By Abraham Cicchetti
The rapid evolution of healthcare technologies, treatments, policies and more can have a profound impact on the financial health of healthcare organizations, as well as on patients and other stakeholders. Transformational change within healthcare can be both positive and negative in terms of its financial impact, and understanding these effects – and their trickle-down impacts across the entire organization – is crucial for leaders supporting all functions within the healthcare industry, from business financial health to staffing excellence, from care delivery to technology and facilities management. As leaders, CAHL members who take time to understand these interrelated aspects can serve as champions for the changes designed to address the quintuple aim of improving population health, enhancing the care experience, reducing costs, addressing clinician burnout and advancing health equity.
Value-Based Care: A Paradigm Shifts of Fits and Starts
The shift from fee-for-service, or volume-based care, to value-based care is one such major area of transformational change with implications across the entire industry. Value-based care is designed to improve outcomes while reducing costs, and it has been shown to be effective in a variety of settings. However, the transition to value-based care affects so many aspects of healthcare organizations that it has become known as one of the most complex initiatives that can be undertaken. Doing so while remaining fiscally stable is a particular challenge: Investment in new technologies and infrastructure, which in turn necessitate changes in workflows and processes to deliver care more efficiently, can be expensive, and these investments may initially result in lower revenue as providers adjust to the new model.
On the other hand, value-based care can also create new revenue opportunities for healthcare organizations. For example, providers who are able to demonstrate high-quality outcomes may be eligible for financial incentives from payers. In addition, value-based care can lead to greater patient satisfaction and loyalty, which can ultimately translate into increased revenue. These investments are seen as so crucial to the future of the U.S. healthcare system that reimbursement pilots are regularly being introduced and modified to encourage providers to undertake such complex initiatives.
Let’s Get Digital
Another area of transformational change within healthcare is the rapidly-evolving use of digital technologies. Catalyzed by the remote care requirements of the COVID-19 pandemic, we’ve now seen a massive uptake of digital technologies such as telemedicine, mobile health apps, and advancements in integrating electronic health records (EHRs). Leaders being asked to research the inclusion of such advancements have the inside track of understanding what pain points they’re intended to solve. For those tasked with implementing them effectively and getting buy-in for universal adoption, consider the investent tradeoffs likely being made behind the scenes:, For example, implementing a new EHR system can cost millions of dollars, and ongoing maintenance and upgrades can be expensive as well. However, EHRs can also generate revenue for healthcare organizations by enabling more accurate billing and coding, reducing errors and denials, and improving documentation for regulatory compliance.
Telemedicine is another digital health tool that is transforming healthcare delivery, particularly in rural and underserved areas. Telemedicine can reduce the need for costly in-person visits, and it can improve access to specialists and other resources. For small practices, it can also enable physicians to increase their patient panel size by allowing providers to see more patients in a day across a larger geography. Leaders investing in these options are examining the potential benefits to patients as well as the costs of technology and infrastructure, risk factors in sharing data, the options of insourcing or outsourcing technologies, and the realities that telemedicine may not always be reimbursed at the same rate as in-person visits.
Anticipating and Managing the Impacts of Transformational Change
In addition to these specific areas of transformational change, healthcare organizations are also facing broader financial challenges related to rising costs and shifting reimbursement models. For example, the cost of pharmaceuticals and medical devices continues to rise, putting pressure on providers to find ways to control costs while still delivering high-quality care. At the same time, providers are increasingly being paid based on the quality of care they deliver, rather than the quantity of services provided. This can create financial incentives to focus on prevention, early intervention, and other strategies that can improve patient outcomes and reduce costs over the long term.
Besides conducting financial analyses, another important strategy to anticipating and managing transforamtional change is to engage patients and other stakeholders in the process. Providers are increasingly being paid based on the quality of care they deliver, rather than the quantity of services provided. This can create financial incentives to focus on prevention, early intervention, and other strategies that can improve patient outcomes and reduce costs over the long term. By involving patients in decisions about their care, healthcare organizations can improve patient satisfaction and loyalty, which can ultimately translate into increased revenue. Providers can also work with payers, regulators, and other stakeholders to align financial incentives and ensure that everyone is working towards the same goal of delivering high-quality, cost-effective care.
Overall, the financial impact of transformational change within healthcare is complex and multifaceted. While some changes may initially result in lower revenue or higher costs, they can also create new revenue opportunities and improve the overall financial health of healthcare organizations. The key is to carefully analyze the potential financial impact of any new initiative or technology, to develop a plan for managing costs and maximizing revenue, and to communicate with stakeholders about the rationales behind such change so leaders can build buy-in and accelerate the return on investment.
Abraham Cicchetti, MSHA, CHEP, is Campus Director of Gurnick Academy and a 2023 CAHL Executive Board Member & CAHL Treasurer