How hospitals must evolve to survive

The days of the American hospital as we know it are numbered, with many of these huge institutions facing extinction unless they adapt to our rapidly changing world.

Our healthcare system has been inexorably altered by The Affordable Care Act, evolving from a fee-for-service (FFS) model to an approach that increasingly links payments to improved health outcomes. Hospitals don’t have to just fix patients but are rewarded with incentives to keep them healthy and satisfied with the quality of their care. That approach is already reaping benefits: A 2015 New England Journal of Medicine report concluded that “reductions in hospital-acquired conditions and Medicare readmissions since the enactment of the ACA are unprecedented.” That won’t change even if Republicans repeal or overhaul the ACA because the shift is reducing costs for healthcare, which consumes one out of every six dollars in the U.S. economy.

Hospitals are struggling with the change. This year, for example, 1,621 hospitals will be fined for the fifth consecutive year as a result of having hospital readmission rates that are too high, according to Centers for Medicare and Medicaid Services data, reducing their payments by as much as 3 percent. The total Medicare penalties assessed on hospitals for patients being readmitted within 30 days in 2017 will increase to $528 million, according to the Kaiser Family Foundation. If hospitals have to change their business model, that’s a good thing: A study published in Health Affairs finds that 55 percent of them lose money.

So, what will the U.S. hospital of the future look like?

The shift to outcomes-based medicine places a greater emphasis on preventive care, improving the treatment of chronic conditions and recovery from surgery, and cutting hospital readmission rates. Aetna and other major insurers have agreed to move 75 percent of their payments to this approach by 2020. This, coupled with other emerging advances, such as wearable devices gathering medical data and the growing use of telemedicine, will change hospitals forever. Improving preventative care and monitoring of patients with chronic conditions will drastically reduce hospital readmission rates — something that will significantly shrink the footprint of every U.S. hospital. For example, a study by Ascension at Home Wisconsin found that patients with chronic health conditions that were monitored remotely have hospital readmission rates of 8 percent compared to 24 percent nationally.

To improve readmission rates and produce better health outcomes, hospitals will increasingly partner with other providers to share patient risk. A surgical hip replacement center, for example, might partner with a rehabilitation provider and a home nurse service to ensure that the patient’s recovery is a success. Smaller healthcare systems will join emerging networks such as the Mayo Clinic Care Network or the Cleveland Clinic to share resources, access to specialist opinions and to leverage treatment protocols that will improve the quality of patient care and outcomes.

Patients visiting doctors via video conference is already becoming commonplace at some providers — virtual visits are already 52 percent of Kaiser Permanente’s 100 million annual doctor consultations, according to Modern Healthcare. As companies like Kaiser reap the savings from that approach, other health providers will follow suit and invest in telemedicine delivery platforms. It’s easy to imagine a future where doctors work at call centers, rendering extinct hospitals that aim to serve all our healthcare needs in one location.

As healthcare becomes decentralized, hospitals will be places for surgery, trauma, and emergencies. However, beyond those essential services, many hospitals will have to specialize, becoming a center for excellence for something, such as knee surgeries, hip replacements, or maternity care. As patients become empowered by the democratization of information and personalized care plans, there will be a greater use of nurses and pharmacists within communities. They are already a critical part of delivering home infusion services to treat such conditions as congestive heart failure, pneumonia, cellulitis, hemophilia, and immunodeficiency diseases. As the number of protocols treating patients at home increases, doctors will be less central to the ongoing delivery of care.

Some hospital systems are starting to adapt to the decentralization of care. St. Vincent hospital in the Indianapolis area is opening four mini-hospitals this year — free-standing emergency facilities, each with seven outpatient beds and eight in-patient beds.

As power shifts from physicians and healthcare providers to patients, the future will bring new ways of assessing healthcare options. For example, patients could sit in a triage kiosk, upload their medical history, their latest biometric data from a wearable device, input their current symptoms and be presented with their options — detailing the advantages and disadvantages of hospital treatment versus home treatment, specifying the out-of-pocket cost of each option and offering a list of service providers.

With so much change coming, a PwC report on challenges facing the industry concludes that, “There are three main tactics that organizations are using to address this shift to value—adapting, innovating and building new programs and approaches to their work.” With so much disruption on the horizon, hospitals that want to survive should plan now.

(Daniel E. Greenleaf is president and chief executive officer of BioScrip Inc., a provider of infusion and home healthcare management solutions.)

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