Healthcare is moving from fee-for-service toward population health-based reimbursement models. This change affects hospital service line planning. To adapt to the increased focus on and reimbursement for population health, every service line planning process should include five key considerations.
1. Strategic alignment. Before any planning can take place, it is crucial to understand the organization's overall strategic vision as the industry transitions from fee-for-service into a population-health based reimbursement model. For health systems, there are four major categories that must be addressed in their strategy and thereby considered in service line planning: growth, effectiveness, relevance and capabilities. Each of the four categories is defined below.
- Growth: Strategies to affect expansion.
- Effectiveness: Strategies that improve an organization's ability to produce a decided, decisive or desired outcome.
- Relevance: Strategies that improve the ability to provide services that satisfies the needs of the user.
- Capabilities: Strategies that create organizational potentiality and ability.
Historically, organizations focused only on growth and effectiveness, but as the market moves toward population health, the asset-centric systems are also rapidly working to create new capabilities and strengthen their relevance to the market. Service line planning must understand the system's balance of these four strategies to create plans which fit with the organizational strategy.
2. Market analysis. In addition to understanding the internal strategic direction, a successful service line plan requires a comprehensive market assessment of both fee-for-service and population-health based market data. Traditional market drivers include elements such as inpatient market share, payer mix, market demographics and utilization rates and are vital in understanding as they generally support the financial viability in today's fee-for-service model.
Additionally, the understanding of how the local market is incorporating value-based models is becoming more important in service line planning. For example, are competitors positioning themselves based on capabilities and expertise, or are they focused on cost and convenience? How independent is the physician market? Is patient choice limited by narrow networks?
Understanding the combination of both fee-for-service and population health-based data will help the organization develop plans which are financially viable in the current market and move the organization toward the future at the correct speed and in ways which work given the market dynamics.
3. Stakeholder engagement. Integrating stakeholders early in the planning process helps create buy in and provides valuable insight to the needs and desires from the people who are responsible for implementation and are acutely aware of market dynamics. Including people from the beginning helps them provide input to the strategic intent and also increases understanding. This is helpful to the implementation process as it creates support from the people who are involved in the operations.
The definition of important stakeholders is also changing. It is no longer sufficient to only consider physicians, specialists and administrators the important stakeholders. The change in focus from inpatient care to preventative medicine makes the primary care provider more important, while the growth in alternative delivery models such as online, retail and urgent cares increase the influence of retailers, payers and healthy segments of the general population. Making these stakeholders part of the process will focus the organization on different priorities.
4. Value proposition. The market's assessment of value is the ultimate judge of a service line's success. Traditionally value has been a quality vs. cost equation. However as the population becomes more engaged and payments becomes more focused on longitudinal outcomes, the value equation takes on new factors including service, convenience, access and long-term outcomes vs. both total and episodic costs.
Service line planning needs to take into account these new value equation factors and, as importantly, how quickly the local market is shifting on each factor. For example, if the market demands for convenience are rapidly increasing, the service line plan should consider on-demand access models such as urgent cares and retail.
5. Financial impact. As healthcare reimbursement continues to undergo reform, it will be important for organizations to prove the financial returns of any service line plan. Plans today must be financially successful in both the fee-for-service and risk-based reimbursement models. This means growth and reduced total cost of care.
Healthcare is undergoing a substantial shift in the value equation. Successful service line plans will need to modify their approach to transition the focus from elements that support the traditional model of care to those that support a population-health based model of care. We believe organizations should change their service line planning in the five planning elements outlined above to better positioned for future health care delivery models.
Victoria Schmitz is a strategic analyst at Health System Advisors. She can be contacted at Victoria.Schmitz@healthsystemadvisors.com. Health System Advisors is a strategy consultancy whose mission is to advise leaders, advance organizations and transform the healthcare industry.
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