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Assessment 3: Value-Based Purchasing and Shared Risk Models
Keti Musi
HCM-FPX5314: Driving Health Care Results
Prof. Stocker
Capella University
February 21, 2022
2
NewYork-Presbyterian Overview
NewYork-Presbyterian (NYP) is one of the nation’s most comprehensive, integrated
academic health care delivery systems, dedicated to providing the highest quality, most
compassionate care, and service to patients in the New York metropolitan area, nationally, and
throughout the globe. NYP was founded nearly 250 years ago with the fundamental belief that
every person deserves access to the best care. NewYork-Presbyterian encompasses 10 hospital
campuses across the Greater New York area, more than 200 primary and specialty care clinics
and medical groups, and an array of telemedicine services. NewYork-Presbyterian has four major
divisions: (1) NewYork-Presbyterian Hospital, (2) NewYork-Presbyterian Regional Hospital
Network, (3) NewYork-Presbyterian Physician Services, and (4) Community and Population
Health. NewYork-Presbyterian Healthcare System’s mission is to be a leader in the provision of
world class patient care (i.e., high quality, fiscally responsible healthcare services that meet the
needs and expectations of the communities they serve), teaching, research, and service to local,
state, national, and international communities. The communities NewYork-Presbyterian services,
which spans from New York City to the counties just outside of NYC, represent a broad diversity
of demographics, socioeconomics, and health service utilization needs. NewYork-Presbyterian is
an 11-hospital system that experiences 2.6 million patient visits annually. The system employs
10,000-plus physicians and is equipped with 4,000-plus certified beds.
Background
As a senior leader of a NewYork-Presbyterian (NYP), I am in the midst of my complete
analysis of the organization. At this point I have reviewed the strategic initiatives, the
organizational structure, and barriers to access, quality services, and cost effectiveness. The next
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step of the analysis is to consider NYP’s role in the futuristic models of value-based purchasing
(VBP) and shared risks. My analysis will focus on three areas:
1)
Identify critical components of a value-based purchasing model.
a.
Analyze budgetary and financial implications of value-based purchasing
on health care management practices and decisions.
2)
Identify examples of shared risk models, such as population health.
a.
Analyze budgetary and financial implications of shared risk models on
health care management practices and decisions.
3)
Analyze evidenced-based strategies to develop an effective organizational culture,
using relevant data and measures such as benchmarks, research, and best
practices.
Value Based Purchasing System
Due to concerns about rising costs and poor performance on quality indicators, the United
States healthcare system is transforming. The healthcare system (which includes employers,
health plans, and government purchasers of health care) is moving from paying for volume
(quantity of care) to paying for value (quality of care) (Meyer et al., 1997). This shift from a fee-
for-service (FFS) based payment model to a value-based payment or purchasing (VBP) model of
health care delivery focuses on providing quality and efficient care (i.e., reduce insufficient care),
improving patient health outcomes while decreasing the cost to deliver (both inpatient and
outpatient) services and achieve outcomes (Bethke et al., 2020). This model aims to hold
providers accountable for the quality of care they provide in a cost-effective environment. In
VBP, there are a broad set of performance-based payment strategies that link financial incentives
(both bonuses and penalties) to health care providers’ performance on a set of defined cost,
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quality, and outcomes measures in an effort to achieve better value. This is done through the use
of strategies to reward providers for reducing inappropriate care and providing high value care
that is patient centered, clinically effective, and cost-effective care. Hospital value-based
purchasing is an incentive program first introduced by Centers for Medicare and Medicaid
Services (CMS) but now adopted by many managed care organizations and private insurers (or
commercial payers) (Blayney, 2008).
Value-Based Purchasing Models
Value-based payment arrangements vary widely and there is no one-size-fits-all financial
model for hospitals or healthcare systems (Damberg et al., 2014).While there is to no single
value-based payment model that is appropriate for all situations or all patient groups, there are a
few critical components of a value-based payment: (1) Patient Centered – the care is easily
accessible and provided by staff that communicate well, demonstrate knowledge and technical
proficiency, and take enough time to address the needs of the client, (2) Clinically Effective – the
care is effective in achieving individual outcomes that matter to clients and system-wide
outcomes that matter to payors and the community, and (3) Cost Effective – the care is more
cost-effective than alternatives that may have been selected because of the treatment selected
and/or because waste (excess costs) has been removed from the work processes (Damberg et al.,
2014).
The CMS designed four domains that health organizations need to meet to receive and
incentive payment and failure to meet these measures will result in a penalty. Each of these
domains has measures that are designed to assess the quality of care provided and enhance the
patient experience (Chee et al., 2016). Hospitals that follow the guidelines set forth by CMS and
focus on the patient have the potential to maximize the bonus payment. These domains are: (1)
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patient and caregiver-centered experience of care/care coordination, (2) safety, (3) clinical care,
and (4) efficiency and cost reduction (Chee et al., 2016).
As hospitals and health systems in the United States continue to move from a purely fee-
FFS model to VBP models, the financial impact of participating in these various models can be
in the millions of dollars for these organizations and the provider organizations they may sponsor
(Gilman et al., 2014). The transition to value-based care revolves around a recalibration of how
healthcare is measured and how payments are reimbursed. Revenue streams can be unpredictable
in the first early cycles of a switch to value-based care and resources will often be stretched thin
to cover for departments within a healthcare organization that can’t make the transition as easily
as others. Understanding the mechanics of the value-based payment arrangements (between
participating hospitals, physicians, and other providers) is critical to building a useful model
(Gilman et al., 2014). A forward-thinking financial model can help hospital leaders better predict
and balance potential gains and losses from incentives, penalties, volume changes, and other
factors related to value-based payment.
Shared Risks Models
As a natural progression in the vision to improve access to care, provide quality care, and
decrease cost, shared risk models are being field tested (Gavious et al., 2014). In the healthcare
industry, this risk can be shared in a few different ways: (1) between payers and manufacturers;
(2) between payers and providers; (3) between payers and patients; (4) between manufacturers
and providers; and (5) between providers and patients. Value-based models—pay-for-
performance bonuses (based on achieving a predetermined performance goal), bundled payments
(i.e., establish a comprehensive fee for a clearly defined episode of care, rather than paying
providers for each discrete service delivered in the care cycle), and population-based payments
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(i.e., pays a predetermined fee to cover all the health needs of each person in a given patient
population)—focus on the role health care organizations play to ensure the overall wellness of
communities and help create incentives for providers to achieve these goals (Gavious et al.,
2014). Such models require providers at all levels of health care, not just physicians and
hospitals, to be accountable for wellness and prevention services; timely and accurate
diagnostics; and cost effective, quality, and available treatment regimes. Value-based care models
will require providers to maximize risk-adjusted revenue and minimize risk-adjusted total cost-
of-care within new innovative organizational structures that focus on greater efficiency and
better care quality.
These models require the creation of strategic partnerships among the various types of
health care organizations to improve overall community health through innovative means. It ties
significant financial incentives to encourage such strategic partnerships through a shared risk
(Dummit et al., 2020). Pharmaceutical companies, medical device firms, diagnostic services,
managed care organizations, hospitals, physician practices, supply chain networks, et cetera all
have a role in making community wellness possible. Sometimes this reaches outside the more
traditional health care sector to include the likes of housing providers, weight loss clinics, and
workout facilities (Dummit et al., 2020).
Evidenced-Based Strategies
Evidence-based strategies are used to (1) enhance the skills and knowledge of the
healthcare providers in the organization and (2) solve decision-making problems in healthcare
organization (Echevarria et al., 2007). Evidence-based strategies are necessary to move a
healthcare organization from the “What will we do?” phase to the “How do we do it to achieve
the desired outcome?” which leads us to our evidence-based solutions to address organizational
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challenges and opportunities in a dynamic environment (Schipper et al., 2015). Evidenced-based
strategies should help position NewYork-Presbyterian (NYP) for the future, particularly given an
environment of value-based purchasing and shared risk models. In today’s competitive and
dynamic environments, evidence-based strategies need to be developed for NYP to maximize the
potential it has identified from merger and acquisition (M&A) – i.e., to improve patient access to
care, quality services, and cost effectiveness. In M&A, it is critical to have a compelling strategic
rationale and strong pre- and post-deal management (i.e., proper integration planning and
execution). Additionally, it is critical to document the necessary strategies and initiatives that will
help realize NYP’s overall goal. From both VRIO analysis and a SWOT analysis, it is evident
that competition (from consolidation and new market entrants) and technology (particularly that
digital transformation of healthcare) from external macro-environmental factors are the main
aspects that could directly affect NYP’s business operations, functions, and financial
performance, impacting its ability to provide accessible, affordable, scalable, and sustainable
care for patients. NYP should embrace competition and technological advances to drives
relentless improvements in access, quality, and cost.
Below are three evidence-based, innovative strategies (which are interconnected and
interdependent) to address NYP’s organizational challenges and opportunities in a dynamic
environment, allowing NYP to exploit all opportunities and mitigate the threats or challenges it
may face. These will be critical to ensure NYP’s provide its patients and communities with high-
quality, convenient, and cost-effective care.
1)
During both integration and transformation phase, ensure that NYP (i.e., the
acquiring hospital) both transfers and receives managerial, clinical, operational,
and technological expertise (at least 50%) to ensure that access, affordability,
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quality, and experience are all improved. This will increase HYP’s changes to
attract patients into their ecosystem (versus the competition)—in a sense,
encouraging patients to think of NYP health system first for all their healthcare
needs (i.e., provide a one-stop shop – in term of breadth and scale – for the
entirety of a patient’s healthcare encounters).
2)
Improve operational efficiencies associated with economies of scale, reduced
administrative and overhead costs, improved integration of care, reduction or
elimination of redundant services, shared costs for expensive IT infrastructures
and purchasing, access to a robust network of system resources, equipment and
facility upgrades to reduce hospital operating costs (by 15%−30%) – savings that
accrue need to be passed on to patients and their health plans, translating into
average price decreases of hospital/medical services (by 6%−18%). In a
competitive marketplace (where consolidation is increasing due to rising levels of
M&A’s), taking a coalition approach (1) helps NYP ensure the most efficient use
of resources, (2) enables NYP to provide better patient care and service, achieve
operational efficiencies, decrease patient care cost, and achieve differentiation,
and (3) help fuel innovation and drive value-based care.
3)
Increase the quantity of care, enhance access to care (i.e., breadth of services), and
improve quality of care across the full continuum of care (by updating clinical
operations across a health system, implementing consistent best practices, and
enhancing the promise of technology and data analytics), but decrease costs (due
to increased scale). This will enable NYP to deliver (1) broad access to health
services, (2) high quality and efficiency in the delivery of health services, and (3)
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match (and exceed) the level of competition to the nature of the health services to
improve health outcomes, while improving quality of care and controlling costs.
Evidence-Based Recommendations
Below are specific recommendation solutions (based on relevant, sound, logical, and
credible evidence) for each of the three evidence-based, innovative strategies identified to
address the specific organizational challenges and opportunities that I originally identified. These
evidenced-based strategies will help NYP for the future, particularly given an environment of
value-based purchasing and shared risk models.
Having a strategic integration planning and execution plan that aligns with the
transaction’s strategic rationale (i.e., ensure NYP provides its patients and communities with
high-quality, convenient, and cost-effective care) is critical are key success drivers for M&A
transactions. Post-merger success will require (horizontal and vertical) integration across the
continuum, all overseen by an integration management office (IMO) comprised of senior
executives whose roles are clearly defined, aligned and supportive of the NYP’s mission and
vision. The IMO will be an essential component of integration to ensure the coverage of all the
bases, and nothing slips through the cracks throughout the integration process. The first step will
be to complete a holistic diagnostic review to understand an organization’s current state, identify
the priorities and opportunities for organizational integration based on a set of criteria for desired
state, and develop a strategic roadmap (i.e., coordinated, and prioritized guide) based on the
organization’s criteria. Next, functional integration teams led by appropriate executives from
each organization will plan, coordinate, and facilitate initiatives in each key functional area.
It will be essential that NYP creates a business plan of operational efficiency (BPOE) to
ensure the long-term viability of any M&A transactions. Each functional department will need to
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develop a plan (using Lean and Six Sigma tools or methods) to identify areas of opportunity to
reduce costs, decrease waste, improve operational efficiency (i.e., throughput), increase
productivity, and unlock capacity by standardizing policies, procedures, equipment, and supplies;
optimizing staff resources; aligning contracted support services; and exploring group purchasing
options. Once the functional departments identify these cost-saving opportunities, the financial
team will need to assess the step-change improvement plans for short-term results and long-term
sustainability and achievability, then allocate resources to the efforts.
To meet the growing need for more comprehensive tracking of outcomes and costs, to
have value-based payments cover the full cycle of care, and to implement multiple types of
payments at scale, successful initiatives invest in developing data and advanced-analytics
platforms (Agarwal et al., 2020). These platforms integrate data from several sources (from
outcomes, costs, and patient satisfaction) and continuously feed information to all stakeholders
on how they are performing on value. NYP will need to use data science (both descriptive and
predictive analytics), machine learning (ML), artificial intelligence (AI), natural language
processing (NLP) and deep learning (DL), and advanced optimization algorithms to significantly
increase the quantity of care, enhance access to care, and improve quality of care across the full
continuum of care for a lower cost. NYP will need to invest in a developing a data lake (to
collect, store, process, and analyze big data), building data science, data platform engineer, data
architect, and data visualization designer teams, and intelligent (cloud computing) solutions that
will enable that to make better medical/clinical, operational, and financial decisions. Investing in
data and advanced analytics will enable NYP to create greater efficiencies and improve
diagnostic accuracies throughout the full continuum of care, which will further reducing care
costs and promoting success in a value-based system.
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Conclusion
The market shift toward value-based care (VBC) presents unprecedented opportunities
and challenges for the U.S. health care system (Bethke et al., 2020). Instead of rewarding
volume, value-based payment (VBP) models reward better results in terms of cost, quality, and
outcome measures. The shift to VBP is really about having the financial flexibility to provide the
right care, to the right patient, in the right place, at the right time. All health care organizations
need to support these endeavors in order to remain competitive in this new world of health care
delivery. Although the specific approach will, of course, vary depending on the starting point and
organization of a given health system, health system leaders should begin building a value-based
payment system by focusing on three strategic interventions (Damberg et al., 2014). These
include creating incentives to:
1)
Manage the total cost and quality of the health system, which is critical for
encouraging providers to prioritize wellness and disease prevention.
2)
Optimize the value of routine specialist care, which are a predictable and
relatively high-cost component of any health system.
3)
Optimize the value of complex, acute, inpatient care, which is a major source of
fixed costs for any health system.
When it comes to changing behavior, financial incentives matter—but so do
organizational cultures, norms, practices, and data and analytics. Therefore, it is critical not to
conceive of value-based payment in isolation but, instead, to see it as just one element in a broad
system transformation that will require considerable investment and long-term institutional
commitment (Chee et al., 2016). If initiatives are conceived narrowly as a way to achieve
immediate short-term cost-savings, they are likely to fail. Additionally, implementing a value-
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based payment system is likely to be a dynamic process with considerable experimentation,
learning, and adaption (Chee et al., 2016). NYP will need to be pragmatic and action oriented. In
addition, rather than treat value-based payment in isolation, NYP will need to recognize it as one
element in a broader set of system-wide changes, designed to align patient, provider, and payer
behaviors around the shared goal of improving health care value. As a senior leader of NewYork-
Presbyterian, it is vitally important that I understand my role in this process to best position our
organization as a strategic partner. This will allow me to maximize NYP’s success in this new era
of health care and achieving the triple aim of better care, better health, and better cost. These
value-based payment models are constantly changing, so an astute healthcare leader develops an
organizational culture that is agile, innovative, and responsive to be best positioned for the future
(Dummit et al, 2020). The key is to ensure the alignment of the organization’s structure with
strategic initiatives driving customer-focused results.
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