Sustainable Cost Reductions Born from a Question

I often hear financial leaders say that cutting costs starts on the front line with doctors. You have to get the physicians on board with reducing utilization and acting efficiently if the organization is going to reduce costs. What CFOs and other healthcare leaders really seem to be asking is: Why do physicians make the decisions they do?

I came away with some insights—but not all the answers—earlier this month when attending the American Medical Group Association's national convention in San Diego. Over 2,000 providers and C-suite leaders from large multispecialty medical groups, IPAs, integrated healthcare delivery systems, and academic faculty practices attended the AMGA event, which was billed as a conference to "broaden leaders' strategic thinking and prepare them to meet the challenges of the new age of healthcare reform and the role they will play in leading the transformation of care delivery in this country."

I'm certain the attendees left with a lot of innovative ideas from both the presenters and their peers. When it comes to innovations for the payment system, however, I didn't hear much chatter. I did sense that attendees are experiencing the same question mark above their collective heads as their hospital and health system counterparts: why is the healthcare payment system failing, and how can we fix it?

During a networking session for large group practices that I attended, the moderator posed a simple question: "How do you create a culture of value?" The question sparked a few ideas and many other questions. Interestingly, many of the statements from these medical providers mirror the areas in which healthcare organizations also need more clarity. For financial leaders, this may help explain why providers aren't on board with your strategic cost-cutting vision—they are still trying to understand the problem.

Here are some of the thoughts of large group practice leaders on how to create a culture of value.

What is value and who defines it? 

• "Everybody from the insurance company to the employer."
• "The problem is, how do you identify who is the customer?"
• "How will a culture of value change as our relationship with the health plans changes?"
• "How will the new, narrowed health plans impact care?"
• "How do our patients know a test is important? We tell them it is; it's us [physicians] creating that demand."
• "Politicians [do], but resource allocation is a societal issue and shouldn't be addressed through politics."
• "Do you think when a patient comes in with chest pains they care about the total cost of care? They just care about getting well."
• "You have to include patients in the culture of value; patients must be in the room learning and engaging with the team."
• "As physicians we have to be responsible for not over-testing."

How important is data?

• "Many of us know how to measure quality, but we need to have an idea of cost. Unless we get real cost data, we can't have discussions about reducing costs through quality."
• "The payer uses claims data to tell us the total cost of care. I think we can do it better. We need a tool that tells us: Who is doing better than us [on cost]? Who is more efficient than us? Who's the most efficient doctor and medical group? And what are we actually putting into [the formula] that gives us the total cost of care?"

How should the physician shortage be handled?

• "We've added a virtual cardiology group that's available to our internist to guide them on non-invasive procedures, and naturally the compensation is different for them."
• "We're looking more into telemedicine." (Nearly half the group practices polled in the room were looking into or had added telemedicine to address physician shortages.)
• "Telehealth is a transformative way to practice. We had a drop in our institutional costs."

What do we do about patient non-compliance?

• "If the patient is non-compliant, then it's the physician's fault; you didn't convince them." (This comment was not well-received by the physicians in the room, as you might imagine, though they did acknowledge the need for more patient education.)
• "We need to practice participatory [patient] medicine."
• "Did you know the group with the lowest end-of-life care cost is the physicians? They also have the lowest cost of care when it comes to outcomes. Contrast that cost with Medicare's outcomes; it's a big difference. Why can't physicians educate patients about end-of-life care?"
• "We have to have the tough conversations about what a patient wants versus what a patient needs if we are going to drive a culture of value."

The healthcare payment system will take years to heal, and no financial leader has the time (or bottom line) to waste waiting. However, if financial leaders give providers the evidence-based, benchmarked, best-practice data they need, then providers might be able to stop asking questions and start delivering the answer everyone wants: high-quality care at a long-term, sustainable, lower cost.