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Healthcare
Industry Dynamics
With the recent passage of healthcare reform legislation in the U.S., many in the industry are pondering their next move. The immediate impact of the legislation on delivery was limited. The big changes - those that will challenge the business model of the industry - are yet to come. The foundations for these changes are rapidly being built - meaningful use of health information technology requirements, comparative effectiveness research, and pilot studies of alternative reimbursement mechanisms, to name a few. Changes based on these foundations will be implemented administratively, and soon, because the current structure is unsustainable. These changes will require more quality for lower cost, and delivery organizations will have no choice but to comply.
These policy-mandated changes will be implemented in the context of a market environment that, by itself, would have presented multiple challenges. Dramatic increases in demand driven by the age-wave of retirements, growing shortages of critical medical personnel like internists and family practitioners, tighter financial market credit and public sector budgets, and lingering unemployment are just the beginning.
In addition, consumer and government requirements for more transparency and accountability for quality is growing. Domestic competition between hospitals for contracts with large, self-insured employers, global medical tourism that is reimbursed by major payers, and segmentation and specialization by innovators large and small are gaining momentum. Bundled payment by payers is on the horizon, calling for new management and financial reporting structures. Physicians are increasingly looking for employment arrangements, adding a whole new dimension to the challenge of employee relations. Add in further restrictions on and shrinkage in government (and probably private payer) reimbursement, increasing regulation and quality requirements - like non-reimbursement for "never-events" and 30-day readmissions - and the challenges ahead for the current business model become increasingly apparent.
Business Challenges
To adapt to these profound changes, delivery organizations will need to re-think their sources of revenue and growth, their approaches to physician alignment, to pricing, to the very definition of their business. Approaches that have been used historically in the industry to manage through cyclical economic rough patches aren't up to the task. The rapidly evolving post-reform marketplace demands new approaches and fresh thinking.
Fundamental strategic and operational change will be needed by most organizations to ensure their financial health. The race for effective market differentiation - through superior quality outcomes, transparent pricing, and safer, more effective care delivery is underway. Bundled pricing and comparative effectiveness research will call for new capabilities in managing practice variation, tracking costs, and ensuring accountability. Meaningful use of health information technology will be critical, and this remains an elusive goal for many organizations that have yet to create the capability set needed for data-based process management. Finding ways to align physician strategic interests with those of the hospital - whether employed or simply affiliated remains a key challenge. Lessons learned by other industries about structuring business units or service lines, the role of managers, and the importance of real strategic marketing and implementation will need to be integrated into most healthcare organizations. Success in this environment will demand a more focused service line strategy, supported by more sophisticated organizational competencies in managing key physician relationships.
Healthcare management's ability to succeed in this environment requires an overdue investment in management infrastructure, and substantial cultural changes. The critical foundation skills for conceptualizing strategy responsive to market dynamics and embedding role and process change must be developed for long term viability. Managers must also be capable diagnosticians of critical operational, process and people issues to effectively implement their strategy in a complex, ever changing technological and political world.
Our Depth of Knowledge
Over the last 20 years we’ve worked across a wide variety of industries understanding changing market dynamics and influence mechanisms, and translating this knowledge into effective strategy and breakthrough results. Our work with healthcare systems, payors and physicians positions us to help our clients understand the complex relationship needs of all key stakeholders, and to use this perspective to shape responsive strategy.
Our work with healthcare provider clients has involved multiple engagements and encompasses a broad range of projects, including the following examples:
- Supporting the implementation of bundled pricing models by analyzing cost drivers of diagnosis and treatment, modeling and practice variance management.
- Developing and implementing predictive care paths that reflect evidence-based medicine and optimal clinical outcomes at lower cost.
- Defining appropriate accountability and coordination mechanisms to support improved quality at lower cost.
- Redefining roles, responsibilities, processes and structure to support meaningful use of health information technology.
- Conducting strategic market and trend analysis, defining what positive-margin service niches hospitals can own and sustain over time.
- Developing customized strategies to ensure alignment between provider institutions, physicians, and payers.
- Building the necessary culture and management infrastructure that can develop, operationalize, and implement strategy responsive to a dynamic market.
- Developing a more strategic approach to process improvement, achieving a sustainable low cost structure by eliminating work and standardizing processes to enable greater flexibility in utilizing limited human resources.
- Conducting healthcare reform readiness assessments.
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