The managerial challenge in dual transformation is operating the existing business (transactional healthcare) effectively, even as it shrinks, while nurturing and growing the new business (care management). There is no overlap. However, senior management arrange for capabilities to flow to both “A” and “B” in sufficient measure to optimize organizational success.
Consequently, revenue management for transactional healthcare and care management must operate independently from one another. At the same time, each must receive the resources necessary to have revenues effectively flow efficiently into the traditional and new businesses.
These resources include people, capital, time and technology. Intentional allocation of resources to revenue management for FFS and capitated payments is essential for effective revenue management in dual transformation. Examples include:
- People – Billing, coding, charge capture, collections personnel are important roles for high-performing FFS revenue operations while care managers, resource nurses, care coordinators and financial risk managers are key for success managing capitated payments
- Technology – Intelligent automation improves quality and efficiency in the highly transactional FFS environment and predictive analytics improves quality and efficiency for managing capitated payments
Operational and outcome metrics for transactional healthcare and care management are key for senior leaders to manage the on-going allocation of resources and performance.
As challenging as it is, optimizing revenue under both transactional healthcare and care management business models is only half the battle. Health systems must embrace productivity improvement to achieve the same or better outcomes at lower costs. This is particularly true for routine care services.
As shown in other industries, understanding costs, enhancing resource allocation, optimizing staffing, centralizing services, eliminating waste and managing supplies are essential to being competitive. This “better, faster, cheaper” mentality is now coming to healthcare.
In transactional healthcare, prices for care services will commoditize at lower, transparent price points. In response, health systems will need to reconfigure their operations to deliver high-quality and profitable care services at these lower price points.
During this transition period to value-based care and payment, health systems confront the dual challenge of optimizing top-line revenues and improving productivity (not just cutting costs) to maintain their near-term competitiveness and longer-term sustainability.
The same will be true in care management. As prices for capitated health provision commoditize at transparent rates, profitable health systems will deliver the preventive, diagnostic and therapeutic services that optimize their members’ health within a global care delivery budget.
Under both business models, developing a deep understanding of organizational costs is essential to making rational resource allocation decisions. Effective cost accounting makes this possible. Market pressures for value-based care delivery make it necessary.
Fortunately, advances in data collection and analytics make the application of cost accounting methodologies easier and more cost-effective to implement in healthcare. These advances include activity monitors to measure labor costs, better capture of treatment activities within electronic health records and standardized metrics for measuring performance outcomes.
Breakthrough performance in healthcare is becoming a function of managerial mindset. Value-driven organizations prioritize outcomes, costs and customer experience in a relentless drive to improve their performance.
The bottom line is that health systems must become much more proficient both at optimizing revenues under value-based and FFS payment models, and at delivering appropriate care services at competitive prices. Revolutionary healthcare, where outcomes matter, customers count and value rules, is coming.
Is your health system ready?