Healthcare Issues & Trends

Advice & Insights for healthcare's Leaders & HR Professionals

The Volume-to-Value Transition: Challenges Ahead for Healthcare Leaders

Posted on June 25, 2015 by Bill Jessee

Since the advent of health insurance, the driving force for revenues—for both hospitals and physicians—has been volume. The more services provided, the greater the revenue. But volume is no longer the sole marker of success. As healthcare organizations across the country begin to transition toward more value-based payments, the leaders of those organizations will face new challenges.

In our last blog post, we outlined some of the barriers to change that healthcare leaders will face as they strive to begin the transition toward value-based methods of care. But what challenges will they face after getting past those barriers and beginning to actually make the changes?

  • Creating a value-driven culture while still living in a volume-driven payment environment
  • Getting buy-in from board, management team, staff, and physicians
  • Integrating physicians and other clinicians into the organization
  • Aligning compensation and rewards with goals
  • Breaking old habits

For more insights about this trend that you can present to your organization (including how to navigate some of these challenges as a leader within your organization), download the full presentation for free. 

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Key Takeaways from Becker's Hospital Review 2015 Annual Meeting

Posted on June 19, 2015 by Susan O'Hare

The format for the Becker's Hospital Review annual meeting in Chicago, May 7-9 was a blend of plenary panel discussions and small group breakout sessions. The plenary sessions consisted of a panel of CEOs, led by a moderator, speaking on what their organizations are doing on a given topic—such as dealing with the impact of the ACA—in 10-15 minute segments, followed by audience Q&A. The breakout sessions consisted of seven educational tracks: 1) Strategy, 2) Financial issues, 3) Physician-Hospital Alignment, 4) Patient Safety and Quality, 5) Health Information Technology, 6) Population Health, and 7) Thought Leaders (something of a catchall for topics that didn't fit cleanly into another track). 

Our own Steve Rice and Chad Stutelberg spoke in a breakout session in the Population Health track on the design of physician compensation plans that are both compliant and supportive of population health goals. Additionally, one of the attendees mentioned there were 200 attendees when this meeting began 6 years ago. This year's conference, however, had well over a thousand. 

One plenary panel discussion, moderated by Tucker Carlson, asked what two things each SEO spent the majority of their time on. Nancy Schlichting of Henry Ford Health System in Detroit answered, "people," and in minute of explanation, one realizes why she is so highly respected. Additionally, Joel Alison of Baylor Scott and White reminded the audience that "healthcare is about relationships," reiterating what we know and do as a consulting firm.

Some themes from the meeting were:

  • "Pillars" remain the strategy framework systems use to focus the masses—both staff and physicians.
  • Population Health Management is THE strategy of the day.
  • High deductible health plans have increased bad debt for systems.
  • The challenge of doing the right thing by reducing admissions, with the outcome of actually reducing revenue, was cited as a challenge to those most influenced by value-based markets. Getting boards to understand that concept was paramount in the success of transitioning from volume to value. 
  • The appetite for non-reimbursed research in academic medical centers adds a layer of complexity to the financial equation.
  • "Disruption" of organizations was a theme as was "disruptive innovation." An entirely new vocabulary of terms is entering the healthcare arena.
It strikes me that in markets with a stable or declining population, "innovation" is an essential trait for a CEO to succeed. By contrast, in a market where the population is growing, such as many parts of the south and west, achieving success is a completely different strategy mostly about running the organization right. It begs the question, do board members or CEO search committees even realize that?

One other note: Gallagher Integrated sponsored the Wi-Fi service for this meeting. Registrants could pick up a wireless information card at registration with our name on it so they could tweet or email without using data. 

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The Volume to Value Transition: The Barriers to Change

Posted on June 18, 2015 by Bill Jessee

Healthcare organizations have already begun a transition away from volume-driven payments towards value-based payments, and it is predicted that many more will soon follow suit. In our last blog post, we proposed several key traits leaders will need if they are to effectively manage this volume to value transition: mission, vision, communication, motivation, and trust. These traits will become especially important given the numerous barriers to change these leaders will face.

Leaders embarking on the tall task of managing the volume to value transition need to be prepared for several roadblocks that will prevent change. These barriers include:

       Lack of accountability or managing care and cost of care

       Prevailing payment method is pay per unit of service

       Volume orientation of executives and physicians

       Psychological commitment to doing whatever is needed or wanted to care for patients, without regard for cost-effectiveness, efficacy, or quality of care

       High fixed costs—so hospitals need to keep beds filled and keep utilization of capital equipment high

       Inadequate data and systems

       No incentives for managing, maintaining, or improving patients’ health

       Little coordination of care

While substantial, these barriers are merely one piece of the puzzle, representing the initial challenges that will prevent many organizations from beginning to make this critical transition. Once an organization has actually agreed to shift towards more value-based payments, however, leaders will face new challenges.

In our next blog post (and the last in this series), we will discuss some of those challenges and how leaders can tackle them efficiently.

For more insights about this trend that you can present to your organization—or even just read on your own time—download the full presentation for free

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The Volume to Value Transition: The Critical Qualities Needed in Leaders

Posted on June 11, 2015 by Bill Jessee

As we discussed last time, the healthcare industry is facing a changing current: the shift from volume-driven payments to value-driven payments. Healthcare organizations across the country are already embarking on this transition, recognizing the numerous benefits (cost, efficiency, population health) of such an approach.

For the cutting-edge organizations that are already making the volume to value shift, it has already become quite clear that leaders play a critical role in making this transition as smooth and successful as possible. Healthcare organizations will not need just competent leadership—they will need outstanding leadership.

What qualifies as “outstanding leadership”* in the context of the volume to value transition?

  • Vision: Seeing the barriers preventing an organization from reaching its end goal.
  • Mission: Strategic decision-making that drives an organization towards value-driven payments.
  • Communication: Being able to not only recognize the changes that need to be made, but also being able to communicate that to the team.
  • Trust: Empowering your employees to do their job more effectively, and without unnecessary micro-management.
  • Motivation: Not only within oneself, but the ability to motivate others as well.

 It is particularly important that the healthcare leaders tasked with managing this transition be adept in all of these skills because they will face unique barriers that past leaders have not yet encountered.

 For more information about the barriers preventing change that volume to value leaders will have to address, look for our next blog post in this series.

Can’t wait until then? Download the FREE slides to present to your organization about this growing trend—or even just read on your own time.                                    



As explained in Elizabeth Jeffries, The Heart of Leadership, 1992

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The Volume vs. Value Debate

Posted on June 4, 2015 by Bill Jessee

Historically, healthcare payments to providers have been based almost exclusively on volume—number of services, tests, days of care, procedures, and so on. In many areas of the country, however, there is a transition away from purely volume-driven payment to a system in which at least a portion of revenues is based on value of care (as measured by safety, quality, efficiency, and patient satisfaction.)

It is a reasonable expectation that this trend will continue and begin to affect even more healthcare organizations in the coming years. Managing this transition will require skilled leaders (more on that next week), but it will also require a comprehensive understanding of the circumstances that have led to this fundamental shift in thinking.

So what is so bad about the current system, where revenues are driven by volume?

  • It’s expensive and wasteful. Despite the high healthcare spending in the United States, we do not fare well on measures of population health, such as life expectancy. In other words? We get less than we pay for.
  • Certain groups are disproportionately—and negatively—impacted. There are significant racial disparities in both health and healthcare quality in the United States due, in large part, to volume-driven healthcare strategies.
  • Healthcare spending vs. GDP. A country’s per capita spending on health services is generally determined in large part by its Gross Domestic Product per capita. But the US is a major outlier from the curve, spending far more per capita for healthcare than one would expect given our GDP.
  • There are no incentives for quality or safety, which reduce risk. And conversely, volume-based systems encourage more interventions, which increase risk. Meanwhile, efficiency suffers.

All of these issues would be better addressed by value-driven payment systems, which keep people healthy and out of hospitals—all while discouraging waste and rewarding physicians for quality, safety, and efficiency.

In our next blog post, we will address the leadership qualities needed to manage this volume-to-value transition.

For more insights about this trend that you can present to your organization—or even just read on your own time—download the full presentation for free.        

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