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Your 2014 agenda: Exchanges, Medicaid expansion, and consolidation. With mid-term elections, insurance exchanges (love them or hate them), provider consolidation, cost management, and an economy that is growing slowly, this all points to an interesting year. Here are the top 10 healthcare trends for 2014, and the areas that management should keep an eye on.
1. Insurance exchanges will provide mixed results to providers. For those hospitals or physician groups that enjoy high prices or are operating at capacity, they most likely will not participate in the first year or two. Many “baby boomer” aged physicians may not choose to participate, wanting to avoid the challenges, investment, lower reimbursement, and disruption to their practice. Exchange issues will evolve around higher bad debt, lower than expected enrollment, very narrow networks, and the geographic concentration of the newly insured (where low income and Medicaid populations are concentrated).
2. New care and payment models will continue to develop and expand. Insurance companies and Medicare, along with some Medicaid programs, will continue to push for more relationships (i.e., contracts) with accountable care organizations (“ACOs”) and different payment models such as shared savings, co-management of service lines, bundled payment, and patient-centered medical homes (“PCMHs”). Expect to see a trend towards “shared savings” incentives with physicians based on lowering cost and improving quality and patient satisfaction. Some health plans will pay physicians more through the PCMH in anticipation of reduced spending overall (less use of specialists, hospitals, and more use of post-acute care). Health systems must adapt their care processes to include coordinated care management; often this means consolidating care management, use of hospitalists, and clinical protocols. Additionally, a robust Information Technology (“IT”) platform will be required.
3. Consolidation of providers will continue…the big will get bigger. With the pressure of increasing operating costs, physician alignment initiatives, new care models, IT investment, and limited access to capital (debt), many medical groups, IPAs, hospitals, and health systems will merge or be acquired. Health systems may merge with other systems to gain increased access points, greater critical mass, population health management knowledge, and a stronger presence in geographic areas or regions.
4. Physician shortage begins to take effect, and alignment is a priority. Anticipate the beginning of the decline in physician supply. There are some off-sets: people are seeing the physician less (due to benefit changes), there is growth, albeit small, in the use of telehealth and e-visits, and better use of nurse practitioners and other advanced practice providers. Additional insureds through Medicaid expansion and the Insurance Exchanges should also drive demand up for all services.
There will still be the issue of physician alignment. Organizations will need to explore co-management agreements, incentive pools based on defined metrics (e.g., savings, quality, and satisfaction), and participation in shared savings programs (e.g., ACO and bundled payments) for both Medicare and commercial beneficiaries.
5. Marketing and creating a strong brand will be important. The stronger the market position, the more critical it is for creating a strong brand. Expect to see an increased allocation of resources to brand an organization, especially during enrollment periods. Branding will utilize the power of name recognition, preference, expertise, and grow critical mass such that the public experiences the organization’s presence – everywhere. Anticipate greater use of social media, internet links, and marketing to the public. This strategy will be tailored to specific market segments (Medicaid, Medicare, ACOs, self-funded employers, etc.).
6. Transparency will continue to increase. This trend will grow, although it will become more prominent in 2015 and 2016. 2014 will begin the awareness of quality and cost profiles as public and private insurance exchanges utilize this information and make it available to the public. This effort will help drive the providers’ “value” in the public’s eye. The public can access numerous internet sites to see value, quality, and satisfaction ratings.
7. Large employers will increase their partnering with providers. This trend will be very dependent upon the market served. There has been success with BMW, where on-site clinics have been put in place. Private insurance exchanges have been put in place at IBM, Kmart, and Walgreens as examples. Further, large employers (e.g., Lowe’s, Walmart) are increasing their direct contracting with “Centers of Excellence” such as the Cleveland Clinic, Geisinger, Virginia Mason, and Baylor Scott & White Health.
Additionally, employers like Safeway have developed and now post pricing information for selected procedures, making them available on employee websites. This example has shown that the public is interested in value that link outcomes (quality) and most importantly price.
8. Expect continued deployment of new technology. The emphasis for most health systems and physician organizations is on the population health analytics. There is less emphasis on diagnostic and therapeutic equipment and facilities. As mentioned previously, the growing use of telehealth, e-visits, mobile apps, electronic data warehouse, population analytics, “big data,“ EHR, CPOE, and electronic prescriptions will continue. The big question for many health systems and physician organizations that are growing through merger and/or acquisition of other providers is how to move all of the owned providers (e.g., ambulatory sites, physician practices, hospitals, post-acute, etc.) to a common or at least compatible IT platform.
9. Health systems and hospitals will continue to expand their continuum of care within their market. As has been the trend over the past decade, hospitals will continue to vertically and horizontally diversify their delivery systems through ambulatory expansion. Expect to see providers vertically integrate into the post-acute care delivery continuum. The providers will put in place the “softer-lower spend” post-acute services (e.g., home health, hospice, palliative care) and then assess the need to convert or repurpose facilities to post-acute use in the areas of skilled nursing, rehabilitation, step down units, and transitional care units.
10. Labor relations will continue to be a challenge. While many providers believe more volume is on the way due to more insured people and Medicaid expansion, the reality is there is the potential for an increase in bad debt, revenue per unit increasing at a rate below operating expense growth, and growing capital needs that drive up operating costs, forcing management to reduce staffing. Further, lower facility use and lower utilization due to benefit design will also force labor cuts. Expect a small increase in organized labor sponsoring legislation to cap management compensation. Labor strife and layoffs will continue in 2014 with most staff reductions in the areas of non-clinical positions. Union organizing activities should increase and get more aggressive.
The transformation of healthcare is truly upon us in 2014, and we all are anxious regarding its impact. Demand for some services will increase while processes are put in place to reduce resource consumption, and provider consolidation will continue ahead, with systems assessing mergers with other systems. Given the mid-term election, the rhetoric this year will be very loud regarding “ObamaCare” with those who sing its praises and those who feel it is a disaster.
For more information pertaining to healthcare, contact Chivaroli & Associates.
