In varying degrees, hospitals and health systems are preparing to manage the additional risk heading their way from health reform. To be successful, they will have to manage advanced payment models and coordinate care across the healthcare ecosystem, with both owned and affiliated partners. When faced with financial challenges, providers historically have turned to departmental budget cuts and process improvement initiatives that target areas for greater efficiency. These are essential measures that yield 3-5% annual savings on average, but they are not nearly enough in today’s environment.

Regardless of the extent of reform, many providers are bracing themselves to subsist on a so-called “Medicare diet,” with no reimbursement greater than 88 cents on the dollar. Staying profitable could mean having to reduce operating expenses by 20-30%, quite a feat for any organization.

What Success Looks Like Over the Next Decade

In addition to the change already under way with meaningful use and ICD-10, there is a shared sense that more change is on the way. Over the next decade, reform will force organizations to assume greater clinical and financial risk for the populations they manage. The accountable care organization (ACO) model is expressly designed for this purpose, but whether ACOs will take hold remains to be seen. Regardless, many self-insured providers, with no intention of forming an ACO, are fully engaged in accountable care-like behavior to manage their own employees. By better managing chronic conditions, coordinating care and giving members an incentive to actively manage their health, these organizations are seeing health costs drop – and are gaining valuable experience in managing risk.

Strategically Use IT to Thrive Under an Evolving Care Model

McKesson’s Better Health 2020™ strategy is designed to help organizations strategically use IT as they address the big business challenges of an evolving care model – cost reduction, care coordination, risk shifting, and the need to profitably manage new care models, among others. In order to thrive, providers will need to master four areas critical to success. These capabilities determine value delivered and support the ability to adapt and grow as the health paradigm changes and risk increases.

Maximize the Value of Your Technology to Improve Agility and Drive Operational Improvements

If you are on a path to assuming more risk, it’s essential to ensure you are getting the full value from your technology, including core systems. That technology should enable you to leverage integrated clinical and financial data and drive workflow efficiencies, while reducing complexity and cost. It is important to put mechanisms in place to assess cost and quality throughout all of your operations – not enough just to cut cost, but to improve capacity and throughput, manage staffing and resources, drive higher quality and patient safety – and to make smart business decisions related to these operational levers. Your systems should support your current needs and enable you to take an agile approach to adopting new care models and managing risk.

Use Population Management and Readmission Reduction to Improve Financial Performance and Quality

While providers are just beginning to use analytics to understand the intersection of quality and cost, payers have long leveraged this power tool for stratifying populations and identifying opportunities to improve performance and outcomes. Analytics can play a key role in managing populations with chronic conditions and predicting readmission risk based on clinical, socioeconomic and environmental factors. Should an at-risk patient be hospitalized, clinicians can be alerted proactively so they can take appropriate precautions during the stay.

Leverage Connectivity for Care Transitions and Coordination

To make bundled payments and other shared-risk models work, providers must expand their focus well beyond patient discharge to each subsequent care transition. This will require robust platforms for the secure exchange of patient information that connect diverse stakeholders with the same, accurate patient information, along with utilization and case management solutions that enable informed care coordination and promote patient engagement.

Manage the Increasing Risk from Advanced Payment Models

Emerging payment models range from bundled payments to value-based purchasing to assuming full risk for defined populations – with traditional fee-for-service plans still in the mix. Many of these models will require new financial tools to manage payer contracts and distribute payments to disparate stakeholders, as well as disease management and risk modeling solutions. To navigate this complexity, healthcare organizations will need to leverage the expertise and assets of payers, who likewise are reinventing themselves to remain relevant by acting more like providers.

Don’t Underestimate the Need for Change

Bill Gates is often quoted as saying, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.” As your technology partner, McKesson doesn’t intend to let that happen. Better Health 2020 is our strategy to position healthcare organizations to meet demands today and as health reform unfolds. For the next decade, the use of IT will be critical to mastering and nimbly adapting to the changes coming from the government’s healthcare reform goals of better care, better health and lower costs. Organizations that deliver on those three challenges are positioned to thrive and lead in their markets.

Pat Blake

About the author

Pat Blake is Executive Vice President of McKesson Corporation and Group President of McKesson Technology Solutions. He has overall leadership responsibility for all of the businesses within McKesson Technology Solutions, which serves the health IT needs of hospitals and health systems, payers, physicians, homecare agencies, retail pharmacies and manufacturers.