Faster is Better When Shifting Business Models

Philip Betbeze, December 19, 2014

Creating a sense of desperation has helped Banner Health fully embrace changing its business model from volume-based to value-based. Its unofficial motto: "The quicker the better."

This article first appeared in the January/February 2015 issue of HealthLeaders magazine.

Healthcare executives are fond of using the analogy, fast becoming a cliché, that their organization has one foot in the boat and one on the dock in terms of dealing with healthcare reform. They say this because changing from one way of getting paid to another (from volume to value) requires a deft balancing act with great potential for disaster.

Thus the cliché. And it's a good one.

I have sympathy for executives who know they may be cutting their own financial throats if the reimbursement system doesn't keep up with their pace of change. They're being asked to do a 180-degree turn on their traditional business model and there's nothing, not even a sextant, to guide the way, to continue the metaphor.

But some organizations are embracing, indeed even helping to drive, the shift. If most executives want to conduct the move slowly, one inch at a time, executives at Banner Health, based in Phoenix, want to vault into the canoe from a running start, strap a motor on it, and trigger a detonator that will destroy the dock once they reach safe distance.

"Going forward, probably two-thirds of the scorecard will be based on population health management metrics."

That's one way of taking the metaphor further. Another more meaningful way of operationalizing that metaphor is through the balanced scorecard, which Banner uses to track performance in areas of finance, customer relations, operations, and clinical quality and IT infrastructure.

Incentivized for Performance
It uses these measures to incentivize and reward performance, an admirable goal, but much of it had to be retooled to work in a value-based reimbursement environment, says Becky Kuhn, president of the Arizona healthcare giant's eastern region.

"We've had a balanced scorecard for about 10 years," says Kuhn. "The whole organization is aware and incentivized for performance, but what has been interesting to see is that until three years ago, incentives were all facility-based. Going forward, probably two-thirds of the scorecard will be based on population health management metrics."

Philip Betbeze

Philip Betbeze is the senior leadership editor at HealthLeaders Media.

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