Faster is Better When Shifting Business Models

Creating a sense of desperation has helped Banner Health fully embrace changing its business model from volume-based to value-based. Its unofficial motto: "The quicker the better."

This article first appeared in the January/February 2015 issue of HealthLeaders magazine.

Healthcare executives are fond of using the analogy, fast becoming a cliché, that their organization has one foot in the boat and one on the dock in terms of dealing with healthcare reform. They say this because changing from one way of getting paid to another (from volume to value) requires a deft balancing act with great potential for disaster.

Thus the cliché. And it's a good one.

I have sympathy for executives who know they may be cutting their own financial throats if the reimbursement system doesn't keep up with their pace of change. They're being asked to do a 180-degree turn on their traditional business model and there's nothing, not even a sextant, to guide the way, to continue the metaphor.

But some organizations are embracing, indeed even helping to drive, the shift. If most executives want to conduct the move slowly, one inch at a time, executives at Banner Health, based in Phoenix, want to vault into the canoe from a running start, strap a motor on it, and trigger a detonator that will destroy the dock once they reach safe distance.

"Going forward, probably two-thirds of the scorecard will be based on population health management metrics."

That's one way of taking the metaphor further. Another more meaningful way of operationalizing that metaphor is through the balanced scorecard, which Banner uses to track performance in areas of finance, customer relations, operations, and clinical quality and IT infrastructure.

Incentivized for Performance
It uses these measures to incentivize and reward performance, an admirable goal, but much of it had to be retooled to work in a value-based reimbursement environment, says Becky Kuhn, president of the Arizona healthcare giant's eastern region.

"We've had a balanced scorecard for about 10 years," says Kuhn. "The whole organization is aware and incentivized for performance, but what has been interesting to see is that until three years ago, incentives were all facility-based. Going forward, probably two-thirds of the scorecard will be based on population health management metrics."

Though some facility-based measurements remain, those that include a population health bent include a focus on member growth in Banner's ACO structure, clinical performance, member satisfaction, end-of-life care and health promotion, among others.

The bottom line: "Our balanced scorecard looks dramatically different, reflecting the story of where we were as an organization to where we intend to be," she says.

Population Health: Are You as Ready as You Think You Are?

To make the kind of rapid progress in switching the business model, the idea of taking baby steps toward a population health orientation is anathema. They're trying to transform as quickly as possible. Making that kind of move, however, doesn't come without constant reassessment and checking the progress of the path to change.

But every time they reassess, says Kuhn, they come to the same conclusion, making a swift transition is best, even though nearly 80% of the system's business is still on the "dock," the fee-for-service world.

This Time It's Different
That begs the question: "How much can we endure to get from here to there, because the things that we do to be there negatively impact the things that we do here?" asks Kuhn, anticipating a reporter's question. "But every time, we convince ourselves—that this is the future. That is where we need to end up. And so the faster we move toward it, the better."

And that is the question all senior leaders have to answer. Once they've come to the conclusion that value-based care is here to stay, of course. The trend seems unstoppable, but once, so did managed care, and we know where that ended up. It may be dangerous to believe, but it appears this time is different.

With the growing influence of high-deductible health plans, active participation in value-based reimbursement schemes from CMS, and a growing clamor for transparency in quality and price, many will choose based on those metrics. This doesn't just include patients, but those who buy their healthcare.

Where do you think health plans, and ultimately patients, will go? Likely they'll ultimately do the same thing they do with anything they shop for. For Banner, price and quality will eventually be the most important defining factors in determining winners and losers in healthcare reform, so they're paddling furiously.