Maximizing Value in Healthcare Transactions

The overarching goal for healthcare providers is improving value in healthcare, which requires delivering better outcomes without raising costs or lowering costs without compromising results. But improving value is challenging.

Neither of the dominant payment models in healthcare, global capitation, and fee-for-service, directly rewards increasing value. They reward providers for cost reduction rather than for improving outcomes or efficiency.

Conduct Your Due Diligence Early

Hospital executives should use a systematic approach and focused due diligence to derive the most value from a transaction. Rushing any part of the process can jeopardize a deal.

The time it takes to complete due diligence varies, depending on the buyer type and if state laws require a municipal lien search. It also depends on how promptly the seller responds to buyer document requests and whether there are any judicial or administrative proceedings.

In addition, a certain degree of luck is involved in the speed with which a transaction can be completed. A good point man who can orchestrate communication and review all information before it is released to the buyer can help accelerate the process. This should be done even before the contract is signed.

Build a Strong Team

One of the keys to a successful healthcare transaction advisory is assembling a solid team. This will help your group overcome any challenges in the process and ensure a smooth transaction.

Building a strong team starts with clearly defining your group’s roles, working practices, and communication structures. This can be difficult as groups often have different ideas of what a “team culture” is, but some great resources, such as this Hyper Island method, can help your team define and clarify its working practices.

It is also important to consider the happiness of your team. Team members that feel supported and valued are more likely to be loyal to the organization and will work hard to help each other.

Keep an Eye on Other Constituents

Value is the key to health care, as in so many other industries. Those providers that improve value in healthcare in the eyes of consumers will win. Those that don’t will be left behind.

Most medical centers, even top academic medical centers, primarily serve patients in their immediate geographic area. But suppose providers are to be truly competitive for certain medical conditions. In that case, they must build out their networks and increase outcomes-driven volume in ways that aren’t limited to increasing local market share.

This is often accomplished through physician compensation plans, and our experts help system leadership create a model that aligns physicians and organizational goals with maximizing the opportunity for empanelment and patient outcomes-driven revenue. We also help organizations profile their reimbursement environment to understand how payor contracts influence physician payments.

Don’t Get Ahead of Yourself

In health care, the overarching goal of every organization must be to improve value in healthcare. This means increasing outcomes without raising costs and lowering costs without compromising results. Providers that pay attention to this imperative risk. Health insurers that fail to embrace the value agenda by favoring high-value providers risk losing subscribers.

For example, numerous studies show that patients who travel farther to receive treatment from teams with significant experience in a particular medical condition get better outcomes at a lower cost than those treated by providers with less experience. Yet most providers and payers do not track individual patients’ results or prices by medical condition.

Physicians who enter private equity transactions must carefully structure their lease agreements to preserve and maximize real estate value. The right advisors can help.

Don’t Overlook Opportunities

Historically, healthcare providers have focused on growing volume and maintaining margins. This legacy mindset has created a system with unpredictable quality and unsustainable costs.

Numerous studies show that the outcome of a medical condition depends on the volume of patients treated by specialists with deep experience in treating it. This means that patients often travel long distances to obtain care from teams with expertise in their medical conditions.

Health systems should seek to capitalize on these trends. They can start by designing physician compensation models aligning physician and organizational goals. This will help maximize revenue opportunities in value-based contracts prioritizing empanelment and patient outcomes. VMG Health can help health systems profile their reimbursement environment and understand the levers.