There is a gap in capabilities and core competencies between large and small hospitals and health systems in the ongoing transition to value-driven care. What’s more, small organizations often lag far behind large ones in key components of the transition, putting themselves at financial risk, according to the findings in a new report released today by the Ernst & Young LLP Advisory Health practice.
For the report, EY surveyed 700 qualified health care professionals. Respondents included chief medical officers, clinical quality executives and chief financial officers at US-based health care providers, with annual revenue of US$100 million and higher.
The aim of the research is to shed light on the state of the provider industry, including some prominent factors that are challenging organizations’ performance and growth. “Based on our industry knowledge and interpretation of the survey findings, health care organizations can address challenges through a total transformation across the continuum of care that will lead to a competitive advantage and better health outcomes,” the report authors wrote.
The report notes that the American health care system is straining under an increasingly oppressive burden of rising costs. “In 2015, health care spending grew by 5.8 percent, reaching a total of US$3.2 trillion in the United States, or US$9,990 per person. Health care spending in the US has now risen to 17.8 percent of GDP, a rate far above that of any other industrialized nation. Yet, by many measures, American consumers are not getting their money’s worth. Americans have a lower life expectancy, higher incidences of chronic conditions such as heart disease and diabetes, and higher infant mortality rates than people in other industrialized nations. Even worse, health care disparities still exist among several vulnerable demographics, and equitable access to health care remains problematic,” the report authors stated.
The report points to four key factors that are challenging the value-driven transformation that is essential to the U.S. health care industry’s future sustainability:
- The escalating cost of care delivery, driven by system inefficiencies
- Clinical workforce challenges that increase the potential exposure of patients to medical errors
- A lack of standardization in how quality is defined and measured
- Lack of trust between providers, payers and regulators
The report also identifies a gap in capabilities and core competencies between large and small hospitals and health systems in the ongoing transition to value-driven care, and this is causing small organizations to lag far behind large ones in key components of the transition.
As value-driven care will require new reimbursement models, the survey examined where organizations stand in their reimbursement priorities for 2017. Sixty-seven percent of smaller hospitals, those with revenue of 100 million to $499 million, currently have no value-based reimbursement initiatives, compared to only 8 percent of the largest hospitals and health systems (with revenue of $5 billion or more).
Only 7 percent of the smaller healthcare organizations are involved in bundled payment model initiatives and only 12 percent of hospitals with revenue of $500 million to $999 million have those initiatives, compared to 47 percent of the largest hospitals and health systems. What’s more, only 27 percent of the smallest hospitals ($100 million to $499 million in revenue) and 28 percent of provider healthcare organizations with revenue of $500 million to $999 million are participating in alternative payment models, compared to 52 percent of organizations with revenue of $1 billion to $2.49 billion, 61 percent of organizations with revenue of $2.5 billion to $4.99 billion and 62 percent of the largest revenue hospitals and health systems.
Only 1 percent of the smallest revenue hospitals, as polled in this survey, are involved in provider-sponsored health plans and 6 percent of the next size hospitals. Those percentages go up with size—11 percent of organizations with revenue of $1 billion to $2.49 billion; 17 percent of organizations with revenue of $2.5 billion to $4.99 billion and 19 percent of the largest revenue organizations.
“It is insightful that among hospitals and health systems with revenues of less than $1 billion, few have embraced strategies or made progress toward value-driven care,” Yele Aluko, M.D., an executive director in the Advisory Health practice at EY, a former hospital system physician-executive and a co-author of the report, said in a statement. “This creates a competitive disadvantage for smaller hospitals, and quite frankly, puts their financial futures, sustainability and corporate existence in jeopardy. The new world order in healthcare will require clinical, administrative and financial innovation to meet the needs of consumerism and industry demands for value transparency. Many smaller hospitals and health systems lack the strategic management processes, corporate resources and capabilities to remain competitive in the short term or relevant in the long term.”
The report also looks at healthcare organizations’ top five cost-control initiatives for 2017. Seventy-eight percent of those surveyed said the cost of care is “considerably important” or “very important,” and 95 percent are taking cost-control measures. However, the report notes that a quarter of organizations do not have any “value-based” reimbursement initiatives planned for 2017.
More than half (58 percent) of organizations are undertaking efforts to reduce medical errors and increase reliability; 41 percent are undertaking efforts to decrease unnecessary variation and utilization (24 percent are planning to do such efforts); only 13 percent are undertaking efforts to do peer benchmarking and competitive benchmarking, but 40 percent plan to do so; 34 percent are working to increase patient access to primary and specialist care and 20 percent are currently working to reduce hospital use and emergency departments by high-cost patients, with 28 percent planning to do so.
In addition, the report that some providers are taking initial steps to establish quality. Almost half (49 percent) of those surveyed said their organizations have already initiated quality audits, 31 percent had instituted physician performance scorecards that include a quality measure and 38 percent plan to institute facility scorecards in the future.
However, the report authors contend that audits and scorecards along will not move the needle far enough. “Organizations that hope to thrive in the health care industry of tomorrow must start aligning revenue and costs with quality-first thinking and a culture of accountability,” the report author state.
EY outlined in the report the four pillars that support of value-driven care—clinical outcomes, cost optimization, patient experience and talent engagement, and supported by technology and data analytics. EY researchers contend that moving to value-driven care will require balancing the following priorities—elevating the patient experience, transforming the culture, advancing with analytic insights, increasing productivity and embracing then new way to pay.
Diving into some of these areas, 93 percent of survey respondents said they are undertaking patient experience initiatives in 2017, however, only 26 percent of respondents selected patient access/satisfaction as one of their top three initiatives for the year.
What’s more, while half of respondents believe that employee satisfaction in health care drives patient satisfaction, only 35 percent of respondents reported that their organizations have initiatives underway to create a more positive work environment, and only 10 percent of respondents have undertaken employee surveys to solicit employee input.
And, the report also uncovered a “value gap” in cost optimization efforts. While 95 percent of respondents are undertaking cost control measures, 25 percent do not have any “value-based” reimbursement initiatives planned for 2017.
“Transitioning to value-driven care is hard. It demands a whole new approach to operations and patient care, the adoption of advanced data analytic technologies, and an enormous shift in culture,” Dana Alexander, an executive director in the Advisory Health practice at EY, a former health system chief nursing officer and a co-author of the report, said. “But the hospitals and health systems that make these strategic changes will see a huge payoff in terms of financial resiliency, a more engaged workforce and improved patient outcomes. What that means for the health of individual Americans and the overall American health care system cannot be understated.”