Four Keys to Competition Under Bundling

HealthLeaders Media Staff, July 10, 2009

If you're leading a part of or an entire health system, life is about to get a little tougher—at least in the short-to-medium term. Healthcare reform has galvanized the president and lawmakers, and they clearly aren't impressed with its high cost and relatively low quality.

That unimpressed feeling is probably mutual behind your closed door, but they do have the power of the purse strings, controlling about half of your reimbursement dollars. They hope to make healthcare more cost-effective by finding ways to make sure care is coordinated and that more emphasis is placed on keeping people healthy rather than on procedures.

Part of the talk among lawmakers is the idea of bundling healthcare payments. You already know what it is, but most of you have no idea how to make it work for your system. Well here's some good news. The kinds of things you need to do to prepare for bundled payments are good business practice regardless of how healthcare reform shakes out.

I hope you got a chance to check out my June cover story on the issue. While bundling of payments is only one part of healthcare reform, it's a big part. In last week's column, I argued that trying to handicap how legislators might reform healthcare is not only impossible, but can get in the way of effective strategic decision-making. That doesn't mean you can't anticipate broadly how healthcare delivery might change based on what's coming out of Washington—and further, that you can't make some changes of your own in advance of health reform law.

Preparing for healthcare reform effectively—even if it doesn't materialize as part of a law—makes good business sense. Following are four important steps you can take now to make sure your hospital or health system is better positioned when a healthcare reform bill passes—and even if it doesn't.

1. Focus on your strengths. Your hospital might have high quality scores in orthopedics, while not doing so well in other specialty areas. Many of the experts I talked to for my story say that hospitals need to move away from being all things to all people. Now, you still have to operate some money-losing services, but get away from those that don't contribute to the bottom line.

2. Eliminate the losers. This is really a corollary to the first tip, but it takes a lot of guts to do away with specialties that are money losers or where you don't have a competitive advantage. Why? Because there's often a lot of political power stored in even the most unprofitable of service lines in a hospital. Plus, it means taking on the difficult job of retaining those workers you can retrain and reassigning them to more lucrative pursuits. What's most difficult in closing a service line is that you might send some valuable employees to the local competition. But if you don't want to compete in obstetrics, for example, the competitor's gain isn't necessarily your loss.

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