The nation's healthcare system will undergo tremendous changes in 2016. While macro factors are at play, some of the greatest challenges will be finding ways to respond to new payment models, consumer expectations, as well as changing organizational operations, facilities, and culture to respond to population health strategies. Here's a look at the trends and factors that will have the greatest impact during 2016:
Macro Issues: A Changing Industry
- The World is Shrinking. Consolidation is one of the biggest phenomena occurring in every arena of healthcare. While we can expect the regulatory approvals for the major payer transactions to be resolved during 2016, keep an ear to the ground for additional mergers. As the number of players shrinks, this will impact both payer and provider strategies, particularly in markets where the payer mix is already highly concentrated. In the provider realm, there will be additional eyes focused on these actions as the Federal Trade Commission will continue scrutiny of provider consolidations, including hospital and medical group acquisitions. "It will be essential to demonstrate direct consumer benefit related to efficiency, access and quality, both pre- and post-merger," said Laura Jacobs, president, GE Healthcare Camden Group. Watch for consolidation to take many forms -- not just asset mergers but many other types of affiliations and integrated relationships.
- Innovation Will Rock the Boat. From technology, to new models of care, to new approaches to patient experiences, innovation will cause ongoing marketplace disruption. Private equity dollars will continue to flow into mobile technology, while new primary care delivery models and telehealth will offer different ways to engage consumers. In addition, retail giants like CVS and Walgreens/Rite-Aid will push further into care delivery, pressuring traditional providers to enhance access, change delivery models, and/ or forge partnerships to address this issue. At the same time, healthcare organizations will be required to enhance efforts to improve the patient experience far beyond measuring patient satisfaction -- the experience must be exceptional at every encounter -- from electronic to face-to-face visits.
- Expansion and Redefinition of Health Systems. Health systems will continue to expand their physician enterprise, although many will be challenged by the financial strain of operating large employed models. Compensation redesign to move away from strictly productivity-driven models will be a priority. 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. Expect ongoing development or expansion of provider-owned health plans 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.
Follow the Money
- Transparency and the Pocketbook. Pressures related to price and cost -- along with the adjacent need for transparency -- will drive more transformation. Consumer scrutiny will play an increasing role in this dynamic as high deductible plans force them to pay closer attention to price. As a result, lower-cost alternatives will have a competitive advantage. Because payer rate increases will be in the low single digits (if at all), any upside will require participation in some value-based payment, such as shared savings or pay-for-performance. In addition, thanks to the new budget bill, new provider-based clinics will not be reimbursed any more than physician practices. These pressures will continue to force more efficiencies across the continuum related to patient throughput and require operating cost reductions, moving from cost-per-unit to cost-per-episode basis.
- The Variety Show: Value-Based Payments. Value-based initiatives may radically change referral patterns and the need for effective population health management. For an example, consider the 2015 introduction of the Comprehensive Care for Joint Replacement (CJR) model for Medicare -- with a roll-out in 2016. There is no way to predict how quickly new similar initiatives could strike your market. In addition, as employers introduce narrow networks to better control costs, some markets will experience acceleration of employer direct contracting. 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 care model perspective will cause more confusion before the fog clears.
- Increased Focus on Post-Acute Care. The spotlight will shine on post-acute care, thanks to population health management models and bundled payment. We'll see the emergence of "preferred" networks of providers providing these services, as well as repurposing acute care facilities to meet the needs of post-acute patients. More transactions involving post-acute providers -- home health, skilled nursing, rehabilitation, hospice -- will create increased upheaval in this realm of healthcare.
Inside the Walls
- Patient Volume: The Seesaw Effect. Changing dynamics in the healthcare system will have a give-and-take impact on patient volume. While new payment models will decrease acute hospital utilization, the continued expansion of Medicaid and the insured population through the public exchanges will push additional patients through the doors. Additional factors feeding demand across the spectrum include an aging population and the ongoing rise of obesity and chronic disease. Although urgent care, better care management and redesigned primary care models will eventually deflect patients from the emergency department, the ultimate impact of these initiatives will take a while, requiring these areas of hospital to operate at (or over) capacity.
- The People Factor. Change cannot occur without effective leadership, leading to an increased demand for clinical leaders who can help drive transformation. Participation in population health management will increase competition, as well as cost, for these capabilities. At the same time, there will be leadership turnover as mergers/consolidations occur and as systems evolve from "holding company" to "operating company" models (and sometimes back again). Finally, be on the lookout for union activity, which may be sparked in some regions due to cost pressures and reductions in force.
- The Makeover. As administrators "rationalize" clinical service lines, they will strive to reduce variation in quality and cost across health systems. Physician alignment with these moves will be crucial. Simultaneously, consolidations and mergers will spawn a new wave of facility planning to repurpose or enhance the efficiency of existing structures.
- The Rise of IT and Turf Wars. One area where capital will continue to flow: IT tools and resources. The need for new structures for data governance within health systems will be driven by the proliferation of population health tools and analytical systems. And in a related development, watch for a tug-of-war between CIOs and business unit leaders. Turf battles may ensue on selection of systems and data management.