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Redesigning Care Delivery in Response to a High-Performance Network: The Virginia Mason Medical Center

Hoangmai H. Pham, Paul B. Ginsburg, Kelly McKenzie, and Arnold Milstein

This Health Affairs article by Pham et al. examines how an integrated delivery system responded to threatened exclusion from an insurer's network by attempting to reduce costs though redesign of its care delivery model.

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When threatened with exclusion from an insurer's high-performance network, one Seattle integrated delivery system attempted to reduce costs by rethinking its care delivery model. The resulting juggling act — an attempt to increase efficiency, improve care, and reduce costs, all while remaining profitable — is the focus of this article published as a Health Affairs Web Exclusive.

The CHCF-funded study, "Redesigning Care Delivery in Response to a High-Performance Network: The Virginia Mason Medical Center," takes an in-depth look at efforts to improve care and lower costs for four common conditions: uncomplicated lower back pain, gastroesophageal reflux disease (GERD), migraine headaches, and cardiac arrhythmias.

By adapting aspects of the Toyota Production System to a health care setting, Virginia Mason mapped out strategies to improve efficiency per episode of care. However, the study reveals that in the current fee-for-service payment structure in which some services are highly profitable and others are not, pursuing cost reduction by decreasing the number of services or changing their mix can reduce profitability.

The article presents a cautionary example of how fee-for-service payment and uncoordinated payers present stubborn barriers to sustaining cost control.

A related issue brief, "Distorted Payment System Undermines Business Case for Health Quality and Efficiency Gains," also funded by CHCF, supports the conclusions of the Virginia Mason study. It finds that most efforts to improve efficiency for specific medical conditions usually reduce the number of services that can be billed, creating financial challenges for providers.

The Web Exclusive is available free of charge on the Health Affairs site through the link below. The issue brief is available on the site of the Center for Studying Health System Change.

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