I recently had the opportunity to hear a presentation by Brandi Greenberg, Managing Director at The Advisory Board and the Healthcare Supplier/Provider Institute in Las Vegas. Brandi presented research findings that are packaged for the C-Suite. I found it very enlightening and wanted to share my notes with you.
Please provide comments, or contact me directly with questions!
Opening Premise: No matter the legislative, political or legal activities around healthcare and healthcare reform, there are other key market and business factors looming that are dictating the need for change.
CURRENT THINGS THAT ARE HAPPENING
- Patients still deferring/forgoing procedures due to cost
- 2010 report on median hospital operating margins: 2.4%
- Banks are still tight on lending funds, so it is hard to get capital for investments
- The margins are too slim for hospitals to self-finance capital investment
THERE ARE 4 MAIN GAME CHANGERS
- The first wave of the “Silver Tsunami” is hitting; impacts margins in two ways:
- Payer mix shift: from private insurance to Medicare, which means lower reimbursement to hospital, lower margin for services delivered
- “Market basket” of delivered services is shifting from surgical to medical procedures
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- Medical treatment has lower reimbursement levels and uses more resources
- High revenue surgical procedure volume will trend down, as a percentage of delivered services
- Hospitals/IDNs cannot depend on private pay insurance reimbursement to cover gaps of Medicare-led reimbursement cuts, as they have historically
- The squeeze on margins is only going to get worse
- Payment Reforms
- Still very much a project in development, but it is already in action
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- Mandatory projects: Value-Based Purchasing; Hospital Readmission Reduction Program
- Pilot Programs: Bundled Payments (5 models); Shared Savings; Accountable Care Organizations (ACOs)
- Will tie into comparative effectiveness and quality of outcomes initiatives
- RAC (Recovery Audit Contractor Program) and CMS Utilization Reviews
- Builds on RAC fraud investigations was created by legislation in 2003 and 2006 (http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/recovery-audit-program/index.html?redirect=/RAC/)
- Setting stage for more scrutiny of “formularies of care”, appropriateness of therapies/care delivered and utilization of therapies/procedures
- Can have a big financial/legal impact on organizations
THIS YEAR’S REALITIES
- Need to drive down healthcare cost growth
- Need to deliver high quality, coordinated care
- Need to engage patients to be active participants in their healthcare to improve outcomes
TRENDS IN SUPPLY CHAIN
- Migration to Regional Purchasing Coalitions and self-contracting
- Driver: e-sourcing
- Advisory Board survey found 88% of the hospitals surveyed are looking into self-contracting
- Shift to delivery of care to ambulatory and other settings outside acute care facility
- Mergers and acquisitions continuing, but in more disruptive manner
- Payers or private equity firms buying healthcare organizations
- Expanding emergence of patient-centered “Medical Home”
- Comprehensive primary care delivery
- Currently led by commercial payers
Favorite Quote: “Do not need innovation in products, but innovation in the processes.”