Staying Relevant

Understand the issues facing your customers in the marketplace, consultant Mark Dixon says

Healthcare is changing, and IDNs are adapting. Suppliers need to do the same. They can do so in three ways, said Mark Dixon, president, The Mark Dixon Group, which provides consultative assistance to IDNs and medical suppliers:

  • Understand the impact on IDNs of the movement from volume to value.
  • Understand IDNs’ key drivers and issues.
  • Proactively address IDNs’ needs.

Change to the nation’s healthcare system was inevitable, said Dixon, who made his remarks at the recent Market Insights Supply Chain Forum in Charlotte, N.C., sponsored by MDSI, publisher of the Journal of Healthcare Contracting. Total healthcare and hospital expenditures have nearly doubled in the last decade. If growth rates stay constant, the average cost of a family health insurance premium will equal 50 percent of household income by 2021. “America cannot afford our healthcare system and cannot compete in a world economy if it keeps spending more on healthcare,” said Dixon, who was regional president of Fairview Health Services, Minneapolis, Minn., prior to forming his own consulting firm.

From volume to value

By offering incentive payments to hospitals that provide high-quality, efficient care, the Centers for Medicare & Medicaid Services is pushing providers to move away from fee-for-service to fee-for-value, Dixon said. Examples of mandatory programs the government has put in place: Value-Based Purchasing, the Hospital Readmissions Reduction program, and the Hospital-Acquired-Conditions-Reduction program. Put all these programs together, and an average 300-bed hospital has about $10 million per year at risk.

Leading the “volume to value” movement are accountable care organizations, which are groups of providers that work together to:

  • Coordinate care for the patients they serve.
  • Deliver seamless, high quality care.
  • Create patient-centered organizations in which the patient and providers are true partners in care decisions.

ACOs – of which more than 480 operate in the United States today – measure outcomes, practice process-level care management, and align financial incentives, he said. While many ACOs were established through CMS programs (Pioneer and Medicare), in many markets, commercial payers are establishing or have established similar accountable care programs.

What’s on the C-suite’s mind?

Today’s IDN executives are watching six key healthcare trends, each of which already is affecting – or will affect — IDNs:

  1. Healthcare consumerism. High-deductible products have grown four times in number since 2006.
  2. A focus on population health. Improving the health of large groups of people calls for providers to shift their emphasis away from the volume of services offered, to the value of care delivered. To do that, they are using care bundles, care pathways, care coordination, the patient-centered medical home, evidence-based medicine, clinically integrated networks of physicians, and more.
  3. Physician employment and integration. More physicians are becoming employees of hospitals and IDNs, while others are joining large groups.
  4. Scale wins. Consolidation among providers and suppliers is continuing. Dixon predicted that the 2020 provider landscape will be dominated by 100-plus regional megasystems.
  5. IDNs moving away from holding company systems, to operating companies/businesses. Expect more centralization of decision-making about such things as capital, supplies and operations, predicted Dixon.
  6. A relentless focus on cost. IDNs will remain focused on reducing costs and improving operating margins. They are cutting direct costs (e.g., FTEs, drugs, services), leveraging their size to negotiate better pricing, and increasing operational efficiencies.

Key questions for the C-suite

C-suite executives are working aggressively to answer questions such as these:

  • How can we maintain profitability on Medicare reimbursement?
  • How can we change the care model with our employed and independent physicians?
  • How fast should we design and implement the new care model and the new payment systems that recognize value?
  • Does our hospital/system have enough scale to succeed?

Suppliers can stay relevant to today’s IDN by:

  • Identifying operating mechanisms in the system, and find out which hospital is responsible for key initiatives.
  • Understanding the elements impacting the value of their product in the IDN.
  • Leveraging relationships beyond their target departments to include the vice president of system departments and other CXOs.
  • Understanding the balanced scorecards of hospitals and IDNs.

For suppliers, the bottom line is simple: Provide value, not just products. Move away from selling commodities, to contributing solutions for your customers’ organizational issues. Doing so won’t be easy, said Dixon. After all, many IDN executives believe there are too many salespeople pushing too many products, and too few salespeople who do their homework to really understand the issues and challenges facing their customers.

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