The JP Morgan Healthcare Conference took place this week in San Francisco. While most of the updates you'll find from this conference focus on public, private-equity backed and venture-backed companies, the nonprofit track of the conference focuses on hospitals — and there were some pretty interesting and consistent takeaways.
During the conference, CEOs and CFOs from over 20 major healthcare delivery systems presented for 30 minutes each. Organizations include Downers Grove, Ill.-based Advocate Health Care, Milwaukee-based Aurora Health Care, Dallas-based Baylor Scott & White Health, Cleveland Clinic, Danville, Pa.-based Geisinger Health System, Salt Lake City-based Intermountain Healthcare, Chicago-based Northwestern Medicine, Boston-based Partners HealthCare, Nashville, Tenn.-based Vanderbilt University Medical Center and University of Wisconsin Health, based in Madison. Clearly an impressive and important group of players.
As stated by many at the conference many times, perhaps what was most remarkable was the consistency in strategy. In other words, health systems know what they want to and need to do. From this point forward, it's all about execution.
Here were the top 10 trends:
1. Changing payment structures. Every organization is starting to get paid in different ways. They are taking on payment risk for delivering better care at a lower cost. While in some cases these new contracts represent a relative small percentage of revenue, it appears that every health system is skating to where the puck is going and betting that value-based care will be the system of payment of the future. And that it is a better, more responsible way to run their organizations.
2. Population health and understanding cost and margins. Everyone is continuing to get their arms around population health so they can better manage groups of patients. Not a surprise, nothing knew there. What is new is the increased focused on understanding cost as a requirement to driving margins in bundled care contracts. Clearly cost accounting is quickly becoming a core system with a focus on understanding both inpatient and outpatient cost, something traditional cost accounting systems can't do.
3. Managing unit cost and reducing the cost of care delivery. Per the point above, the one strategy that works in both traditional fee-for-service and value-based care is driving out cost. Every organization that presented identified lowering the per-unit cost of care delivery as a top board-level strategic objective. Some targets were as high as $400 million, but everyone had a target. This positions these organizations to take on risk-based and capitated contracts and actually know their margins.
4. Becoming a health plan/company. Almost everyone is going after the risk premium now. Of the 23 organizations that presented, more than 20 already have a health plan in place or are developing one. One example is Intermountain Healthcare's insurance product, which 760,000 people have as their primary plan. Most of these delivery systems are now referring to themselves as health and healthcare companies vs. hospitals and healthcare systems.
5. Outpatient shift. There continues to be a major shift to the outpatient setting, both in volume and revenue. Health systems are organizing themselves around this by increasing their presence in the ambulatory setting. West Des Moines, Iowa-based UnityPoint is an example of this. The system now has 100 + clinics throughout Iowa, Wisconsin and Illinois.
6. Personalized medicine. Personalized medicine is becoming increasingly important so that specific treatment protocols can be developed for specific patients. As an example, Geisinger is using predictive analytics to look at family history to determine potential health issues before they happen. They can proactively intervene with patients as it relates to their diets, medications, etc. As many in this market know, when Geisinger speaks, every health system listens.
7. Scale. There is a push to continue to get larger through mergers and acquisitions to survive and thrive in the current healthcare marketplace. This allows systems to reach more patients, manage populations more effectively and to negotiate better rates from suppliers/insurers.
8. Partnerships. Per the point above on scale, health systems are increasingly looking to partner with other health systems that are geographically connected to compete and serve patients better. As an example, Aurora Health Care has started a partnership with seven other health systems in Wisconsin called 'About Health.' They compete with these organizations in some markets, but also partner with them to create scale.
9. Consumerism. For the first time ever, healthcare is becoming a consumer product. People want better access to care and they want to know how much they are paying for their care. They want ease of access and don't want to wait for a doctor who is only open from 9 a.m. - 5 p.m. As an example, Advocate in the Chicago market just bought 50+ of Walgreens' clinics inside stores. This embraces consumerism and gets them in front of new patients.
10. Brand. Strong brands and reputations are taking center stage. Many organizations are focused on their brand's reputation in their markets as healthcare becomes a consumer-driven marketplace. It was pretty interesting to hear the level of emphasis on this — clearly this ties to the consumerism push.
Clearly there is more in motion, but these are some of the key trends that showed up consistently throughout the presentations. It is refreshing to see the clarity and consistency. It provides a great opportunity to drive a scalable transformation of the health system that doesn't just benefit one patient or one community, but every patient in every community.
About the author
Vince Panozzo started his career at Strata Decision in 2003 and currently serves as Senior Vice President and Chief Revenue Officer. As CRO, Vince leads business development for Strata Decision and is responsible for expanding the company's footprint with new and existing customers.
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