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Value Model Forces New Role on Healthcare Technology

As the health care industry shifts its focus to population health, will technological innovation take the lead or follow?

Historically, it seems healthcare technology often led the way, even if it included a hefty price tag. New innovations with potential benefits could be adopted as long as costs could be billed and passed on to payers.

In contrast, today’s technical innovations need to deliver care of equal or better quality at a lower cost. Unfortunately, that won’t be the case under new economic models that require providers to balance quality care with fixed payments based on a given population.

 

Under the bundled payments model, for example, a payer issues one “bundled” sum to the physicians, hospitals, and post-acute care providers involved in an episode of care during a specific time period. Because the bundled sum is smaller than the combined total fees each individual provider would receive, providers can only succeed by reducing input costs and delivering a more efficient episode of care. Innovation now has to follow the money.

Deloitte’s recently published 2014 Global health care sector outlook explains that health care providers around the world are recognizing this simultaneous need for innovation and efficiencies,

“[innovation] advances are likely to increase overall costs, prompting widespread efforts by public and private health care providers and insurers to contain expenditure by restructuring care delivery models and promoting more efficient use of resources.”

If innovation follows the market’s lead, many of the new breakthroughs in healthcare technology must include cost saving components.

Writing in Hospitals & Health Networks, health care futurist Joe Flowers says that shifting away from the fee-for-service model changes the decision from whether a new technology is billable to whether a new technology is cost-effective,

“The focus will be much more on efficiency and effectiveness: Does it really work? Does it solve a problem? Whose problem?”

Flowers envisions a radically different, tech-enabled health care model “that is not only seriously better, but far cheaper than what we have today.”

He cites examples of improved efficiencies such as made-to-order bone and knee replacements created in minutes with 3-D printers and the use of “nano” sensors in the bloodstream to alert potential heart attack victims to seek medical care.

While innovations like these may still be in the future (although probably not the distant future), technological innovations which reduce health care costs are already available. Prominent among them are systems that deliver real-time operations management and accelerate workflows by automating manual processes to remove wasted time. The need for such efficiency-improving systems is supported by the Deloitte study’s acknowledgment that “inefficient processes” are among the key reasons that “rising health care costs are unaffordable and unsustainable” across the globe.

While in the past these inefficiencies may have previously been ignored in favor of technological innovations, the “New Health Care” will force hospital administrators to more closely examine any and all technologies which can help them deliver better quality care in a more efficient, cost-effective way.

According to Flowers, the shift from volume to value will change virtually everything.

As he puts it, “when you are paid for waste, being inefficient is a business strategy.”

 

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