VUMC prepared to thrive in era of health reform

12/09/2010 – Going forward, the federal government’s efforts to reduce the nation’s budget deficit will likely spell a decline in reimbursement rates for health care services. This is at least what the nation’s savvy health care providers should assume.

The implications for such actions could be considerable for Vanderbilt University Medical Center if steps are not taken now to prepare.

This was the central message from Jeff Balser, M.D., Ph.D., vice chancellor for Health Affairs and dean of the School of Medicine, when he spoke Tuesday at VUMC’s Leadership Assembly. Some 800 managers and faculty leaders gathered at Langford Auditorium for the latest in a series of quarterly institutional updates.

In his keynote address, Balser stated that VUMC is exceptionally positioned to thrive in the coming era of health care quality and cost transparency. However, this new environment for health care delivery will require even greater innovation at Vanderbilt, and an even greater emphasis on providing value in both hospital and clinic settings.

Balser began his address by considering the likelihood of reduced reimbursement and its potential implications.

Combined, Medicare and Medicaid presently account for 21 percent of the 2010 federal budget. And the government’s debt is projected to surpass its Gross Domestic Product (GDP) within a few years. At 6 percent annual growth over the past decade, the current trend in per capita health care expenditure is unsustainable.

Balser said the future of federal health care reimbursement is intrinsically tied to VUMC’s continued success because literally one-half of the Medical Center’s clinical revenue is derived from federal reimbursement.

And because federal and private carrier reimbursement rates are relational, if the federal government lowers its reimbursement rates, commercial payers may follow.

Balser said that in the new health care economy, successful medical centers will find ways to increase productivity and reduce cost. Also, as payment formulas change and providers compete based on value, there will be a greater focus on the ability to successfully provide patients a continuum of care.

He stressed the aspirations of VUMC’s faculty and management needn’t be dampened by the new emphasis on value. To the contrary, Vanderbilt is uniquely positioned to show the health care industry the way forward.

Perhaps as never before, VUMC holds opportunities for innovation, whether through new systems-based approaches to care, new ways to cycle the translation of scientific discovery into clinical practice or through new learning programs to address rapid changes occurring in technology and the economics of health care.

In fiscal 2010, the Medical Center achieved its financial targets. However, further gains are necessary to buffer the institution against certain declines in federal reimbursement while continuing to invest in our physical plant, programs and people.

Having thoroughly described the current and future financial picture, Balser proceeded to make the case for VUMC’s growing strength and reputation in the new health care environment.

First, VUMC represents an exceptionally integrated health care delivery system, with its doctors, hospitals and clinics together as one entity. This institutional alignment plays into the expected new prominence of reimbursement for the capability to provide population-based care and systematic prevention of acute care episodes.

Second, VUMC already possesses a climate of innovation and expertise to initiate the sort of programs needed as the nation looks for quality care at lower cost. As an example, Balser pointed to My Health Team @ Vanderbilt, a new, highly successful pilot project for managing patients with hypertension.

Third, VUMC has an impressive track record for redesigning processes to reduce errors and waste. He pointed to ongoing clinic access redesign as an example.

Balser devoted the rest of his presentation to describing several current initiatives that stand to quickly lower operational costs in both clinics and hospitals, such as diagnostic management teams, capacity initiatives and supply chain improvements.

Balser said all clinical staff and faculty should be thinking in terms of value-based care and asking how VUMC can provide better quality and service at lower cost. He wrapped up by inviting suggestions from the audience. Suggestions can be sent by e-mail to valuebasedcareideas@vanderbilt.edu

To view slides presented at the assembly, visit the elevate website (employee log-in required).