Predictably, the healthcare industry has been slow to
understand the implications of these impending changes.
Traditional diagnostic and treatment processes are based on
observation, incremental testing, and trial-and-error therapy
strategies. But the ability to have whole-genome sequencing
information for about the price of an MRI will upend these
With proper design, precision-medicine technologies can
return medicine to our core mission of focusing on the patient
at the individual level, with accelerated diagnosis and heretofore unheard of individualized therapies.
Our first step in designing the new precision medicine ecosystem is to understand the critical differences in the business
models underlying healthcare delivery models (see Table 1).
In the fee-for-service model, reimbursement is at the per
unit service base. Therefore, adequate volume is necessary
for financial sustainability. The organizational model is at the
department level, and volume and efficiency are value drivers
at the per service/procedure level. Profit pools are defined
by the number of admissions/discharges, ancillary services,
surgeries/procedures, and visits. In this volume-based business model, investments are in capacity to increase service
volume. Patient referrals are invested in by purchasing or
aligning with physician practices. Revenue producing assets
are the paramount capital investments: cath labs, imaging
equipment, OR space, and hospital beds.
In contrast, value-based models tie performance to reim-
bursement. Although most contemporary value-based payment
models are still built on the traditional fee-for-service chassis,
pay-for-performance measures, shared savings, and/or risk
payments are made retrospectively, and care coordination
fees are often added on a per-member-per-month basis. The
organizational model is built around patient populations that
are risk-stratified based on conditions and focused factories,
where high-volume, high-efficiency facilities develop for certain
conditions and treatments with differentiated payments based
on high performance standards (“centers of excellence”). Value
drivers are efficiency at the population-level, low-variability, and
quality-process measures. Profit pools in value-based models
are in chronic condition management, population management,
and, in the long term, wellness and prevention. Necessary
investments in this business model are in clinical integration,
commercialization, and health information technology capa-
ble of measuring performance.
Finally, the precision-based business model is coming into
focus with some interesting distinctions. Reimbursement can
be in alternative payment models or in fee-for-service, but
is highly tied to outcomes rather than performance measures. The organizational model is at the care model level
and necessitates consumer/patient engagement. The value
drivers are efficiency at the individual patient level, with an “n”
of one analytic measurement structure and quality outcomes
rather than quality process measures. Profit pools are based
on information management and patient differentiation capabilities. Investments are in information integration, predictive
analytics, and whole-person focused design.
These critical business design factors are essential in
understanding how to go about competing in the healthcare
ecosystem rapidly transforming based upon 21st century
technologies. We should be looking forward to this transformation. We can refocus our industry on patient-centered
solutions. We will reduce professional burnout. We will
improve patient care. Bring it on!
Grace E. Terrell, M.D., M.M.M., FACP, FACPE, is president and chief
executive officer at Envision Genomics, Inc., a comprehensive clinical
genomics services provider, and a general internist at Wake Forest
Baptist Healthcare Cornerstone Internal Medicine. Dr. Terrell serves
as treasurer on the AMGA Board of Directors.
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medicine to our
core mission of
focusing on the
patient at the