How the health care landscape is evolving through internal and external pressure

Rob Rogers, Principal, Findley Davies, Inc.

Health care providers such as hospitals — particularly the more enlightened ones — started to reform years prior to the Patient Protection and Affordable Care Act (PPACA). Although the law crystallized the industry’s direction, health care systems faced pressure to reinvent themselves long before the act. This reinvention has not only affected the delivery model but also the human capital requirements within the health care system.

“There’s a big shift to outcome-based rewards as opposed to transaction-based rewards,” says Rob Rogers, a principal and health care industry leader at Findley Davies, Inc. “In other words, what is the quality of care provided as opposed to how many units of X were done in the fiscal year.”

Smart Business spoke with Rogers about the outlook for hospitals and health systems, and what this means for business owners.

How will reform affect revenue and other financials for hospitals and health care providers?

The topline or gross revenue for health care systems — which can either be an integrated network comprising multiple hospitals, physicians, clinics and outpatient treatment centers, or an independent community hospital — is going to jump. In particular, hospitals will have more patients as result of 30 million people now being covered under an ‘insured’ delivery system. Providers face the challenge of bolstering staff while facing a shortage of nurses and physicians.

Despite volume increases, net revenue will come under a lot of pressure as reimbursement levels from insurance carriers and Medicare and Medicaid continue to decline. Health care providers are being forced to scrutinize operating expenses to ensure they are providing care as efficiently as possible.

How will patient care be impacted?

More focus on clinical outcomes is one good thing occurring through reform — not necessarily the governmental legislative act, but the whole process. The health care system has recognized, based on internal pressure and pressure from employers covering health care costs, that patients and plan sponsors aren’t interested in paying for the volume of diagnostics. The reform focuses on keeping people healthy. If there are health problems, then the attention shifts to measuring outcomes such as the success rate of treatments, morbidity rate, length of hospital stay, patient satisfaction, etc. Health care systems must learn to cope with the continuous challenge of providing the right mix of care while, at the same time, getting paid for it.

What kind of consolidation and collaboration do you expect?

More collaboration among providers and consolidation of various related-care entities have already started. Some think only large health care systems will be able to operate in this new environment because they have enough volume to manage the margins better. However, while community hospitals will continue to operate independently, there will be pressure for them to partner with other community hospitals or to create alliances with the larger hospital networks.

Physicians are also building more partnerships. In 2010, for the first time, more physicians were employed by organizations such as hospitals and other related entities than were in private practice, though many independent physician groups exist in Ohio.

Health care reform works to eliminate silos of treatment. So we’re seeing the development of an integrated delivery model, with numerous entities working together under one umbrella to provide more efficient and better quality care. To remain competitive, physicians are creating alliances with patient care providers such as hospitals and nursing homes.

How will the operating procedures for health care providers differ?

Health care systems are taking a more proactive role in physician and nurse development and recruitment by providing financial assistance to university students in exchange for employment arrangements. With the assistance of experts to provide strategy, hospitals are looking at how they attract, retain and reward physicians, senior leadership and nurses to ensure staff is highly motivated and delivering quality care.

Most health care systems and hospitals are not-for-profit, tax-exempt organizations. As pressure increases from the public, Congress and state legislators, most health care providers are paying close attention to transparency in everything they do from audits, executive compensation and governance. More and more tax-exempt organizations are operating like public companies, which must comply with Sarbanes-Oxley requirements.

There isn’t a more public entity than a tax-exempt organization — the general public is the taxpayers. Rules governing the reasonableness of executive compensation and benefits under intermediate sanctions statutes are creating added pressure on health systems to ensure transparency and objectivity when dealing with executive rewards.

How might these changes impact business owners who provide health care plans?

The reform, apart from PPACA, is going to be mostly positive for business owners. While there may be additional costs associated with reform, the system will be more efficient with more focus on preventive care and wellness, which are steps in the right direction. There will be more integration with fewer silos of care. There’s more concern with helping the patient get from A to B to C without jumping through hoops. It will be less costly, more efficient and the outcomes will be better, which will make employees healthier.

The health care industry is rapidly changing. As health care providers work to deliver more efficient, better quality care, employers and employees both should be able to reap the benefits.

Rob Rogers is a principal and health care industry leader at Findley Davies, Inc. Reach him at (216) 875-1926 or [email protected]

Insights Human Capital is brought to you by Findley Davies Inc.