The ballooning costs of [healthcare] act as a hungry tapeworm on the American economy.”
We are moving, just like the rest of healthcare, to a value-based model, where we get paid in some fashion for actually achieving the outcome. It's a step we have to take to make sure that the value we create with our technologies is truly realized. And when it gets realized, we will get paid fairly for it.” 7
The partnerships described above were formed through various means; however, at the core of each is a vendor that brings unique capabilities and market knowledge to further the goals of an IDN. These goals may be accomplished through the utilization of data. Over time, vendors that are able to provide data-derived insights can evolve the nature of their partnerships with IDNs from transactional to ongoing valued partnerships that provide the foundation for multiple purchases and co-development opportunities. To establish this type of partnership, though, vendors must be well positioned to offer insights and services that are valuable to IDNs and differentiate vendors from the capabilities of IDNs and their vendor competitors.
Today, only a minority of US markets are fully value oriented to value-based care, with only 32% of the population in leading markets for accountability and value readiness (Figure 3). Yet forward progress toward value continues. The transition to value is experiencing an uneven rate of progress, with some markets moving faster than others. This variability between markets means that market stratification has begun. For suppliers, market variation impacts the success of traditional representative access models, as providers, payers and employers in value-leading markets begin to shift their expectations from suppliers and redefine rules of engagement.
Additionally, despite several efforts to reduce supply expenses, studies show that the majority of hospitals can reduce these costs further, by an average of $11 million annually. Increasingly, health systems are looking to their supplier relationships to continue moving the needle on supply-related costs. In particular, IDNs are becoming more refined and diligent at tracking the impact that medical devices have on health outcomes, utilizing sophisticated data analytics, and holding suppliers accountable for the guarantees made at the point of sale.
While the pace of movement toward value is variable, forward momentum will continue as commercial payers, progressive providers, and other key stakeholders in the market ecosystem tackle rising costs (Figure 2). As this trend continues, suppliers need to approach markets differently and adopt field-based strategies that foster deeper, more meaningful partnerships.
These markets are largely categorized by their advanced Systems of CARE. While these markets are highly competitive, consolidation may occur in them as it does frequently in others. Additionally, these markets are able to benefit from improved alignment between payers and providers, with employers becoming involved as well. Finally, these markets frequently feature IDNs, which participate in government innovation programs such as the CMS Bundled Payment Program.
These markets also contain organizations that are committed to value-based care, but they have experienced minimal action to date. While significant building efforts to expand Systems of CARE and the presence of preliminary risk models are emerging, they are not highly prevalent. Finally, these markets feature IDNs and stakeholders in general who are seeking to learn from stakeholders with more experience in risk and clinical integration. These markets are generally simply learning how to work across stakeholders.
These are segmented by their minimal interest in evolving value-based care business models that do not have a proven financial return. These markets have limited scale available to them, lack local government support, and experience a higher for-profit presence than other markets. These markets are plagued by disconnected Systems of CARE and limited cooperation by stakeholders.
Note: This article was written in collaboration with Sg2, a vendor-neutral strategy advisory consulting firm that helps healthcare organizations integrate, prioritize, and drive growth and performance across the continuum of care. The opinions expressed in this article are those of GoSpotCheck, and do not reflect an endorsement by Sg2.