Propelled by Medicare initiatives, hospitals and health systems across the nation are increasingly adopting value-based payment models as the industry transitions away from fee-for-service. This has left many provider organizations trying to strike a balance between success under value-based initiatives and the financial strength volume-based growth provides.
Although many health system leaders think it's impossible to grow revenue while reducing volume and costs, Mike Farris, chairman and CEO of Navvis, a healthcare growth and diversification company, says that is not the case. Mr. Farris has more than 25 years of healthcare industry experience. He has expertise in creating strategies that align hospitals and physicians. He also has extensive experience in organizational development and strategy implementation. Prior to forming Navvis, Mr. Farris was president and CEO of Orlando, Fla.-based medical device company Lasersight Inc. He also previously served as CEO of MEC Health Care, a managed care company with more than 1 million insured lives, and as founder and CEO of the Farris Group, a healthcare consulting practice that focused on mergers and acquisitions.
Mr. Farris recently spoke with Becker's Hospital Review about how hospitals and health systems can achieve revenue growth while succeeding under value-based initiatives.
Note: Responses have been lightly edited for length and clarity.
Question: What advice do you have for provider organizations that are mainly operating under a fee-for-service payment model but are interested in experimenting with more value-based initiatives?
Mike Farris: The healthcare market is evolving at a rapid pace and provider organizations that strive for market leadership don't have the luxury of trying, waiting and evaluating. When you experiment there is a notion that you may or may not do something. As leaders, we need to focus less on experimenting with value and more on delivering value.
There is a popular visual of the "journey to value." In it the character has one foot on the dock and one in a boat, symbolizing the forced decision between being a volume-based growth organization or a value-based performance organization. This image is flawed, and distorts how we should be thinking about this journey. Value does not have to conflict with volume, and when done correctly, a value-based initiative will fuel the right kind of volume-based growth. Leaders who embrace the concept that volume-based growth is achievable through value-based performance will thrive in their markets.
For example, many hospitals form accountable care organizations as an entry point into value-based care. In this model, they are cutting cost, measuring quality and hopefully capturing shared savings. They focus on the operational aspects of the ACO, but they should also be focused on the bigger picture of using the ACO as a growth strategy. They don't think about how a market-leading ACO model could be leveraged in new markets to grow market share by attracting new physicians and patients.
So, the question is not how to experiment with value-based initiatives. The question is how do we embrace value-based performance and volume-based growth to ensure we are delivering the most value possible and leveraging that value to fuel growth.
Q: What are some strategic steps hospitals and health systems can take to help ensure their organizations are achieving growth and expanding market share while also having success under value-based payment models?
MF: Many CEOs I talk to are struggling with growth and diversification for their organization. By growth I mean expanding what you are currently doing, and by diversification I mean doing new and different things to unlock new sources of value.
Generally speaking, every market presents unique opportunities to drive growth and increase market share. There are three areas where I look for growth and diversification opportunities. The first is payment models, such as ACOs or bundled payments. The second is care delivery within the acute and post-acute settings. The third is physician alignment through clinically integrated networks.
When you align expert design with world-class execution to implement initiatives related to these strategies, you provide the highest quality care for the best price. When done correctly, this can be used to attract physicians, drive consumer preference, redefine payer relationships and open up direct-to-employer strategies — delivering the right kind of growth.
First, hospitals need to ensure they have the ability to operationalize these strategies through deployment of people, processes and technology to eliminate unnecessary costs and improve quality and the patient experience. You must be able to execute and deliver outcomes. The next step is leveraging these outcomes to move market share by deploying new services and business lines and expanding into new markets.
Let's use bundled payments as an example. A well-designed model that delivers outstanding results for an episode of care will attract physicians, patients, payers and ultimately employers to access the program, if properly marketed. Part of the success of a well-designed model includes the build-out of a post-acute care network to deliver high quality care at a reduced cost. This is how you translate value-based care into a growth and volume strategy.
One thing to note, a team may be strong at operating, but that doesn't mean the same team is good at driving growth and diversification. These are two different skill sets and require different thinking and focus. Both are critical, and if leaders are going to get the top- and bottom-line growth that they are seeking, they need to ensure they have the right organizational structure to drive the results they are looking for.
Q: Are volume and value mutually exclusive?
MF: Unfortunately too many hospitals and health systems today answer yes to this question. But for those that are going to thrive in their markets, the answer is no. The key is to embrace the power of "and" instead of falling prey to the tyranny of the "or." This will unlock not only your thinking, but also the ability to execute on strategies that can deliver growth and diversification through the promise of both.
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