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New Model Helps Hospitals Transition to Value-Based Care

‘Value management offices’ cut system-wide costs and improve outcomes

As hospitals work to transition from a volume-based care model to value-based care, they can cut system-wide costs and improve outcomes with “value management offices” (VMOs), according to an article posted online by the Harvard Business Review.

This centralized office is designed to oversee value-based initiatives, such as bundled payments, the authors say. The office can also serve as a “center of excellence to assist decentralized clinical units in outcomes and cost measurement and management, set priorities for continuous improvement projects, facilitate the creation of value-based payment models with insurers and employers, and ensure that new information technology platforms are aligned with the value agenda,” according to the article.

Although many hospital leaders may be hesitant to add another layer of bureaucracy, pursuing the transition without centralized leadership is far less cost-effective, write the authors. They cite two examples that demonstrate the success of the VMO model when it is initiated with leadership involvement.

At the M.D. Anderson Cancer Center in Houston, Texas, the Institute for Cancer Care Innovation (ICCI), established in 2008, uses time-driven, activity-based costing to monitor treatment costs for medical conditions across the care continuum. Office staff provided hospital leaders with resources for a pilot project and assisted them in adapting the pilot to the entire institution.

ICCI’s role subsequently expanded to integrate outcome measurement and reporting into MD Anderson’s new electronic medical records system, the authors write. ICCI is now playing a key role in providing outcomes and cost data to MD Anderson’s enterprise data warehouse, which will integrate multiple types of clinical and financial data into clinical care and research. ICCI also led the negotiations with one of the institution’s largest private insurers to adopt the first cancer-care bundle in the United States.

In 2014, the Hospital for Special Surgery in New York City established a VMO with three key objectives: 1) improve the collection of outcome measures; 2) integrate quality data into care delivery; and 3) expand from process excellence to population management.

“Institutions should house the expertise needed to produce superior outcomes for patients and truly bend the cost curve in a central group as MD Anderson and the Hospital for Special Surgery have done,” the authors write. “Doing so will help units throughout the organization move far more rapidly from a world that rewards the volume of procedures that are performed to one that rewards the delivery of superior patient value.”

Sources: Harvard Business Review; December 2, 2015; and FierceHealthcare; December 3, 2015.

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