Outcome-driven Healthcare | Asher & Company

Patient Centricity / Outcome-driven healthcare

Asher's Outcome-Driven Healthcare provides superior insights and transparency, empowering healthcare organizations to bolster Patient Centricity initiatives. This innovative approach, defined by Harvard University, aims to deliver enhanced value for patients by improving care quality, optimizing patient experiences, and reducing costs simultaneously. As Michael Porter states, it focuses on "the health outcomes achieved that genuinely matter to patients, relative to the cost of achieving these outcomes." By embracing Outcome-Driven Healthcare, organizations can redefine their priorities, aligning them with patients' needs and driving meaningful improvements in overall healthcare delivery.

Healthcare institutions are facing big challenges

Hospitals, clinics, MD practices, and other provider organizations are grappling with significant challenges. They need to streamline workflows, as patients increasingly desire to take charge of managing their care, while organizational leadership strives to secure adequate budget and staffing to make it all work. The strain on the healthcare system is multifaceted:

Quality of Care vs. Labor Strains: As the population ages and the prevalence of chronic diseases rises, the need for complex and costly care escalates. Simultaneously, healthcare organizations struggle to provide suitable care due to ongoing labor shortages.

The Era of Patient-Centric Care: Rooted in the principle of shared decision-making, patients increasingly seek involvement in their care. Empowered like never before to understand their options, patients still expect healthcare professionals to guide them in determining optimal treatment.

Thin Profit Margins: The financial sustainability of healthcare organizations is fragile, as revenues drop and expenses grow. Organizations seeking to invest in innovation or other potentially high-risk, high-gain initiatives may need to prioritize opportunities with the highest probability of quickest ROI and postpone others.

Transforming Data into Valuable Insights: Healthcare organizations are increasingly equipped with electronic health records (EHR) and enterprise resource planning (ERP) systems. These systems house vast amounts of data on interventions, outcomes, disease progression, and associated costs. This information can be incredibly powerful, but only if an organization knows how to unlock value from the data. Once this challenge is overcome, the insights can serve as a foundation for outcome-driven healthcare and support decision-making for both healthcare professionals and providers.

Unlocking the Potential of Technology: Healthcare innovation is thriving, but technologies such as artificial intelligence (AI), machine learning (ML), and robotics still play a relatively small role in the industry. Technology's potential in healthcare and life sciences has yet to be fully realized, as organizations struggle to incorporate it into their regular routines and processes. Beyond their roles in operating rooms or biology labs, these technologies also have the potential to uncover inefficiencies, improve workflows, and increase visibility into an organization's financials, driving operational excellence.

Healthcare professionals can base the decision-making process on the outcomes of patients with similar diseases or illness profiles, also known as 'patients like me.' This approach fosters a patient-centric mindset, tailoring care to individual needs while leveraging collective insights.

Our EPM and Industry Analytics support Outcome-driven healthcare

Several challenges faced by healthcare organizations can be at least partially mitigated by implementing outcome-driven healthcare, with some benefits being realized immediately.

Enhanced Patient Satisfaction: Outcome-driven healthcare is inherently patient-centric and aligns with the concept of P4 medicine: predictive, preventive, personalized, and participatory. Services should be tailored to individual patient needs using available data on patient characteristics, medical interventions, and associated outcomes. Together, patients and doctors can leverage this information to determine the most suitable treatment plan and manage expectations regarding outcomes. By jointly deciding, patients feel more empowered about their care, potentially resulting in better adherence to agreed-upon treatment plans and improved medication compliance.

Improved Quality of Care: Data on treatments and outcomes enables benchmarking at regional and national levels. Providers and healthcare professionals can utilize this information to compare treatment protocols and further optimize the care they provide, improving outcomes and patient satisfaction.

Transparency Driving Cost Reduction: When organizations can leverage data to monitor healthcare costs concerning patient outcomes, the costs associated with treatments become more transparent. Furthermore, this enables organizations to identify and eliminate ineffective treatments, reducing costs. When outcome-driven healthcare is implemented at a national level, it has the potential to curb rising healthcare expenditures.

Increased competition in the marketplace, combined with increasing healthcare costs, has forced healthcare insurers to place a premium on managing administrative expenses. With the evolving complexity of product offerings, understanding product line and market segment costs becomes essential information for managing the business. Add to the business information need the complex compliance requirements imposed by government programs such as the Federal Employee Program, and Medicare, and you have a very complex financial application requirement. All of these issues are creating challenges and opportunities for the Healthcare Insurers. Increased efficiency will allow insurers to maintain stability in their operations and rates. It will also allow them to react quickly to changes in regulation and their markets. Receiving accurate information on time will allow them to make better decisions regarding their operations, markets, and ultimately their long-term viability and survival.

The Relevance of Profitability and Cost Management Today

The interest in profitability and cost management is re-emerging, and the topic is increasingly being elevated to the board‘s agenda. Profitability and cost management is more relevant than ever. There are multiple reasons for this, both on the tactical side—responding to internal and external pressures, and from a strategic point of view—increasing the organization‘s competitiveness.

Indirect Costs Are Increasing

Healthcare Insurers are continuously challenged to determine their organizational effectiveness. Despite modern processes and systems, indirect costs are increasing. To reduce these costs many organizations are introducing shared service centers, centralizing certain operations either in the front or back-office. The economies of scale outweigh the overhead of such centralized operations, but the overhead and other types of indirect costs still need to be allocated. Profitability and cost management solutions help ensure the business relevance of shared service centers. Profitability and cost management solutions can also help establish whether these shared service centers should be placed within the organization or should be outsourced. In such an exercise, the burden of internal indirect costs can be compared and benchmarked against external services.

Competing on Service, Portfolio and Brand

It may be relatively easy to attribute revenues to the sales of specific products, but individual products alone do not make a competitive difference anymore. It is the service that comes with the product that makes the difference. Whereas Activity Based Cost Management (ABC/M) had a strong focus on the back-office as an analytical tool to optimize processes, profitability, and cost management solutions can be used for service pricing—where the relationship between resources, activities, and revenues is not always easy to make.

Horizontal Alignment

Reporting structures tend to be hierarchical in nature. New plans and strategies are cascaded top-down into the organization‘s hierarchy. Conversely, most geographic or functional domains self-report to their management, and at the top all information about all costs and revenues come together. However, cost and value drivers seldom report ‗upwards‘ in a meaningful manner. Drivers tend to impact the organization ‗sideways‘, through the organization‘s value chain. Profitability and cost management solutions introduce ‗horizontal alignment‘, which is a crucial extension to the vertical alignment most organizations have. For instance, the most important cost driver for a claims department within an insurance company is the risk profile that the underwriting department is using. Too many accepted bad risks lead to an increase of claims, both in quantity of claims and in size per claim. The claims department actually has little means to influence total claim size, which can be up to two-thirds of the cost structure of an insurance company.

Transparency

The cliché that business experiences higher cost and regulatory pressures will come as no surprise in the Healthcare market. Patients, suppliers, shareholders, and regulators, all demand more transparency. Executives cannot allow surprises regarding their profitability. They need to ensure that both cost and revenue are managed in alignment throughout the organization. A solid set of processes, a comprehensive methodology, and a robust system are needed to meet these requirements. In fact, if executives do not ensure such a level of control in a transparent and regulated world, it will cost them dearly.

How is Profitability and Cost Management Different Today?

Profitability and cost management traditionally has been an operational function because of the prevalence of ERP systems. These systems have a Chart of Accounts, ledger, sub-ledger, operating statements etc. This is a necessary structure to accurately reflect and record the financial activities of an organization. However, it has very little relevance to the products and services offered by the business. As a result, the majority of the profitability and cost management solutions in the business were relegated to a series of reports which were pulled together from disparate sources. Organizations often spent more time in reconciling the variances in reports than in actually understanding the data on the reports. As a result, Management had very little faith in these profitability reports. Profitability and cost management today is a strategic function. It has management attention and visibility. Today‘s profitability and cost management solutions are driving a key performance metric – the overall profitability of the business. It is not only reported upon but it is used as a strategic tool to driver change throughout the organization. It involves mastering a methodology, understanding the business drivers, changing business processes, and introducing a system. The impact of profitability and cost management ripples through to all management processes. The following is an overview of the stages most organizations experience as they mature in their approach to profitability and cost management.

Where do Profitability and Cost Management Fit in the Organization?

Profitability and cost management is integral to many areas of a healthcare insurer‘s operations. Visibility is important to assist in making strategic and competitive decisions for:

Executive Management Team
Product Management
Underwriting and Actuarial
Customer Service
Sales and Marketing
Treasury and Asset Management

Choosing the Right Tool for the Job

The journey of profitability and cost management begins with creating a profitability model that can allocate costs and revenues. A flexible allocation engine that can be easily used by business users is, therefore, a must. A flexible allocation engine provides the basis for more granular allocations, leading to more accurate profitability data. In most organizations, allocations are a rather arbitrary process.

While the granularity of allocations is the precursor for accuracy, the confidence in the accuracy of the allocations can still be suspect. Therefore, being able to visually trace the path that an allocation takes can quickly turn doubt into confidence, thus empowering users to make effective decisions. In addition, many healthcare insurance providers contract with the federal government and are reimbursed for administrative costs. These costs include overhead allocations and as such, allocations are subject to specific guidelines/rules that must be followed to maximize their reimbursement. Contractors perform audits of the payers' systems to insure costs are allocated within the guidelines of their contract making the audit trail a vital feature of any system.

While allocations are necessary for accuracy, analyzing profitability data to discover the key drivers of cost and profitability is at the heart of a profitability and cost management solution. Therefore, having a robust analytic foundation is also a necessity. The analytic foundation needs to provide an intuitive user interface for ―speed of thought analysis. Business users must be able to manipulate large profitability data sets to monitor complex scenarios, forecast outcomes, and perform what-if analyses to identify customer/product profitability trends.

Profitability and cost management solutions have traditionally focused on reporting and analyzing profitability—generally as an accounting, analysis or operational process. The users could report and analyze the data but there was no integrated or systemic process to execute the decisions stemming from the analysis. With profitability as part of performance management, profitability is not merely reported—it is planned, measured, and interpreted.

Profitability and cost management solutions today must provide a systemic process to execute and implement best practices discovered as a result of profitability analysis. There must be a closed-loop system between the profitability and cost management system and the budgeting and planning system so that resources can be strategically allocated as a result of the profitability data. Planning ensures that efforts are directed toward the achievement of corporate objectives. Measurement checks and adjusts progress against plans by matching revenue against costs incurred, making adjustments by tweaking processes to align with profitability metrics. Interpretation of profitability data helps identify developing trends that alert management to ask the right questions and take action.