Value management must align with organizational business tactics

Sept. 28, 2021

There may not be a more significant time to observe “an otherwise obstructed field of view above the surface” with such meaning as it has since the beginning of 2020. The learnings during this time have been written about at length with many theories about how to get a foothold on the tactics that were moving healthcare forward toward the Quadruple Aim versus the new variables we have yet to meet. 

Let’s start with what we know works. When speaking to audiences about understanding what business their organization is in, I usually see facial responses marked by furrowed brows. Whether you have recently taken a role in a new organization or are seeking to bring a greater level of value to your current role while understanding your organization’s business tactics your next move is now more important than ever before to achieve actionable, sustainable, collective value. 

This is value management. It’s not a new term, it’s not a substitute for value analysis and its meaning can vary depending on the audience or industry. It is a critical science and art used to create a greater understanding of the practice of consumer-centered healthcare. We should not — and cannot — work in siloes and assume we will reach best value.  Healthcare is perceived as complex; however, when there is a shared expectation among all roles across the continuum each link in the value chain grows stronger. This includes providers, suppliers, insurers, government, academia and consumers, encompassing the entirety of healthcare.

In 2010, new financial pressures were realized through pay-for-quality programs created the spark to proactively infuse value principals into practice and function within each provider organization. This sent a ripple across the healthcare industry. The COOs and CFOs were imploring their direct reports to seek out individuals with value analysis, quality, data intelligence and performance improvement skill sets and either create roles or whole departments that would contribute to this knowledge evolution.

This exceeded a traditional new product introduction committee view and represented a shift from incremental savings to programs that used proven practices from other industries. Planned tactics became known and communicated through a series of leadership meetings within provider organizations. This was not like turning on a switch overnight. It consisted of developing a curriculum taught at every level, creating relationships, learning your organization’s business. To that end using accurate, single-source-of-truth data to assure transparency was paramount to mature your processes from:

  • New products, drugs and services
  • Standardization of practices and programs
  • Utilization of resources — human, physical and financial
  • Reduction in variation and waste
  • Value-Based Care
  • The Next New Need

These processes are additive, adjunct and/or concurrent. Depending on the evolutionary point of your organization, the knowledge, skills and abilities of staff remain key. They do not have to reside in one department but should be made available to the organization to participate in data-centric root-cause analysis, quality initiatives, risk mitigation, process improvement, financial driven reviews, innovation brainstorming and other activities that create value.

I’ve learned from personal experience that when a relatively few staff are working peer-to-peer, the value earned amounted to approximately 2% of non-labor spend. As leadership involvement and communication increased, the value improved to almost 40% from 8 %, which was demonstrated by higher key quality indicators and Press Gainey scores. The pace of value improvement can be fast or slow depending on awareness, effort and resources. The ongoing struggle is keeping a close eye on inpatient metrics, such as average length of stay and acuity using the “Case Mix Index” as well as outpatient and other local services that allow consumers to stay in their communities and out of expensive care environments.  

You often hear we need to improve or “make margin.” Data illuminate the highest- or lowest- margin contributing procedures, which can be analyzed by time of year, gaps in expertise or direct-to-consumer marketing campaigns. Value management can influence margin by flexing known tactics based on the organization’s reimbursement strategy across the spectrum from Fee-For-Service (FFS)- to Value-Based Care (VBC)- often referred to as volume-to-value.

In the FFS model the concentration is on performing as many procedures/encounters as possible that can lower the price of goods and services to create margin. An example in procedural areas is average cost per procedure, what products are driving costs, sharing the data with those performing the procedures and discussing how to move closer to average balanced with equal or better outcomes.  The VBC model looks at bundles of care. The CMS Bundled Payments for Care Improvements program began in 2013 with one payment for care across the continuum by procedure, improving quality and coordinating care while lowering costs. 

This brings us to 2020.  From the first weeks of March, executive and clinical leadership were exposed to value analysis professionals, clinical resource managers and supply chain expertise where provider organizations have experienced value management firsthand. Testimonials ranging from, “I understand what you have been trying to teach us all along,” to “this is how we should assess our need vs. our want,” and other sentiments resonated. Continue to apply the learnings on what worked and what didn’t, what to keep and what to innovate, what finances should look like based on the real level of consumer need while using a value centric process. Keep those principles close and recognize the people who make value materialize closer.