While some current trends will continue into 2016, keeping pace with local market changes will require foresight and nimble leadership. Watch for these potential change “accelerators” for 2016:
Consolidation. The major payer consolidations likely will get ironed out during 2016. The degree to which your payer market is already highly concentrated will affect your payer strategy, but watch for additional consolidation and its potential effect. Furthermore, the Federal Trade Commission will continue to scrutinize provider consolidations, including hospital as well as medical group acquisitions. The degree to which any anticipated affiliations or acquisitions truly achieve consumer benefit in terms of efficiency, access and quality must be clearly demonstrated both pre- and post-merger.
Government, commercial payer and employer move to value-based payment. As illustrated by the Centers for Medicare & Medicaid Services' introduction of the Comprehensive Care for Joint Replacement model for Medicare, there is no predicting how quickly certain initiatives could strike your market. Also, employer direct contracting will pick up in some markets as employers introduce narrow networks to control costs better. These initiatives can radically change referral patterns and the need for effective population health management.
Further, the “foot in two canoes” analogy will have to change to recognize the proliferation of payment models beyond a strict definition of fee for service vs. fee for value. The cacophony of models ranging from strictly fee for service to pay for performance, care management/patient-centered medical home, bundled payment, shared savings/ACO, full or partial risk/capitation and beyond will continue to add administrative, strategic, operational and financial complexity to most organizations. Trying to make sense of this blend of payment structures from both a financial and a care model perspective will cause continued confusion before the fog clears.
Care model disruptors and innovators. Retail giants like CVS and Walgreens/Rite-Aid will push further into care delivery, continuing to put pressure on traditional providers to “up their game” on access — or partner. In addition, the “firehose” of private equity dollars flowing into mobile technology, new primary care delivery models, and telehealth will either “disintermediate” health systems from consumers, or be a powerful tool to enhance engagement. Health care organizations will be required to step up their efforts to optimize the patient experience — way beyond measuring patient satisfaction of their hospital stay.
Increased focus on post-acute care. As more organizations move into population health management models or bundled payment, the spotlight on the post-acute care services will strengthen. The creation of “preferred” networks of post-acute providers, repurposing acute care facilities into post-acute facilities, and more transactions involving post-acute providers will result in increased upheaval in the post-acute world.
Meanwhile, the trends we witnessed in 2015 will continue into 2016, driving the need for health system and care delivery transformation:
Patient volume generally strong, but straining. While new payment models will drive acute hospital utilization down, the continued expansion of Medicaid and the insured population through the public exchanges will keep demand up. Further, as the nation fails to abate the rise of obesity and chronic disease, and the population ages, demand for services across the continuum will continue to be relatively strong. Emergency departments will continue to be capacity-constrained until efforts to decant volume through urgent care, better care management or redesigned primary care models begins to take effect — likely still a ways off.
Price and cost pressures. Pricing transparency will continue to be a focus, pressuring health systems to understand and reconsider their pricing structure, if necessary. The proliferation of high-deductible plans will raise consumer attention on prices and will raise the competitive advantage of less-expensive options outside the hospital. Rate increases from payers will continue in the low single digits (if any), and any upside will require participation in some value-based payment, such as shared savings or pay for performance. And with the new budget bill, new provider-based clinics will not be reimbursed any greater than physician practices. These pressures will continue to require operating-cost reductions, moving from cost per unit focus to cost per episode and efficiencies in patient throughput across the continuum.
Reaching across the care continuum. Health systems will continue expansion of their physician enterprise, although many will be troubled by the financial strain of operating large employed models. Compensation redesign to move away from strictly productivity-driven models will be a priority. The expansion and merging of clinically integrated networks will continue, as a vehicle to align incentives in population health and value-based payment models, as well as minimize the need for “owning and controlling” the continuum. The development or expansion of provider-owned health plans will continue as either a counterweight to the highly concentrated payer market or a means of taking global risk with payers or employers. Meanwhile, payers will extend their reach into the care delivery space, acquiring physician practices and clinical networks.
Talent management. Heightened demand for clinical leaders who can help to drive change and participation in population health management will increase competition as well as cost for these capabilities. Union activity may be sparked in some regions as cost pressures and reductions in force cause some upheaval in the labor market. Leadership turnover will be caused as mergers/consolidations occur and as systems evolve from “holding company” to “operating company” models (and sometimes back again).
Clinical service consolidation and facility repurposing. As health systems look to “rationalize” their clinical service lines into systemwide services to reduce variation in quality and cost, physician alignment with these moves will be one of the critical success factors. As a result of some consolidations or mergers, there will be a new wave of facility planning to either repurpose or enhance efficiency of existing structures.
Information technology and data governance. Capital will continue to pour into information technology tools and, in some cases, replacement of electronic health records. With the proliferation of population health tools and analytical systems also comes the need for new structures for data governance within health systems. Watch for new turf wars between chief information officers and business unit leaders around who is driving the bus on selection of systems and management of data.
As in 2015, the greatest challenge to most health care organizations in 2016 will be finding the right pace for adapting to or embracing new payment models. For most health systems, it is not a matter of if, but when population health will become less of a “strategy” and more a defining culture for the organization.
Laura P. Jacobs, M.P.H., is president of GE Healthcare Camden Group, Los Angeles.