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Analysis

CIA Insider Tip: Avert Failures by Reading 'Weak Signals'

By Philip Betbeze  
   March 17, 2016

Three Questions
So Leavitt asked the executives in the room to task themselves and other organizational leaders with answering three questions on the volume/value transition as it applies to their local market:

1.Will value actually replace volume?
No weak signals here anymore. The answer is yes. Last week Medicare issued a proposed rule for part B (drugs administered in hospital outpatient departments and physician offices) that will incorporate outcomes and value analysis, which will dramatically change how drugs are reimbursed in hospitals. It's also already announced that 50% of CMS payment will come through alternative payment models by 2018. The number of lives in ACOs, about 25 million now, according to Leavitt, is tripling every two years. Value based purchasing has bipartisan support.

"Some say take a wait and see attitude," says Leavitt. "Do it at your peril."

2.If value does replace volume, how quickly will it occur in my market?
The trend is happening at different rates in all markets. Misperceiving how quickly it's happening is dangerous, says Leavitt. This is vital to success and monitoring it is of great importance.

Leavitt, who is founder and chairman of Leavitt Partners, a healthcare consulting company, says his firm has been working on trying to predict the speed of the shift from volume to value, and while it has not yet reached the point of being predictive, it has identified a series of factors that will increase or decrease the speed of the transition locally.

"If I was reporting to a board and my career was dependent on how quickly the shift was coming, I would be gathering the weak signals and watching them closely," he says. Factors such as the presidential election winner, whether interest rates normalize (which would increase the cost of borrowing), whether your state has expanded Medicaid and the speed and extent of commercial insurer adoption of value-based contracting are just a few factors that will affect the transition.

"Making sense of the weak signals will provide opportunity for you to be right, but not all weak signals are created equal. You need to weight them by what's most important," he says.

3.Do my organization and its partners possess the competencies to succeed in a value world?
The readiness of organizations to assume risk is not fully mature, in most cases, says Leavitt. In that collision there will be tension, so being able to ascertain your own readiness and that of your partners is a key competency, and requires monitoring and frequent assessment.

The signals are there. Like the signals that presaged the Pearl Harbor attack, in healthcare, they're often misinterpreted, ignored, or overlooked because they fail to fit into the predominant mindset, says Leavitt. Geopolitics is not only place where missing weak signals has serious consequences. It's also true in business and economics.

Blockbuster Video missed the weak signals. Kodak owned digital technology but missed the weak signals that may have helped them determine where it was going. Blackberry also missed weak signals. Look what happened to them, Leavitt says.

Don't be next.

Philip Betbeze is the senior leadership editor at HealthLeaders.


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