A small group of hospital and health system CEOs last week shared their challenges and compared notes over breakfast about what’s ahead for the field. Here’s what I heard. Hospital/health system leaders believe the U.S. health system is at a tipping point that’s unprecedented.
They do not believe the “new normal” is a repeat of the past nor do they think their management teams, boards and physician leaders necessarily comprehend its impact. They know that optimizing performance around operating efficiency, regulatory compliance, patient safety, physician engagement and revenue growth are table stakes: doing well in these areas is no guarantee of success, regardless of their size, affiliation and market conditions.
These leaders believe the “new normal” is primarily impacted by three major challenges facing hospitals and health systems:
1) PREPAREDNESS FOR RISK-BASED CONTRACTS WITH PAYERS: Health system leaders believe the transition from volume to value is real; they believe momentum will increase as payers embrace alternative payment programs. Their challenge will be responding to the myriad ways payers will seek to structure contracts.
Medicare will accelerate use of accountable care and bundled payments, while Medicaid will encourage patient-centered medical homes and case management for dual eligibles.
Employers will demand carve outs, narrow networks and reference pricing, and individual consumers will force price competitiveness for routine diagnostics and lower cost procedures that accommodate their high deductible health benefits.
Ducking risk based contracting is not an option. Gauging which payers and how much risk to take is the imperative. And in some cases, health systems may elect to implement their own plans as a hedge strategy to fend off private insurer efforts to commoditize the system’s services.
2) SCALE AND SMART GROWTH: Hospital and health system CEOs recognize some organizations are too small to provide services at an appropriate scale. Achieving an optimal scale to fund capital investments efficiently while pricing services competitively is not attainable for many: mergers, affiliations, partnerships are on the table in every community. There’s recognition that the U.S. health system has an over-capacity of beds and under-capacity in primary care services to manage populations effectively.
Managing physician relationships as part of a smart growth strategy is a perplexing challenge. Though half of America’s physicians are now employed in hospitals, integrating physicians into viable team based models and aligning their compensation with enterprise goals remains difficult.
As a result, CEOs are updating org charts, re-deploying capital and engaging in partnership discussions at a frenetic pace.
3) REGULATORY INTENSITY: CEOs believe their organization risk exposure is increasing exponentially. The spotlight on fraud is intensifying. HHS says it collected $4.3 billion from fraudulent activity last year, a record. Consolidation among providers—doctors, hospitals, post-acute facilities—is a megatrend.
The Department of Justice and Federal Trade Commission are keen to assure taxpayers that competition is fair and consumer interests protected. And the costs associated with unnecessary care — treatment that financially benefits providers with no clinical benefit to patients — is a point of focus for HHS’ Office of Inspector General and in the business community. Notably, the Wall Street Journal’s “Medicare Unmasked” series just won a Pulitzer Prize for reporting of previously unavailable Medicare data. CEOs are keenly aware their risks are high.
Not surprisingly, these three challenges help to make stress in upper management a huge issue: burnout is a concern; turnover is understandable; and easy solutions are hard to find. And the strategy of recruiting key talent with varied backgrounds to C-suite roles to implement non-traditional approaches also adds stress. Hospitals and health system management teams tend to make life unwelcome to outsiders. Expanding boards to add industry expertise in health insurance, retail health, investment and negotiations is tough where compensation and non-local representation are considerations is stressful.
But the CEOs at the breakfast meeting appeared up to the task and confident about the future in their organizations. They said they are cautious about moving too fast, but committed to moving deliberately from the status quo. And they are realistic about the barriers they face from internal naysayers more comfortable with keeping things as is.
The breakfast ended punctually — of course each had a list of typical meetings, calls and obligations. But I’m sure at some point in their day, they’ll make a decision in light of their view of what is the new normal in health care.
Paul H. Keckley, Ph.D., a health economist and expert on U.S. health reform, is managing director at the Navigant Center for Healthcare Research and Policy Analysis. His H&HN Daily column appears the first Monday of every month. He is a member of Health Forum's Speakers Express. For speaking opportunities, contact David Parlin.