How do we counter the inertia of fee-for-service?

Twine Health, who wants to change the way docs communicate with their patients, has given up on ACOs. They recently stopped offering their coaching programs to healthcare providers and do not think there are enough incentives in place for preventive care to be a viable business. Twine decided instead to work with employee health programs, where there is a desire to lower costs.

What? Aren’t preventive care, accountable care, value-based care, patient-centric care all part of the future of healthcare? And doesn’t everyone want to lower costs and improve care?

Yes, but in reality, docs are quite happy with fee-for-service and are quite skeptical of value-based transformation. Indeed, 70% of docs favor fee-for-service, even with a higher cost compared to value-based models.

Wrong models
But that makes sense. Healthcare orgs seem to have a simple-minded focus on revenue, things that are tied to billing codes. The whole financial model seems to be predicated on simple additive math. Cost savings are not revenue, so don’t try to explain that lowering costs increases profit, sometimes even if the revenue goes down as well. And docs have hard time figuring out how well they are doing without counting patients and procedures. In the end, revenues beats cost savings and better outcomes. And I’m not making this up – I reality-tested this with some experts.

In the end, revenues beats cost savings and better outcomes.

This is why selling analytics, or patient portals, or preventive care is challenging. All of these are usually a way to lower costs, provide better care, and make happier patients. But none of these explicitly generate revenue. Worse, buying these solutions requires money from a operational budget and only saves money orgs were already spending.

In a bind
The sad thing is much of the important things we need to do to improve care (such as engaging patients, improving outcomes, dealing with social determinants of health) don’t usually lead to new billing events.

This ties back to my previous post on establishing ROI of customer service and the lack of business models that connect a cost center to subsequent revenue. To get us past fee-for-service, and to unleash many of these cost-saving and outcome-boosting solutions, we need to help providers build models that connect these “soft” solutions to incoming revenue.

I am sure that companies like Target know quite well how much an email or a circular contributes to sales. Why can’t hospitals learn the same?

This is a measurement and metrics-setting problem providers are not equipped to address. We need to help providers build systems of engagement that measure individual caregiver and patient behavior and show how that behavior ties to revenues. Not only will this help boost the value of these soft services, but also give providers visibility into the whole of their business, not just how many patients came in and how much money was made.

What do you think?

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