Turning Value-Based Health Care into a Real Business Model

Turning Value-Based Health Care into a Real Business Model

The shift from volume-based to value-based health care is inevitable. Although that trend is happening slowly in some communities, payers are increasingly basing reimbursements on the quality of care provided, not just the number and type of procedures. But because most providers’ business models still depend on fee-for-service revenues, reducing volume (and increasing value) cuts into short-term profits. How, then, are innovative providers redesigning care so that, despite financial pain in the short term, they achieve long-range success?
 
Let’s start with four examples from the front lines of care and then step back to see what deeper strategic advantages all of them have in common.
 
At Intermountain Medical Group clinics, mental health care is integrated with primary care as a default practice, first piloted 15 years ago. All primary care patients undergo mental and behavioral health screening, and they get appropriate follow-up with counselors, often at the same location. The clinicians collaborate in the same way for all patients, whether or not Intermountain’s health plan is the insurer. As a result, patients are receiving coordinated behavioral care, and their outcomes are improving. Costs per member are now $22 higher up front but are also $115 lower overall annually, because of reductions in ER visits and other care. In the current fee-for-service environment, Intermountain obtains those long-term savings for the minority of patients for whom it is the payer, but other payers reap the rewards for most patients.
 
At Mayo Clinic, surgeons who perform lumpectomies or partial mastectomies for breast cancer work during the operation with the Frozen Section Pathology Lab to determine whether all the cancer has been removed. Such microscopic analysis of frozen-tissue samples can take 24 hours or more at some hospitals, but Mayo achieves it in, say, 20 minutes while the surgery is in process. Yes, 20 minutes is valuable extra time in an operating room while the surgeon and staff wait for pathology findings. But Mayo doesn’t do it just to get results to a patient 23 hours sooner. The main benefit is the on-the-spot chance to extend the surgical excision, if needed, to remove all evidence of cancer. That approach eliminates the need for repeat lumpectomy in about 96% of patients. In a study of five years of lumpectomy data, the 30-day reoperation rate was 3.6% at Mayo in Rochester, Minnesota, compared with 13.2% nationally. The result: Mayo’s costs for surgery are higher in the short term, and it earns less revenue from follow-up operations. But it reduces overall medical costs, and the patient gets peace of mind more quickly.

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