5 Indicators of Where Healthcare is Headed

November 2017

If you want to know where healthcare is headed, start by following the data.

At the Washington Business Journal’s recent Hospital CEO Summit in Washington, four healthcare leaders from Sibley Memorial Hospital, Kaiser Permanente of the Mid-Atlantic States, Children’s National Health System and George Washington University Hospital offered their insight on where the industry is headed. First stop on the route? It’s all in the data.

Here are the top 5 insights, as told from inside the beltway:

1) Rigor around data-driven decision-making, quality and safety is growing: The panelists discussed the different ways each is using data and process improvements to run their organizations. One of the methods was a daily management reporting process for a senior leadership team at a hospital, run seven days a week, year-round, with significant tracking and reporting of key metrics.

BDO’s quick take: System-wide, metrics-driven reporting to achieve operational goals is a best practice. The need has been catalyzed further by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)’s Quality Payment Program for any hospitals with physician groups. One path to compliance is the Merit-based Incentive Payment System, which requires the collection of performance data and asks providers to outline how they’ve used technology to improve care.

Read about the upcoming March 31, 2018 deadline for submitting data to the Centers for Medicare & Medicaid Services.

2) As the move toward value-based outcomes intensifies, the focus on efficiency, reducing waste and increasing margins will too. The panelists unanimously agreed on the need to deliver higher quality care and reduce costs. One of the hospital executives described a tremendous amount of waste in how healthcare is delivered overall and cited “razor-thin margins” at most hospitals in the country. He stated that more than 45 percent of U.S. hospitals are operating in the red. The key takeaway? The push to make care more affordable – and more efficient – is accelerating.

BDO’s quick take: Industry pressures associated with demographic shifts, rising drug costs, healthcare spending cuts and complex disease conditions all challenge healthcare’s ability to attain value. These pressures suggest the need for aligning, implementing and sustaining healthcare delivery that is both clinically and financially efficient. Leading policymakers, researchers and experts have identified a promising evidence-driven approach. Focusing on patient outcomes to facilitate healthcare provider attempts to cut costs and enhance the overall well-being of their patient populations will be key.

The key principles of value-based healthcare—a focus on quality, cost and patient outcomes across the entire care continuum—are more important than ever. Aligning all stakeholders so they can capitalize on the value in the value-based healthcare environment means reforming an entrenched system. Instead of separate payments for each consultation or treatment, healthcare organizations must adopt a new approach to payments, tied to episodes of care in systems such as bundled payments or on risk-adjusted models of care (e.g., Medicare Advantage or PACE programs).
Read more about how providers can truly define—and capture—value.

3) Care is continuing to move outside the four walls of the hospital, and it’s shifting to ambulatory care. Many of the panelists commented on the declining length in stay for hospital visits. Surgical procedures such as joint replacements that used to require four-day stays are being reduced to one-day stays. The expansion and build-out of more ambulatory care facilities to make healthcare more accessible where people live and work is accelerating.

BDO’s quick take: Integrated supply chains are becoming the norm. The development of integrated supply chains will provide care on an industrial scale, replacing the mom-and-pop and single-shingle approach to healthcare delivery. Individual healthcare silos will disappear. If you need your hip replaced, the surgeon will not be separate from the hospital or the drugs or the rehabilitation facility or the home healthcare agency. Just the opposite, in fact.

CMS’ mandatory Comprehensive Care Joint Replacement Program (CJR) began to change the rules, assigning risk to the primary convener of services—in most cases, the hospital. This requires hospitals to organize and manage care far beyond the four walls of their facilities, making them responsible for the cost and quality of care provided by skilled nursing facilities. As the convener of care, the hospital is required to find all the providers, charge one unified price, be paid by CMS at that single price and then find an equitable way of distributing the fee to all the players.  According to a JAMA Internal Medicine study, savings are beginning to be realized.  However, former Health and Human Services Secretary Dr. Tom Price had proposed reducing the number of mandatory geographic areas participating in CJR from 67 to 34.  Additionally, Dr. Price proposed making participation in the model voluntary for all low-volume and rural hospitals in all geographic areas. Ambulatory surgery centers were proposed to be conveners of risk. Notwithstanding the uncertainty, the dynamic of market and regulatory forces are converging to move care from hospital settings to non-hospital settings, impose site neutrality and price determinants for care, and form integrated supply chains.  All are components of the five revolutionary forces shaping healthcare investment.

Read about the five forces.

4) The opioid epidemic remains one of the top public health issue in the U.S. The panelists agreed universally that the mental health of and ER visits by opioid addicts is the number one public health issue in U.S. healthcare. Some panelists referenced proactive steps they are taking to handle the influx of such patients in the emergency room. One organization is attempting to use telemedicine to help treat children and adolescents for addiction. Behavioral health units are looking to expand outpatient access, and primary care facilities are incorporating behavioral health services into their offerings.

BDO’s quick take: Over the last several years, a number of unprecedented changes have occurred in the behavioral health market that spurred consolidation. The number of covered lives with behavioral health issues has grown faster than the availability of services to treat them and demand has significantly outstripped services supply.

The initial and primary motive for increased demand and reimbursement for behavioral health services occurred in 2008 when Congress passed the Mental Health Parity and Addiction Equity Act (MHPAEA). This act requires that insurers equalize coverage for behavioral health and medical health benefits in terms of co-pays, deductibles, lifetime caps and access to providers. Also in 2008, Congress passed the Medicare Improvements for Patients and Providers Act (MIPPA), which increased access to mental health in federal programs. In 2013, Congress issued clarifying legislation imposing penalties and sanctions on insurers that did not comply with these requirements. In 2010, the Affordable Care Act (ACA, Obamacare) allowed adult children aged 18 through 26 to remain on their parents’ insurance. It also built on MHPAEA with the requirement that most insurance plans cover mental health and substance abuse services—the largest expansion of such coverage in a generation. These major changes in reimbursement and confluence of regulatory events have resulted in marked improvements in the financing of behavioral health. Despite growth in privately owned treatment centers, the opioid crisis has reached a breaking point for hospitals struggling to cope with the influx of addicts in the U.S. Treating addiction as a chronic disease rather than an episodic encounter will be critical. Hospitals can and should partner with behavioral health treatment centers (and police departments) to intervene, care for, treat and track patients after discharge to prevent readmissions. BDO has seen innovative and successful partnership models among hospitals, recovery centers and local police departments, most recently at Gosnold on Cape Cod with three hospitals in Massachusetts. Intervention specialists from Gosnold are present in the ER to assist overdose victims seven days a week and encourage them to seek follow-up treatment as part of this innovative partnership. 

Read more on the behavioral health market dynamics and demographics.
5) There is strong bipartisan desire among hospital executives to build upon the Affordable Care Act rather than simply repeal it. Panelists voiced concern about efforts to repeal and replace the ACA resulting in potential reductions to Medicare and Medicaid and hence, reduced access to care and cost increases. One CEO expressed distinct concern given half of his patient population consists of Medicaid patients in DC.

BDO’s quick take: Three sea changes are happening today in healthcare: the move from mandates to choice, from regulation to competition and from subsidies to actuarial soundness. These changes will continue to shape how healthcare entities are valued, the way care is paid for and regulated and how various stakeholders invest in the industry. After the failure of two repeal efforts in 2017, and the Trump administration’s executive order to end cost-sharing subsidies, patients and providers could see adverse impacts, with significant increases in premiums by insurers for lower-income enrollees to counteract losses in subsidies. Fewer enrollees and fewer insured Americans would spell higher costs and outstanding collections issues for providers and hospitals in 2018-2019, putting pressure on already strained expense systems. A focused look at non-labor expense reductions must be taken in 2018 to balance these headwinds.