HFMA VIEWS

by Kevin Nolan

How do we define success in healthcare? Affordable care? Access to quality care? Positive patient outcomes? As we search for a definition, here are a few facts to consider:

• Healthcare consumes 17.6% of US GDP today, a number that is projected to grow to 20.3% by the year 2018. 
• The Medicare Trust Fund is projected to become insolvent by 2019.  
• U.S. businesses are increasingly burdened by an escalating cost of employer-sponsored health insurance as these premiums have increased 119% over the past decade.  
• 62% of all bankruptcies filed in 2007 were linked to medical expenses; of those who filed for bankruptcy, nearly 80% had health insurance. 

Sadly, despite the astronomical cost of providing healthcare in the United States today, outcomes are simply no better, and often worse, than those of other industrialized countries. One Commonwealth Fund study in 2007 found that the U.S. healthcare system ranked last compared with five other industrialized nations on measures of quality, access, efficiency, equity and outcomes. The health system, as currently construed, is economically unstable and, ultimately, unsuccessful.

As the reform debate continues in the Senate, we must ask ourselves what are the possible outcomes and how can the system best achieve success in providing and paying for health care. 

Let’s start with the “status quo” scenario: No reform.

The “status quo” scenario will find us proceeding along the path we are currently on, characterized by questionable quality and increasing costs and burden to individuals, employers, providers, and the government.  Quality improvement will remain the purview of the “quality-minded” (although “quality” will be increasingly scrutinized and demanded by payers, thus hopefully driving improvement). Costs will escalate due to technology and payment system inefficiencies, placing continued pressure on individual, health system, and government bottom lines.

So where does the status quo get us? Likely, only to another crisis-induced healthcare reform debate ten (or some other number—you pick) years down the road. What happens in the interim? A widening disparity between “haves” and “have nots” among health systems, moderate “quality improvement” as code for removing waste from the system, and continued concerns about the escalating costs of care.

So what happens if we get reform?

Regardless of the ultimate language of reform, it will focus on materially shifting one or more of the following: access, cost, quality, and prevention and wellness. The degree to which each variable will ultimately be a part of reform is still to be determined, but the likely implications on health systems from changes in each are identifiable and directionally quantifiable. 

If “reform” means an increase in coverage, a decrease in cost, a closer focus on quality, and/or a commitment to prevention and wellness, health systems and payers, including the government, will have many new challenges, but they can lead to ultimate success. These include supporting well-coordinated disease management programs, focusing on economic alignment with physicians through vehicles such as clinical integration, rewarding and supporting “value,” and having lean operations with efficient and effective revenue cycle systems. 

Regardless of where the pendulum ends with the various aspects of health reform, there are several actions the health sector, payers and government actors should take to prepare to be successful.

• Clinical integration is the name of the game—collaborate and coordinate among providers; align with and among physicians as this is essential to succeeding in this dynamic environment; align incentives to optimize productivity (not just reduce costs).
• Bundled payments are coming—begin working on how you will deal with this regulatory evolution.
• Partnerships and alignments are key—look to establish strategic partnerships across the continuum to supplement your core competencies and capabilities. 
• Disruptive technology is inevitable—keep a careful eye out for what Clayton Christensen  refers to as “disruptive technology” and determine how you will deal with this inevitability in healthcare.
• The medical home model is needed—develop a medical home model for primary care, it is great for access, quality, prevention and wellness, and hopefully cost; this is also a great strategy for recruitment and retention of primary care providers—and patients are begging for it.

Success is possible, if we think about the problems and the opportunities in the right way. The reform debate gives us the chance to do so. Will we?

Kevin Nolan is Managing Director and leader of the Healthcare Strategic Planning Practice at Navigant Consulting, Washington, DC (knolan@navigantconsulting.com).