developing the organizational competencies needed in value-based payment systems

With value-oriented payment models expanding in both the commercial and public insurance markets, health system leaders should take steps to put their organizations in the best position to thrive in the new environment.

In the public space, the Medicare Shared Savings Program includes 424 accountable care organizations (ACOs) covering 7.8 million beneficiaries. Medicare recently announced a plan to tie 85 percent of fee-for-service payments to value-oriented criteria and to make 30 percent of overall payments through alternative payment models such as ACOs by the end of 2016.a In the private space, UnitedHealthcare, one of many private insurers offering value-oriented contracts, released plans to add 250 ACOs to its roster of 520 by the end of 2015.b

Skeptics question whether the majority of health systems will be able to overcome the many challenges associated with achieving financial sustainability under value-based payment. Fortunately, several health systems around the country are proving success under such payment structures is possible and are shedding light on the key factors in defining a transformation strategy.

Among the many barriers to success-the need to upgrade technology systems, limited access to the required financial capital, and disengaged patients, to name a few-leaders of successful health systems frequently mention that one of the most difficult challenges in the transformation effort is promoting changes in attitude and behavior among employees. These leaders recognize that a timely and financially viable transformation depends on the ability of the entire team to understand and adopt the new mission. A failure in that respect is likely to lead to an unsuccessful transformation and, in turn, to a loss of competitiveness that may threaten the organization's very existence.

Assessing Progress in the Transition to Value

John Kotter, an author and recognized leader in change management, states, "Leading an organization to constructive change begins by setting direction: developing a vision of the future along with the strategies for producing the changes needed to achieve that vision."0 As we previously have suggested, a well-designed capabilities assessment can serve as an effective starting point for leaders to develop an organizational design and can promote individual behavior changes that help a healthcare delivery system achieve desired levels of proficiency.d

To help leaders translate the assessment results to actionable insight, we developed a model that applies theories of organizational learning and individual behavior change to the "volume to value" transformation agenda (see the exhibit on page 77). The model enables leaders to design a well-informed transition strategy that evaluates and addresses the mind-set of employees and the subjective norms of the organization. At the same time, it allows leaders to understand and improve the key organizational competencies that are required to both meet value-oriented contractual agreements in the short term and attend to system design challenges in the long term.

Here, we report insights gleaned from our experience in applying this model to more than 25 health systems. The model is designed to highlight "blind spots" by identifying previously unrecognized differences in perceptions of priority and proficiency within and across organizational roles, from executive leaders to direct care providers.

For some organizations, application of the model revealed that the leadership team had not clearly defined the purpose and urgency of advancing certain competencies; it was essential that leadership focus its efforts on communicating the vision, aligning the organization, and motivating employees to change (these competencies fall in the "Communicate Vision, Align & Motivate" quadrant in the exhibit).

In other organizations, leaders found the need for certain competencies was well understood organizationwide, yet respondents thought their organizations had limited ability to perform at levels necessary to be successful (these competencies fall in the "Ready for Improvement" quadrant). In these cases, knowing that employees recognized the need to change, leaders could focus on setting specific improvement objectives, ensuring adequate funding and teams were in place to achieve the objectives, and assigning managers to establish the processes and plans required to accomplish the desired change.

Regardless of the quadrant in which a competency is assigned, the model enables leaders to leverage the perspectives of their organization's employee population to design an intentionally sequenced and well-coordinated transition-to-value strategy.

Strong Leadership Required

Establishing a health system that consistently achieves optimal quality for patients, limits financial risk for consumers and payers, and simultaneously reduces the operational costs of healthcare services delivery is an immense challenge. Health system leaders must deliberate over numerous organizational, market-level, and strategic elements at each stage of the system redesign to ensure their organization achieves long-term financial sustainability. Success clearly depends on the ability of these executives to demonstrate strong, effective, and consistent leadership. The new business model will thrive only if leaders can manage cultural transformation by clarifying the purpose of planned changes, establishing a sense of urgency for change, effectively communicating the new behaviors required to succeed, and implementing a thoughtful transition strategy. *

a. Burwell, S.M., 'Setting Value-Based Payment Goals-HHS Efforts to Improve U.S. Health Care," New England Journal of Medicine, March 5,2015.

b. Joszt, L, 'UnitedHealthcare Will Add Additional 250 ACOs in 2015," AJMC, Feb. 18,2015.

c. Koffer, J.P., John P. Kotter on What Leaders Really Do, President and Fellows of Harvard College, 1999, p. 54.

d. Kotzbauer G., and Weeks W. B., 'A Road Map to Success for ACOs," hfm, August 2014.

Greg Kotzbauer, MPH, is managing director, strategic technology initiatives, Dartmouth Institute for Health Policy and Clinical Practice, Lebanon, N.H. (gregory.kotzbauer@ dartmouth.edu).

William B. Weeks, MD, PhD, MBA, is a professor, Geisel School of Medicine, Dartmouth College, Hanover, N.H. ([email protected]).