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Healthcare Trends and Implications
Co-sponsored by:
• Society for Healthcare Strategy and Market
Development of the American Hospital Association
• American College of Healthcare Executives
• With Support From VHA Inc.
American College of Healthcare Executives
• Professional society of more than 40,000 healthcare
executives—Leaders Who Care
• Board certification in healthcare management as ACHE
Fellows (FACHE®)
• Foremost continuing educator for the field
• Leading healthcare management publications:
– Health Administration Press books
– Journal of Healthcare Management, Frontiers of Health
Services Management and Healthcare Executive
• Fulfilling our vision to be the premier professional
society for healthcare executives dedicated to improving
healthcare delivery
Society for Healthcare Strategy and Market
• Personal membership group of the American Hospital
• Serves more than 4,400 healthcare planning, marketing
and public relations/communications professionals
• Committed to helping members meet the future with
more knowledge and opportunity as their organizations
work to improve health status and quality of life in their
Futurescan 2012–2017
• Healthcare Reform: The Transformation of America’s
Hospitals—Economics Drives a New Business Model
• Healthcare Reform: States Grapple With Health Insurance
• Access to Capital: The Gold Rush Is On
• Demographics: Will the Baby Boom Be a Boon to
Hospitals? Don’t Count on It
• Community Connections: An Expanding Hospital Role
Includes Community Well-Being
• Bending the Cost Curve: Hospitals Challenged to Lead
With Quality to Reduce Costs
• Clinical Integration: Déjà Vu All Over Again
• Physician Strategies: Employing Physicians—The Future
Is Now
“The hospital—altogether the most
complex human organization ever
devised …”
Peter Drucker
Drucker, Peter F. (2002). Managing in the Next Society. New York, New York: St. Martin’s Griffin.
Actions We Should
Start, Stop and/or Continue
We should start.....
We should continue.....
We should stop.....
Implications of this Trend?
Implications of this Trend?
Implications of this Trend?
Implications of this Trend?
Implications of this Trend?
At least 1 positive, and 1 negative.
Implications of this Trend?
Healthcare Reform
The Transformation of America’s
Hospitals: Economics Drives a New
Business Model
Kenneth Kaufman
Mark E. Grube
Transforming America’s Hospitals:
A New Business Model
The Economics of the 21st century will force
healthcare delivery to be value based.
• Don’t wait for change to come from federal or state
• Focus on outcomes, quality and access rather than
• Move from physician-centric to team-based care.
• Emphasize teamwork, discipline and humility as
organizational values.
Transforming America’s Hospitals:
Downward Trends
Reimbursement and utilization will decline over time
on either a relative or absolute basis.
• Breaking even on Medicare patients will be key.
Aggressively pursue this goal.
• Rethink service offerings and examine care
processes in order to achieve efficiencies.
• Adopt a team-based approach that focuses on
population health rather than just individual patient
Transforming America’s Hospitals:
Technological Innovation
The rapid emergence of new technologies that
improve health outcomes and reduce costs will
disrupt clinical practice and competitive strategy.
• Invest in disease management systems that monitor
patients in their homes in order to promote health and
reduce readmissions.
• Develop hospital-branded “apps” for smartphones
that provide health information to consumers and
best-practice information to clinicians.
• Make technological innovation and adaptation an
essential part of your management strategy.
Transforming America’s Hospitals:
Boundaries Blur
The traditional hard lines between various types of
healthcare providers and participants will begin to
break down.
• Carefully monitor the trends in your community
regarding employed physicians, integrated services
and ACO development.
• Consider participating in joint ventures between forprofit and nonprofit providers.
• Look for opportunities for collaboration between
health insurers and provider organizations.
Transforming America’s Hospitals:
Price and quality competition from large
organizations will be intense, and it will be
increasingly difficult for small independent
organizations to survive.
• Look for ways to achieve economies of scale by
partnering with other community or regional
• Use group purchasing alliances to reduce costs.
• Educate the board and medical staff on the realities of
the new healthcare landscape so that they are prepared
for change.
Healthcare Reform
States Grapple With Health
Insurance Exchanges
William W. Sneed
Health Insurance Exchanges:
Sooner Rather Than Later
It is very likely that the ACA will be judged
constitutional and that all states will be expected
to implement exchanges by January 2014.
• Monitor the federal regulations closely as they evolve
in response to comments from the field.
• Be thoroughly familiar with your state’s intentions and
progress regarding exchange development.
• Project how an operational exchange will impact your
facility in terms of both patient volume and cash flow.
• Be prepared to act quickly.
Health Insurance Exchanges:
Expanding Access
Exchanges will enroll individuals without prior
access to employer-sponsored insurance as well
as employees of small companies.
• Get involved in your state’s exchange development.
Have a voice in determining its policies and
• Monitor the local workforce environment so you can
anticipate the exchange’s clients and their health status.
• Serve as a resource to local small businesses as they
consider dropping their health coverage in favor of an
Health Insurance Exchanges:
Provider Risks
Operating exchanges will create financial risks
for provider organizations.
• Run projections to determine the individuals most
likely to join exchanges in your area, and their likely
health status and health needs.
• Be prepared for the competition that exchanges will
create based on cost.
• Be vigilant about pricing services below cost in an
effort to maintain market share.
Health Insurance Exchanges:
The Benefit Package
The federal government will allow individual
states to define essential benefits for its
• Monitor the federal and state policy and legislation
• Closely monitor state agency-vendor relationships.
• Actively advocate for a benefit package that
maximizes quality at a reasonable cost.
Health Insurance Exchanges:
Health insurance exchanges will promote
transparency in an attempt to lower costs.
• Begin making cost and quality information available
• Use social media (website, Facebook and more) as a
means to promote transparency of services and quality.
• Devise strategies to help consumers understand what
an exchange is and the various products that will be
offered by the exchange.
• Be an active participant in the design of the exchange.
Access to Capital
The Gold Rush Is On
Marian C. Jennings
Access to Capital:
Unstable Markets
Volatility in the credit market will likely continue,
making access to timely, affordable debt
challenging and uncertain.
• Attend to key balance sheet and liquidity ratios NOW.
Don’t wait until you need access to capital.
• Cultivate relationships with local and traditional
• Monitor competitors’ situations regularly. Don’t
assume weak organizations will always be strapped
for capital.
Access to Capital:
A Widening Resource Gap
The gap between the haves and the have-nots in
terms of access to capital will increase.
• Develop a five-year strategic financial plan that
incorporates capital needs and links them to
continued competitiveness.
• Consider a variety of “what if” scenarios to best
position your organization for the inevitable changes
that will occur over the next five years.
• Smaller facilities should consider partnerships with
larger or regional systems.
Access to Capital:
Competitive Advantage
For-profit systems will use their ability to access
capital as a competitive advantage and continue
their aggressive acquisition mode.
• When appropriate, look for a for-profit partner for new
or existing projects.
• All facilities—for-profit or nonprofit—should make
planning for capital needs under various scenarios a
key part of management.
• In order to maintain your competitiveness, find ways
to break even on Medicare reimbursement.
Access to Capital:
More Demand Than Capacity
Capital demand will outstrip capacity, even in the
strongest and largest nonprofit systems.
• Carefully examine criteria for capital projects or
• Consider divesting underperforming assets sooner
rather than later.
• Be cognizant that bond holders expect a return on
their investment.
• Be sure to demonstrate your organization’s continued
value to the community.
Access to Capital:
An Urge to Merge
The need for access to capital will result in more
hospitals and regional systems merging with
larger organizations.
• While access to capital may drive a merger, other
benefits of affiliation can be obtained without ceding
• Be aware that merging with a smaller, struggling
hospital could result in a credit downgrade or divert
limited system resources.
• Carefully monitor proposed federal legislation that
would make newly issued municipal bonds taxable.
Will the Baby Boom Be a Boon to
Hospitals? Don’t Count on It
Jeff Goldsmith
The 21st Century Retiree
Many baby boomers will postpone retirement or look for
new ways to make a meaningful contribution postretirement. They will expect to maintain healthy and
active lifestyles.
• Offer programs that will help seniors remain healthy and
active well past the traditional retirement age.
• Develop expertise in orthopedic services, particularly
joint replacement.
• Provide volunteer or part-time consulting opportunities
for talented seniors in your community.
• Focus on patient satisfaction, as boomers will demand
high-quality services.
Cost-Sensitive Seniors
Because of the economic downturn, Medicareeligible boomers are more likely to opt for the
cost-savings offered by Advantage programs.
• Anticipate reductions in the use of hospital services
by future—as compared to past—Medicare recipients.
• Develop programs that help patients and their families
manage and coordinate post-hospital care.
• Engage Medicare Advantage programs in
experimenting with new care models.
Anticipate Needs
The greatest needs of the boomer generation will
be joint replacement surgery, diabetes-related
care and cancer services.
• Develop ambulatory centers for cancer treatment and
• Develop specialized services for diabetes treatment and
• Develop expertise in joint replacement and rehabilitation
following surgery.
• Carefully monitor the health and social needs of seniors in
your community to identify opportunities for additional
Break Even on Medicare
In the long term, successful providers will need
to break even on Medicare’s current DRG and
APG systems.
• Work with physicians, particularly intensivists and
hospitalists, to reduce costs.
• Implement aggressive infection control processes.
• Develop systems that coordinate care.
• Work with families to reduce post-care complications
and readmissions.
Demographics: Innovations in
Healthcare Delivery
The CMS Innovation Center created by the ACA
will promote innovations in healthcare delivery
designed to control costs and ensure quality.
• Be active participants in any field tests or experiments
in order to learn to improve care and influence
emerging models.
• Actively involve physician leaders in any new models.
• Look for new ways to deliver primary care, care
transitions and follow-up care.
Community Connections
An Expanding Hospital Role
Includes Community Well-Being
Connie J. Evashwick, ScD, FACHE
Eileen L. Barsi
Community Connections:
Demonstrating Community Benefit
There will be increasing pressure on hospitals to
demonstrate their value to the community.
• Nonprofit hospitals should ensure they are in
compliance with the new community benefit
requirements under the ACA.
• Nonprofits should be prepared to respond to
challenges regarding their tax exempt status.
• Promote the importance of your organization’s
economic impact on the community.
Community Connections:
Population Health
Hospitals will be expected to make good on their
mission to improve the health of the community.
• Assess your organization’s current engagement with
the community now.
• Have metrics in place that track your organization’s
impact on the community’s health and well-being.
• Work with churches and other community
organizations to enroll qualified individuals in state
Medicaid programs.
Community Connections:
Wellness and Prevention
Wellness and preventive programs will
proliferate as employers and insurers look for
ways to reduce healthcare costs.
• Partner with insurers and employers to offer wellness
programs and expertise.
• Work with community-based clinics to expand access
to preventive services.
• Develop expertise in disease management that can
benefit community providers and reduce healthcare
Community Connections:
As part of their community benefit, hospitals will
need to be actively engaged with the community.
• Incorporate community outreach as a key function of
the organization.
• Involve senior leaders in activities and strategies that
benefit the community.
• Choose governing or advisory board members who
reflect and are sensitive to the needs of the broader
• Communicate regularly with internal and external
Community Connections:
Collaboration with other community organizations
will be a critical strategy for providing coordinated
• Make sure that key leadership understands how your
organization interfaces with other community agencies
or providers.
• Provide incentives for employees to volunteer with or
provide expertise to other community agencies or
• Offer expertise to local health departments that may be
seeking accreditation by the Public Health Accreditation
Bending the Cost Curve
Hospitals Challenged to Lead With
Quality to Reduce Costs
Nancy M. Schlichting, FACHE
Bending the Cost Curve:
Deficit Reduction Challenges
Pressures to reduce budget deficits—at both the
federal and state levels—will target entitlement
programs including Medicare and Medicaid.
• Use proven strategies like Lean and Six Sigma to
reduce costs associated with Medicare and Medicaid
• Work with clinical staff to coordinate care in attempts
to reduce costs.
• Set a goal to “break even” on Medicare patients by
Bending the Cost Curve:
A Demographic Tsunami
The aging of the baby boom generation will
create a tsunami of increased demand and high
expectations for services.
• Since seniors will likely be paying more out of pocket
for healthcare services, emphasize the value of your
• Pursue clinical integration with physicians to provide
high-quality, efficient and coordinated care.
• Design intake and discharge processes that are
efficient and sensitive to the needs of seniors.
Bending the Cost Curve:
Value-Driven Healthcare
The expectations for quality and value in the delivery of
healthcare services will increase. The bar will be set
• Use quality improvement techniques like Lean and Six
Sigma to improve processes.
• Investigate new models of care that will reduce
complication and infection rates and improve
• Make sure that information systems are flexible enough
to capture meaningful performance indicators.
• Focus on patient satisfaction.
Bending the Cost Curve:
Public and private payors will continue to
penalize hospitals for high readmission rates.
• Be aware that some patients may not have the
financial resources for post-discharge care (e.g.,
home health, medications, etc.).
• Use a transition coach who will help patients
transition from the hospital to their homes.
• Provide post-discharge clinics for patients at risk of
Bending the Cost Curve:
Focus on the Intersections
Successful providers will coordinate care across
settings with payors and community
• Work with community organizations to develop
wellness and chronic disease management services.
• Develop preferred relationships with organizations to
provide home care and other post-discharge services.
• Work with nontraditional caregivers like homeless
shelters and free clinics.
• Explore new models for providing primary care.
Clinical Integration
Déjà Vu All Over Again
Nathan S. Kaufman
Clinical Integration:
Back to the Future
Despite the failures of the 1990s, providers will look
for ways to achieve clinical integration as the ACA is
phased in.
• Make sure that any strategies are compliant with FTC
• Early on, determine whether your organization possesses
the infrastructure for clinical integration.
• Exercise caution and carefully evaluate the organization’s
readiness to form an ACO or vertically integrated system.
• Pilot test any new network with health system employees
and their beneficiaries before expanding to a larger patient
Clinical Integration:
Rewards and Consequences
In clinically integrated systems, performancebased rewards will be used to improve quality
and efficiency.
• Engage physician partners in determining which metrics
will be monitored and used to reward performance.
• Regularly review these indicators to determine their
usefulness and validity.
• Be sure information systems can track these indicators
reliably and in real time.
• Be prepared to deal with poor performers.
Clinical Integration:
Core Competencies
ACOs and other integrated organizations will
only be successful if they master “2nd generation
• Adopt a common EHR that incorporates point-of-care
• Create sufficient primary care capacity.
• Implement evidence-based inpatient and outpatient
care plans.
• Incorporate proactive disease management programs.
• Develop physician leadership and engagement.
Clinical Integration:
More Than Physicians
Clinical integration under a reformed health
system will extend to all types and levels of
healthcare providers.
• Work with local health departments and community
clinics for follow-up care and wellness services.
• Develop relationships with organizations providing
specialized post-acute care.
• Partner with social services organizations that provide
services that maintain individuals’ health and well-being.
• Include behavioral health services in the network.
Clinical Integration:
Failures Are Inevitable
Many organizations will assume risk for
integrated care without possessing 2nd
generation competencies. They will likely fail.
• Carefully evaluate your organization’s readiness
before assuming risk associated with an ACO or
integrated network.
• Cultivate physician leadership and buy-in for reducing
cost and improving quality.
• Recognize that watchful waiting and learning from
others’ experiences may be the best strategy for
many organizations.
Physician Strategies
Employing Physicians:
The Future Is Now
Nick A. Fabrizio, PhD, FACHE
Physician Strategies:
The New Employees
Individual physicians and group practices will
continue to look to hospitals for employment and
the economic security it offers.
• Be judicious and strategic in offering employment
opportunities to physicians and physician groups.
• Anticipate cultural clashes between physicians and
hospitals and plan for a transition period.
• Be sensitive to the varying needs of different
generations of physicians.
Physician Strategies:
Learning From the Past
Hospitals will benefit from the mistakes of the 1990s
and achieve strategic advantages by employing
• Emphasize the economic security of affiliating with a large
and stable organization.
• Make sure that your organization has sufficient human
resources to manage physicians and physician practices.
• Link incentives to productivity and make sure that your IT
system reliably measures key indicators.
• Allow physician leaders to participate in decision-making
and governance activities.
Physician Strategies:
Larger and Larger Groups
The number of physicians in group practices and
the size of physician groups will continue to
• Develop affiliations with large independent groups of
• Monitor the growth and vitality of physician groups in
your community.
• Monitor the competitive environment in order to
identify opportune times to offer employment to select
physician groups.
Physician Strategies:
Shared Governance
Physician-manager leadership dyads will be
necessary for success with employed
• Make sure your organization will accept physician
leaders as an integral part of the management team.
• Spread physician-administrator dyads throughout the
• Engage physicians in the selection of the physician
• Ensure that employed physicians have easy access
to the CEO.
Physician Strategies:
Practice Management Skills
Hospitals and systems will need management
personnel and infrastructure to integrate physician
• Hire individuals with experience and expertise in
physician practice management.
• Make sure that the IT system can integrate practice
management with the EHR and billing systems.
• Work with physician leadership to develop incentive
plans that promote efficiency and quality as well as
physician satisfaction.
• Expand physician leadership and training opportunities.
“‘We will do everything for everybody’ has
never been a viable value proposition for
any successful business model that we
know of—and yet that’s the value
proposition … of general hospitals.”
Clayton M. Christensen,
Jerome H. Grossman, MD,
and Jason Hwang, MD
The Innovator’s Prescription: A Disruptive Solution for Health Care (2009)
This presentation was adapted by Mary Stefl, PhD,
Chair, Health Care Administration, Trinity University,
from Futurescan: Healthcare Trends and Implications
Futurescan 2012 is available for purchase from Health
Administration Press. Single copies (order code 2206)
are $45. Packages of 15 copies (order code 2208) are
available for a discounted price of $395. Order online at or call the ACHE/HAP Order Fulfillment
Center at (301) 362-6905.
Healthcare Trends and Implications