peter S. Fine, FACHE, president and CEO, Banner
Health, Phoenix
John M. Haupert, FACHE, president and CEO,
Grady Health System, Atlanta
Elliot Joseph, FACHE, president and CEO, Hartford
(Conn.) HealthCare
Edward H. Lamb, FACHE, division president, western
division, IASIS Healthcare, South Jordan, Utah
Gov. Michael O. Leavitt, founder and chairman,
Leavitt Partners, Salt Lake City
John (Jack) Lynch III, FACHE, president and CEO,
Main Line Health, Bryn Mawr, Pa.
Stephanie S. McCutcheon, FACHE, innovation and trans-
formation advisor, Health Employer Exchange, Pasadena, Md.
Diana L. Smalley, FACHE, regional president, Mercy,
Oklahoma City
Rulon F. Stacey, PhD, FACHE, managing director,
Navigant Leadership Institute, Navigant Healthcare,
Minneapolis

5. Reprinted with permission. All rights reserved.
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JULY/AUG 2016
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EXECUTING ON VALUE
healthcare organizations and among consumers. “What
are we doing to prepare the second, third and fourth lev-
els of the organization for the culture change needed in
our organizations to make this transition—and how do
we explain this to our patients?” Leavitt said.
Just as airlines have begun to redefine quality as “a
safe trip between point A and point B,” Leavitt said,
“We’re having to redefine what a quality experience is
in healthcare.”
Mobilizing healthcare employees to drive improved value
takes leaders who can define their organization’s strategic
vision for value in such a way that employees understand
how they can make an impact.
The move toward value-based business models also
requires training, particularly for physicians, clinicians
and medical students, who may be asked to act in ways
that run counter to care and business practices of the
past. Education—both for staff and for patients, who
need to understand the “Why?” behind new
approaches—also is key.
“It’s important for us to recognize that a deficiency in
value readiness is not a technical problem; it’s a behav-
ioral problem,” one CEO said.
No. 3: When it comes to embarking on value-based
initiatives, timing is everything. “You can be right on
this issue way too soon,” Leavitt said.
“The shift to value-based business models will happen
differently by market, with some markets being ready for
it sooner than others,” he said. “The question is: What
time is it in your market?” Judging the extent to which
your market is ready for value-based approaches to care
delivery and population health management is a critical
step in formulating your organization’s value strategy.
Fee for service is a uniquely American system, one
roundtable participant commented, and it is so deeply
rooted that resistance to replacing it with a new pay-
ment model is coming from a number of sides. “We’re
trapped in a sort of limbo because culturally, we have
consumers who say, ‘I want what I want, and I want it
now,’” one roundtable participant commented, while
another said four of the largest payers in his organiza-
tion’s market are equally reluctant to move away from
fee for service: “They’re holding onto this [old model]
with a death grip.”
“Our view is that CMS is going to lead the way” in the
transition to value-based business models, commented one
CEO from the East Coast, whose organization brought in
ABOUT THE SPEAKER
Michael O. Leavitt is a former governor of Utah, former secretary, U.S. Department of Health and Human Services,
and founder and chairman, Leavitt Partners, Salt Lake City, where he advises healthcare clients in the move toward
value-based care.
While leading HHS, Leavitt oversaw the implementation of the Medicare Part D prescription drug program. That
responsibility required the design, systematization and implementation of a plan to provide 43 million seniors with a
new prescription drug benefit.
Leavitt also is a seasoned diplomat, having led U.S. delegations to more than 50 countries. He has conducted negotiations
on matters related to health, the environment and trade.

6. Reprinted with permission. All rights reserved.
One health system in the South
attributes its success in transitioning
to value-based care to its collabora-
tion with one of its payers. “Our sys-
tem is working very closely with an
insurance company to better under-
stand its thinking,” the CEO for the
system said—to which Leavitt
responded, “That relationship is a
recipe for the future.”
Healthcare executives also should
work closely with medical schools to ensure future phy-
sicians are trained in value-based theory and practices,
leaders who attended the roundtable agreed. Looking out-
side the industry for best practices that can be applied to
healthcare in the move toward value—particularly
around improving efficiency and reducing waste—also is
an approach healthcare leaders should embrace.
LEADING SUSTAINABLE CHANGE
Now more than ever, the field is going to need healthcare
executives who are adept at responding to market forces
and skilled in leading their teams through change.
“I hope that as we think about this topic, we can
strengthen the pathways to develop leadership readiness
for the transition to value,” said Deborah J. Bowen,
FACHE, CAE, president and CEO, ACHE.
The move toward value-based business models is a test for
today’s healthcare leaders, Leavitt said—one that leaders must
pass if their organizations are to survive in an era of
transformation.
“We’ve got to figure out ways to deal with more people in
more coordinated ways for less money without compro-
mising our humanity,” one CEO said.
Jennifer A. Williams is editor-in-chief and content manager,
American College of Healthcare Executives (jwilliams@ache.org).
a consultant to help executives
determine, actuarially, how the
organization could become profit-
able under Medicare Advantage.
Although the Medicare Shared
Savings Program “was a great cata-
lyst” for the move toward value, the
risk-adjustment methodology used
by CMS is “too confusing,” the
CEO said.
In developing an approach to value
that is right for a specific market, incremental change is
best, ACHE roundtable participants agreed. “This is a
good time for testing changes that can be replicated
across systems,” one healthcare executive said.
No. 4: Attaining value-readiness will require providers to
collaborate with payers, physicians, employers, consum-
ers—and each other. “We can learn a lot more from each
other in the transition to value than we think,” Leavitt said.
That sentiment was echoed by roundtable participants.
When asked what keeps CEOs up at night in contemplat-
ing the transition to value-based business models, one
CEO responded, “Incentive alignment”—especially in
determining how to engage both employed and indepen-
dent physicians in value-based initiatives. “That is the
cultural piece of the transition toward value that we are
trying to wrap our arms around,” the CEO said.
Also needed, according to roundtable participants: new
approaches to working with payers in moving away from
fee for service.
Healthcare executives attending the roundtable share
the belief that insurance companies are reluctant to
move away from a fee-for-service model; they also agree
that significant progress toward value-based business
models of care cannot be achieved without payer
partnerships.
Transformation also requires
leaders to break through
cultural barriers to improving
value—both inside
healthcare organizations
and among consumers.
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JULY/AUG 2016
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EXECUTING ON VALUE