Rather, Tenet is looking to identify areas of medicine not only in which its hospitals have a competitive advantage, but also where demographics show patients are likely to increasingly demand certain services.
"We create a customized list of five to eight services based on the demographics," he says. For example, about 30 of Tenet's hospitals are targeting orthopedic surgery for growth while the remaining hospitals don't. In such cases, the competitor down the street might have an overwhelming market share with which Tenet doesn't compete well.
"We're not out to go head-to-head with our competitors," Newman says. "But it takes a lot of fortitude to make those choices because some services get gored in the process. It's easier to marginally fund a wide array of services than place your bets."
Tenet is betting that in the environment of healthcare reform being touted by government and employers, increasing volumes in certain areas of focus "will improve effectiveness, throughput, and drive down the cost of care."
Innovative payers are also trying to get ahead of the curve as government debates how to reform its payment system. Rather than focusing on traditional fee-for-service payment, BlueCross BlueShield of Massachusetts has, for example, been able to transition about 25% of its physicians and members to being managed through its Alternative Quality Contract. Under fee-for-service, says Deb Devaux, executive director of community transformation with BCBSMA, providers that did the most procedures got the most revenue regardless of whether it was necessary or high quality.
"Physicians were telling us we were rewarding the wrong behaviors," she says. The AQC, which was implemented in January, provides global payment for a variety of services related to all care for a particular patient, with a 10% upside for meeting quality measures. Such a payment system incentivizes providers to focus on certain procedures where quality is high and where follow-up care can be provided in owned or contracted facilities.
Of the early adopters of the AQC, says Devaux, one type consists of highly integrated groups that manage cost and quality effectively already. The second type consists of providers that have a vision to integrate care and improve quality, but needed a payment vehicle to enable them to execute that vision.
"We do not prescribe how they share the payment," she says. "It's up to them how they are going to share surpluses and losses."
Devaux and her superiors hope that the AQC, results for which are not in yet because of the newness of the program, will improve quality, medical necessity, and drive down costs.
"We debated long and hard whether to make this contract a condition of participating in our network as a provider," she says. "We decided not to, which is why we call it an ‘alternative.' But staying in the fee-for-service contract will become increasingly less attractive because employers and members can't afford to provide the rates of inflationary adjustment that we have in the past."