News and Insights
The Numerof 2024 US Healthcare Delivery Outlook
With the May 2023 expiration of the public health emergency (PHE) in the U.S., the page was turned on the pandemic. But the aftereffects remain. Staffing shortages are endemic, right up to and including physicians; staff dissatisfaction is at historic levels, leading to large scale labor disputes and nurses seeking alternative employment; wage and general inflation have dramatically increased operating costs; balance sheets have been weakened; and systems across the U.S. are working toward integration of their recently acquired facilities with various degrees of success.
Key lessons of the pandemic – like the downside risk in fee-for-service revenue models, and the public health risk presented by underserved communities – are very slowly being processed, if at all. On the upside, consumers have been empowered by their experience during the pandemic to demand easier access from the healthcare establishment, and telehealth is proliferating, at least among retail challengers to the conventional healthcare establishment.
With the end of Federal emergency relief funds, hospitals have been largely left on their own to fix their battered balance sheet. For many, the anticipated spike of pent-up demand from closures during the pandemic hasn’t materialized. 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 for 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 continue to look at the predictable revenue offered by capitated arrangements. In any case, we expect 2024 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 and consumer expectations 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. Disruptive non-traditional market entrants will leverage retail and telehealth capabilities to engage consumers as well. Consolidated delivery organizations will standardize data platforms, processes, and organizational structures. Mergers and acquisitions will continue cautiously 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.