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State of the Healthcare Industry Snapshot

Guest blog by David Porter, Executive Partner, Advisory Board

As 2022 comes to a close, the healthcare industry continues to experience a sense of urgency.  Today’s market dynamics have eroded margins forcing healthcare leaders to focus on short term crises and opportunities. More than ever, leaders’ choices will also impact their organization long-term.

Among the major disruptive market forces are:

  • Increasing costs associated with labor and supplies
  • Labor shortage and recruitment/retention challenges
  • Compounding health crises that require new care delivery systems in response
  • Shifts in coverage with Medicaid enrollment poised to decline following the public health emergency while Medicare Advantage participation accelerates
  • Health solutions giants continue strides toward vertical integration
  • Heightened scrutiny of tech venture investments

The vicious staffing cycle tops concerns, not only difficult for hospital and health system leaders but at all staffing license levels. Many health organizations remain understaffed relative to demand. A clinical workforce strategy of the future must address:

  1. How clinical models adapt to reduced staffing and lower staffing ratios
  2. The way in which staff respond to their employer’s higher expectations
  3. Support for staff, including behavioral health tools, to help minimize burnout

Industry leaders also face pressures from retail and tech “disruptors” that dip in and out of the healthcare space with care options – which include Amazon’s clinics, CVS adding nurse practitioners and diagnostics to Minute Clinics, Walmart adding physicians to its comprehensive healthcare centers and adding offerings like audiometry. How will new care options influence employer as well as consumer choices? To align with this dynamic, hospital and system leaders will be challenged to explore partnering with retailers and technology providers to maintain or expand their market share.

Guideposts reshaping healthcare

Health equity

The opportunity for each individual to attain full health potential regardless of social position or social circumstances. A health equity mission is central to healthcare. While some health systems are developing equity initiatives and integrating their efforts into quality metrics, these are mere steps toward eliminating health disparities and achieving optimal health for all Americans.

Value-based payment

A form of reimbursement based on the quality of care provided that also rewards providers for both efficiency and effectiveness. While public programs have a clear trajectory toward population-based downside risk, commercial plans and providers have not coalesced around a viable model that meets employers’ experience and cost needs. Going from fee-for-service to pay-for-value (assuming risks and sharing of savings or losses) is one of the greatest financial challenges facing our healthcare system.

Physician partnerships

Physician practices are integrating into well-resourced, innovative “super practices” by orienting their operations around avoiding hospital care. As payers and financiers increasingly support these models, health systems will have to choose whether to wield their hospital assets in partnership with super practices—or hyper-consolidate to keep power.

Consumer navigation

As mentioned and experienced, new care options influence consumers’ care decisions. Yet, more than 70% are unsure how to make care choices. Healthcare organizations are focused on steering consumers to specific services and engulfing them in a managed ecosystem. It remains to be seen whether consumers are willing to break their traditional healthcare relationships for other options.

Telehealth

Telehealth continues to capture consumer attention. The industry has approached virtual visits as a direct replacement for in-person care, leaving opportunities open for remote monitoring and asynchronous tools. Remote patient monitoring will see continued growth and competition for consumers.

Home-based care

As industry stakeholders push forward their growth ambitions in home-based care, their challenges to scale vary with the diversity of services. Aggressive industry movers overcome reimbursement barriers by integrating services into the total cost of care or high-cost service management categories, but that may cause strain on other providers or worsen inequities.

Looking to 2023 and beyond, much change is on the horizon for healthcare providers. Community hospital leaders must stay apprised of advances and position their facilities for success in an evolving industry.

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