Hospital’s Future in a Medicare Advantage World

Hospitals—long a centralizing force for the healthcare industry—are losing business faster than ever. More than 80 rural hospitals have closed across the country in just the last eight years. As the three foundational shifts take hold of healthcare and the government moves to expand the purview of Medicare Advantage (MA), hospitals’ traditional model will come under even more fire.

Since the healthcare world began migrating toward a value-based care environment, “success” has been re-defined. Filling beds is no longer the sole business objective of hospitals as more care moves to non-hospital settings. The new winning strategy requires a broader focus on giving patients the best care in the lowest-cost setting—especially in a Medicare Advantage world.

Medicare Advantage: Healthcare’s Example

MA plans have provided greater transparency and accountability in their move towards outcomes-based payments. CMS has already shown support for the plans by offering insurers under the plans flexibility. And insurers are responding—Anthem, Humana and WellCare have shown plans to expand their MA businesses through M&A activity.
Over time, we see more of the responsibility to lower care costs falling to the private sector, with Medicare Advantage leading the charge. The growth of the MA patient populations presents even greater financial impact for hospitals, including:

  • Increased risk of lower reimbursements if they’re unable to demonstrate the value of their care
  • Growing pressure to redesign delivery and invest in innovation and digital technology with value-based payment


The Hospital’s Future: BDO Insights

So, will hospitals cease to serve as the nucleus for care in the future? The answer comes down to three questions. In a recent webinar with Irving Levin Associates, BDO’s Patrick Pilch and David Friend discuss:


  1. How is the definition of patient care changing? Hospitals have long been in the business of treating sick patients. But that’s no longer enough. Hospitals are on the line to ensure patients stay well after they leave, as well as to initiate programs that help people avoid getting sick in the first place. “Healthcare is becoming location- and treatment-agnostic, instead focusing on what will improve the overall health of the patient. Successful healthcare organizations must understand the overall market’s needs and provide relevant services that not only treat, but prevent, illnesses,” says Pilch.
  2. Where will care be delivered? The five revolutionary forces are quickening. Reimbursement changes are forcing providers to re-examine how and where they treat patients. Insurers are driving the conversation, questioning whether certain tests and procedures can be done more affordably outside of hospital walls. For example, Anthem will no longer cover MRIs and CT scans at a hospital on an outpatient basis. “Providers must frame decisions about patient care around the 4 Rs: the right place for the right care at the right time and the right cost. In the future, hospitals won’t be the singular catch-all we see today; they will transform into a dispersed network of buildings that include skilled nursing facilities, physicians, outpatient MRI centers and home health agencies, each addressing specific needs in a more cost-effective manner,” says Friend.
  3. How can hospitals develop a winning future strategy? Technology will be an increasingly powerful influence, not only in improving medical treatments and diagnoses, but in connecting an expanding an ecosystem of providers to treat patients more holistically. Hospitals that embrace technology advancements and have forward-thinking management that understands how the value of the clinical enterprise is changing will come out ahead. “To succeed, you must know how to create value, which will be defined as clinical outcomes divided by cost. Hospitals will need invest wisely in the people and resources that can help them create more value,” says Friend.


Hospitals have an opportunity now to carve out their leadership role for the future direction of healthcare, and that means paying special attention to the move towards Medicare Advantage.
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