Healthcare Trends and Implications2012–2017

Futurescan

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FuturescanCo-sponsored by:• Society for Healthcare Strategy and Market

Development of the American Hospital Association • American College of Healthcare Executives• With Support From VHA Inc.

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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

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Society for Healthcare Strategy and Market Development

• Personal membership group of the American Hospital Association

• 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 communities

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Futurescan 2012–2017• Healthcare Reform: The Transformation of America’s Hospitals—

Economics Drives a New Business Model• Healthcare Reform: States Grapple With Health Insurance

Exchanges• 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

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“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.

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Actions We Should Start, Stop and/or Continue

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Implications of this Trend?At least 1 positive, and 1 negative.

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FutureScanning

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Healthcare ReformThe 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

governments.• Focus on outcomes, quality and access rather than

volume.• Move from physician-centric to team-based care.• Emphasize teamwork, discipline and humility as

organizational values.

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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 care.

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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.

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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 for-profit and nonprofit providers.

• Look for opportunities for collaboration between health insurers and provider organizations.

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Transforming America’s Hospitals: Consolidation 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 organizations.• 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.

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Healthcare ReformStates 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.

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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 implementation.• 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 exchange.

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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.

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Health Insurance Exchanges:The Benefit Package The federal government will allow individual states to define essential benefits

for its exchange.• Monitor the federal and state policy and legislation closely.• Closely monitor state agency-vendor relationships.• Actively advocate for a benefit package that maximizes quality at a reasonable cost.

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Health Insurance Exchanges:Transparency

Health insurance exchanges will promote transparency in an attempt to lower costs.• Begin making cost and quality information available now. • 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.

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Access to CapitalThe 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 lenders.• Monitor competitors’ situations regularly. Don’t assume weak organizations will always

be strapped for capital.

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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.

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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.

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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 improvements.• 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.

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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 control.• 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.

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DemographicsWill the Baby Boom Be a Boon to

Hospitals? Don’t Count on It

Jeff Goldsmith

Demographics:The 21st Century Retiree Many baby boomers will postpone retirement or look for new ways to make a meaningful

contribution post-retirement. 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.

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Demographics: Cost-Sensitive Seniors Because of the economic downturn, Medicare-eligible 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.

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Demographics: 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 imaging.• Develop specialized services for diabetes treatment and management.• 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 services.

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Demographics: 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.

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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.

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Community ConnectionsAn 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.

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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.

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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 costs.

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Community Connections: Engagement 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 community.• Communicate regularly with internal and external stakeholders.

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Community Connections: Collaboration Collaboration with other community organizations will be a critical strategy for providing

coordinated care.• 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 providers.• Offer expertise to local health departments that may be seeking accreditation by the Public Health

Accreditation Board.

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Bending the Cost CurveHospitals 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 admissions.• Work with clinical staff to coordinate care in attempts to reduce costs. • Set a goal to “break even” on Medicare patients by 2014.

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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 care.• 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.

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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 higher.• 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

efficiencies.• Make sure that information systems are flexible enough to capture meaningful performance

indicators.• Focus on patient satisfaction.

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Bending the Cost Curve: Readmissions 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 readmission.

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Bending the Cost Curve: Focus on the Intersections Successful providers will coordinate care across settings with payors and

community organizations.• 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.

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Clinical IntegrationDéjà 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 guidelines.• 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 base.

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Clinical Integration:Rewards and Consequences In clinically integrated systems, performance-based 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.

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Clinical Integration: Core Competencies ACOs and other integrated organizations will only be successful if they master

“2nd generation competencies.”• Adopt a common EHR that incorporates point-of-care protocols.• Create sufficient primary care capacity.• Implement evidence-based inpatient and outpatient care plans.• Incorporate proactive disease management programs.• Develop physician leadership and engagement.

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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.

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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.

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Physician StrategiesEmploying 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.

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Physician Strategies:Learning From the Past Hospitals will benefit from the mistakes of the 1990s and achieve strategic advantages by

employing physicians. • 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.

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Physician Strategies:Larger and Larger Groups The number of physicians in group practices and the size of physician groups will

continue to increase.• Develop affiliations with large independent groups of physicians.• 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.

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Physician Strategies: Shared Governance Physician-manager leadership dyads will be necessary for success with

employed physicians.• Make sure your organization will accept physician leaders as an integral part of the

management team.• Spread physician-administrator dyads throughout the organization.• Engage physicians in the selection of the physician leadership.• Ensure that employed physicians have easy access to the CEO.

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Physician Strategies: Practice Management Skills Hospitals and systems will need management personnel and infrastructure to integrate physician

practices.• 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.

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“‘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)

FuturescanThis presentation was adapted by Mary Stefl, PhD, Chair, Health Care Administration, Trinity University, from Futurescan: Healthcare Trends and Implications 2012–2017.

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 ache.org/HAP or call the ACHE/HAP Order Fulfillment Center at (301) 362-6905.

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Healthcare Trends and Implications2012–2017

Futurescan

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