What Executives Should Expect Financially in 2013

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A recent article by Karen Minich-Pourshadi, senior editor over at HealthLeaders Media, provides some interesting insights into what healthcare executives can expect for their organization’s financial future as we enter ever-so-cautiously into the murky future of 2013.

First, Minich-Pourshadi believes that “healthcare is entering a renaissance.”

She readily admits that this is hard to believe, especially since financially, “2012 and 2013 may feel more like Armageddon.” Still, she insists that “healthcare is really preparing for its rebirth.”

Every birth (or rebirth as the case may be) requires pain, however. Minich-Pourshadi writes that many hospitals who will “thrive in the value-based care future haven’t gotten through this limbo-like period quickly.”

It’s important to understand that healthcare really hasn’t changed, she insists. Instead, it’s being retooled to provide care for the millions more who are entering the system. She advises that organizations not delay in implementing ACOs and population-health management, because “if implemented now, an organization can tweak its approach to help reduce costs before the payment model shifts away from fee-for-service.”

In the interim, prepare for financial losses, because they’re almost guaranteed, she warns. But this is another growing pain that she believes will lead to healthcare’s renaissance.

Based on her research, Minich-Pourshadi believes that establishing the ACO and population-health management models now will not necessarily reap benefits in the short-term, but they’ll pay off in dividends down the road.

Don’t forget the importance of data collection, she adds, writing, “Organizations will need quality and patient-satisfaction metrics to help construct bundled-payment agreements with payers. Moreover, healthcare organization must also figure out how to calculate physician pay for spending more time with patients on preventative care.”

Second, Minich-Pourshadi advises against making “quick cuts.” Instead, “make strategic, sustainable cuts.”

Some organizations make the same cuts over and over again, pruning the branches of the tree, but never successfully managing the tree’s growth and health. This is an allusion made by Gene Michalski, president and chief executive officer of Beaumont Health System. He told Minich-Pourshadi that the pruning process for them “evolved into share-of-saving and value management.”

From 2007 to 2010, he achieved an 11 percent patient-care cost reduction at BHS’s three, south Michigan hospitals.

Minich-Pourshadi writes, “Achieving this magnitude of savings wasn’t the hard part. The hard part was structuring changes in a sustainable way, according to Michalski. Sustainable cost reduction requires organizations to shed the reactive, tactical approach that has been the norm for years, and instead make deliberate, strategic changes that permanently reduce costs.”

Third, she urges organizations to remember that “consolidation isn’t the only answer.”

When it comes down to it, a path to growth comes about for an organization via blending three methods, Minich-Pourshadi writes, listing physician employment, joint venture, or merger/acquisition. “But,” she adds, “structuring contracts that foster alignment between parties is often the neglected ingredient. That can turn a service-line gap solution into a big problem.”

The three-hospital Health Quest system in Lagrangeville, N.Y., decided to “focus on quality to drive alignment” and “designed compensation and incentive structures” around that idea. The key ingredient to its success was working with its physicians “to determine the metrics used to measure quality.”

“Moreover, Health Quest created a management team consisting of a physician and administrator to run its service lines,” Minich-Pourshadi writes. “Physician bonuses are based 70 percent on quality and 30 percent on patient satisfaction for five agreed-upon metrics. The percentage of bonus paid to each physician is based on whether the participant reaches a baseline goal, a target goal, or a stretch goal.”

The article contains a more in-depth look at each of these examples and bullet points and is worth reading in its entirety.

In the meantime, what do you think of the ideas Minich-Pourshadi puts forth? Do you agree with them? How is your organization confronting the various financial issues that 2013 holds?

-by Pete Fernbaugh

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