What the C-Suite Needs to Know about US Healthcare

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.


  • 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


  1. 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
    • Medical treatment has lower reimbursement levels and uses more resources
    • High revenue surgical procedure volume will trend down, as a percentage of delivered services
  2. 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
  3. Payment Reforms
    • Still very much a project in development, but it is already in action
    • 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
  4. RAC (Recovery Audit Contractor Program) and CMS Utilization Reviews
    • Builds on RAC fraud investigations was created by legislation in 2003 and 2006 (
    • 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


  • 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


  • 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.”


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