Healthcare Competition This Way Comes

Philip Betbeze, for HealthLeaders Media , August 16, 2010
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Consider these three steps to a secure future under healthcare reform.

Drastic change is coming to the way healthcare is paid for and consumed, but you wouldn’t know it because hospitals and health systems are still operating under a soon-to-be-obsolete fee-for-service payment system.

Between now and 2014, most of the Patient Protection and Affordable Care Act’s myriad regulations will go into effect, bringing more insured patients into the healthcare marketplace, but forcing healthcare providers to drastically alter the way they do business. Though much of the fallout from the law is still to be determined, it does represent a very different system of payments and incentives than are currently in place. According to conversations with a variety of hospital and health system chief executives and industry experts, whether hospitals or health systems will be able to survive under the provisions of the healthcare reform act can be boiled down to three metrics: outcomes, cost, and physician alignment.

Six-hospital Henry Ford Health System sees integration as a way to improved outcomes. It’s invested heavily in its community care services division, an operating unit that focuses on home care, pharmacy, dialysis, and ambulatory services. The system is highly integrated, says CEO Nancy Schlichting, with its own 1,140-physician multispecialty group and 500,000-member health plan. That structure was often emulated once before, in the middle of the last decade, but ultimately widely abandoned as it was not as effective in maximizing revenue under fee-for-service, and such vertically integrated conglomerates showed a poor aptitude for managing risk. Such a model does appear, however, well-positioned for the realities of healthcare reform.

“We stayed in,” says Schlichting, “because we’ve always believed the health plan and medical group financial incentives were aligned to provide very good outcomes. We continued developing innovation between our health plan and the medical group, so now we’re way ahead of the game because we never cut those services and we’ve been working on reducing readmissions for two years now.”

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