With uncertainty in the healthcare climate regarding the impending repeal of the ACA, the decision on whether to enter consulting contracts is even more crucial for hospitals and health systems.
Organizations must decide if they want to pay for a consultant to advise them on strategic goals when no one knows exactly what next month or next year will be like in the healthcare industry. At this particular time of change, organizations and consulting firms say providers are increasingly seeking consultants for guidance, although not necessarily in the same way they previously did.
Barton Health
South Lake Tahoe, Calif.-based Barton Health has a number of current and pending consulting contracts for areas such as supply chain, revenue cycle and benefits administration. The system also is looking to search for consultants that can help implement cybersecurity packages.
Moving forward, Barton Health CFO Dick Derby believes more consultants will be needed because it will require extra effort to understand the various directions President Donald Trump's administration may take regarding healthcare.
"The CFOs I know have not talked about any terminations [of consulting contracts]," says Mr. Derby. "They're talking about more because the need is going to be relatively significant. We've gotten to a place where things were beginning to become stable and more predictable, but now it will go in [the] other direction. We have to figure out what will happen and figure out how to accommodate that."
Piedmont Healthcare
Joe Colonna, vice president of supply chain at Atlanta-based Piedmont Healthcare, has engaged consultants from his department and negotiated agreements with consultants on behalf of the organization. He says the fact people who hold his position are included in these discussions and that true negotiations are going on with consultants is somewhat telling. "The dynamics of consulting engagements are starting to become much more particular about the specific items the consulting firm would be responsible for producing during the contract period. I'm noticing we're starting to really want to make sure we get out of that deal what we thought we would," he says.
More recently, Mr. Colonna says he has been involved in valuations with consultants where "the juice wasn't worth the squeeze" because the return won't be there.
"So for instance, a consultant may promise $10 million improvement to your bottom line over five years. The first year you save $2 million and other years you will avoid spending $2 million you saved. That's really only saving $2 million."
Mr. Colonna also sees more use of consultants with specific expertise as opposed to generalists. Therefore, he says, there may be firms specializing in areas such as supply chain, quality improvement and physician education in the future.
"I would say that regardless of ACA repeal, with the need to manage the cost of doing business, I do think you will continue to see growth of specialty players where you don't have to pay a ton to one firm for all their expertise," Mr. Colonna says.
Cheyenne Regional Medical Center
Phyllis Sherard, PhD, chief strategy officer and vice president of population health at Cheyenne (Wyo.) Regional Medical Center, says her organization, like Piedmont, is being selective about initiating new consulting contracts. She says the medical center is only seeking consultancy contracts that have a strong knowledge transfer component. "For example, we may seek consultancy contracts in areas where we may not have adequate knowledge or capacity," Dr. Sherard says.
Consulting firms weigh in
Hayes Management Consulting has seen a steady increase in requests for assistance in its revenue cycle practice, according to Don Michaels, PhD, senior vice president at Hayes.
"Our clients are becoming even more aware of the need to maximize their collections and reduce their costs as reimbursement continues to move from a traditional fee-for-service model to alternative payment methodologies. Our clients are looking to us to help them examine the costs for billing and collecting, delivery of services, costs for aftercare, leakage and other financial metrics," he says.
As far as health IT implementation work, there has definitely been a shift as the number of organizations looking for complete new systems like revenue cycle or EMR has probably reached its peak, according to Dr. Michaels.
"We see an increasing number of clients coming to Hayes looking to optimize their existing systems. We are seeing growth in the mid tier (hospitals with 500-800 beds) organizations and a slow down in opportunities with academic medical centers — many of whom have made major IT purchases over the past five to seven years," he says. "There's definitely an increased demand for [return on investment] studies where we help organizations quantify the pay back for optimizing their existing technology investments."
Dr. Michaels says hospitals and health systems are hesitant to make major capital expenditures, such as IT, building and new program development. This hesitation is due to the uncertainty of funding from the federal government in terms of replacing the ACA, and a lack of a complete understanding of how other federal initiatives such as the Medicare Access and CHIP Reauthorization Act will affect their organization.
Peter Angerhofer, a principal at Colburn Hill Group, agreed with Dr. Michaels, saying hospital and health system leaders understand the benefits of bringing in outside expertise, but they also understand the need to be specific in the outcomes they are seeking.
And while some hospitals and health systems have been burned by consulting arrangements that either didn't deliver the promised results or couldn't sustain those results after the engagement ended, the complexity of the reimbursement process and the constant state of flux leads to demands for outside expertise or just additional capacity, says Mr. Angerhofer. "Providers may try to limit risk with contingency models, but they still seek outside help," he says.
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