iProtean—Cutting Healthcare Costs Even Further

It seems hospitals have been in cost-cutting mode for many years, and still experts say that a significant amount of waste is inherent in our healthcare system.  The healthcare environment—today and tomorrow—must find additional ways to bring down costs, and many agree that hospitals should use multiple strategies to attack different aspects of cost savings at the same time.  A recent article from the Healthcare Financial Management Association outlines specific strategies for bending the cost curve.  (Moore, Eyestone, Coddington, “The Healthcare Cost Curve Can be Bent,” hfm, March 2013)


Most of the strategies require a broad-based effort from the healthcare industry.  But heading the list is one individual hospitals/health systems can and should embrace: moving from fee-for-service to value-based contracting.


We have noted in previous blogs the importance of moving to value-based purchasing (see Transitioning to Value-based Care, February 19 and Value-based Contracts, February 26).  The authors of the hfm article note that payers such as Medicare, private health plans and employers should aggressively move away from open-ended, fee-for-service contracts toward payment based on value—and it seems clear this is their intention.


Leaders of hospitals/health systems have been working to prepare their organizations for value-based contracting by focusing on all facets of planning, projection scenarios, integrating with physicians and even payers.  Progressive hospitals/health systems make sure they have strong financial leadership to manage the transition, Lisa Goldstein from Moody’s Investors Service noted in the iProtean course Transforming Your Organization to an Integrated Delivery System.  “The new mantra is ‘no outcome, no income,’ and that is going to be the new way of payment going forward.  So for integrated health systems of all sizes, if they really are going to be progressive with their future, they need to understand what the new payment arrangements will be and how they are going to move their organization from today’s world to tomorrow’s world.”


Planning for this change should be done deliberately and with urgency.  Hospitals, health systems and physician groups should determine their “tipping point”—where they are receiving sufficient value-based payments, as opposed to fee-for-service/volume-based payments, to warrant reengineering their approaches to care.  Strategic and scenario planning should be detailed and thorough as the organization moves toward implementation of these approaches.  In most cases, payers and providers will work together for this transition to be successful.  (Moore, Eyestone, Coddington, “The Healthcare Cost Curve Can be Bent,” hfm, March 2013)


The transition requires hospitals/health systems to move quickly to adopt new management dashboards and analytics, and to create workable accountable care organizations capable of managing the health costs of a population.


Other initiatives to bend the cost curve suggested in the hfm article include:

  • Increasing the supply and effective utilization of primary care physicians and physician extenders
  • Focusing on the management of individuals with chronic disease or those who are likely to become chronically ill
  • Discouraging the use of physician-owned ambulatory surgery centers, imaging centers and specialty hospitals
  • Encouraging the formation of multispecialty group practices and integrated systems
  • Reducing administrative complexity
  • Rejecting excuses that physicians and hospitals cannot cover their costs under Medicare and therefore need to shift costs to the private sector
  • Expecting more from the customer




Reminder to iProtean subscribers:  Major D&O insurance carries have been attracted to iProtean’s board certification program.  Interested iProtean subscribers may want to explore the possibility of reducing their D&O insurance premiums as a result of completing iProtean’s certification program.


The iProtean advanced courses Value-based Purchasing & Accountable Care Organizations, Financing Considerations for Integrated Delivery Systems and Transforming Your Organization into an Integrated Delivery System feature experts in value-based purchasing and system/clinical integration.  Nate Kaufman, Lisa Goldstein, Marian Jennings and Dan Grauman offer suggestions for boards that strive to be up-to-date on these and other topics related to the implications of health reform and the challenges facing hospitals/health systems.



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