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How Value Gives Healthcare Providers an Edge

 |  By Philip Betbeze  
   September 10, 2013

As competition for volume increases among hospitals and health systems, employers are seeking high-value partners.

This article appears in the July/August issue of HealthLeaders magazine.

Mercy, the nation's sixth-largest Catholic health system, is by all accounts a thriving and innovative 32-hospital health system that is based in Chesterfield, Mo., and operates in four states. But Alan Scarrow, MD, is under no illusions. It will have to compete hard to remain so.

The neurosurgeon and president of Mercy Springfield (Mo.) Communities, which includes Mercy Hospital Springfield, is competing with dozens of hospitals and health systems, not just locally but across the country and beyond over what he and many others see as a shrinking revenue pie. Innovation and transparency, he says, are the key tools in that competition. Better defining and distinguishing itself through value will be the key differentiator.

"We're the high-value folks now, but there will be more competition in this space," he says.

Scarrow was integral in involving Mercy in local demonstrations about the value the organization could provide large employers, thanks to reams of data about outcomes and utilization compared to other healthcare institutions.

Further, he says, Mercy demonstrated a commitment to giving employers what they want—a measure of cost certainty when it comes to expensive procedures. Mercy's effort, which started locally in Springfield nearly eight years ago, culminated late last year in a medical destination agreement with Wal-Mart Stores Inc., which employs 1.4 million associates in the United States.

Walmart's Centers of Excellence program calls for the retail giant to send employees who may need spine, heart, and transplant care to Mercy Springfield, which has 866 acute licensed beds and posted a 2011 total operating revenue of $866 million. Along with Cleveland Clinic, Geisinger Medical Center, Mayo Clinic, Virginia Mason Medical Center, and Scott & White Healthcare, Mercy has agreed to treat Walmart employees who may need these procedures for a single price for the entire episode of care.

Patients still have a choice, but the carrots Walmart and other employers are starting to dangle in front of them are alluring. In return for choosing one of these organizations for their care, Walmart employees are subject to no out-of-pocket healthcare costs for the care and the procedures that result from their condition.

Scarrow sees the program as a way for progressive healthcare organizations to drive patients to their organizations in an era where many in the industry expect reduced volume. Indeed, volumes are soft nationwide, especially in some of the most expensive, and therefore most profitable, services hospitals and health systems offer. Walmart's Centers of Excellence program, Scarrow says, is only the beginning of a move toward price and quality transparency. Hospitals and health systems can either embrace that demand or slowly wither.


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Philip Betbeze is the senior leadership editor at HealthLeaders.

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