Will Your Health Care Organization Be Sustainable?

by Rachel McCann Ermer
Analyst, Sage Growth Partners

The U.S. health care economy consumes roughly 18% of GDP, $2.48 trillion, and has grown 20% since 2005, outpacing inflation by 12%. In the most popular system of payment, fee-for-service (FFS), physicians are paid for the number of services provided with a marginal emphasis on quality and outcomes. With the current structure incenting volume of transactions, slowing the growth of health expenditures seems unreachable.

While the Patient Protection and Affordable Care Act (PPACA) increases medical expenditures by adding covered lives through federal funds, portions of the act aim to curb expenditures by shifting health care delivery emphasis to quality, not quantity. The PPACA proposes the creation of a Medicare Accountable Care Organization (ACO) program—the Medicare Shared Savings Program—along with additional federal funds to spur growth for organizations such as Patient Centered Medical Homes (PCMHs) and ACOs. These organizations attempt to reward physicians for quality, not the quantity-based FFS structure that still dominates the reimbursement system. Reimbursement changes, along with the administrative complexities and costs of the HIPAA 5010 and ICD-10 conversion will create severe margin pressure.

While the movement toward alternative delivery and reimbursement structures is still in its infancy, PCMHs and ACOs are forming. The PCMH is supported by four primary care physician specialty societies; endorsed by purchaser, labor, and consumer organizations; and is being tested by major public and private health plans. A Commonwealth Fund survey found that in 2007 only 27% of adults had a well-functioning medical home, proving the need for these organizations. ACOs build on the idea of PCMHs with the added incentive that providers are “accountable” for not only the quality of patients’ care but the cost of that care as well. Medicare and commercial payers have devised a variety of payment structures for distributing the shared savings, including decreasing premiums for patients and creating incentives for physicians.

In this new paradigm, organizations will need to swiftly adapt to market conditions to create a sustainable healthcare enterprise. Sustainability characteristics will include:

  • Consumer engagement
  • Embedded technology
  • Care coordination
  • Quality incentives

At the core of sustainability lies technology. Providers will need to be connected with hospitals, health plans, and patients; have access to quality data; and track non-FFS activities. Health care Information Technology allows for measuring quality and ensures team coordination when used properly, decreasing costs to the health care system while ensuring that patients have access to needed care. Technology has the capability to supports access, care coordination, and payment reform through the following modalities:


  • Same-day/convenience scheduling
  • Remote monitoring
  • PHR/EHR access
  • Access to care plans
  • Patient/family feedback to practices
  • Patient engagement tools

Care Coordination

  • Reminders/outreach
  • Team coordination
  • Referral management
  • Shared decision support tools
  • Case/condition management
  • Care plan/medication adherence
  • Care transitions management

Payment Reform

  • Tracking of non-fee-for-service activities
  • Quality and efficiency measurement
  • Pay-for-performance reporting
  • Episode of care tracking
  • Risk and acuity measurement

The coordination of care can fulfill the long sought after promise of reducing expenditures driven by FFS while simultaneously improving patient outcomes. Left unchecked, the health care economy will consume 50% of US GDP in 2080. Clearly, the health care delivery system needs redesign in order to avoid catastrophic spending. Sustainable health care organizations, aided by technology, will play a pivotal role in helping to transform the financing and delivery of health care.