Market share and cost control are top of mind, as are clinical performance, consumer engagement, evolving payment models and physician alignment. Successfully addressing the following will help hospitals and health systems preserve and protect markets, gain competitive advantage and deliver greater consumer value.
Cost reduction for long-term growth
Many health systems continue to face declining margins. Simply put, expenses are outpacing revenues. While the Affordable Care Act added 21 million to insured rolls between 2014 and 2015, demand for inpatient and other acute care services once considered foundational to hospital operations has slowed.1 The reasons are many and include a shift to performance based reimbursement, more effective medications and treatments, consumer-centric preferences (and care delivery approaches), greater emphasis on the role of social determinants in health outcomes and rising out-of-pocket costs from high deductible health plans. Despite these shifts in service mix and setting, certain hospital and health system investments (e.g., information technology, population health solutions) must continue, further contributing to margin pressure. Labor, pharmacy and supply chain are low-hanging fruit for cost takeout, and rightfully so — labor is a leading contributor to hospital operating expense (~ 60%).2 Health system infrastructure, back office operations (e.g., revenue cycle) and corporate services are other areas that should yield additional dollar savings.
As indicated above, directed IT and other health system investments will continue, though in the case of IT, many of these solutions (e.g., artificial intelligence-driven analytics, enterprise data warehouses and telehealth, among others) should work in parallel with standardized care pathways and population health programs to drive greater system efficiencies and quality.
Physician alignment and integration – start with the end in mind
In light of recent merger activity, physician integration and compensation will be key focus areas in the year ahead. Reimbursement is now dependent, at least in part, on performance-based metrics and a certain percentage of physician compensation should be tied to quality and patient satisfaction standards. As value-based purchasing arrangements continue to gain traction, the compensation model can adjust to whatever spread the organization desires, and then be monitored to ensure it remains in line with industry-standard productivity ratios by specialty. Taking this approach, at least in broad strokes, should help deliver the end goal – a vertically integrated practice model that 1) rewards physician staff for high quality outcomes; and 2) includes financially feasible yet appropriate production-based incentives.3
While fair compensation is critical to an aligned physician staff, so too is the recognition that practitioner engagement – and burnout – is a tangible pain point. In an era of competing priorities, physicians spend too many hours per week meeting reporting requirements. In many cases, the electronic health record has become a source of frustration rather than useful tool, resulting in duplications, unnecessary alerts, reminders and other non-valued added tasks, taking time away from clinical care. Workflow and IT strategies to optimize the EHR experience are therefore critical, as are programs to reduce alert fatigue and improve communication, coordination and overall interoperability across the system.4 This need to address EHR “systemness” – and its effect on physician productivity – will only increase as more hospitals and health systems look to integrate services and staff.
Big data – challenges in scale, complexity and security
The transformative potential of big data is undeniable; and yet, health systems continue to be challenged by the scale and complexity of the data that exists. Talent acquisition is one strategy, and new hiring (think chief data strategists) will not likely slow.4 Physician leaders facile with data mining and system interoperability – and how they can be leveraged to impact chronic disease management and predict outcomes for vulnerable populations and subpopulations – are likewise critical players. Whether a health system chooses to build organically or seeks outside support, establishing a coherent data strategy that unites departments across the enterprise – think clinical care, research, supply chain, pharmacy, and procurement – is necessary. If successful, the organization will not just benefit internally; big data is an attractive asset to any number of outside players, including payors, pharma, research consortia, non-traditional new entrants and other hospitals/health systems.
Due to the increasing threat of data breaches – and their impact on reputational risk – a formal cybersecurity strategy should go hand-in-hand with any big data initiative. Just last month, the files of an estimated 75,000 individuals were accessed in a breach of Healthcare.gov.5 In another example, Anthem agreed to pay $16 million to Department of Health and Human Services to settle Health Insurance Portability and Accountability Act violations related to a 2015 breach that exposed the protected health information of an estimated 79 million members, the largest breach of health data in United States history (of note, the hacker responsible for the Anthem breach was reportedly acting on behalf of a foreign government).6 Healthcare data is clearly a valuable commodity and one whose proper safeguarding requires not only endpoint security and data loss protection, but consistent employee awareness and training. Willingness to stay vigilant, invest in security measures and even seek outside help to do so, will help organizations stay ahead of the next threat, especially in an era of heightened visibility.
New partnerships
Partnerships between hospitals and/or health systems will continue to offer a viable counterpoint to the wave of mergers in the marketplace. Prevailing wisdom has argued that mergers (particularly for independent hospitals) provide economies of scale, more desirable patient networks and the ability to establish robust data registries and integrate technologies.7 Based on a hospital’s strengths and understanding of local markets, however, strategic partnerships with likeminded clinical partners may be preferable. The degree to which a hospital’s physician practices, for example, are independent, willing to experiment with new payment and practice models and share responsibility for service line management, may argue in favor of such alliances, including shared expense models and accountable care organizations.7 Some of these partnerships will include the addition of other value added shared services, such as data registries and IT solutions, not to mention the sharing of best practices and administrative functions.
Conventional thinking around nontraditional partnerships is that they allow health systems to augment their businesses with expertise in noncore areas. They may also open health systems to new markets through joint ventures (e.g., ambulatory surgical centers and skilled nursing facilities), help defray costs around care management and deliver consumer oriented solutions through new technologies, direct-to-employer services and co-branded pharmacies.4 Those systems with the size, scale, financial resources and management expertise to act as coordinator for such add-on services are in best position to participate – particularly if an alliance supports core offerings, such as population health management. Consider, for example, health systems that contract with companies to provide employees on-site clinics, health screenings and other wellness services. If executed properly, these alliances will be of mutual benefit to both hospital and outside organization alike.
Consumer engagement
Health systems must continue taking aggressive steps to engage consumers and influence behavior faster and better. Patient-based focus groups, social media engagement, and town hall-style events are a few of the ways in which organizations are capturing the patient voice. Using this information, hospitals and health systems are better able to tailor incentives and even employ gamification tools to empower and promote healthier choices. In an era of value over volume, where health promotion is emphasized over the delivery of services, these techniques help bend the cost curve and right size the optimal mix of services to the populations and subpopulations most in need. Those health systems most mature in this approach will continue to lead on outcomes and value.8
References
1. https://www.businesswire.com/news/home/20180912005205/en/
2. https://revcycleintelligence.com/news/hospitals-target-labor-costs-layoffs-to-reduce-healthcare-costs
3. https://www.beckershospitalreview.com/accountable-care-organizations/keys-to-success-as-an-aco-model-physician-relations-maintaining-entrepreneurial-incentive-and-self-direction.html
4. https://www.h2c.com/nov-2018-h2c-strategic-survey-summary
5. https://www.healthcarefinancenews.com/news/cms-responds-data-breach-affecting-75000-federal-aca-portal
6. https://www.healthcarefinancenews.com/news/anthem-pays-16-million-record-hipaa-settlement-data-breach
7. https://hbr.org/2015/12/making-hospital-partnerships-work
8. https://healthcare.mckinsey.com/spinning-customer-insights-business-gold
