Becker's Hospital Review

STRATEGY AND INNOVATION 24 about prices compared to last year, Mr. Pryor says the system still isn't inundated with calls. e system directs calls to one place, which ensures patients receive consistent information. e push to compete on price requires health systems to make changes like those Edward-Elmhurst Healthcare made. Competing on price will also force leaders to scrap the old way of thinking. "Hospitals only began to seriously look at costs as payment and reimbursement mechanisms changed," says Ms. Arduino. "Now the next challenge will be becoming an organization that embraces 'marketing.'" is involves being able to provide information in a format that is "easily accessible, accurate and comprehendible," she says. The price and quality conundrum Price is one way to compete, but hospitals are still scrutinized based on the quality of care they provide. Competing on both is "the quintessential highwire act that all hospitals and systems are performing now," says Kanner Tillman, PhD, CFO of Sherman Oaks (Calif.) Hospital & Encino Hospital Medical Center. It costs money to improve quality — that was the conven- tional wisdom anyway. Now, hospitals are more aggressive about finding opportunities to cut excessive spending in areas that don't add value. "For example, physician-specific information on the cost and quality of the preference items and on adherence to evi- dence-based practice show there isn't always a positive correla- tion between cost and quality," says Dr. Tillman. e Association for Healthcare Resource & Materials Man- agement predicts that medical supplies will outpace labor as the biggest expense for hospitals and health systems around 2020. erefore, when systems are looking to reduce costs, supplies is a natural place to start. Some of the more innovative systems and suppliers are com- ing together to redesign procedures with a focus on overall value. Intermountain Healthcare, a 22-hospital nonprofit system based in Salt Lake City, is one of those systems. More than four years ago, the system took seven senior sourcing managers and created a solutions department to start building a framework for collab- oration with suppliers. Intermountain has also developed a process to determine whether products benefit patients. e system conducts physi- cian-to-physician comparisons to see if a product has a clinical benefit. If not, the system begins the process of eliminating the product. With an eye on overall value, hospitals are also cutting costs by eliminating clinical waste. Christiana Care Health System in Wilmington, Del., was concerned it was spending too much on cardiac monitoring for patients who didn't need it. e two-hos- pital system made changes to its computer system to encourage physicians to follow American Heart Association guidelines for cardiac monitor use. Aerward, the number of patients using cardiac monitors and the system's daily costs for monitoring fell by 70 percent without any harm to patient care, according to a 2014 study in JAMA Internal Medicine. The interplay between quality measures and hospital finances CMS got the ball rolling with its value-based programs and other payers are not far behind. "More and more, quality is being rewarded in the marketplace, and it will increasingly be a revenue driver," says Dr. Tillman. Hospitals and health systems are increasingly using val- ue-based payment models as they transition away from fee-for- service medicine: As of February, 42 percent of hospitals reported that 10 percent or more of their revenue stems from value-based contracts, according to a survey from Kaufman, Hall & Associ- ates — an increase of 20 percent since August 2014. e survey found even more dramatic growth in expecta- tions for future use of value-based payments. e percentage of hospitals anticipating that value-based contracts will constitute 50 percent or more of their revenue within the next 24 months tripled, from 7 percent to 22 percent, in six months. Gaining the rewards of pay-for-performance initiatives takes the whole team, including management and physicians. "Physicians can be your best partner in this effort if you give them data that shows their performance relative to their peers and how they contribute to quality and outcomes," says Dr. Till- man. Providing high-quality care can also be great leverage with payers. "Metrics such as risk-adjusted mortality rates and all the measures used by CMS can allow hospitals to price differently in the marketplace," says Dr. Tillman. Can hospitals successfully compete on price and quality at the same time? "e answer must be yes because a number of hospitals and integrated delivery systems are doing a great job achieving both objectives simultaneously," says Dr. Tillman. "Strong stock per- formance of publicly-held integrated delivery systems and strong financials and rapid expansion of some other for-profit and non- profit hospitals and systems are a testimony to that." Operating in a system that requires efficient, high-quality care is a painful evolution for some healthcare organizations, especially given the tight financial parameters many run under. However, both aspects — price and quality — are inseparable for the success of any hospital or health system. n

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