Future-proofing for Health Care’s Four Alternate Realities

April 26, 2018

Within the industry and without, opinion leaders are making sweeping predictions about the future of hospitals:

• Dr. Zeke Emanuel of University of Pennsylvania wrote in The New York Times that hospitals will be obsolete.
• Dr. Steve Klasko of Jefferson Health says in his book and in a recent Modern Healthcare interview that someday, health care leaders will think of hospitals as mere ancillary parts of larger, more complex systems.
• Jeffrey Romoff of UPMC speaks about a future in which, for most people, the great majority of health services will be provided far from hospitals. Technological advances will allow more home-based, office-based, and smart phone-based care. The only entities resembling today’s hospitals will be the relatively few quaternary behemoths where the most advanced surgical care and research will be concentrated.

No wonder hospital leaders feel constant pressure. They must manage today’s very tough operational and financial challenges and, at the same time, prepare for the transformations these visionaries and others are describing.

What kind of future, exactly, should hospital leaders prepare for?

Four likely scenarios for the future of health care

No one knows precisely how health care will evolve. What we do know is that powerful technological, scientific, consumer, political, and market forces are at work shaping its future.

While the pace and precise contours of change are uncertain, we can imagine a set of alternative futures that might emerge. Several years ago, the HAP Board did exactly that.

Based on the board’s predictions, and on developments since then, I see these four alternate realities for the future of health care:

1. Consumer as King:  Consumers press hard for greater innovation, efficiency, and convenience. Pressure mounts to deliver less costly options.  State oversight of health care comes under assault.
2. The Land of the Giants:  Provider consolidation and new entrants (Amazon, CVS) accelerate. Fully integrated financing and delivery systems become the norm. Large, self-contained health care systems amass and leverage data to achieve efficiencies, drive clinical improvement, and deliver personalized, optimized care at lower cost.
3. Single Payor Tantrum:  Innovation is too slow and consolidation fails to lower costs. The U.S. throws up its hands and joins European industrial countries in turning all insurance financing over to a single government payor: “Medicare for All,” or something similar.
4. Status Quo Plus:  Consolidation continues, but the system reaches equilibrium and looks similar to today’s, with greater efficiency and innovation providing marginal progress in cutting costs and boosting convenience. Consumers are on the hook for an ever-increasing share of their health care spending.

In 20 years, the system is likely to look like one of these scenarios. How are today’s hospital leaders preparing to survive and thrive?

10 strategies for success, regardless of future realities

Experts cite ten major strategies being employed to varying degrees to prepare for the future of health care. Many Pennsylvania hospitals and health systems are using these approaches to “future-proof” their service delivery, come what may.

Here’s a quick recap.

1. Merging and partnering:  Hospitals and health systems want to care for patients across entire episodes of care, providing the full complement of clinical services needed. At the same time, cost pressures are pushing hospitals to seek economies of scale. Mergers and acquisitions and other types of partnerships help achieve both goals. Pennsylvania has seen 39 health care acquisitions since 2014.
2. Expanding ambulatory and outpatient care:  To reduce health care costs and spending, hospitals are moving care out into the community. They are investing “upstream” on routine and preventive care delivered in doctor’s offices and “downstream,” post-discharge, to prevent avoidable readmissions.
3. Reducing inpatient capacity:  Keeping patients healthier and out of the hospital is reducing the need for inpatient capacity. Hospital leaders call it “demand destruction.” In Pennsylvania, hospital days per thousand population have dropped by more than 100 during the past ten years.
4. Measuring and managing clinical outcomes:  Pay for performance, value-based payment, and population health are part and parcel of modern health care delivery and payment. “No outcome, no income” as the saying goes.
5. Improving reliability—cutting error and harm:  Payors, patients, and hospitals themselves are pushing for zero tolerance. We’re making progress. With HAP’s support as part of Center for Medicaid & Medicare Services’ Partnership for Patients Initiative, participating Pennsylvania hospitals collectively reduced sepsis mortality by more than a third (36%) and post-operative sepsis by nearly 70 percent.
6. Improving convenience, reducing friction:  As Ken Kauffman has noted, consumers are urged to take responsibility for improving their own health—and paying more out of pocket for their health care—they are demanding easier online access to health records, open scheduling, on-demand telemedicine services, and predictable, understandable hospital bills.
7. Redesigning workflows and the workforce:  We are facing a workforce shortage as the nation’s population ages. What’s more, the very nature of health care (more integrated, less inpatient-based) requires a workforce that supports patients across the continuum and relies on more effective use of physician expertise and critical thinking. We need team-based care, with greater use of advanced practice professionals and community health workers.
8. Cutting waste, reducing unit costs:  Experts, including the Institute of Medicine, have targeted about 30 percent of overall health care spending as wasteful. The culprits include repeat tests and the high costs of regulatory burdens and poor outcomes. This wasted spending is hard to address, but new ventures like the collaboration of Amazon, Berkshire Hathaway, and JP Morgan Chase have vowed to try.
9. Accepting, managing, and diversifying financial risk:  Through new payment models such as accountable care organizations (ACOs), hospitals and health systems are learning how to deliver good outcomes while avoiding unnecessary health care utilization and spending. Currently, 39 ACOs operate in Pennsylvania and have an estimated 800,000 potential patients (attributed lives).
10. Addressing social determinants of health:  A growing appreciation for the degree to which socioeconomic challenges compromise health and health care is prompting hospitals to address food insecurity, housing challenges, transportation barriers, and more. Population health goals demand solutions for these issues, but who pays for these additional resources remains a question mark.

None of this is news to hospital leaders. It’s the source of the relentless pressure they feel to innovate and adapt. They must prepares for a future that’s likely very different, but still unclear.

As the association for Pennsylvania hospitals and health systems, HAP is taking steps to help. I’ll describe those in my next blog.

Meanwhile, I’d really like to hear which future you think will prevail. Comments welcome here!

---