Can Hospitals Succeed in VBC and Improve Their Overall Financial Health? An Oxymoron, It Is Not

Value-based care has been viewed primarily as a cost-center to the hospital budget that requires upfront investment in the infrastructure without a guarantee for shared savings down the road. A risky bet.

And if you’re doing value-based care right, with greater focus and attention paid to preventive care services, it could result in decreased use of hospitals for acute care needs. Downright threatening to the very existence of a hospital system that is reliant on volume.

For these very reasons, hospital executives might shy away from value-based care.

And yet transition to value-based care is necessary and inevitable. If not out of concern for the out of control spend on healthcare, it is a necessary response and adaptation to the formidable market forces.

Consider these example shifts –

  • More than 50% of the hospitals saw negative hospital contribution margins this year with continued lower utilization of hospital services post-pandemic.
  • Greater than 50% of Medicare members are projected to enroll in MA plans in 2023. These health plans will need to hit their medical loss ratio (MLR) if they are to be successful. What that translates to, is a need to control costs and therefore a greater number of VBC arrangements that will be offered in the markets. A hospital that knows how to play in VBC will see an increase in the number of members they serve. And those that don’t will miss out.
  • Add to that, the relentless market disruption and competition from non-traditional health care entrants (Amazon, Walmart) and the continued market consolidation.
  • With CMS’s bold aim to transition 100% of its traditional Medicare payments to VBC payments by 2030, it will only serve to accelerate the forward momentum adopted by private payers

Collectively, what these signal is that ‘status quo’ is a regression move for a hospital system. So, how then is a hospital system to balance the simultaneous need of strengthening overall financial sustainability and achieving objectives of value-based care?

It is by utilizing the levers available in value-based care that are not available in the fee-for-service world.

How exactly?

It comes down to strategizing across three areas:

  1. Leveraging data to achieve cost savings AND improve revenue growth
  2. Creating ‘stickiness’ for members at critical points
  3. Targeting and eliminating inefficiencies and waste
  • Leveraging data to achieve cost savings and improve revenue growth 

A big upside of a VBC participation is that you receive data from payers you otherwise would not. This includes data on use of services occurring outside of your hospital system.

Use the data to assess cost inefficiencies for services occurring outside of your hospital. And target those for redirection of services to your facility to win on cost savings and revenue earned. A double win.

What specialty categories is your facility cost-advantageous in the market? Start there. These could be procedures, imaging, deliveries, etc.

A comparative analysis may reveal that you are cost advantageous in orthopedic and GI procedures. Identify and align with those providers to educate and redirect care to your facility.

Patients win with potential lower out of pocket spend. Your hospital wins with new patient volume, and shared savings potential.

  • Creating stickiness (aka brand loyalty) 

One of the most critical, yet often overlooked transition points is your hospital and ER discharge process.

Patients remember the last thing you do for them when they leave your hospital. And if that includes handing them a piece of paper with instructions to schedule a follow-up appointment, it signals ‘we don’t really care what you do after you leave the hospital’.

It is also a big missed opportunity to share that their care is coordinated within your integrated system and their provider.

When you schedule a follow-up appointment before they leave the hospital/ER –

  • It ensures an appointment is made for timely follow-up (AND your hospital readmit reduction program will thank you for penalties avoided).
  • Eliminates the need for telephonic follow-up AND associated cost savings!
  • And gives you a golden opportunity to build your brand loyalty by delivering a key message.

What is the key message? That their care is better coordinated when they go to your hospital. When members go outside of your ACO network of facilities, you lose the visibility to coordinate or influence their care and outcomes.

Investing time and effort into this basic function is impactful on multiple fronts. But often overlooked, due to staffing shortages or availability of systems to coordinate it or due to a new ‘shiny object’ that seem more advanced.

Patients win with better overall care and you win their loyalty and long-term value for their overall care needs in the future. 

  • Targeting and eliminating inefficiencies & waste 

A common mistake that hospitals make with access to troves of new data is get distracted, enter a decision paralysis or tackle too many opportunities at once.

While conducting data analytics, target your cost savings opportunity identification for utilization that occurs outside of your hospital. This is your low-hanging fruit potential.

This typically is high-cost and high-spend activity post-acute care settings, use of high-cost drugs with generic alternatives, utilization of free-standing ERs, high-cost imaging facilities, etc.

Participating in a value-based care payment model does not have to be a win-lose proposition as these example strategies show. Through deliberate planning and focused execution, you can create an overall winning proposition that supports your financial health and keeps patients at the forefront of your efforts.

Photo: nito100, Getty Images