The shift from the traditional fee-for-service payment model to new financial models, such as global payments, bundled payments and value-based payments, are transforming how health systems and hospitals operate. The drive to deliver value over volume necessitates greater visibility into existing processes, and a deeper understanding of how specific clinical interventions and products impact patient outcomes – and financial outcomes – for healthcare organizations.
To understand how changing financial models are impacting providers, and what we as suppliers can do to support our customers as they evolve, I reached out to Mary Beth Briscoe, CFO of the University of Alabama at Birmingham (UAB) Hospital, to gain her insights.
Q. Mary Beth, how are changing financial models impacting UAB?
A. The shift in payment mechanisms is having a significant impact on our organization. Culturally, it provides an opportunity for clinical and operational stakeholders across UAB Medicine to better align, which I believe is very positive. Financially, it has challenged us to engage at a level not required of us in the past, including a granular discussion at the “cost” level of care. Additionally, exposing gaps in our processes and systems, we are better prepared to make meaningful improvements in clinical and administrative areas.
For example, when we evaluate the financial opportunities associated with supplies, we see that for the most part, they are squarely in utilization and variation, not in price. It is critical to understand “what” we are using to provide care to our patients, and why there is variation among providers. Price is easier to understand; however, the linkage between the item purchased, the cost and the intended clinical outcome –is a much greater challenge.
Q. What models have you chosen to adopt and why?
A. When bundles were first introduced, we recognized the industry was headed in a new direction, and wanted an opportunity to learn. To that end, we agreed to participate in three Centers for Medicare & Medicaid Services (CMS) Bundled Payments for Care Improvement Initiatives (BPCI): chronic obstructive pulmonary disease (COPD), cardiac valve and stroke. In doing so, we discovered opportunities to improve process linkages to foster effectiveness and efficiency. Our work in these areas not only improves patient outcomes, but had a positive impact on patient satisfaction – and financially as well. We are also participating in the CMS Oncology Care Model, which requires efficient care navigation and effective patient management.
Q. In your organization, how is your supply chain team supporting these initiatives?
A. In organizations with a mature supply chain, the supply chain team has a collaborative relationship with clinicians and a solid understanding of how the business of healthcare is changing. Because they understand both clinical language and data, they are able to bridge the gap between the clinical and operational realms to foster sound decisions regarding products and services. As these new financial models take hold, I see supply chain transitioning from a materials management role to one that contributes to and shapes the decision making process by having a seat at the table.
Q. How do suppliers need to think about and understand changing payment models?
A. As our environment changes, clinical, financial and operational leaders are focusing on alignment strategies as they more fully recognize organizational success or failure as a collective activity. Historically, suppliers influenced purchasing by working with a single component within the care delivery model – the clinicians. Success in today’s environment is predicated on an evolved decision-making process capable of evaluating purchasing impacts across clinical, operational, compliance and financial settings.
Suppliers must first understand our landscape has changed and historical practices may not equate to success in the future. I believe the healthcare provider/supplier relationship has to evolve into a contractual partnership with both parties aligned to realize both risk and reward.
Suppliers must also understand the importance of evidence-based outcome data, and be prepared to demonstrate how their products deliver on the outcomes they promote. Furthermore, as we evolve toward managing populations outside of the four walls of our hospitals, suppliers must help us address a broader patient needs across the both the continuum of care and length of time required to complete the patient’s treatment plan.
Q. What advice would you give to suppliers navigating this new healthcare reality?
A. We are all operating in a world we haven’t been in before. We all recognize and accept that our industry must and is changing, and to remain relevant in the future, we must embrace change. Even if competition is low and demand is high, the market always catches up. Suppliers should constantly work to differentiate themselves from their competitors by the way they engage with providers.
Make an effort to understand the healthcare landscape, and its volatility. I have had suppliers ask me to tell them about my “pain points”. If you do not already know our pain points, you may bear out the fact that you do not understand our organization, nor have taken the time to research the issues we are facing within our market. Market conditions and pressures may vary, perform pro-active research, develop specific market driven opportunities and challenges, and provide solutions that profit from opportunities and mitigate challenges.
Consider taking a risk and do something different to demonstrate how you align with an organization’s values and mission, and how that relationship will benefit the health and well-being of patients and the organization. Tell me what you can do and what you cannot do, do not simply try to sell providers something. Be proactive in providing evidence-based data and information, which allows for informed decision-making that resonates across clinicians and non-clinicians alike. Understand and be prepared to demonstrate value beyond the products you provide.
As suppliers we need to understand the changes that are occurring in healthcare and how they are impacting our principal customers – healthcare systems – so that we can pivot our organizations’ thoughts, strategies and technology investments accordingly. As Mary Beth related, product selection is now a broad stakeholder decision that revolves around – but is not mutually exclusive of – the clinician. And while price is always going to be a component in negotiation, utilization and outcomes are growing in importance as the industry shifts from volume-based to value-based care.
The key word is “value” in today’s healthcare environment – as providers take steps to increase the value they provide, we as suppliers must determine how we can deliver greater value as well – to our customers and through to their patients.
Dave Reed is currently Vice President of Healthcare Solutions for Cook Medical. With over 35 years of life science industry expertise, Dave holds an MBA from California Miramar University and serves on the board of the Strategic Marketplace Initiative (SMI) is a past member of the Indiana University Kelly School of Business Supply Chain Academy Advisory Board and is a professional member of the Association of Healthcare Resource & Materials Management (AHRMM).