EUA recently hosted an Advisory Board presentation on our Madison office terrace at Ovation 309. This year’s topic, The State of Our Services Lines: Modernizing Strategy for the New Economics of Care was presented by Senior Director, Dr. Aaron Mauck and was well attended by a mix of EUA’s clients, business partners and Healthcare Studio members. The focus of the presentation was on major trends that are reshaping service line economics, with details on new imperatives for service line growth. Not a new message to me was the impact that Healthcare reform is continuing to have in pressuring healthcare organizations to be innovative, highly accessible and low cost.
For anyone that was unable to attend the session, here are the key takeaways:
Major Healthcare Trends:
- Inpatient care profitability is deteriorating with shifting population demographics. Aging Baby Boomers will drive significant growth in the Medicare population, with a varied case mix by age cohort. For instance, Young-old (65-74) account for the least amount of hospitalizations yet the highest percentage of surgical volumes, while comparatively, the old-old (85+) account for 2.5 times the hospitalizations, with about half of the surgical volumes of the young-old (Advisory Board - slide 9). Generation X, a smaller population, is also unlikely to boost future demand.
- Despite overall growth, care will shift unevenly to outpatient settings due to Payer mix and clinic demand. This poses a risk to inpatient volumes, as some of the highest profit, high volume services are most likely to shift to outpatient settings. This trend will continue as the Centers for Medicare & Medicaid Services (CMS) approves procedures in ambulatory surgery centers (ASC) while applying pressure to reduce costs. Nationally, clinical feasibility and regulation are driving forces in the shift to outpatient service delivery, while physician comfort, payment rates and patient preference are more localized in consumer decision making.
- For reimbursements, hospitals and health systems will continue to lose outpatient pricing advantages for services performed in hospital outpatient departments. Care delivered in more cost effective and convenient settings will drive higher volumes but at the expense of lower rates. Purchasers are adding pressure to direct high-priced procedures to lower cost out of network providers, with a widening of networks that provide specialized services in Centers of Excellence (COE). These COEs are gaining in popularity and being selected by employers based on performance, quality, safety and reputation. In some cases, employees are being incentivized to utilize these centers, while in others, employers have mandated their use.
- Non-traditional competitors are meeting new market demands for specialization, accessibility and affordability with an increase in self-referrals to specialty care. Consumer preferences also continue to vary by age. Millennials are more likely to self-refer for specialty care and travel for quality surgical care while the older consumers rarely break a referral and find travel times more important. Although ASC supply has been plateauing, those gaining market share are doing so via acquisition, including new players in the space such as private equity firms. Niche service providers are also popping up that provide lower cost quality care in dedicated specialty centers, while others are offering digital telehealth platforms for services that are needed yet often difficult to access.
Imperatives for Healthcare Service Line Growth:
- New market opportunity analytics will be critical in planning for service line strategies that are best-in-class. They will require a balance of planning, prioritization, retention and acquisition.
- Service lines will need to be redesigned around patient needs and preferences to solve very specific problems with the goal of future cost avoidance. Demand for these services might require operational adjustments, such as hours of operation, to accommodate the demand for delivery of care in an alternative environment. Creation of access points will attract self-referrers that are specialized, understandable and accessible. Leverage social media and online presence to spread positive reviews.
- Cultivate system-wide loyalty as capturing new patients is the primary goal. Keeping new patients for future care requires a strategy as consumers are likely to utilize more than one system for their care. Populations have common needs and steering them to the appropriate place for care should be done proactively vs. reactively.
My takeaway is that we are in an unprecedented era, with many new opportunities and challenges. We have an aging population that lived a traditional lifestyle, did not always have access to technology, had limited choices and did what the Doctor told them. We also have a younger population that lives a transverse lifestyle, grew up not knowing what it was like to not have internet, has unlimited choices and is research savvy enough to find the desired healthcare solution that can best meet their needs and preferences. Along with those of us who fall in between this spectrum. As Healthcare reform continues to evolve and whatever path it might take, the continued pressure on finding new and innovative ways to deliver quality care at an affordable price for an ever-changing demographic will keep healthcare leaders on their toes for generations to come.
What is your take?
Ed Anderson, MBA, EDAC
Healthcare Market Leader