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The Future of Care Isn't in Your Hospital

Michael Abrams, MA, is the co-founder and managing partner of Numerof & Associates, a firm that helps businesses across the healthcare industry define and implement strategies for winning in dynamic markets. He has more than 25 years of expertise working helping clients navigate an evolving healthcare landscape, across hospital systems, payers, and Fortune 500 pharmaceutical, device, and diagnostics companies. He has co-authored several books and has been featured in leading business journals and news outlets.
It’s a tough time to be a health system chief executive officer (CEO). Rising consumerism, new competition, and payment models designed to keep patients out of acute care are forcing hospital-centric enterprises to rethink their delivery models. Articles and news feeds rife with stories about hospital closings, layoffs, and the shuttering of underutilized services and facilities serve as constant reminders that old delivery models are no longer working.

Organizations that excel in building integrated care delivery ecosystems and lasting consumer relationships based on a differentiated brand promise and superior outcomes will be the ones that find success. The strategies, facilities, organizational capabilities, and leadership competencies that served health systems well in the antiquated fee-for-service world are becoming burdens as the industry shifts to value. Fortunately, there’s a roadmap for moving forward that will not only position systems for long-term success but will help them improve performance and protect margins during their transition to market-based delivery models.

Market Forces at Work
Fundamental forces—spiraling healthcare cost inflation, consumer and employer pushback on rising insurance premiums, lagging quality indicators, and increased demand for transparency and convenient access—are hastening the demise of the traditional hospital-centric enterprise. Consumers and payers alike are demanding value through better, less expensive health outcomes.

Value requires greater transparency in cost and quality; accountability for outcomes and costs across the continuum; and consumer choice based on real competition. These are the hallmarks of a market-based delivery model that is vastly different than the complex, costly, fragmented, and wasteful models that maximized revenue and met the needs of hospitals, not consumers.

The Future is Now
Some forward-thinking healthcare CEOs have already embraced the new market reality. Systems like Ascension and Northwell Health are redirecting spending from their inpatient platforms to new technologies, microhospitals, and outpatient and urgent care facilities that make care more convenient, affordable, and accessible. For example, Ochsner Health System is directing 80% of its expenditures to outpatient facilities.1 But these examples are more the exception than the norm.

Seizing upon the reluctance of some healthcare systems, new entrants are making vertical integration plays and introducing new care delivery approaches to address cost growth, care fragmentation, and access. Organizations that are ignoring the potential implications of deals like the CVS–Aetna merger or the Amazon–Berkshire Hathaway–JPMorgan Chase joint venture do so at their peril.

Hospital CEOs would be wise to subscribe to the age-old adage, “follow the money.” Look at where private equity and venture capital firms—and even healthcare system venture arms—are placing their bets, and you’ll see a very clear pattern. Investments in new technologies, products, and services designed to keep patients out of hospitals or bring their clinical expertise to the patient are flourishing.

One is an early-stage company, Outset Medical, with a product that allows patients to get dialysis at home. Another, Epiphany Health, provides direct primary care to patients for a modest monthly fee. As the shift to consumer-directed care accelerates, savvy investors in products that demonstrably bend the cost curve and keep populations healthy will be rewarded.

Payers and self-insured employers are also hastening the shift to more cost-effective care settings. Employers are combining high-deductible health plans and smarter, narrower provider networks to keep their employee healthcare expenditures under control. Payers like Anthem are increasingly resistant to paying site-based reimbursement differentials, directing nonemergent hospital outpatients to freestanding imaging centers instead. Risk-based and shared savings payment models incentivize providers to quickly and safely transition patients to less expensive settings.



 
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