As T.S. Eliot once said: "If you aren't in over your head, how do you know how tall you are?"
Although hospital leaders may feel in over their heads most days, it helps to step back and take in the big picture. As detailed here, there are opportunities behind most obstacles facing hospitals in 2015.
Population health
Population health was one of the biggest ideas in healthcare this past year, and it will likely maintain or gain momentum in the next few years to come. But despite the frequent use of the term in the healthcare bubble, population health is a multidisciplinary concept to be shared between public health agencies, social institutions and policymakers.
Hospitals fit in there somewhere. Defining that role is one of the ongoing challenges they will face in 2015.
Hospitals' demand for population health expertise overwhelms the supply. Nearly 60 percent of health system and hospital CEOs ranked population health as the hardest skill set to find within the broader healthcare field, according to a 2014 American Hospital Association survey. Further, nearly half of executives polled identified community and population health management as a talent gap within their organizations. Some health systems are filling this gap by creating new C-suite positions: 10 percent of executives indicated their health system had a chief population health manager.
Quantifying population health is another challenge. Although healthcare leaders need to think creatively about how to improve the health of a geographic population, they should also maintain a healthy sense of skepticism about population health efforts. What might seem like a much-needed intervention on paper, such as a grocery store in a food desert, may be one small piece of a multipronged solution. There are no silver bullets, after all. Amid excitement for population health, systems may oversimplify problems and overinvest in solutions only to see the same health outcomes.
To find success, hospital leaders may need to diminish their traditional reliance on "programs" and instead focus more on partnerships with community organizations and nonprofits. Some health systems still act as autonomously as they can, ignoring a wealth of expertise and resources.
"When we talk to other population health managers, they have unearthed a number of unique challenges inside their populations, such as domestic violence, elder abuse and other public health crises," says Jason Dinger, PhD, CEO of MissionPoint Health Partners in Nashville, the accountable care organization affiliated with Saint Thomas Health. "Unfortunately, most respond by trying to implement their own unique program to respond to the issue. We usually encourage them to first speak with the experts in their community who work on these issues every day. In many cases these are nonprofit organizations that can add great value to the population health effort but often have trouble engaging and integrating with a health system's efforts."
Shifting from volume- to value-based reimbursement
The move from volume- to value-based reimbursement is inevitable. For now, it's a matter of how quickly providers should make it.
Move too fast, and hospitals risk losing revenue and implementing a strategy the market does not support. Move too slow, and they may lose partnership opportunities, experience and time that could have been spent modifying clinicians' behaviors and transforming practices.
In its 2014 national study of payers and providers, McKesson found 90 percent of payers already transitioned to some form of value-based reimbursement. Generally, providers are more reluctant to value-based care initiatives, such as accountable care organizations. Sixty percent of payers said they believe value-based reimbursement will have a positive finance effect on their organizations, while only 35 percent of healthcare providers believed the same.
Despite their feelings about new reimbursement models, both payers and providers agree they will soon eclipse traditional fee-for-service. Providers using mixed models expect fee-for-service to decrease from about 56 percent today to 34 percent by 2020.
The onset of pay-for-performance varies among markets, and several payers in a region are necessary to make the transition efficient and worthwhile for providers. Health systems can align with employers, other providers and payers to build a critical mass. Providers also need to adjust their thinking about value-based reimbursement from the short- to long-term. Taking it one pilot or contract at a time worked in years prior, but executives must now build a strategic plan that details where the organization needs to be in five years and how it will get there. This plan must be as flexible as it is detailed, for the environment is changing quickly.
Regulatory demands
Healthcare providers must adhere to numerous, complex regulations that set guidelines and expectations for quality, coding, reimbursement and overall care delivery. Although many of these regulations were designed to improve care and efficiency, many providers see them as burdensome and impractical.
Regulations like the transition to ICD-10 coding and the two-midnight rule, for example, each require providers to allocate extensive time, money and staff for effective implementation. These regulations — and the systemwide efforts required to meet them — are often met with frustration and resistance.
While successive delays in the start dates of these mandates may seem like a relief for some, arguably, delays only exacerbate the "burden" these regulations impose.
Venson Wallin, managing director at BDO Consulting and a member of the BDO Center for Healthcare Excellence & Innovation, said delayed implementation of certain regulations, such as the yearlong delay of ICD-10 until October 2015, creates additional issues for providers.
"The delays themselves impact a wide variety of aspects," Mr. Wallin said. "Prior to the delay, everyone was getting ready for billing using ICD-10 codes for implementation in October this year and working with coders. In actuality, with the delay of another year, there is a need for continuity around ICD-9 billing."
According to Mr. Wallin, the ICD-10 delay creates a resource gap. There are about 25,000 coders across the country that have been trained in ICD-10 and not ICD-9 in anticipation of implementation, he said.
While the ICD-10 delay may bring on new challenges, it does provide organizations that were behind in preparation for ICD-10 with a grace period.
"Hopefully those that are behind will use the additional year as an opportunity to catch up and focus on doing what they need to do. I wouldn't bet on another delay. Betting on another delay is a significant risk," Mr. Wallin said.
Other opportunities may emerge from delayed starts. If a regulation's delay is related to significant resistance within the industry because of cost or operationally from a patient perspective, CMS may delay and solicit input, make modifications or provide additional information to help ease the transition, Mr. Wallin explained.
For example, the two-midnight rule was delayed in part because of resistance from providers who contended the regulation imposed too many unnecessary requirements around clinical decision-making; many physicians thought rules relating to the amount of time patients could be admitted took much of the decision-making power out of their hands. In the face of significant protest, CMS offered an opportunity for providers to participate in an "open-door" teleconference during which they could ask questions, relay concerns and hear CMS officials clarify criteria.
The two-midnight rule, in theory, will ensure that any patient who stays in the hospital longer than two midnights legitimately needs to be there. According to the Washington Times, a potential benefit is reduced federal healthcare spending, though this would come at the cost of lower hospital reimbursements. The rule is supposed to also help establish criteria for admitting patients rather than letting the patient linger in observation status.
Other groups find healthcare regulations particularly burdensome. The fast-paced technology companies who are just getting their feet wet in the healthcare industry are finding the time it takes to develop and release products to the market is much longer in healthcare than what they are used to. Companies like Apple, Google and Amazon that have recently been developing, or plan to develop, apps and devices that can be used to serve health purposes, are finding themselves unusually tied down by regulation and inspection.
"I think the biggest challenge for [these companies] is the level of scrutiny and peer-review that needs to occur prior to introduction into the market. They are used to fairly rapid development and introduction to the market," Mr. Wallin said.
If an app or device is intended to serve a medical purpose, the company must submit the product to the FDA for review and testing. While the wait-time before introducing a healthcare product may be drastically longer than technology companies are used to, the development of such products could offer extensive benefits for users, software developers and healthcare providers alike.
Stringent FDA regulations may create the need for technology companies to establish partnerships with healthcare organizations. Having the ability to partner with healthcare organizations provides IT companies the clinical resources, perspective and knowledge that might not have otherwise been available to them, which will ultimately result in a better, safer product, Mr. Wallin said.
Accessible and downloadable healthcare products can potentially very positively influence population health. If hospitals and health systems can work with IT companies to develop products that focus on preventive care and tracking chronic conditions, the community could see great benefits.
"At the end of the day, that's what everyone wants; to control admissions and lower costs," Mr. Wallin said.
Infection control, especially in light of Ebola
Hospital infection control and prevention programs discovered newfound fame in 2014, thanks in large part to the appearance of Ebola in U.S. hospitals and its subsequent transmission to two healthcare workers treating an Ebola patient. The presence and transmission of the Ebola virus within U.S. borders steered the public eye toward the provider organizations' infection control efforts. It wasn't always positive: Ebola also brought attention to the staggering numbers of healthcare-associated infections that occur in U.S. hospitals annually (about 1.7 million, according to the Centers for Disease Control and Prevention).
All of this did not shed a positive light on infection control and prevention in patients' eyes. "Ebola has heightened the awareness of how important infection prevention is," says Linda Greene, RN, infection prevention manager for University of Rochester (N.Y.) Medical Center, Highland Hospital and a member of the Association for Professionals in Infection Control and Epidemiology's consulting board and APIC's Regulatory Review Committee.
The newfound attention being thrust upon infection prevention can yield positive results if hospitals seize the opportunity. Now is the time to invest in giving infection preventionists the resources — in terms of people, technology and funding — to be robust. Nurses can refocus on performing important daily tasks, like donning and doffing personal protective equipment, correctly and effectively when dealing with infectious diseases. And the infection prevention team can collectively "watch each others' backs," Ms. Greene says, which is called for in Ebola guidelines but can be applied to other actions, like reminding each other to perform proper hand hygiene.
"We're going to establish a culture in which infection prevention cannot be taken for granted," she says. "I think it really underscores how vitally important these programs are to the organizations, patients and the public."
Demonstrating the value of M&A to consumers
Whether they are an acquirer, acquired company or an organization pursuing a potential deal, virtually every hospital and health system will be touched by the unfolding wave of healthcare M&A. Even if the system is not involved in a deal, consolidation among hospitals, health systems and physician practices can upend traditional market dynamics, leaving existing systems with new and bigger competitors.
Take the merger between Downers Grove, Ill.-based Advocate Health Care and Evanston, Ill.-based NorthShore University HealthSystem, for instance. Overnight, two of the largest competitors in Chicago's metropolitan area became one of the largest systems in the country.
That deal will create a 16-hospital system called Advocate NorthShore Health Partners, which will be the largest in Illinois and the 11th largest nonprofit system in the country. It would take several transactions to comprise a comparable system, as there is not a single-step move that would rival the new 16-hospital system. Deals such as this dramatically and quickly alter the landscape for other hospitals in a market.
Going forward, those healthcare providers that are participating in M&A may have to worry more about satisfying a key stakeholder in their integration arms race: the consumer. In the past year, dialogue about the value of healthcare M&A grew beyond the healthcare circle and became more textured on a national level. The Wall Street Journal was one major newspaper to publish an ongoing series of op-eds about hospital M&A, for instance. Whereas leaders of hospitals, health systems or hospital associations have argued that the healthcare reform essentially compels them to consolidate, other expert voices have vehemently denied such claims and pointed to the ugly byproduct of increased prices.
The debate over healthcare M&A won't end overnight, but hospitals seem to face increased scrutiny to prove the value of such deals and the benefits they provide to consumers. How will healthcare providers improve transparency in how they measure integration? It may help if leaders focus more attention on partners' capabilities rather than their financial attractiveness. That way, systems can point to tangible, "patient-centered" ways a deal improved care delivery rather than a balance sheet.
Truly integrating systems
In the wake of consolidation, many executives are beginning to realize their health systems are merely jumbled collections of healthcare facilities with different strategies, distinct cultures, duplicate fundraising campaigns and varying reimbursement rates. Many have yet to achieve true "systemness."
Research from Strategy&, formerly Booz & Company, shows many health system transactions aren't successful. In a study of hospitals acquired between 1998 and 2008, just 41 percent outperformed their peers in operating margins and operating income.
"They hadn't managed to find the synergies they had hoped for. It never took place, because it would've required some very difficult choices and they didn't have the fortitude to make those choices," says healthcare strategist Igor Belokrinitsky, partner at Strategy&. "Alliances and power base make it hard to make difficult decisions."
However, disjointed health systems can find a silver lining in their stunted integration. In a parallel study, Strategy& found M&A strategies that leverage the distinctive capabilities of each of the partners are consistently successful.
"Traditional integration approaches are primarily concerned with merging assets to maximize synergy opportunities; they focus on the footprint, head counts, operations and cost reductions. In the process, organizations frequently end up destroying the unique capabilities they have acquired," the Strategy& report read.
Health systems that haven't achieved true integration yet are presented with the opportunity to reevaluate and develop a clear integration strategy — with the benefit that stalled integration likely preserved their mutually reinforcing capabilities.
To improve integration going forward, Mr. Belokrinitsky suggests laying out a roadmap with a strategy and end objective. He then advised starting with "no regret moves," the less crucial decisions that must be made to move forward. To make more difficult decisions, he suggests setting milestones and creating a temporary transformation office composed of both internal employees and external project managers and consultants. The transformation office can act as an unbiased third party and drive integration.
"Hospitals likely do not have the internal staff there specifically to do this kind of integration work. So it may require some handholding at least initially while they get going."
Overspecialization of the physician workforce and questions over the physician shortage
As an increasing number of Americans gain insurance coverage, the demand for primary care increases. It is the building block of healthcare reform. Yet not enough medical students are going into primary care, instead choosing more lucrative subspecialties.
Approximately $13 billion federal dollars are given to 759 medical institutions with residency programs, but 158 of them do not produce any primary care physicians, according to an Atlantic article from July 2013.
More than 6,000 regions across the U.S. are designated Health Professional Shortage Areas for their lack of primary care, according to the U.S. Department of Health and Human Services. Each physician in a Health Professional Shortage Area sees 3,500 or more patients.
Yet despite the increasing need for primary care, the health industry may still be able to fend off a full-blown crisis. Recently, there has been more conversation devoted to whether the physician shortage may unfold as predicted.
"The outdated shortage modeling is the assumption of how much an individual physician can treat. As we look at creating a more effective care model, we have seen a substantial increase in the number of patients that a primary care physician can see because they are working in conjunction with primary care coaches," says Rob Lazerow, practice manager of research and insights at the Advisory Board Company.
The shortage model may in fact be outdated — HHS shortage area modeling doesn't account for primary care provided by nurse practitioners or physician assistants in their projections.
"There is absolutely a move toward team-based care. In some cases it is nurse practitioners or community-based providers, [and] even paramedics are conducting in-home visits as part of their weekly shifts," says Mr. Lazerow. "Some have projected shortages there as well. It would not surprise me if supply does not keep up."
If he is right, the gap in primary care physicians due to overspecialization can only be partially abated by other healthcare providers.
"One way around a shortage, if you can't increase supply, is to figure out how you can restrict demand. ACO-style models are all about preventing care in the first place. That absolutely could be a strategy. The reality, though, is that it takes time to do that," says Mr. Lazerow. "It's not an overnight solution. The amount of time it takes to prevent someone from needing a surgery is a matter of years."
Until medical schools are incentivized to graduate more primary care physicians and ACOs catch up, healthcare reform may need to depend on alternate primary care providers.
Hospital closures
Goldilocks was more certain about the proper temperature of her porridge than healthcare experts seem to be about the proper number of hospitals in the United States.
Some make the argument that there are too many hospitals and hospital beds, leading to low occupancy rates, consolidation and closures. Others argue that America has too few hospitals, especially in critical access areas, endangering patients who have to travel long distances for care. For instance, researchers from UC San Francisco recently discovered a correlation between emergency department closures and increased inpatient mortality rates at hospitals in the surrounding area.
Regardless of whether they should, hospitals are closing around the country, presenting numerous challenges for the patients, employees and community residents.
Kevin C. "Casey" Nolan, managing director of the healthcare provider strategy practice at Navigant Consulting, highlighted several challenges communities face after a hospital closes, including the wind down and redeployment of patients to other facilities and the issue of what to do with the physical hospital and real estate.
Dawn Gideon, managing director of Huron Consulting Group, cited securing and transporting EMRs as a major challenge for hospitals shutting down, as well.
Both Mr. Nolan and Ms. Gideon explained how hospitals shutting down can be a major hit to local economies given their status as major employers. Any debt and pension liability after a shut down can also be extremely problematic.
Shrinking inpatient activity, increasing reimbursement rate pressures, changing delivery patterns and numerous other factors lead Mr. Nolan to predict an increase in the number of hospital closures hospitals in the near future.
Although any closure is going to cause speed bumps, Ms. Gideon argues the real concern is not so much that hospitals are closing but what types of hospitals are closing.
"One of the things we're seeing is, not surprisingly, that the safety-net hospitals caring for the uninsured or the Medicaid populations are the most financially distressed and under threat of closure," said Ms. Gideon. "The impact on those communities when safety-net hospitals close their doors is pretty significant."
On the flipside, hospital closures present opportunities to improve integration of care and realign delivery capacity in a given market with what the community really needs.
"In many communities, what you'll find is that the people no longer need an inpatient hospital, but perhaps they need a comprehensive ambulatory center with lots of services," said Mr. Nolan. The key, in his opinion, is not trying to be all things to all people but honing in on what the community demands and what the hospital or health system can best provide.
Reimbursement rate differences
On average, Medicare paid hospital outpatient departments 78 percent more than ambulatory surgery centers for the same procedure in 2013, in accordance with the Medicare Payment Advisory Commission.
Addressing the payment differential in spring 2014, the HHS Office of Inspector General recommended CMS reduce hospital outpatient prospective payment system rates for ASC-approved procedures to ASC levels for low-risk patients. The change could save Medicare as much as $15 billion between 2012 through 2017, but it could also present a big challenge to hospitals.
Hospitals have very specialized real estate that is capital intensive and difficult to convert, according to Mr. Belokrinitsky with Strategy&.
"Hospitals' whole business model is based on covering these fixed costs as well as ensuring high occupation and utilization of the operating and patient rooms that have been built," said Mr. Belokrinitsky. "When hospitals have a brand new ambulatory surgical center nearby that has potentially lower costs because it's newer and has less overhead, while the hospitals have a higher cost base, they are inherently disadvantaged."
Hospitals and health systems have several ways of addressing the issue, including creating their own ASC in their competitor's territory or entering into joint ventures and partnerships with physician groups to open an ASC together. In addition to pushing hospitals to decide whether or not to expand, reimbursement rate differences also give hospitals the opportunity to reevaluate their costs.
"Fundamentally, reimbursement rate differences creates incentive for all hospitals and health systems to get a better handle on their costs and prepare themselves for transparency," said Mr. Belokrinitsky. "Every hospital has the opportunity to get rid of waste as well as get rid of processes and activities that don't add value for patients, physicians or staff, and don't improve quality. The ASCs just make the pressure that much greater."
Data, data everywhere
Health IT has generated some of the biggest buzzwords in healthcare this year, including such staples as "disruption," "innovation" and "big data."
And, health IT does things worthy of those big ideas in areas both clinically and consumer-driven. For instance: IBM's supercomputer Watson is poised to tailor treatment plans to an individual's genetics. Telehealth brings world-class care to the most remote areas in the country. This year alone, Apple, Microsoft, Samsung and more have launched platforms for health and wellness tracking accompanied by wearable consumer technology.
However, these advancements mean data is piling up faster than many healthcare organizations are prepared to use it. This is the focus of Thomas Janssen's job. Manager of Springfield, Ill.-based Memorial Health System's data warehouse, he works closely with the team of C-suite stakeholders to deliver meaningful insights for patient care.
Mr. Janssen says when he first started, Memorial had the back-end systems to track its data, but no system-wide infrastructure to leverage it. "When we talk about big data, we're not just talking about volumes — we're talking about type of data. That's one of the biggest challenges of making sense of the data, seeing how it's stored and bringing it all together," he says.
He was tasked with doing just that. For a while, the focus for big data analysis was on descriptive analytics — what had already occurred. Then, it was on predictive analytics, or what might happen. Now, Mr. Janssen says he's focused on building data systems to for prescriptive analytics: what Memorial can do to prevent things that might happen. "It's a piece that's really of interest to us. Why a patient comes back, when he might come back again, and how to understand the root causes of that and be proactive with that patient to provide better care at lower cost for a better outcome."
However, preparing data to be integrated is a huge challenge for healthcare organizations undertaking data warehousing, he says, and the goals for data analysis continue to move, which means it's easy to get left behind.
While Memorial Health System has been remarkably successful, the story isn't the same for everyone. The fact that data analytics in healthcare are far behind capabilities of lower-risk organizations, such as fast food or retail sales, is commonly acknowledged: Lack of interoperation in the industry cripples analytics capabilities, and there are no easy solutions in reach.
The advances healthcare has made toward population health-based preventive analytics have been impressive, and for organizations in isolation, leveraging health data in pursuit of value-based care and population health management is becoming a reality. But for many, there is still a long way to go.