Terrific Course for thinking about health system strategy

Gregory James Zahner, M.D., M.S.C. 

Resident in Internal Medicine

Massachusetts General Hospital 

PGY 1

06/02/2021

Gregory James Zahner, MD, MSC

I signed-up to take the Value-Based Health Decisions course to develop a framework for thinking about value-based healthcare that was more than a fashionable buzzword. I have previously worked in healthcare strategy and after residency hope to again work at the intersection of clinical medicine and healthcare management/policy.

In my prior experience, most health systems still define value in monetary terms without relation to patient outcomes. Operational measures are considered to the extent that they reflect efficiency and impact the bottom line (e.g., pre-noon discharges, LOS for a given MS-DRG, etc.). Population needs are rarely considered unless to identify a profitable untapped market. While the transition from FFS to capitated and other prospective payment mechanisms is well underway, health systems still focus on high margin services that tend to be procedural, regardless of value to the patient. For example, one health system was under-penetrated in spine surgery (i.e., lower market share in spine relative to their overall market share). From a finance perspective the estimated “loss” was ~$10M in margin annually, but the reason for the under-penetration was a robust PT and PM&R outpatient program that they had established to non-surgically manage many cases. This program reportedly yielded great patient outcomes, but no financial margin.

Additionally, a lot of current healthcare strategy still focuses on “payor mix optimization.” Given the vastly higher rates paid by commercial insurers relative to Medicare and Medicaid, health systems focus on several levers to improve their payor mix. This includes “aligning” physicians with favorable payor mix, improving their ambulatory footprint by building clinics and ambulatory surgery centers in wealthy suburbs, and investing in service lines with the highest proportion of commercial patients. These strategies can make a health system very profitable and are justified for the purposes of cross-subsidizing healthcare for Medicaid patients. However, the focus on competing for commercially insured patients only reinforces many of the healthcare disparities that exist and destroy value at a societal level.

There were several takeaways from this course that will impact my career. 1) You can be wildly successful with non-commercially insured patient populations through customer segmentation and wrap-around services (e.g., Oak Street). 2) Payor-mix optimization doesn’t have to be the end-all of healthcare strategy. Effective deployment of a network strategy that maximizes optimal site-of-care (e.g., CHOP), integrated practice units organized around diseases (e.g., Cleveland Clinic), and patient-centered outcomes (e.g., Martini Klinik) can all be used to improve value in terms of margin as well as patient outcomes while remaining agnostic to payor mix. 3) Bundled payments are an ongoing improvement project. Although early efforts have been underwhelming, a sustainable competitive advantage can be built by being the first in market to perfect bundled payments for an ever-growing range of high-volume services (e.g., New England Baptist).