Healthcare Industry: Inevitible Move from Volume Based Care to Value Based Care

Recently I have been part of a interesting healthcare assignment. It prompted me to look at healthcare domain much more closely to see the latest trends in that space. Like always, HBR articles are one of trusted source of information in this space. One of the significant observation is how innovative healthcare provider are moving from volume based business model to value-based healthcare. Traditionally business model of healthcare providers like the hospital were fundamentally based on the volume business that includes revenue based on number and type of procedures performed. But now payers are also pushing the providers for reimbursement based on the quality of care provided. It is primarily value based model. In the short term, it will have a significant negative impact on the short term profit for the providers.

HBR has provided few cases where the value-based care model is leveraged. Lets take the case of Mayo Clinic in cancer treatment case. The patient with breast cancer may need to undergo an operation for partial or complete removal of the breast. In normal cases, the tissue is sent for analysis after the operation to confirm that if there are any residual cancer infected areas. It normally takes one to two day to complete the analysis.  But in the case of Mayo clinic, they sent to their pathology lab during the operation itself and got it verified within half an hour. It reduces the risks of repeat surgery drastically. As per HBR report, it has avoided 96% of repeat operations. In the short term, it will increase the cost of operation for the patient, but it reduces overall medical cost. For the provider, it cuts down the revenue generation opportunity in terms of repeat operations & associated procedures charges and hospitalization charges.

There is another case where hospital enforced pre-authorization requirement before doctors could prescribe for any radiological procedures like scan. It is basically to force the reuse of  the scan reports if the patient has already undergone scan recently in the same hospital or another hospital.  It will ensure that patient need not go through the same procedure again. It may look like a loss of revenue for the hospital.In above both cases, providers are playing innovative value-based care strategy. On a long-term basis, it will help in attracting customers who are becoming more and more value conscious. It is a sustainable strategy as the industry will inevitably move from "fee for service" model to value-based healthcare model.  But to execute this strategy, the providers

should have expertise on the entire gamut of care from prevention to intervention, which is supported by advanced IT Systems (eg-healthcare analytics engines, e-medicine, advanced EHR systems). One of the important element for executing this strategy is the ability to build a strong relationship based on principles of higher professional pride & higher ethical ground with doctors, support staff, other providers, social organization and govt. agencies.