Leading in a Value-based World

Presented by Karen ConwayExecutive Director, Industry Relations GHX

Chair, AHRMM

Leaders Need to Know What Lies

Ahead

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You may not know exactly, but you can anticipate and prepare.

What Got You Here, Won’t Get You There

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Value-based Purchasing

Bundled Payments

Accountable Care

Population Health

Are you Looking in the Right Direction?

Or are you leading from the rearview mirror?

Making the Transition: Healthcare

FROM TO

Volume Value

Sickness Wellness

Acute Sub-acute/Home/Anywhere

# of Patients Served # of Lives Covered

Patients Consumers

Price-based Costing Cost-based Pricing

Defined Episode of Care (Limited Providers)

Extended Episode of Care (Multiple Providers)

Highly Specialized Highly Coordinated5

Making the Transition: Supply Chain

FROM TO

Price and Logistics Value (Cost, Quality, Outcomes)

Total Cost of Ownership

Real World Evidence

Risk and Outcomes-based

Purchase Focus Consumption Focus

Product Focus (Supply) Product and Service (Patient)

Medical-Surgical All Non-labor Spend

Acute Across Continuum of Care6

It’s Not Either/Or; It’s Both/And

EITHER BOTH OR AND

Cost Reduction Quality Improvement

Individual Patient Experience Population Health

Highly Specialized Broadly Integrated

Competition Collaboration

Price Negotiation Operational Collaboration

Standardization Mass Customization

Improve What Is Create What Isn’t

Describe What Happened Predict What Will Happen7

Making the Transition is Hard

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Being in Sync w/ a Strong Leader is Critical

It’s Rough Out There

Is Your Team Going in the Same Direction?

Or Going in Nowhere?

What is Value Anyway?

© 2017 Global Healthcare Exchange, LLC. All rights reserved. GHX proprietary information. Do not copy or distribute.12

QUALITY(Outcomes, safety, service)

COST(all resources consumed)

=

Why Value-based Healthcare

© 2017 Global Healthcare Exchange, LLC. All rights reserved. GHX proprietary information. Do not copy or distribute.13

Value-based healthcare looks at health outcomes of treatment relative to cost.

• Drivers:• Advancing medical technology at much higher costs• Aging population• Growing population• Limited resources and opportunity costs

• If you spend money on this, it will not be available for something else.

• Barriers:• Controversy that too financially focused when patient lives at

stake

What products, treatments, services deliver the greatest value?

We Need Data to Understand What Drives Value

“There is almost a complete lack of understanding of how much it costs to deliver patient care, must less how those costs compare with the outcomes achieved.”

Robert Kaplan and Michael Porter The Big Idea: How to Solve the Cost Crisis in

Health Care

Once Value is Defined, It Must be Measured

• Total cost of procedures?

• What factors contribute (fixed and variable costs)

• Which supplies reduce infection rates, readmissions, length of stay?

• Which supplies contribute to improved patient satisfaction?

• When does it makes sense to use a higher priced product?

• Which products work best on which patient populations?

What kind of data is needed to answer these questions?

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From Supply Chain to Value Chain

Supply chain can help answer the questions

• Term “supply chain” first used in 1980s

• In 1995, AMR Research (now Gartner) said it was also about the flow of information

"Supply chain strategies require a total systems view of the links in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer…The main focus is turned to efficiency and added value, or the end-user's perception of value.

- T. Hines (2004)

Raises Questions for Healthcare: • Who is the customer? • Who is the end user?• How do they define value? • How do you measure your ability to

delivery value?

What Data Do You Need: It Depends on What you are Doing

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Clinical

• Point of use capture

• Shortages/substitutions

• Anti-counterfeiting/diversion

• Disaster/terror preparation Operational (Supply Chain)

ClinicalFinancial

• Purchasing

• Inventory management

• Logistics

• Demand planning

• Billing

• Reimbursement

• Clinically relevant attributes

• Recalls/adverse

event reporting

• Comparative effectiveness

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Medical Product Lifecycle

Design

Manufacture

Package/Label

Market

Sell

Distribute

Source

Purchase

Receive

Store

Use

Track

Evaluate

Approve

Pay/Charge/Reimburse

The Era of Real World Medicine

UDI is foundational to evaluating how products perform in the real world, and which products work best on which patient populations.

Patients, Payment are Changing: Pursuit of Value is Not

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Despite the change in Administration, there is strong bipartisan and industry support for the move to VALUE

Source: Growth And Dispersion Of Accountable Care Organizations In 2015. David Muhlestein. Health Affairs Blog, March 31, 2015

Value is Here to Stay

© 2016 Global Healthcare Exchange, LLC. All rights reserved. GHX proprietary information. Do not copy or distribute.20

Focus on Value

• Strong bipartisan support for payment models that lower cost, improve efficiency and coordination of care and promote transparency

• ? is who will drive, how fast, and using what levers

• Most healthcare systems have strategic plans that assume the shift from volume to value

• KP growth predicated on the exchanges and Medicaid

“We expect elements of value-based payment models to stay through the Trump presidency, because they are pretty successful at driving down hospital costs while improving patient outcomes and satisfaction scores.”

- Zach Silverweig, co-founder, CipherHealth (New York)

“The market has shifted and is not going back.” - David T. Feinberg, CEO, Geisinger Health

A Grand ExperimentA Grand ExperimentThe Social Determinants of Health

A Grand Experiment

© 2017 Global Healthcare Exchange, LLC. All rights reserved. GHX proprietary information. Do not copy or distribute.22

An Experimental Mind

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The Essential Traits*

• An Experimental Mind• Innovation at the Core and at the Edge• Balance between Control and Chaos• Design and System Thinking• Freedom to Fail, Fast• Constructive Collaboration• Strong Sense of Self

*LeadingfromtheEdgebook.com

(Neal and Conway, 2013)

For Leaders….It’s Both/And

Leaders Need a Wide Angle Lens

On what is…. and what could be…

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Leaders Live Here

Leaders Live in Two Worlds

Control Chaos

Innovation Happens Across a Continuum

From Process Improvement at the Core…to Creating Something Entirely New at the Edge

Design Thinking

+ =

A Continual Process

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Freedom to Fail, Fast

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There’s an App for That

Patient Engagement

Individual• Medication adherence• Activity tracking• Fall detection• Pain and mood monitoring• Weight gain

Population• Pollution alerts• School-based illness tracking – strep throat alerts• Yelp tracking foodborne illnesses

Diagnosis Home Monitoring

Rapid development of Smartphone apps will change what procedures are done in the hospital environment

Healthcare Needs a Supply Chain Brain

Patient

Care Location

Products

Services

Level of Care

• Sourcing Mix: Clinical, Non-clinical, home based technologies• Sourcing Partners and Customers: Across the Continuum• Delivery of Products (and Services?)• What else?

What might change for supply chain?

Constructive Collaboration

Constructive Collaboration

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Under accountable care, we must be as concerned about the quality of care delivered by our competitors as we are at our own institutions

A Strong Sense of Self

Surround Yourself with the Right Team Members

Leaders know their strengths and their weaknesses and surround themselves with people who complement them, not replicate them.

Courage to Recreate Everything, Including Yourself

Yourself

Your Team

Your Culture

Your Business Model

(And sometimes an entire industry)

The Value-Based Supply Chain Talent Check List

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Data Scientists (e.g., Master Data Management, Enterprise Data Management, Business Analytics, Predictive Analytics, Descriptive Analytics)

Technologists, e.g., (Both Old and New Tech)• Old Tech, e.g., automation, integration, architecture, security, storage• New Tech, e.g., collaborative platforms, cloud, mobile, social, block chain?

Design Thinkers

Systems Thinkers

Translators

Change Agents

Marketers/Persuaders

And…..

Category Managers

VALUE Analysts

Cost Accountants

Community (Vendor+) Managers

Risk Managers

Social Scientists

From Tactical to Strategic

• Sourcing Strategy

• Strategic Negotiation

• Category Strategy

• Market Knowledge

• Supplier Management and Development

• Supplier Performance Evaluation / Reporting

• Root Cause Analysis and Solution

• Performance Metrics Development

• Savings Identification & Capture

• Tactical Negotiation

• Problem Resolution

• Invoice Processing

• Order Processing

Strategic

Tactical

From Transaction Processing…

….to Strategic Analysis and

ExecutionSupply Chain Activities

Invest in Technology Here

Invest in People Here

To Attract Talent, Make Supply Chain Compelling

42Next Generation Workers Want to Work for Organizations with a purpose

Source: Supply Chain Insights

Good Luck on Your Journey

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It’s not the strongest species that survive, or the most intelligent, but the ones most responsive to change.

Charles Darwin