The shift to value-based purchasing and away from reimbursement based on volume requires hospitals and health systems to transform their processes and capitalize on opportunities in the changing competitive landscape. The Healthcare Financial Management Association (HFMA) calls this “strategic agility” and recently released an educational report that identifies characteristics of strategic agility. (Heeding the Call for Strategic Agility, Report 1, HFMA, May 2013).
Irrespective of market position, reputation, resources and mission, strategically agile hospitals/systems share several foundational characteristics: creative strategic partnerships, sound investments in system capabilities, progressive asset management, innovative management of the care network and nimble governance.
Creative strategic partnerships. Mergers, alliances, and other forms of collaboration between systems are central determinants of future strategy and structure, helping the organization achieve economies of scale. For example, Winona Health in Minnesota has crafted an arrangement with its electronic medical record provider to oversee its entire IT operations and management of the revenue cycle, thus allowing Winona to reap the benefits of sophisticated IT without merging with a larger system.
Sound investments in system capabilities. Shifting from volume to value requires a new look at system capabilities. For example, Memorial Hermann in Houston has efforts well underway to integrate care delivery, physician alignment and its payer strategy. It will accomplish this through its clinical information system.
HFMA notes that Memorial Hermann made other early investments to ready itself for population management including installing quality management tools and a clinical quality platform across its physician network, so it could mine important practice-based information. “Like other industry leaders, Memorial Hermann is evolving its focus from systems that monitor operations to applications of technology that drive improved quality and efficiency of care.”
Progressive asset management. Capital planning will require new levels of collaboration among clinical, financial and operational leadership. Diverse expertise ensures that decisions about capital take into account the impact on financial performance as well as patient experience. Also, should capital needs, market competition or cash flow rapidly change, the organization must have structures in place that allow it to rapidly adjust. Finally, capital planning efforts should “reflect shifts in strategic prioritization . . . Even the large-scale capital project to-do list of just a few years ago isn’t necessarily the same these days.”
Innovative management of the care network. Hospitals and health systems should apply new levels of rigor to service line review, identifying care delivery deficits and repetitions both within the organization and the community at large. “As hospitals across the country reassess their service mix, many organizations also are exploring ways to transfer, integrate, or co-manage certain aspects of their services with other providers.” Working with other community providers to ensure patients receive needed services enables the hospital/system to maintain or enhance those services related to its core mission.
Nimble governance. Boards and executives should be alert to “key missteps” such as underestimating patient care needs under global payments and capitation, overinvesting in vertical integration and failing to effectively manage divergent payment structures simultaneously.
The HFMA report characterizes strong governance in a value-driven environment as follows:
- Ensuring that executives/managers elevate the importance of preparedness
- Having the right checks and balances in place to respond quickly to competitive threats and opportunities
- Board member experience and expertise in addition to traditional skills in finance, law and banking to encompass backgrounds in real estate, M & A, industrial engineering and utility management
To read the full report from HFMA, click here.
iProtean subscribers, for more information on strategic agility including innovative changes to the care network, please note two upcoming advanced courses: Making Difficult Decisions about Programs and Services, Part One and Part Two. These courses feature Marian Jennings, Lisa Goldstein and Nate Kaufman and will be published in your course library this summer.
For a complete list of iProtean courses, click here.
iProtean Symposium & Workshop
Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Barry Bader (Bader & Associates), Ed Kazemek (ACCORD LIMITED). For more information, click here.
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