Rather than focusing on the list of services provided to each patient, the entire industry has shifted to a value-based model, in which payment occurs for what is actually achieved.

Hospitals Can Get An Edge By Thinking Like A Health Plan

The relationship between hospitals and the world of healthcare plans has been a contentious one at best. But by learning to think like the plans, hospitals can more effectively address disruptive forces in their industry and increase their chances of not just surviving, but thriving.

According to the Healthcare Financial Management Association, there’s a big change occurring in hospital management. Instead of relying on historical forms of running provider organizations, a growing number of organizations are learning from insurers in how they approach managing health, moving from considering each patient alone to a population-oriented view.

Rather than focusing on the list of services provided to each patient, the entire industry has shifted to a value-based model, in which payment occurs for what is actually achieved. The shift has been behind such trends as a re-emphasis on managed care, cost-of-care contracts, focused care networks, and provider-owned plans.

The reason is because such techniques and models are disruptive forces in healthcare. Hospitals that don’t find ways to adapt to the changes could find themselves at a competitive disadvantage, if not in financial danger.

Put simply, prices have become too high and consumers, governments, and businesses are all trying to find ways to mitigate costs while managing risks. The Affordable Care Act has literally put a premium, through tax penalties, on employees and employers who don’t participate in approved healthcare insurance programs.

Many employers are planning a shift from providing a fixed health insurance plan to offering a defined contribution toward employee purchase of insurance through a government-run exchange. Also, many companies demand that employees either be more active in managing their health or take on higher premiums.

Healthcare insurance is becoming a consumer-driven market and will likely follow a variety of other industries, whether telecommunications or car insurance, which provide a wide variety of options for people to make their own choices. That will mean partnering more closely with insurers or becoming insurance providers themselves. The change requires a shift from a pay-per-service view of business to that of risk management, value delivery, and cost control. In other words, hospitals must think like health insurers.

A number of examples show the changes some organizations have undertaken, including at times significant legal and financial restructuring designed to better align management, growth, and cost control with the responsibility for actually ordering services. In some cases, hospitals no longer are the major revenue generator as clinics, medical groups, and partnerships become the main drivers of growth.

Thinking like a health plan means significant changes in business as usual for hospitals. Managers will have to reexamine every assumption, business structure, and process to build a strategy that will weather the coming changes.

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