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While government-led healthcare reform has slowed, 2018 promises to be another dynamic year of change.
Health systems nationwide are being forced to pay more attention to costs as they experience higher expenses, a payer mix that increasingly tilts toward Medicare and Medicaid, and constrained reimbursement. Major deals—mergers, acquisitions, and partnerships—will continue to unfold and redefine the healthcare landscape. Technological change will accelerate, continuing a shift to lower-cost treatments that is being driven by breakthroughs in care delivery, especially molecular engineering and gene therapy.1
The continuing quest for scale will take center stage in 2018. Just look at what happened in December:
In short, a major realignment of healthcare financial and human assets is underway. After realizing that the federal government is not going to solve our healthcare cost crisis, health plans and providers have taken the gloves off in their ongoing competition to control how health care is financed and delivered. Health plans are employing capital aggressively to expand control over care delivery, and provider systems are consolidating to protect their historical hospital franchises and expand their geographic reach.
2018 Healthcare Market Assumptions
There seems little doubt that the transformation from volume to value will continue. The Affordable Care Act (ACA) promoted provider-sponsored accountable care organizations (ACOs) that could help not-for-profit provider systems move into health plans’ business of managing population health. The ACA also capped the profit margin that insurers can earn on their books of business. In response, health systems began searching for their “sweet spot” in value-based contracting, with ACOs that take risk and with provider-owned health plans.
In addition, health systems are now in the physician business, employing 40 percent or so of the nation’s physicians. At the same time, for-profit companies like UnitedHealthcare, CVS, and Humana have been aggressively acquiring physician practices and building primary care in their continuing effort on behalf of their customers and members to force the sector to become more cost-effective.
Beyond pursuing value-based care, however, health systems need to incorporate four major planning priorities in their strategic thinking for 2018.
1. System value and affordability. The post-reform financial picture of health care is not pretty, given the shrinkage of commercial insurance, potential cuts in Medicare, looming cuts to state Medicaid programs, and the significant portion of the population that remains uninsured or underinsured.
Moody’s and Fitch have both issued negative forecasts for the not-for-profit healthcare industry, while being somewhat more sanguine about their for-profit counterparts. BDC’s own Survey of Leading Academic and Community Health Systems is somewhat more optimistic, with C-suite leaders in a dozen market-leading organizations indicating they are shaking off the uncertainty caused by the legislative and court battles over the future of the ACA and plan to press forward in pursuit of financial and competitive advantages.
One key to these efforts will be to have a blended revenue accountability model that aligns incentives and infrastructure requirements for capitated total-cost-of-care arrangements, ACOs, and episodic care models. Being able to compete as relatively low-cost providers will be key to value-based contracting, which entails understanding how both patients and payers perceive value and demonstrating the ability to meet expectations.
2. Merger, acquisition, and partnership activity. The acceleration of merger-and-acquisition activity at the end of 2017 suggests we are on track for radical consolidation of not-for-profit health systems. It is not far-fetched to think that super-regional consolidation and national mega-deals could result in a national not-for-profit market dominated by 20 to 30 large provider systems in five to 10 years. An alternative scenario is that provider systems and health plans will merge, creating a network of large ACOs across the country.
Partnerships offer greater flexibility than mergers—particularly for academic medical centers (AMCs), given the restrictions frequently imposed by university ownership structures. While challenging to manage and not without risk, these agreements can create real value in terms of geographic scope, economies of scale, and access to AMC skills and technology. Joint ventures between AMCs and well-financed for-profits—such as the Duke-LifePoint joint venture, which includes 14 jointly owned community hospitals and approximately $2 billion in revenues—will seem more attractive.
One beneficial outcome of consolidation is the creation of greater resources and leadership for continuing the transformation from a business model centered on acute care to one centered on population health and chronic care management.
3. Consumer engagement and brand focus. A number of observers have noted that consumers are dissatisfied not only with their healthcare costs but with the complexity of accessing care.
It is not clear whether we are at the same inflection point that industries such as retail or technology have reached, where control over the buying decision is firmly in the hands of consumers. There are plenty of investors betting on such an outcome, however, given the billions invested in healthcare start-ups like Oscar Health, One Medical, and Zocdoc, with their consumer-centric business models. Even the giant CVS-Aetna deal is predicated on creating a new front door to the healthcare system through thousands of in-store clinics—as well as on increasing value by reducing pharmacy costs.
For 2018, there will be an increasing focus on consumer engagement, with the winners being consumer-centric organizations that are able to build positive “touchstones”—critical points where customers interact with the healthcare system and its services—throughout the customer life cycle with a “whole customer” approach.
Closely related to consumer engagement is brand-building. A furious branding competition is being fought by health systems, insurance companies, medical groups (in some areas), and new specialist disruptors like CareMore Health—an integrated health plan and care delivery system that focuses on relatively sick Medicaid and Medicare patients, with a business model prioritizing disease management, limited specialty referrals, and reduced hospitalization—over how to capture and retain consumer loyalty.
Thirty years ago, private practitioners had the strongest claim to patient loyalty, but with the institutionalization, consolidation, and digital transformation of health care, consumer loyalty is up for grabs. Health systems that fail to build a coherent, defensible, and powerful franchise with consumers are vulnerable to being marginalized by other health sector players. While not often discussed, brand-building is an important driver of health system consolidation.
4. Investment in innovation to drive value. Succeeding in the post-reform “transformation market” requires focusing on investments that create new value within areas of market growth, or that improve care quality and control costs. The shift of risk from payers to providers through value-based payment systems has proved to be an expensive transformation, requiring the development of physician networks, care management and delivery systems, new approaches to contracting, and investment capital.
To succeed in this challenging environment, many health systems are turning to venture investing, as well as internal innovation labs, to launch initiatives to improve quality of care, increase efficiency, diversify revenue streams, and build more flexible, innovative corporate cultures. In the first half of 2017, U.S. healthcare venture fundraising totaled $5 billion, putting it on track to exceed the record of $7.5 billion raised in 2015.2 Of this total, a growing proportion represents investment by health systems—and this trend is not likely to slow anytime soon.3
These four priorities—increasing value and affordability, pursuing consolidation and partnerships, focusing on consumer engagement and brand, and investing in innovation—define overarching strategic priorities for health systems in 2018. Beyond responding to shifting government policies and competitive dynamics, health systems should make sure these priorities are explicitly considered in their strategic-planning processes.
David G. Anderson, PhD, is director, Planning & Development, BDC Advisors, LLC.
Dudley Morris is a senior adviser, BDC Advisors, LLC.
1. Acton, A., “Five Important Healthcare Predictions for 2018,” Forbes, Aug. 18, 2017; and Fox, M., “Luxturna gene therapy for blindness to cost $850,000,” NBC News, Jan. 4, 2018.
2. Norris, J., Schuber, P., and Tolman, C., “Trends in Healthcare Investments and Exits: Mid-Year 2017,” Silicon Valley Bank, August 2017.
3. A recent survey conducted by the American Hospital Association (AHA) and AVIA reports that 72 percent of the 400+ hospitals in the U.S. with over 400 beds have already built innovation centers that support venture investing or plan to do so in the near future.
Grant Thornton: Helping Organizations Embrace Robotic Process Automation
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VitalWare: Creating a Transparency Strategy: Meeting the Mandate to Post Standard Hospital Pricing
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Grant Thornton: Optimizing the Ambulatory Workforce
One of Grant Thornton’s senior healthcare consultants addresses the topic of workforce management and the importance of a data-driven approach.
6 Patient Revenue Cycle Metrics You Should Be Tracking (and How to Improve Your Results)
Patient financial engagement is more challenging than ever – and more critical. With patient responsibility as a percentage of revenue on the rise, providers have seen their billing-related costs and accounts receivable levels increase. If increasing collection yield and reducing costs are a priority for your organization, the metrics outlined in this presentation will provide the framework you need to understand what’s working and what’s not, in order to guide your overall patient financial engagement initiatives and optimize results.
10 Ways to Reduce Patient Statement Volume (and Reduce Costs)
No two patients are the same. Each has a very personal healthcare experience, and each has distinct financial needs and preferences that have an impact on how, when and if they chose to pay their healthcare bill. It’s no longer effective to apply static billing techniques to solve the complex challenge of collecting balances from patients. The need to tailor financial conversations and payment options to individual needs and preferences is critical. This presentation provides 10 recommendations that will not only help you improve payment performance through a more tailored approach, but take control of rising collection costs.
Reduce Patient Balances Sent to Collection Agencies: Approaching New Problems with New Approaches
This white paper, written by Apex Vice President of Solutions and Services, Carrie Romandine, discusses the importance of patient segmentation and messaging specifically related to the patient revenue cycle. Applying strategic messaging that is tailored to each patient type will not only better educate consumers on payment options specific to their billing needs, but it will maximize the amount collected before sending to collections. Further, targeted messaging should be applied across all points of patient interaction (i.e. point of service, customer service, patient statements) and analyzed regularly for maximized results.
The Future of Online Patient Billing Portals
This white paper, written by Apex President Patrick Maurer, discusses methods to increase patient adoption of online payments. Providers are now seeking ways to incrementally collect more payments due from patients as well as speeding up the rate of collections. This white paper shows why patient-centric approaches to online payment portals are important complements to traditional provider-centric approaches.
Payment Portals Can Improve Self-Pay Collections and Support Meaningful Use
Increased electronic engagement between healthcare providers and patients provides significant opportunities for improving revenue cycle metrics and encouraging patients to access EHRs. This article, written by Apex Founder and CEO Brian Kueppers, explores a number of strategies to create synergy between patient billing, online payment portals and electronic health record (EHR) software to realize a high ROI in speed to payment, patient satisfaction and portal adoption for meaningful use.
Large Health System Drives 10% UP (Patient Payments) and 10% DOWN (Billing-related Costs)
Faced with a rising tide of bad debt, a large Southeastern healthcare system was seeing a sharp decline in net patient revenues. The need to improve collections was dire. By integrating critical tools and processes, the health system was able to increase online payments and improve its financial position. Taking a holistic approach increased overall collection yield by 10% while costs came down because the number of statements sent to patients fell by 10%, which equated to a $1.3M annualized improvement in patient cash over a six-month period. This case study explains how.
ICD-10: Managing Performance
With the ICD10 deadline quickly approaching and daily responsibilities not slowing down, final preparations for October 1 require strategic prioritization and laser focus.
Clarity Drives Collections
Read how Gwinnett Medical Center provides clear connections to financial information, offers multiple payment options for patients, and gives onsite staff the ability to collect payments at multiple points throughout the care process.
Orlando Health Gains Insight into Denials, Reduces A/R Days with RelayAnalytics Acuity
Read how Orlando Health was able to perform deeper dives into claims data to help the health system see claim rejections more quickly–even on the front end–and reduce A/R days.
Revenue Cycle Payment Clarity
To maintain fiscal fitness and boost patient satisfaction and loyalty, healthcare providers need visibility into when and how much they will be paid–by whom–and the ability to better navigate obstacles to payment. They need payment clarity. This whitepaper illuminates this concept that is winning fans at forward-thinking hospitals.
Streamlining the Patient Billing Process
Financial services staff are always looking for ways to improve the verification, billing and collections processes, and Munson Healthcare is no different. Read about how they streamlined the billing process to produce cleaner bills on the front end and helped financial services staff collect more than $1 million in additional upfront annual revenue in one year.
Wallace Thomson Hospital Automates to Maximize Limited Resources
Effective revenue cycle management can be a challenge for any hospital, but for smaller providers it is even tougher. Read how Wallace Thomson identified unreimbursed procedures, streamlined claims management, and improved its ability to determine charity eligibility.
7 Steps for Building and Funding Sustainability Projects
Before launching an energy-efficiency initiative, it’s important to build a solid business case and understand the funding options and potential incentives that are available. Healthcare leaders should consider taking the steps outlined in the whitepaper to ease the process of gaining approval, piloting, implementing, and supporting sustainability projects. You will find that investing in sustainability and energy efficiency helps hospitals add cash to their bottom line. Discover how hospitals and health systems have various options for funding energy-efficient and renewable-energy initiatives, depending on their current financial structure and strategy.
Key Capital Considerations for Mergers and Acquisitions
Health care is a dynamic mergers and acquisitions market with numerous hospitals and health systems contemplating or pursuing formal arrangements with other entities. These relationships often pose a strategic benefit, such as enhancing competencies across the continuum, facilitating economies of scale, or giving the participants a competitive advantage in a crowded market. Underpinning any profitable acquisition is a robust capital planning strategy that ensures an organization reserves sufficient funds and efficiently onboards partners that advance the enterprise mission and values.
Key Capital Considerations for Mergers and Acquisitions
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Trend Watch: Providers adapt as value-based care moves from hype to reality
Announcements from several commercial payers and the Centers for Medicare and Medicaid Services (CMS) early in 2015 around increased efforts to form value-based contracts with providers seemed to point to an impending rise in risk-based contracting. Rather than wait for disruption from the outside in, health care providers are now making inroads on collaborating with payers on various risk-based contracting models to increase the value of health care from within.
Yuma Regional Medical Center case study
Yuma Regional Medical Center (YRMC) is a not-for-profit hospital serving a population of roughly 200,000 in Yuma and the surrounding communities.
Before becoming a ZirMed client, Yuma was attempting to manually monitor hundreds of thousands of charges which led to significant charge capture leakage. Learn how Yuma & ZirMed worked together to address underlying collections issues at the front end, thus increasing Yuma’s overall bottom line.
Reforming with a New 50-Bed Acute Care Facility
Kindred Hospital Rehabilitation Services works with partners to audit the market and the facility’s role in that market to identify opportunities for improvement. This approach leads to successes; Kindred’s clinical rehab and management expertise complements our partners’ strengths. Every facility and challenge is unique, and requires a full objective analysis.
5-Minute Briefing on Revenue Integrity Through HIM WhitePaper Hospitals FS
As the critical link between patient care and reimbursement, health information enables more complete and accurate revenue capture. This 5-Minute White Paper Briefing shares how to achieve cost-effective revenue integrity by your optimizing HIM systems.
5-Minute Briefing on Accelerating Cash Flow Through HIM WhitePaper Hospitals FS
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5-Minute Briefing on Reducing the Cost of RCM WhitePaper Hospitals FS
Qualified coders are getting harder to come by, and even the most seasoned professional can struggle with the complexity of ICD-10. This 5-Minute White Paper Briefing explains how partnerships can help improve coding and other key RCM operations potentially at a cost savings.
Providers Focus Too Much On Revenue Cycle Management
The point of managing your revenue cycle isn’t just to improve revenue and cash flow. It’s to do those things effectively by consistently following best practices— while spending as little time, money, and energy on them as possible.
Lucille Packard Children’s Hospital Stanford Case Study
How Lucile Packard Children’s Hospital Stanford increased payments received within 45 days by 20% and reduced paper submission claims by 70% by using ZirMed solutions.
Using Predictive Modeling To Detect Meaningful Correlations Across Claims Denials Data
The reasons claims are denied are so varied that managing denials can feel like chasing a thousand different tails. This situation is not surprising given that a hypothetical denial rate of just 5 percent translates to tens of thousands of denied claims per year for large hospitals—where real‐world denial rates often range from 12 to 22 percent. Read about how predictive modeling can detect meaningful correlations across claims denials data.
ZOLL and Emergency Mobile Health Care Case Study
Emergency Mobile Health Care (EMHC) was founded to be and remains an exclusively locally owned and operated emergency medical service organization; today EMHC serves a population of more than a million people in and around Memphis, answering 75,000 calls each year.
Maximizing Medicare Reimbursements White Paper
Since the Physician Quality Reporting Initiative (PQRI) introduction, CMS has paid more than $100 million in bonus payments to participants. However, these bonuses ended in 2015; providers who successfully meet the reporting requirements in 2016 will avoid the 2% negative payment adjustment in 2018, so now is the time to act! Included in this whitepaper are implications of increasing patient responsibility, collections best practices, and collections and internal control solutions.
Denials Deconstructed: Getting Your Claims Paid
Getting paid what your physician deserves—that’s the goal of every biller. Yet even for the best billers, achieving that success can be elusive when denials stand in the way of success, presenting challenges at every turn. Denials aren’t going away, but you can learn techniques to manage and even prevent them.Join practice management expert Elizabeth W. Woodcock, MBA, FACMPE, CPC, to: Discover methods to translate denial data into business intelligence to improve your bottom line, determine staff productivity benchmarks for billers, and recognize common mistakes in denial management.
Automation and Operational Improvement Drive Sustainable Results
Physician practices must improve organizational efficiency to compete in this era of reduced reimbursement and escalating administrative costs.
Revenue Cycle Management Resolves Migration Implementation Issues
Many healthcare organizations are pursuing next-generation health information systems solutions. Learn more about Navigant's work with University of Michigan Health System.
Partnering For Success – Provider Achieves Strength in Stability
The proper implementation of healthcare information technology systems is crucial to an organization’s financial health.
Building a Clinically-Integrated Network
As value-based payment models evolve, providers are challenged to maintain superior clinical outcomes while controlling costs.
Winning in the Post-Acute Marketplace
Read more about factors contributing to the changes in the post-acute marketplace and what it means for manufacturers, physicians, clinicians, patients, and post-acute facilities as they anticipate the transition to the second curve.
Building A Common Vision with Employed Physicians
HSG helped the physicians and executives of St. Claire Regional in Morehead, Kentucky, define their shared vision for how the group would evolve over the next decade. As well as, develop the strategic and operational priorities which refocused and accelerated the group’s evolution.
Practice Performance Improvement
The client was a nine-hospital health system with 14 clinics serving communities in a multi-state market with very limited access to care, poor economic conditions, high unemployment, and a heavy Medicare/Medicaid/uninsured payer mix. In most of these communities, the system was the sole source of care.
Though the clinics were of substantial size (they employed 98 physicians) and comprised of multiple specialists, the physicians functioned as individuals and the practices lacked any real group culture.
Clinical Integration Without Spending a Fortune
Clinical integration can be expensive, but it doesn’t have to be, as this four-step road map for developing a CIN proves. Does it have to cost millions to initiate a clinical integration strategy?
Contrary to popular belief, we have clients who have generated substantial shared savings and a significant ROI over time, without massive investments. Yes, some financial capital is required for resources the CIN providers can’t bring to the table themselves. But the size of that investment can be miniscule relative to the value it produces: improved outcomes and documentation for payers.
Adding Value to Physician Compensation
Today’s concerns about physician compensation are the result of the changing healthcare environment. The transition to value is slow, but finally becoming a reality. Proactive hospitals want to ensure that provider incentives are properly aligned with ever-increasing value-based demands.
This report focuses on the three big questions HSG receives about adding value to physician compensation; Why are organizations redesigning their provider compensation plans? What elements and parameters must be part of successful compensation plans? How are organizations implementing compensation changes?
Effective Revenue Cycle Management in Your Network
Revenue Cycle Management has become an even more complex issue with declining reimbursements, implementation of Electronic Health Records, evolving local carrier determinations (LCD), and payer credentialing [The emphasis on healthcare fraud, abuse and compliance has increased the importance of accuracy of data reporting and claims filing).
The efficiency of a medical practice’s billing operations has critical impact on the financial performance. In many cases, patient billings are the primary revenue source that pays staff salaries, provider compensation and overhead operating cost. Inefficiencies or inaccurate billing will contribute to operating losses.
Succeeding in Value-Based Care
This publication identifies and outlines the necessary characteristics of a fully-functioning clinically integrated network (CIN). What it doesn’t do is detail how hospitals and providers can participate in the value-based care environment during the development process.
One common misconception is that the CIN can’t do anything significant until it has obtained the FTC’s “clinically integrated” stamp of approval. While the network must satisfy the FTC’s definition of clinical integration before single signature contracting for FFS rates and contracts can legally start, hospitals and providers can enjoy three key benefits during the development process.
Therapy: Benefits at All Levels of Care
Nearly half of all Medicare beneficiaries treated in the hospital will need post-acute care services after discharge. For these patients, a stay in an inpatient rehabilitation facility, skilled nursing facility or other post-acute care setting comes between hospital and home.
Does Your Budgeting Process Lack Accountability?
With the proper process, tools, and feedback mechanisms in place, budgeting can be a valuable exercise for organizations while helping hold organizational leaders accountable. Having a proper monthly variance review process is one of the most critical factors in creating a more efficient and accurate budget. Monthly variance reporting puts parameters around what is to be expected during the upcoming budget entry process.
Cost Accounting: the Key to Cost Management and Profitability
Managing the cost of patient care is the top strategic priority of most hospital CFOs today. As healthcare shifts to more data-driven decision making, having clear visibility into key volume, cost and profitability measures across clinical service lines is becoming increasingly important for both long-range and tactical planning activities. In turn, the cost accounting function in healthcare provider organizations is becoming an increasingly important and strategic function. This whitepaper includes five strategies for efficient and accurate cost accounting and service line analytics and keys to overcoming the associated challenges.