Adapt To Thrive: Academic Medical Center Strategy for a Value-Based World
- Volume XXII, Issue 68
- Executive Insights
The shift to value has been a top of mind issue for AMCs for years.
COVID-19 is serving as an accelerant, pushing care into outpatient, low cost, community-based or virtual care settings.
Now is the time for AMCs to critically evaluate their portfolio of service lines and identify sources of risk and opportunity.
In this Executive Insights, we propose a framework for where AMCs should focus to position for sustained success.
Much ado about value
The migration to value ― high-quality care at low cost ― has been a top-of-mind issue for academic medical centers (AMCs) for years. The pressure continues to slowly mount. Large, self-insured employers like Walmart, Disney, Boeing and many others nationwide are establishing condition-specific centers of excellence (COEs) with providers that can demonstrate evidence-based, standardized and efficient care. Employer coalitions like the Health Transformation Alliance are implementing local, high-value provider partnerships in pursuit of step-change reductions in cost. National payers are pursuing hardline tactics to lower provider payments.
UnitedHealthcare recently announced that it would no longer pay for certain planned procedures in the hospital outpatient setting1 ― where prices can be about nine to 10 times higher than in an office setting2 ― unless medically necessary.
While all signs point toward a future environment of pressured revenues, especially from the “cash cow” commercial line of business, AMCs on the whole have continued to excel. Their brand names continue to draw patient volume, particularly for tertiary and quaternary care, and they are indispensable to payer and employer networks that prioritize choice. Further, AMCs are poised to emerge from the COVID-19 crisis as winners, with their scale and brand strength giving them greater resilience in the financial downturn than that offered by smaller, “insurgent” competitors.
Wholesale change may not be necessary just yet, but targeted adaptation is a smart strategy. While many AMCs operate from a position of financial strength, it is an optimal time for them to critically evaluate their portfolios of services and invest in order to thrive for the future. Focused action in specific service lines that are commoditized and “shoppable,” or that present the greatest opportunity for competitive differentiation, will prepare AMCs for bigger changes that may be necessary down the road. A winning strategy must be thoughtful and service line-specific, ensure protection against current and future potential share loss from low-cost competitors, and capitalize on inherent advantages like reputation and medical expertise.
AMCs should focus their near-term efforts on a few service lines that present the greatest degree of risk or opportunity. The answers to the following questions can help AMCs identify which service lines to prioritize for near-term action and investment, and how quickly to adapt.
Any winning strategy must be designed around the specifics of prioritized service lines. However, regardless of the service line, there are a number of universal elements core to a successful value-based strategy.
The march toward affordable, convenient care is slow but inevitable. Getting ahead of this trend while operating from a position of financial strength will position AMCs to continue to win over the long term. However, wholesale transformation is difficult and may not be immediately necessary. Prioritizing service lines that are at risk of market share loss or where AMCs have an inherent right to win can make this change more manageable. Initial wins will help generate valuable learning and drive organizational support for large-scale transformation down the road.
Endnotes:
1Modern Healthcare, Oct. 17, 2019, https://www.modernhealthcare.com/payment/unitedhealthcare-outpatient-surgery-policy-threatens-hospital-revenue (subscription access required)
2HCCI: Settings of Care ― Office and Outpatient APC Service Utilization and Prices 2009-2017 - https://public.tableau.com/profile/health.care.cost.institute#!/vizhome/ServiceSettingsOfficeandOutpatient2009-2017/ShareandPrices