There’s a growing view in U.S. healthcare circles that the industry is on the cusp of remarkable – perhaps even revolutionary – transformation. At a recent summit sponsored by the Altarum Institute’s Center for Sustainable Health Spending, speaker after speaker returned to the theme that we are slowly but surely moving from a volume-based system (paying for stuff) to a value-based model (paying for results).
The health sector is moving toward the traditional economic principles of other industries. Revenues flow to businesses that are high quality, efficient and knowledgeable about customer desires. In other words, high performers reap the financial rewards, not those that are simply doing more. We at PwC describe this future state as the New Health Economy.
Several stars have aligned to make this shift possible. Cost pressures have turned attention to getting our money’s worth in healthcare. Technological advances such as cloud storage, mobile devices and data analytics provide the tools to deliver the right care to the right patient at the right time. And consumers today have both the freedom and responsibility that come with making more decisions and spending their own money.
What was striking at the Altarum summit was the widespread agreement on where American healthcare is headed. Speakers referenced the rise of myriad alternative payment programs, including overall spending growth limits in Massachusetts, site agnostic payments for specialty care such as oncology and provider bonuses tied to patient satisfaction.
But if the destination is clear, the journey ahead remains difficult to navigate. As Peter Orszag, former director of the White House Office of Management and Budget observed, “The worst place to be is one foot on the boat and one foot on the dock when the boat’s moving away from the dock.” So how do we make the leap from the dock of volume-based payments to the value-based model?
There is no single answer but healthcare can find clues – and inspiration – in other industries. Consider banking, music and travel, all businesses turned upside down by the forces now descending upon healthcare. So the question is no longer what, but when and how?
Disclaimer: Ceci Connolly serves on the national advisory board of non-profit Altarum Institute.