Attributes of Value-as-a-Service

I get it… VaaS is the right revenue model for healthcare.  But what distinguishes VaaS from previous technology delivery models?

1. RAPID TIME-TO-VALUE

VaaS vendors integrate subscriber data directly into the technology ecosystem they host and manage.  They then enable their services quickly—in weeks rather than months – typically generating positive cash flow for customers from the very first invoice.

2. SCALABLE

Infrastructure, know-how and expert resources that ramp up or down to match actual business volume needs.  Clearly superior results and economies of scale than could be achieved in house.

3. STANDARDIZED

Shared services model to standardize and scale processes and delivery. Repeatability is achieved with a multi-client and multi-tenant model.

4. CONSUMPTION BASED

Paying only for what is used rather than committing to services or functionality that may not be needed. Just in time delivery in response to demand.

5. OUTCOME ORIENTED

Working as business partners where both the buyer and provider are committed to specified business outcomes.   Insight teams are embedded alongside the business, data and insights are aggregated and collected. The core team determines the desired outcome, and the VaaS provider handles the execution.

6. SOURCE SYSTEM AGNOSTIC

No dependencies on specific data source systems and no need for integration.   Likewise no dependencies on ancillary systems.

7. INNOVATION ENABLED

Committing to on-going innovations in business processes, infrastructure and applications. Can nimbly add customer-specific personalizations, test new features on-the-fly and iterate with the clients in a matter of business days.

8. FUTURE PROTECTED

Shielding the buyer from the potential disruption of upgrades and future change. Services are always up to date, and buyers have continuous access to innovation, scale and in-depth expertise.

Three Billboards Outside Boulder, Colorado: a Value-as-a-Service Parody

Three Billboards outside Boulder, Colorado is a story set in the backdrop of an industry in flux, struggling with the shift from volume to value-based care and the financial pressures of operating in an at-risk world.   Feeling resentment  for “solution” vendors who had historically placed the burden of value realization squarely on the shoulders of its customers, healthcare providers are pushing back demanding they be insulated from the financial uncertainty and professional embarrassment of unmet expectations.

It’s a story about IT companies trying to redeem themselves from the fallout of those unmet expectations yet not buckling to the demands for financial risk sharing.  It’s an examination of one industry’s journey out of the darkness of the misaligned risks and rewards of healthcare IT solutions and into the light of “Value-as-a-Service”.

Plot

As healthcare is coming to grips with increasingly tighter margins thanks to the economic realities of healthcare reform, leaders are demanding that risk be cascaded down to their suppliers and business partners.  Angry over the economic sting from products and projects that fell short, a trio of abandoned billboards are rented outside Boulder, Colorado to call attention to the problem.

Vendors were simultaneously sympathetic yet unmoved to change their revenue models.  The billboards stayed up while the war of wills played on for years.  Finally, a “Value-as-a-Service” (VaaS) model  took shape.

How’d We Get Here?

In the late 1990’s, the Information Age was booming under the belief that technology was a disruptor providing huge competitive advantages when deployed.  Throughout the Dot-com tech bubble, companies spent massively on technology because they were afraid to be left behind.  Technologies were purchased and implemented on-premise without any clear line-of-sight as to how they could realize a return on their investment.  Customers paid a king’s ransom for software licenses, computing infrastructure, and expensive consultants to implement the software.  They added staff to support these new technologies, trained and retrained thousands of end-users with relatively low adoption rates.  They incurred huge upfront costs and steep annual maintenance fees with less than stellar results downstream because the siren of the tech bubble lured them to add complexity they were ill-prepared to use let alone optimize.  Over time, buyers became jaded and suspicious of any vendor relationship where the vast majority of the risk was borne by customer.

Next came the subscription era where customers mitigated the financial burden of front-loaded technology costs by effectively financing the product purchase via a leasing arrangement.  Still, clients were looking at the offering from the same vantage point – paying a hefty price for some expected/hoped for future benefit but now simply spreading those payments over time with the contractual right to terminate the contract  (if they had the appetite to swallow the associated switching costs).  The buyer gained more leverage but no assurances that something of value would be returned.

In the mid-2000s, the “subscription economy” was ushered in by companies like Salesforce.com, Amazon, and Netflix who pivoted to new consumption models: from buying/selling products outright to subscribing for services.  Subscription economy companies realized it was not enough to slap a low monthly price on a product and call it a service. They also needed to re-architect the way products were built, sold, and delivered by adding a service component to manage the entire subscriber lifecycle.

The customer-centric market shift lead to the next iteration: XX-as-a-Service Cloud- computing offerings where “Pay-as-you-Go” models tied vendor compensation to actual capacity or on-demand utilization of their solutions.  Think “Infrastructure-as-a-Service” or “Platform-as-a-Service” from vendors like Amazon and their Amazon Web Services where you paid for the elasticity of capacity without having to overpay for excess hardware and infrastructure to meet peak demands.

Subscription economy vendors focused on customer retention and usage monitoring as proxies for the presumed value customers would receive from their products and services.  But there was still a breach between the presumption of value vs. actual outcomes.   We were getting closer but not quite there yet.

Value-as-a-Service

 

Those three billboard messages outside Boulder…

“PREPAID SUBSCRIPTION FEES”, “UNCERTAIN RETURNS” and “HOW COME?”

were prophetic  statements about over-promised and under-delivered solutions and a harbinger for the reconstruction of customer/vendor relationships.  Consumers had a new set of expectations. They now wanted outcomes, not ownership. Personalization, not generalization. Constant improvement, not planned obsolescence.  Customer success, not satisfaction.

Value-as-a-Service hypothesizes that the future will be much less about the delivery model and will shift to the ultimate focus on measurable value creation.

VaaS promotes the simple vendor promise to deliver something that will lead to quantifiable improvements asking customers, in turn, to pay only for that certain quantifiable value received.  There is no vagueness, no marketing-speak, no presumption of value, it’s all about paying proportionate to the objective results delivered.

The new VaaS frontier establishes a relationship not based on features and functions designed to solve a particular problem but as a business partner paid on the basis of the actual value realized.  Rather than placing your focus on the “product” or the “transaction,” VaaS companies live and die by their ability to focus on the customer.  Whereas, all the preceding models placed the burden on customers to attain success with the products and services they bought and were all priced on variables that were at best proxies for value,  VaaS vendors conditioned their relationships on outcomes; not promises.

VaaS in Healthcare

The shift to value-based reimbursement models creates a new “Fee-for-Value” (FFV) paradigm; a sea change in the delivery and financing of medicine in which care is delivered by an entire coordinated medical community sharing in the responsibility—and risk—of outcomes and costs.  The phrase “doing more with less” has evolved from an inspirational challenge to an industry credo forcing healthcare providers to operate differently to remain solvent.  To mitigate the inherent risks in profitably financing and delivering patient care, providers will need a reorientation to (1) operate more lean, (2) outsource non-core competencies, and (3) mandate that outsourced business processes be priced and paid retrospectively on the realized vs. potential benefits they deliver.  You simply cannot be at-risk and not expect your partners to likewise bear proportionate risk in delivering their part in the overall care delivery/financing equation.

No more squishy ROI projections or business cases that are pillared more on hope than reality.  No more Field of Dreams “build it and they will come” leaps of faith. Business relationships will all be conditioned on iron-clad ROIs with hard dollar profitability and retrospective payments triggered by quantified results.

Epilogue

In the end, Three Billboards Outside Boulder, Colorado is a story of forgiveness.  Holding vendors’ feet to the fire has lead the industry away from the strained customer relationships of the past and into the relationship-centricity of Value-as-a-Service.

The pendulum of risk has swung and with it, the business landscape has forever changed.  When relationships are framed by objective outcomes and the financial obligations are conditioned on actual results, risks are no longer a variable in the contracting process.  With the financial certainty afforded by VaaS solutions, those three billboards on the outskirts of Boulder have been replaced.  VaaS customers no longer have to ask “How come?” but instead ponder “Why not?”.

AcuStream Revenue Assurance – VaaS in Practice

AcuStream, Inc. a pioneer in Revenue Assurance, has been using VaaS to rewrite their customers’ story and reinvent the industry.  At AcuStream, our knowledge, skills and culture are all aligned to our singular objective of delivering value in the form of incremental revenue and newfound insights to our clients; to help them mitigate the margin erosion they’re experiencing and will continue to experience as the shift from volume to value gains momentum in the immediate future.

“Our business model enables us to develop relationships with customers; to be a true business partner aligned to a common goal of optimizing financial performance in the face of margin erosion,” said Jeff Colvin, CEO at AcuStream. “Every day, we find new ways to deliver value to our customers that far surpasses the revenue recovered from missing charges.  That drive and commitment is a byproduct of our VaaS model and the relationship-centric culture it inspires.”

What’s Your “Revenue Cycle Handicap”?

A handicap is defined as a race or other contest in which certain disadvantages or advantages of weight, distance, time, etc., are placed upon competitors to equalize their chances of winning. It’s also a way of benchmarking competitors against an expected level of performance to provide comparative scale.  Handicapping is commonly used to index golf proficiency by comparing golfers’ average scores against the expected standard of shooting “par”. 

But what if there was a way to handicap healthcare revenue cycle leaders or teams against an expected level of revenue optimization?  More importantly, what could one do to improve their Revenue Cycle Handicap and  reach a best-in-class level of performance?  Here are four fundamentals revenue leaders can learn from professional golfers to up their games.

Develop all facets of their game

What separates exceptional golfers from average players is the degree to which they develop all aspects of their game.   Knowing they have 14 clubs at their disposal, a variety of ball placements (tees, first and second cuts of rough, different types of grass, sand, etc.), hazards to navigate and hundreds of shots they want to master, professional golfers balance countless hours on the practice range, putting greens and chipping areas to hone a complete, well-rounded game. They don’t singularly work on one element of golf such as their driving even though the driver is the longest hitting club in their bags and therefore can be expected to cover the majority of the tee-to-green distance.

On par 4’s and 5’s, PGA pros use their woods to carry > 75% of the tee-to-green distance. Therefore, one might conclude that 75% of a golfers practice time should be devoted to just their woods and very little time should be spent on putting which represents <5% of the total yardage on a round of golf. If distance alone were the indicator of success, you would expect PGA pros to spend very little time working on their short games. We know that is far from the truth as chipping and putting is where pros shave the most strokes off their game through practice and repetition. Why?… because in terms of percentage of all shots taken in a give round by a typical professional golfer, the driver is used on less than 20% of their strokes while the putter accounts for over 40%.

As further illustration, consider the difference between a well-rounded successful PGA golfer and someone who specializes in the use of just one club.  On average, the top 200 male PGA golf pros drive the ball approximately 295 yards whereas  long-drive champions who focus exclusively on driving distance routinely drive the ball over 400 yards; a 35% difference!  If distance alone were the key to being a good golfer, you would expect the long-drive contest winners to routinely be at the top of the PGA Tour leaderboards.  And yet, the roster of long-drive winners since 1975 only includes two PGA Tour winners, Lon Hinkle and Dennis Paulson.   Two-time World Long Drive Champion, Jamie Sadlowski won back-to-back titles in 2008 and 2009 before deciding to quit long drive competition in the middle of 2016 in order to pursue the PGA Tour.  From 2011 to 2016, Sadlowski made three cuts in four starts on the Web.com Tour, a level below the PGA Tour, and is currently ranked 1,940th in the world.

Sadlowski

In contrast, revenue professionals likewise need to develop a complete approach to revenue optimization.  Rather than placing all their chips (pun fully intended) on one component of the cycle, revenue professionals must develop strategic approaches to cover the front-, middle- and back-end of the revenue cycle with a balanced focus.  All too often, revenue cycle leaders chose to focus the vast majority of time and resources on one RCM improvement initiative at a time prioritized on the basis of higher expected returns and rationalizing their single-threaded approach under the guise of more focused execution and limited resources/bandwidth to take on additional work.  Putting all their proverbial eggs in that one basket and foregoing process improvement activities in the other aspects of revenue cycle until they feel they’ve solved their top priority is a very short-sighted plan and often generates operational slowdown, weakened financial performance, and employee turnover due to neglect for their area of the business.

Think of the front-end of your revenue cycle as the long-game of a PGA golfer, the back-end of the cycle as your irons/wedges, and the mid-cycle activities related to charge integrity as your putting where you see the most volume and need the highest level of precision to optimize revenue.  Having a balanced strategic plan across all three aspects and committing the time and resources to optimize all three phases equally is the best way to lower your “Revenue Cycle handicap”.

Surround themselves with expert advisors and proactively seek feedback

PGA golfers seek out professional guidance to help them develop their games.  They employ swing coaches, sports psychologists, and professional caddies.  They pick the brains of other golf pros to look for any tips or tricks to shave strokes off their game.  They collect statistical data on their own game and benchmark themselves against others to determine where they need to improve to gain a competitive edge.  They’re voracious in consuming as much information as they can in the hope that they can translate that knowledge into small but critically important refinements that will help them lower their scores.

CamiloVillegas-17-03

Revenue professionals likewise should seek out the guidance of subject matter experts – including consultants and solution vendors who have very specific knowledge, tools and experiences that focus on particular aspects of the revenue cycle –  as well as their peers and their professional association to refine their games.  They should  statistically analyze their performance to look for opportunities to improve.  The old adage ‘what you don’t measure, you can’t manage’ applies equally well to golf as it does to revenue optimization.  If you have a void in terms of objective measures or lack clarity on measurable goals, now is the time to invest in getting the data, benchmarking best-in-class performance, honestly assessing where you stand in comparison and setting realistic goals for where you want to take your organization.

A great example of such a void is in the area of mid-revenue leakage.  If you were asked “does your organization incur leakage?”, the honest answer would be “yes” but if asked where it occurs, how often and what are the financial implications of leakage, few would be able to answer such questions because they simply do not have the means to identify and measure missed charges.  You may very well be missing an opportunity to reduce your Revenue Cycle Handicap simply because you don’t know what you don’t know.

Equipment matters!

There is a reason the old persimmon “woods” have been replaced by titanium and composite carbon fiber metal drivers.  The lighter weight, stronger material, longer and more flexible shafts and larger hitting surfaces all lead to greater club speed and forgiveness which in turn leads to increased ball loft, spin, distance and accuracy.  Every year, there are new technological advances in clubs, balls, apparel, and accessories for which golfers of all skill levels spend billions in their quest for any slight competitive advantage they can gain through the adoption of better technology.

The same holds true for revenue professionals who should be vigilant about innovation seeking out better ways to replace manual processes with automation, to increase coding accuracy, and eliminate unnecessary or non-value-add steps.  He with the best tools often wins so factor expenditures for innovation into your annual budget so you won’t be left behind.

In today’s shift from volume-to-value based care where providers are assuming more of the financial risk to care for patient populations, there is very little room for inefficiencies. A competitive payor market will steer patients to low cost/high quality providers and even if you’re successful in terms of patient acquisition, inefficiencies will erode your operating margins and reduce the amount of money retained or reinvested.  Inefficient revenue operations are the equivalent of a golfer giving away strokes throughout their round.  There are boundless opportunities available to help you lower your Revenue Cycle Handicap by adopting advanced technologies to wring out excesses replacing manual processes with automation and workflow.

Strive for perfection

Professional golfers are driven to perfection.  Knowing the separation between the scoring average of the #1 and the #11 PGA golfer is just 3% (currently, Rickie Fowler’s 67.21 vs. William McGirt’s 69.36),  dropping two or more strokes is the difference between being a top 10 golfer and being just another name in the rest of the field.  The separation from #1 to #3 is only a single stroke or >1.5% variance.  And while PGA professionals are an elite group representing the absolute best golfers in the world, they never rest on being “good enough”, they strive for perfection in every shot they take.

Over the past 10+ years, AHIMA has advocated a 95% minimum quality standard for coding accuracy.   And while the Central Learning 2nd National ICD-10 Coding Contest findings reveal coding accuracy rates far below the 95% accuracy standard (see below), there is still room for improvement amongst provider organizations boasting >95% accuracy.

In the pursuit of perfection, a professional golfer wouldn’t stop at 95% of their personal potential and neither should Revenue professionals.  If you’re one of those organizations that can lay claim to >95% accuracy, kudos to you but don’t stop there.  Excellence is a journey, not a destination and while 100% accuracy may be unattainable, the revenue generated by an additional 1% improvement in coding accuracy can drive millions of dollars to a health system’s bottom-line.

Conclusions:

Revenue professionals can borrow best practices from professional golfers by…

  1. having defined executable strategies for the front-, middle- and back-end of their revenue cycles and committing their organizations to a balanced high-level of performance across all three phases.  Single-threaded process improvement initiatives are like stepping on a leaky garden hose that only enhances the leaks further downstream.  Have a synchronized plan across all three phases of the cycle to drive excellence.
  2. seeking guidance and statistical measures of your own performance.  Don’t put yourself on an island, open yourself to professional help and analysis.
  3. investing in the right technologies to replace manual processes with automation.  Technology has come a long way and if you’ll avail yourself to niche vendors who bring subject matter expertise on these technologies, you’ll stay state-of-the-art.
  4.  not settling for the “speckled ax”.  Sharpen your tools and skills daily, and go beyond “good enough” by striving for perfection.  Perhaps that is why the most watch golf tournament each year is called the “Masters”.