Healthcare executives are often quick to point out that patients are at the center of every strategic decision made. But market dynamics are challenging the “mission-driven model” of community care and health equity, according to Moody’s.
“New dynamics are reshaping the sector’s competitive landscape,” states the rating firm’s quarterly report released Oct. 21. “In turn, hospitals’ ability to navigate and take advantage of the trends will be crucial for delivering favorable health outcomes and sustaining their financial performance.”
Moody’s cited several factors pressuring hospitals and health systems:
- Technology adoption
- ASC and outpatient growth
- Private equity firms acquiring physician practices
AI and technology investments have become essential for hospitals and health systems large and small. Organizations that don’t make the right AI and tech infrastructure investments will fall behind, but the technology is an expensive investment. Many leaders are grappling to make the right investment decisions and partnering with companies that can help optimize staffing, digital patient experience and clinical note taking.
“By adopting scalable platforms that work across different systems, health organizations are better positioned to support value-based care, in which providers are paid based on patient health outcomes, and population health initiatives, which aim to improve health outcomes for entire communities,” the report notes.
The push for more care outside of the hospital dovetails into value-based strategies. Surgery in ASCs and hospital outpatient departments are less costly and provide a unique opportunity to improve quality and lower the overall healthcare spend. It also brings care closer to patients’ homes as health systems build outpatient centers and clinics in farther reaching communities. Last year, outpatient services comprised 57% of hospitals’ net revenue–up from 52% in 2020.
But health systems that aren’t ready to capitalize on ASCs could see a financial hit.
“The growth is fueled by payor incentives, patient preferences for convenience and advances in medical technology. As a result, hospitals face heightened competition from physician-owned and PE-backed ASCs, which are capturing increasing market share of high-margin procedures,” according to Moody’s.
Large health systems are in the best position to joint venture with physicians, or acquire surgery centers, to keep patients within their network. Patient capture and satisfaction is particularly important as private equity has stayed interested in the high-dollar and high-demand specialties as well, including orthopedics.
“PE-backed practices often offer doctors more attractive compensation than traditional health systems,” the report noted.
This could spell trouble for hospitals with a strained bottom line. Private practice physicians have declined from 49% to 42% over the last four years, while private equity-owned practices grew from 4.4% to 6.5%.
