Saturday, January 1, 2011

Shift Happens. Re-evaluating Strategy: Is what constitutes Competitive Differential Advantage about to change?

OK, if you've read my earlier posts or heard me speak, you know that traditional thought about successfully competing in medical practice has had little to do, typically, with providing higher quality care. That's because it's been difficult in most circumstances to show clinical superiority, and with prices more or less "fixed" by the MFS, service has been the mainstay - the principle differentiator. But all of that may be about to change.

We are entering a new era, a new paradigm in health care, a shift in how care is compensated, and thus how it is delivered. The change has been incremental, first with pay-for-reporting bonuses from Medicare, and now Meaningful Use incentives for(and then penalties for failing to use) EHRs, and very soon, Shared Savings opportunities via Accountable Care Organizations. As Michael Porter recently exhorted in the New England Journal of Medicine (December 9, 2010), the key word in healthcare is rapidly becoming VALUE, defined as outcome divided by cost. Critically important to understand in a world where VALUE (to the consumer - the patient) is demanded, is that the VOLUME of INPUTS per se will no longer be as relevant to calculating physician compensation as it is now. Key of course will be accurate definition and measurement of desired outcomes. Evidence will help drive what those outcomes should be.

The door is not yet closed on traditional fee for service compensation, but it seems clear that this method is unsustainable. Looks like practice strategy will have to adapt to this inevitable shift.