Boards need to focus on healthcare delivery transformation — and keep their eyes peeled for changes in federal law
So, has your organization discussed and developed responses to these 10 trends?
1. An uncertain reimbursement landscape
The degree to which reimbursement models will change in 2017 remains uncertain. Given the recent double-digit rise in premiums on the ACA's Health Insurance Marketplace, or exchanges, and calls for the redesign of Medicaid and Medicare, as well as commercial insurance regulation, we should expect an active year of debate in the federal and state ranks. The move to fee for value and expectations for efficiency and data-driven outcomes are not likely to abate. Also likely to be encouraged is consumerism, with a greater focus on health savings accounts and health reimbursement accounts, high deductibles and price transparency.
What trustees should keep their eyes on: federal and state legislative and regulatory changes. Financial plans for 2018 and beyond must consider the impact of higher deductibles, possible increases in bad debt, and even greater transparency on price and outcomes. Expect payer-mix shifts as the health insurance landscape responds to federal (and state) legislative changes.
2. Payment models continue to shift to value
With Medicare as a bellwether, payment models are increasingly reliant on measures of performance (e.g., hospital-acquired conditions, readmissions, patient experience and quality scores). There is no indication that this movement will stop. Medicare Advantage plans are likely to continue to see double-digit growth in enrollment, and, in some cases, health plans may seek risk-based arrangements with providers for these products.
The Medicare Access and CHIP Reauthorization Act of 2015 will have significant effects on the physicians in your market. While the Centers for Medicare & Medicaid Services is allowing different paces of entry, the bottom line is that physician payment will increasingly be dependent upon quality, patient experience, use of electronic health records and resource utilization. This may be the last straw for some smaller practices that don’t have the infrastructure to report the required metrics. Even if your market hasn’t yet experienced risk-based (e.g., downside risk, capitation or percentage of premium) models, private commercial carriers are emulating many of the CMS models, including accountable care organizations, pay for performance and bundled payment.
The lines between payer and provider will continue to blur, as payers acquire or provide services to providers and providers become payers. In some markets, regional health systems have moved into the payer marketplace — often as a Medicare Advantage plan or a plan to cover the health system’s own employees — to create competition and affordable options for their consumer base. Some payers will be increasingly open to partnerships with providers in launching new health plan products or delivery models. We will also likely see more large, self-insured employers reach out to providers as employers seek performance-based payment models to drive lower total health costs and better outcomes.
Overall, one of the most difficult challenges for healthcare organizations in 2017 will be harmonizing population health strategies with the market’s movement to value-based payment; moving too fast or too slowly in this area will challenge financial performance. This, along with a general uncertainty in the health care marketplace, will require astute and nimble financial planning.
What trustees should keep their eyes on: payer trends and the organization’s payer mix; the health system’s payer strategy and readiness for (and results with) performance-based payment; initiatives to help physicians respond to MACRA requirements; potential partnerships with payers or large employers to offer new products.
3. Pressure to reduce costs
Hospitals in general have experienced relatively stable financial performance over the past year or two — for some, even better than expected. In many cases, this has been a function of fairly strong volume, particularly in outpatient services. But the marketplace is putting pressure on payers — and thereby providers — to further reduce costs.
With higher employment rates, coupled with expanded coverage for individuals through the ACA, yet continued primary care shortages, emergency department volume is high. This can put pressure on inpatient capacity, operating room schedules and care management resources.
Pressure to reduce costs because of lower rate increases from payers means that managing patient flow efficiently, and reducing variation through defined workflows and clinical protocols are both critically important for a health system if it wants to achieve or maintain financial sustainability. Ensuring that precious resources like hospital beds and operating rooms are optimally utilized is also important to avoid making potentially unnecessary capital outlays for new bed towers or surgery centers. Some leading hospitals are exploring capacity-command centers that combine systems-engineering principles, commonly seen in complex industries such as aviation and power, with predictive analytics to manage and optimize patient flow, safety and experience.
It also is critical that the health system physician enterprise, which in most cases operates at a loss, optimizes physician time and aligns compensation models with goals and population health strategies, as well as engages in rigorous clinical performance management.
What trustees should keep their eyes on: changes in volume; hospital costs (labor and nonlabor) compared with industry benchmarks; length of stay; episode of care (diagnosis-related group) costs compared with Medicare rates; performance benchmarks of employed-physician practices.
4. Creating 'systemness'
Many health systems have grown in recent years — vertically, horizontally and geographically. The opportunities to create a seamless patient experience, achieve efficiencies, enhance access to capital, promote innovation and optimize population health management are among many of the reasons for this growth. To realize these goals requires the harmonization of multiple cultures, operating mechanisms, IT and approaches to governance. To accelerate “systemness,” some systems will move from a “holding company” model to a greater degree of integration — across governance, management and clinical systems. Creating a single brand experience for consumers and employees will require a systemwide articulation of and focus on every aspect of care delivery across the continuum, including clinical and administrative functions.
What trustees should keep their eyes on: a well-defined health system vision and strategy that guide decision-making on growth and system development; a system integration plan that establishes a governance and management structure to reinforce the desired goals, culture and brand; a disciplined and focused approach to achieve desired efficiencies and clinical integration.
5. The consumer is king
Health care has traditionally not been very consumer-friendly. But with deductibles set to increase again in 2017, as well as new disrupters in both the digital and care delivery spaces, providers will have to pay closer attention to the consumer experience (beyond the “patient” experience). This means price transparency; access where, when and how the patient desires; quality reporting; a social media strategy; and digital outreach to create consumer awareness and loyalty. All these will be increasingly important in 2017 and beyond.
Patient-focused care must be more than a stated value. It must be actualized through physical space, logistics, communication and approach to care.
What trustees should keep their eyes on: market share measured by share of the population, not by use of inpatient beds; the health system’s branding and consumer strategy, including dealing with price and quality transparency and a consistent consumer experience across the continuum and locations.
6. Care everywhere
With the explosion of mobile technology, and applications for home and self-monitoring, not to mention the expansion of urgent care and retail care centers, 2017 will be another year of evolving care models. Private equity–backed as well as employer-backed new models for primary care and complex care, and digital tools will continue to proliferate. Health systems will have to decide whether to partner, adopt or compete with these new entities and models.
Telemedicine will be used increasingly not only for remote rural areas but for the convenience of consumers who would prefer not to leave their home or office for care. This means competition could come from anywhere accessible by smartphone. Home and self-monitoring will be used to help make care for the elderly and other patients with complex conditions more responsive, as well as avoid costly hospitalizations.
What trustees should keep their eyes on: your organization’s strategy for accessible care delivery, including the use of urgent care centers, retail clinics, employer-based clinics, mobile technology, telemedicine and home monitoring. Consider partnerships to accelerate market entry and success in new areas.
7. Analytic tools and digital medicine
Most health systems have implemented at least one electronic health record (some are on their second or third implementation) and also have invested in a plethora of other IT tools for finance, data warehousing, care management, predictive analytics, disease management, scheduling and so forth. The key in 2017 will not necessarily be what the next IT purchase should be (although there will be many of those still) but how these systems work together to optimize decision-making and forward-looking actions.
Having a clear data governance structure and system architecture focused on what operational and clinical outcomes are required will be essential. Furthermore, emerging artificial intelligence (e.g., IBM Watson) and the “internet of things” (digital equipment communicating with other equipment) will begin to change the roles and responsibilities of health care providers and team members as well as care pathways.
What trustees should keep their eyes on: creating a digital and analytics road map that optimizes systems and IT platforms already in place and identifies gaps to guide future purchases; understanding the role of artificial intelligence and digital equipment as health care delivery evolves.
8. Health care cost drivers
While inpatient and physician care still account for the majority of health care costs, pharmacy costs have been increasing at a faster pace than they have and will likely continue to do so in 2017.
Behavioral health will also come into increasing focus, because individuals with mental health disorders often have higher medical costs and greater use of emergency departments. Yet, reimbursement for behavioral health is generally poor, and access to providers is often lacking. This is a particular concern with the Medicaid and Medicaid/Medicare dual population, for whom behavioral health problems often are untreated and socioeconomic conditions such as lack of housing or nutrition can exacerbate health risks. The social determinants of health will be raised more frequently as factors to be considered in population health programs, requiring health systems to connect with community service organizations to drive better outcomes and better health for at-risk individuals.
What trustees should keep their eyes on: your organization’s strategy for behavioral health; creating partnerships or relationships with community service providers as a means of improving the health status of the population.
9. Clinical advances will march forward
Precision medicine based on the genetic profile of an individual will be more accessible to more people but will still be used in only a minority of cases. Cancer care is the early adopter. But watch this trend — it could accelerate fast.
New 3D printers will enhance the ability to replace organs and tissues but will still largely be tested in research labs — for now.
Robotics will continue to be used in operating rooms but will also find a place at the bedside — for lifting or moving, or even interacting with, patients.
Mobile technology, as already noted, will continue to explode, enhancing the ease with which diagnosing, monitoring and treating patients occurs.
All this will require astute assessment by medical staff for the adoption of new approaches, and academic medical centers may find expanded opportunities to partner with community providers in the research and deployment of new clinical treatment options.
What trustees should keep their eyes on: medical staff policies and approaches to reviewing biotechnology and clinical protocols; understanding the role of emerging medical trends in key service lines.
10. Human capital needs are changing
In an industry in which labor costs still comprise the lion’s share of operating expenses, workforce management has always been paramount. Today, with the role of the health system changing as population health and value-based care models take center stage, the roles and responsibilities of clinicians and nonclinicians are also changing.
Generational differences demand different approaches and even policies in human resource management.
Health care workers, including clinicians and nonclinicians as well as the management team, are increasingly facing burnout due to constant change and ever-rising expectations.
New approaches to recruitment, talent development and training, workforce management, and engagement will be required to optimize your most valuable resource — your people.
What trustees should keep their eyes on: potential workforce shortages as unemployment rates continue to drop; understanding the organization’s workforce development and management plan and ensuring it is responsive to changing roles, responsibilities and expectations.