News and Insights
The Numerof 2023 US Healthcare Delivery Outlook
For almost three years, Covid-19 has forced our healthcare system to the top of the national agenda. The headlines were constant – from the struggles of an overwhelmed delivery system, to the record-setting development of vaccines, to the waves of infection and the daily tally of cases across the country and the world. Thanks to the efforts of front-line healthcare providers across the country and to vaccines, a return to some sense of normalcy may be in sight.
And yet, the pandemic has changed healthcare delivery in important ways. It highlighted the downside risk of fee-for-service, as delivery organizations that were forced to suspend nonemergent procedures watched cashflow evaporate. And it raised access to care – via telehealth and home health – to a whole new level of importance. Despite Federal relief funds, the pandemic also left the balance sheets of many organizations badly damaged. The anticipated pent-up demand caused by site of care closures during the pandemic has not materialized. Inflation and staffing shortages have further increased pressure on healthcare delivery systems.
Meanwhile, the same market forces that had been operative pre-pandemic continue to reshape our healthcare system. Employers and consumers continue to see their earnings eroded by the costs of care and insurance. Migration of inpatient procedures to outpatient facilities continues to stress conventional provider margins. And as M&A continues to create fewer and larger conventional provider organizations, the threat of competition from non-traditional disruptors is becoming increasingly real. To consumers, conventional healthcare delivery looks increasingly inefficient and unappealing compared to the convenience promoted by Medicare Advantage programs or the telehealth and home health options promoted by non-traditional providers. Consumer expectations have been reset by these models that have shown healthcare can be easier.
The net of these forces will be to raise the urgency of change, and subtle but important shifts in emphasis for providers. Most healthcare delivery organizations that relied on fee-for-service will be repairing their balance sheets for years to come. In more forward-leaning markets, delivery organizations will focus more concretely on conceptualizing, differentiating and commercializing new offerings that are more responsive to their market. After being battered by Covid, some organizations are taking a second look at the predictable revenue offered by capitated arrangements. In any case, we expect 2023 to be a year of accelerating change.
Delivery organizations will continue to use consolidated purchase volumes as leverage for price concessions from vendors, pharma and device suppliers. To address their financial issues these organizations will need to drive down overhead costs, and that will call for a significant rethinking of their approach. Traditional headcount reduction will not be sufficient.
Government mandated transparency will accelerate development of tools to facilitate comparison shopping for non-emergent care. As an offset to other bottom-line pressures, market leaders will continue to build out direct contracting efforts with employers to reinforce their competitive advantage. Likewise, payers will continue to pursue alternative reimbursement arrangements with providers in receptive markets. Concurrently, payers are moving into care delivery, changing the competitive landscape as they look to leverage the primary care relationship to lower utilization and improve outcomes.
Continuing emphasis on total cost of care will drive integration across the care continuum by payers. Forward thinking acute care providers will increase their focus on patient accessibility through retail and urgent care clinics, telehealth services, centralized scheduling with physicians, and coordination with post-acute care providers. Consolidated delivery organizations will standardize data platforms, processes and organizational structures. Mergers and acquisitions will slow in recognition of the FTC’s tougher stance against consolidation.
Given this outlook, what’s next? We recommend these key action steps:
- Demonstrate differentiated outcomes and value for growth.
- Develop/commercialize capitated products and services while accelerating performance in new delivery/payment models.
- Redesign the business to ensure patient centricity.
- Realign care delivery platforms, including digital engagement.
- Redesign infrastructure to capture economies of scale and improve efficiency.
- Realign structure, roles, and competencies with market needs.
- Build service line capability to drive clinical and financial performance.
At Numerof & Associates, we support healthcare delivery organizations in reinventing their strategies, processes, structure, and analytics to succeed in our evolving healthcare landscape. From competitive strategy to implementation of new payment and delivery models, we have solutions. Read more about our perspectives and solutions for healthcare delivery and see our case studies.