Science & Technology
Video consultations are projected to grow from 5.7 million in 2014 to 130 million by 2018. Geisinger has found that telemonitoring of patients improved the efficiency of care managers and delivered a 3.3 times return on Geisingers investment. 6
Technology-enabled care delivery also may help to constrain health care spending and can play a role in payment models that hold health care providers accountable for the quality and cost of care. There has been an influx of venture capital to support the development of tools, such as data-mining applications, that can be used by accountable care organizations and others working to improve the efficiency and effectiveness of their operations. 29
Every major company from Google to Samsung to Apple is working on biometric devices. Devices will be measuring your blood chemistries, vitamin levels, blood pressure, heart rate and everything else. This is going to become a world in which the patient is enabled to make his or her own choices in health and health care. The relationship he or she has likely will be with a Samsung or an Apple, not with a provider. 30
Our research suggests that telemedicine promises to upend health care markets where supply and demand are out of balance. Close to 300,000 rural veterans tap into the extensive telemedicine network maintained by Veterans Affairs. Mayo Clinic in Arizona, applying a hub-and-spoke telemedicine model to provide neurological consulting for emergency treatment of stroke patients at 16 rural hospitals in four states, has reduced the need for air and ground ambulance transfers and significantly improved patient outcomes. 19
The charge for a day in the hospital in the United States averages more than $4,500. With the technology that now exists for continuous monitoring of a patient’s vital signs in the comfort, safety and reduced cost of his or her own home, a shift from in-hospital to at-home monitoring increasingly appears likely. Hospitals will need to gear up for the capability of becoming data surveillance centers, which markedly extends current information system demands. 5
Economy & Finance
Health care providers expect that the industry shift to value-based contracts will negatively impact their respective organization’s bottom line. When asked about the risk involved in moving to value-based contracts, 17 percent of hospital, system and physician practice providers said they expect a big drop in operating income. Only 4 percent were optimistic that the new model would result in a large rise in reimbursement. 31
Expense growth now outpaces revenue growth due to softness in volumes, transition to lower-cost services, diminishing returns on expense-control initiatives, a shift to lower-reimbursement care models, and other factors. Accounts receivable days are now increasing due to factors including new IT systems, a rise in Medicaid payment delays, and an increasing number of patients with high-deductible plans and large co-pays. 32
Preliminary estimates indicate that national health spending grew by 5 percent in 2014. The health spending share of the gross domestic product was 17.8 percent in December 2014. This is up from 16 percent at the start of the recession in December 2007. Since December 2007, real health spending (using the GDP deflator) through December 2014 has increased by 20.8 percent (an annual rate of 2.7 percent). 33
The outlook for the U.S. nonprofit health care industry in 2015 remains negative as financial and business fundamentals will remain weak over the next 12 to 18 months, says Moody’s Investors Service. Growth in operating cash flow will be weak, operating margins will continue to narrow and revenue growth will remain limited. Moody’s projects that revenue growth for the industry will be slow, but steady, at 3.5 to 4.5 percent over the next several years. Operating margins will weaken further in 2015, as hospitals run out of ways to protect their margins and grapple with operating under two very different reimbursement models — the traditional fee-for-service model vs. emerging models that emphasize preventive care and avoiding hospital stays, such as those that are part of the Affordable Care Act. 34
What the experts have to say …
Gene J. O’Dell
AHA vice president, strategic planning and performance excellence, Chicago, producer of the 2016 AHA Environmental Scan
What are the new trends and key findings of the 2016 Environmental Scan?
Retailers (e.g., Walgreens, CVS, Walmart) are proliferating in the primary health care market and have doubled their number of retail clinics since 2012. These disruptive innovators are now expanding into chronic disease management, which comprises about 75 percent of health care dollars, positioning themselves as fierce competitors for the most profitable health care dollars. Consumer-driven health care is becoming more relevant and driving new models of care delivery. Now, more than ever, consumers are looking to “own” their health and developing a trusted partnership with their doctors in medical decisions. Another important trend is that more health care organizations are taking on greater financial risk by owning their own health plans.
Jonathan Perlin, M.D.
president, clinical services and chief medical officer, HCA, Nashville, Tenn., and chair of the AHA
What is unique about HCA’s strategic planning process?
HCA’s planning process is unique, in part, due to HCA’s size and scale. Given that HCA operates in 20 states, the United Kingdom, and in more than 40 U.S. markets, no single plan can meet the distinct needs of every community. As a result, HCA has planning processes at the enterprise, market and facility levels, as well as across several lines of business. From an enterprise level, the organization sets several overarching strategic objectives, many of which are based on observations of both national and local trends. These enterprise objectives are translated into a portfolio of strategic initiatives. Each market and facility develops its own strategic plan in alignment with the enterprise objectives, but tailored to its competitive environment. As the enterprise strategic initiatives are rolled out, there are some initiatives that are broadly implemented at the local level, while others are adopted by local management as appropriate based on their applicability to local dynamics.
managing partner of SPM Marketing & Communications, LaGrange, Ill., and president-elect, Society for Healthcare Strategy and Market Development, Chicago.
What are the keys to a successful strategic planning process for hospitals and health systems?
Some of the keys to a successful strategic planning process are as follows:
• First, know your point of view and who you want to be.
• Be prepared to disrupt yourself before someone does it to you.
• Remember, planning is all about focus and sacrifice.
• In today’s environment, strategy is all about access.
• You must implement and then measure the results.
• Ultimately, strategy is a framework around which to improvise.
And, finally, strategic planning cannot be done simply in the CEO’s office. It must be an inclusive process.
1 | “Managing Chronic Illness: Physician Practices Increased the Use of Care Management and Medical Home Processes,” James A. Wiley, Diane R. Rittenhouse, Stephen M. Shortell, Lawrence P. Casalino, Patricia P. Ramsay, Salma Bibi, Andrew M. Ryan, Kennon R. Copeland, and Jeffrey A. Alexander, Health Affairs, January 2015 34(1):78–86.
2 | “Creating Connections: An Early Look at the Integration of Behavioral Health and Primary Care in Accountable Care Organizations,” Katherine Tierney, Aleen Saunders and Valerie Lewis, The Commonwealth Fund, Dec. 10, 2014.
3 | “Mental Health By the Numbers,” National Alliance on Mental Illness, 2015.
4 | “Top health industry issues of 2015: Outlines of a market emerge,” Health Research Institute, PricewaterhouseCoopers, December 2014.
5 | “Futurescan 2015, Healthcare Trends and Implications 2015–2020,” AHA’s Society for Healthcare Strategy and Market Development and American College of Healthcare Executives, with support from Evariant.
6 | “Healthcare Trends 2015,” Doug Smith and Christine Ricci, R.N., B. E. Smith, 2015.
7 | “Too High a Price: Out-of-Pocket Health Care Costs in the United States,” Sarah R. Collins, Petra W. Rasmussen, Michelle M. Doty and Sophie Beutel, The Commonwealth Fund, November 2014.
8 | “2014 Employer Health Benefits Survey: Summary of Findings,” the Kaiser Family Foundation and AHA’s Health Research & Educational Trust, Sept. 10, 2015.
9 | “Provider-led health plans: The next frontier — or the 1990s all over again?” Gunjan Khanna, Ebben Smith, M.D., and Saum Sutaria, M.D.,
McKinsey & Co., January 2015.
10 | “Governance of Physician Organizations: An Essential Step to Care Integration,” monograph, AHA Center for Healthcare Governance, January 2015.
11 | “Engaging Doctors in the Health Care Revolution,” Thomas H. Lee and Toby Cosgrove, M.D., Harvard Business Review, June 2014.
12 | 2014 Healthcare Leadership Conference keynote “Disruptive Innovations in Healthcare: The Future is Better Than You Think,” Peter H. Diamandis, M.D., KaufmanHall Report, Kaufman Hall, Winter 2015.
13 | “The Antidote to Fragmented Health Care,” Kedar S. Mate and Amy L. Compton-Phillips, Harvard Business Review, Dec. 15, 2014.
14 | “2015 Health Care Providers Industry Outlook:” Interview with Mitchell Morris, M.D., Deloitte Consulting.
15 | “Big Changes Announced for Medicare, But Watch Out, There’s a Problem,” Leah Binder, Huffpost Business, Feb. 5, 2015.
16 | “Medicare’s Role in Health-Care Payment Reform,” Drew Altman, The Wall Street Journal, Jan. 29, 2015.
17 | “Health Policy Briefs: The Two-Midnight Rule,” Health Affairs, Jan. 22, 2015.
18 | “Health Policy Briefs: Site-Neutral Payments,” Health Affairs, July 24, 2014.
19 | “The Decline of the Rural American Hospital and How to Reverse It,” Karen A. Brown and Nathan T. Washburn, Harvard Business Review, Jan. 30, 2015.
20 | “How Not to Cut Health Care Costs,” Robert S. Kaplan and Derek A. Haas, Harvard Business Review, November 2014.
21 | “The Value of Governance” monograph, Mary K. Totten, American Hospital Association’s Center for Healthcare Governance, 2013.
22 | “Award Winning Efforts in Patient Engagement Drive Better, Safer Care,” Tejal K. Gandhi, M.D., EngagingPatients.org, May 15, 2014.
23 | How to Stop the Overconsumption of Health Care, Eve A. Kerr, M.D. and John Z. Ayanian, Harvard Business Review, Dec. 11, 2014.
24 | “State Strategies for Integrating Physical and Behavioral Health Services in a Changing Medicaid Environment,” Deborah Bachrach, Stephanie Anthony and Andrew Detty, The Commonwealth Fund, Aug. 28, 2014.
25 | “Appropriate Use of Medical Resources,” John Combes, M.D. and Elisa Arespacochaga, AHA’s Physician Leadership Forum, November 2013.
26 | “RadioShack’s Fall Highlights New Decisions for Hospitals,” Kenneth Kaufman, Kaufman Hall & Associates, March 4, 2015.
27 | “New Health Economy,” Health Research Institute, Pricewaterhouse
Coopers, April 2014.
28 | “Your Hospital is Your Shopping Mall,” Kenneth Kaufman, Kaufman Hall & Associates, Feb. 17, 2015.
29 | “Taking Digital Health to the Next Level: Promoting Technologies that Empower Consumers and Drive Health System Transformation,” Martha Hostetter, Sarah Klein and Douglas McCarthy, The Commonwealth Fund, October 2014.
30 | 2014 Healthcare Leadership Conference 25th Anniversary Keynote: “Caring for Mortals,” Atul Gawande, M.D., KaufmanHall Report, Kaufman Hall, Winter 2015.
31 | “Value-based Contracts will hurt profits, execs say,” Ilene MacDonald, FierceHealthcare, June 19, 2014.
32 | 2014 Healthcare Leadership Conference “Rating Agency Update: New Ways to Measure Success, But What Are They?,” Therese L. Wareham, et al. KaufmanHall Report, Kaufman Hall, Winter 2015.
33 | Spending Brief, “Health Sector Economic Indicators,” Center for Sustainable Health Spending, Altarum Institute, Feb. 12, 2015.
34 | “Moody’s Outlook for U.S. Not for Profit Healthcare Remains Negative,” Global Credit Research, Moody’s Investors Service, Dec. 2, 2014.
35 | “Healthcare most dangerous place for workplace injuries,” Christian Nordqvist, Medical News Today, July 20, 2013.
36 | “A Vision for Using Digital Health Technologies to Empower Consumers and Transform the U.S. Health Care System,” Sarah Klein, Martha Hostetter and Douglas McCarthy, The Commonwealth Fund, October 2014.
37 | “Docs say they’re wasting time on care coordination lapses,” Eric Wicklund, mHealth News, April 7, 2015.
38 | “Why Health Care May Finally Be Ready for Big Data,” Nilay D. Shah and Jyotishman Pathak, Harvard Business Review, Dec. 3, 2014.