Health care spending in the United States is on track to hit 19.4% of GDP in the next decade, giving our country the dubious top spot globally for health care expenditure. Given this unsustainable number, health care providers and suppliers must double their efforts to bend the curve by increasing visibility into what provides value for patients and solves the cost/quality equation.
Health care is in the midst of a seismic shift, from a model that rewarded providers for the volume of care to one focused on the value patients receive from that care. This is in response not only to rising costs but to legislative mandates from the Affordable Care Act and Medicare. Providing patients with quality care at lower costs so they can lead healthier lives is a trend that’s accelerating for a reason: because it works.
What does value mean? The International Consortium for Health Outcomes Measurement defines value as, “The outcomes that patients experience relative to the cost of delivering those outcomes.” Value-based health care is defined as, “healthcare that delivers the best possible outcomes to patients for the lowest possible cost.”
It’s difficult to solve the cost/quality equation, even more so when you consider the changes happening in health care. The industry is experiencing unprecedented consolidation, and alliances between retail clinics, urgent care centers and ambulatory centers (for example, the CVS Health acquisition of Aetna) are driving further diversification.
Telehealth and consumer technology are playing larger roles in supporting new health care delivery models, with companies like Apple and Uber trying to figure out their place in our industry through various initiatives. These range from mobile apps used to increase the personalization of health care, in the case of Apple, to Uber’s launch of a medical transit program. Both examples speak to another shift pushing the industry toward value-based care: consumerization. With patients bearing a larger portion of costs and with more options for where to get care, they are becoming more discerning and demanding health care buyers. More care is also being delivered outside a traditional hospital setting, with 95% of patient visits occurring in the outpatient space, according to the Advisory Board.
What Does It All Mean?
Considering these shifts, how does health care reduce costs to become a more efficient version of ourselves and make an unstable world feel steady again? Hospitals and health systems are leveraging various strategies and technologies to adapt, and even compete, in this new era of health care. These include leveraging the power of big data and analytics to help reduce costs and improve quality and accessibility, putting an increased focus on M&A activity to consolidate smaller providers into larger institutions more able to survive and thrive, and closer collaboration with supplier partners to strip unnecessary costs out of procurement and supply management.
Proving value and solving the cost/quality equation for hospitals is still a minefield, as it requires us to understand a reimbursement system that’s a work in progress. Health care also hasn’t always had the mechanisms in place to understand what it costs to serve patients. The costs involved with building a car, for instance, are relatively standardized. Not so with the costs to replace a hip, given variations in patients, clinicians and products.
However, the evolving reimbursement landscape demands we finally understand the true cost of delivering care. This includes the cost of products, which products deliver the best outcome at the best price and how to reduce clinical variation around what works best for the patient. Unfortunately, few health systems today have that critical knowledge.
Data is key to delivering accountable, affordable and informed care. The good news is, hospitals are a treasure trove of data. While most have struggled to use data effectively, the time is ripe for our industry to become truly data-driven and tap into those insights to align costs and outcomes, as well as standardize treatment and address and mitigate social determinants of health.
The Critical New Role For The Health Care Supply Chain
Data is the foundation for hospitals to curb costs and put the value back on patients. Staffing is the leading cost in a hospital, and many organizations are exploring ways to reduce unnecessary labor without affecting patient care. Medical supplies are the second largest expense.
Given this, the health care supply chain is continuing its rise to prominence, through its ability to help providers and suppliers identify inefficiencies and wasted costs. This transformation has come about through a concerted effort to lead change and embrace modern processes and technology. For instance, my company provides critical visibility and insight to health care providers and suppliers with our cloud-based supply chain technology, data solutions, and services to support interoperability, standards and integrity. A couple of other companies in this space are Workboard and ModelN, among others.
The supply chain will continue its leading role in solving the cost-quality equation thanks to the expanding power of data. With access to the industry’s largest repository of critical health care data, organizations can connect dots between what is bought, how much it costs and where it’s used, so supply chain is able to build a story around which products “perform” well in clinical practice. This information can be shared among core systems, like electronic medical records (EMRs), to provide insights across multiple stakeholders like clinical, financial, and quality and risk management. This visibility enables proactive patient care while lowering costs by reducing waste and inefficiencies.
What’s next in this new business of health care? In the cost-quality equation, low cost alone isn’t the answer. It’s about reducing costs but in a way that drives improved quality for patients in an increasingly complex care environment. I’m excited about the role a data-driven supply chain will play in helping providers make connections between their EMRs and supply chain data so clinicians can make informed product decisions that lead to less costly, yet better patient outcomes. Delivering informed, value-based care is a high stakes proposition for health care. Only the power of data will guide us in a direction that curbs rising costs and ensures providers and suppliers stay focused on their mission: to meet patients’ evolving needs.