The US healthcare industry is in the midst of the “perfect storm”. The issue of cost cannot be kicked down the road any further and payers, including the government, are pursuing cost reduction strategies by any means necessary. Although the Fee-For-Service (FFS) reimbursement model is often cited as the root cause of the dysfunctional care delivery system, it cannot be changed overnight. In an effort to catalyze the necessary transformation, the government has created several programs and incentives to model, test and drive care delivery in a more functional direction. Combined with market forces, all payers are expected to follow suit in one way or another to shift the incentives and financial reimbursement model in a more rational direction. All of these efforts are heavily dependent on upgrading the Information Technology and analytic infrastructure of the industry. Healthcare has greatly lagged other information intensive industries, such as banking, in investing in and leveraging technology. All of these efforts will transform the industry and there clearly will be winners and losers. The early and effective adopters will be well-positioned, although there will certainly be a transition period when overall results may slip. It will be important to find and take advantage of the synergies in these drivers so as to respond most effectively and without wasting resources. The basis of competition in the industry is changing and that will be transformative. The following are the top 10 most important drivers to pay attention and respond to.
1) Healthcare Reform
The broad and comprehensive reforms put forth in the Patient Protection and Affordable Care Act of 2010 legislation will be tested at the highest level this year. The Supreme Court decision will have fundamental impact on which components of the law can go forward and which cannot. The increased covered lives is not only an important objective but also bringing healthier enrollees into the pool would make providing health insurance more financially viable. If this form of healthcare reform fails, an alternative would have to be found quickly or draconian cuts in public programs will be likely and private insurance would not be able to make up the difference. The impact on reimbursement for some providers would be devastating for some.
2) Patient-Centered Medical Home (PCMH)
The PCMH is a driver which already has tremendous momentum. There has been unprecedented industry alignment around this concept and adoption is rapidly spreading through primary care practices. Many early tests are beginning to show results. The challenge is the reimbursement model and creating a “medical neighborhood” that is aligned with the PCMH. The most important work of the PCMH is often the uncompensated work of coordinating care. This is where the FFS reimbursement model comes into direct conflict with more effective reimbursement models. Many groups and payers are testing hybrid models to see if they can be mutually beneficial. This model of care is also very dependent on technology and care teams to support the work of coordination and outreach as well as better engaging the patient.
3) Accountable Care Organizations (ACOs)
As one of the programs of the healthcare reform act, testing of Accountable Care Organizations (ACOs) was established to drive a system orientation for the care of a designed population of patients. This approach incentivizes the development of Integrated Delivery Systems (IDSs) as the “medical neighborhood”. The results are expected to be better than the failed movement in the late 1990’s to develop IDSs because incentives are better aligned between providers and payers, quality is more defined, measurable and expected and technology is more mature and affordable. This is a heavily technology and analytics dependent model in that it means that providers must become more like insurance companies with the attendant need to manage risk. Data and analytics are the lifeblood of an ACO as what you don’t know can really hurt you. This will be transformative at a macro level for the entire industry.
4) Population Health Management (PHM)
Population Health Management (PHM) attempts to strike at the root cause of high healthcare costs. The cost of healthcare has now reached a crisis level. To solve this crisis, we have to go where the money is. The costs of care are extremely unevenly distributed with 1% of the population generating 20% or more of the costs. Chronic conditions are a driver of as much as 75% of costs. These are patients that you cannot wait until they show up in your emergency room or clinic. They may be well on their way, by that time, to generating high levels of cost. ACOs will have to manage risk to be successful and that means becoming very good at PHM. It will be critical to identify and outreach to high risk patients and mitigate their risks before the clinical time bomb goes off. This will become the basis of competition as value-based reimbursement becomes more prevalent. The move to PHM will be a powerful driver of transformation of the system.
5) Health Information Exchanges (HIEs)
As one of the elements of the stimulus program, funding to support the development of Health Information Exchanges (HIEs) has increased dramatically the number of viable exchanges in the country. This concept has had appeal for a number of years under different names (e.g. CHINs and RHIOs) but financial sustainability has always been an issue. HIEs may finally have a sustainable business model in that ACOs and PCMHs need the knowledge of patient care activities that HIEs can potentially aggregate and make available. Care coordination and proactively managing risk in a population is important because, if you are an ACO, what you don’t know can hurt you. HIEs will help with tracking patients in and out of your system.
Although not scheduled to become mandatory until October 2013, the switch to ICD-10 is expected to have significant and far-reaching impact on the delivery of health services. And preparation must begin far ahead of the deadline. There is the priority one issues of ensuring that operations can continue with the switch and that cross-walks create comparable financial scenarios. However, the transformative aspect is the increased clinical granularity of the codes. This is expected to drive more effective analytics and understanding of care delivery. Also the richer code set will enable more precise Clinical Decision Support (CDS) to be deployed.
7) Big Data
An interesting development, just in time to consume the volume of new EHR data that will be produced, is the concept of “Big Data”. Big data is a term applied to data sets whose size is beyond the ability of commonly used software tools to capture, manage, and process within a tolerable timeframe. Big data sizes are a constantly moving target currently ranging from a few dozen terabytes to many petabytes of data in a single data set. The research group, Gartner, has defined the challenge data growth challenges (and opportunities) as being three-dimensional: not only increasing volume (amount of data) but also increasing velocity (speed of data in/out) and variety (range of data types, sources). This certainly describes the situation in healthcare as EHRs, outcomes data, predictive models and genomics are creating increasingly large and varied data sets. Big Data technologies are tuned to manage these huge volumes of data with acceptable processing times. This capability, especially in analytics, will be critical for healthcare quality and care management as an organization can move to near real-time decision support and rapid cycles of improvement.
8) Meaningful Use
The Meaningful Use incentives have created a powerful catalyst for organizations to implement Electronic Health Records (EHRs). Although the incentive will not pay the total freight for implementation, it does defray a significant amount of costs and the looming penalty phase should push the laggards in this direction. More than $1.3 billion in Medicare and $1.1 billion in Medicaid EHR Incentive Program payments have been made between May 2011 by the end of December 2011. The result will be the retooling of the entire Information Technology (IT) infrastructure of the healthcare industry. There will likely some come a time when you are not competitive if you do not have an EHR. Most importantly, the basis of competition will shift from whether you have an EHR to how effectively you are using your EHR.
9) Personal Health Records (PHRs)
The Personal Health Record (PHR) is seen as an important tools as we move to managing populations and reducing risks associated with chronic conditions. Engagement of the patient will be essential. Consumerism and personal accountability for health will gain increased momentum especially as consumers continue to pay more out of pocket for health costs. Access to quality information and guidance through remote and mobile technologies will be critical to the consumerism revolution. As we move to PHM approaches, it will be important for healthcare providers to use technology to electronically create a “continuous healing relationship” with the patient as well as support caregivers. Having patients and caregivers empowered, engaged and knowledgeable about their illness and managing their own care is the most cost-efficient and, generally, high quality care delivery model.
10) Social Media
As with many other trends, healthcare has lagged the general business community in adopting certain approaches and technologies. Social media is one of those technologies. Issues of privacy are obviously a barrier. However, the impact of social networking and social media is so important and pervasive that increased healthcare adoption would be transformative. It is important to recognize that not only is social media technologies useful for engaging with patients but it is also valuable for internal use within the healthcare organization.
The Next 5 Years Will be Transformative for the Healthcare Industry
Rarely has there been so much change in play in the healthcare industry. There is much at stake in this trillion dollar industry. There clearly has to be winners, losers and change if we are to bend the cost curve. In this transformative phase, some organizations will fail, some specialties will see decreased reimbursement, many roles and responsibilities will change and the patient will have to become more accountable for his or her own health. However, as has typically been the American way, with innovation, influence of market forces and the right level of government intervention, we can come out of this transformation with a stronger, cost-efficient and high quality system that will, once again be competitive on an international scale.