The year’s financial results are in. Bonuses are being paid. The election results are in, and new players in government are being identified. Market and financial analysts have a new year of data to work with. Several new market entrants are providing more competition and more disintermediation.
The stage is set for healthcare organizations to rebalance their portfolios, looking at where dollars should be redeployed, what relationships and partnerships should be given greater or less weight, what other factors deserve more attention, and ow the risks and rewards have changed.
The following are some factors to consider during the process of rebalancing for 2019.
State policy is more varied and is playing a bigger role. States are showing even greater variation in how much they spend on Medicaid and on which populations (e.g., patients with mental health conditions, the disabled, or the overall safety net). States also are showing greater variation in how they spend it—whether it be through capitated arrangements, new variations of variable-based payments, or sub-state entities or contractors that allocate the funding, for example.
More states are getting aggressive in controlling costs of health care for their employees and retirees. Some are taking a hard look at reference-based pricing. Many are willing to establish contracting tiers or other mechanisms to channel state employees to lower-cost facilities.
State retirement plans are now potential purchasers of innovative approaches for the sickest of their retirees, including use of innovative forms of home care, extensivists who deliver multidisciplinary services that can help retirees avoid expensive hospitalization, wraparound services (which may include mental health or other forms of social support), and telehealth services. In essence, state governments and their contractors have become a significant market for piloting innovations that reduce costs.
State attorneys general are looking closer at consolidations in which health systems grow larger and/or cross state lines, and they have reshaped several health system consolidations.
The bottom line: State governments play a significant role in almost every aspect of healthcare policy or finance. Healthcare economists who seek to understand cost trends but don’t understand differences in state-level dynamics do so at their peril. Lobbyists and other relationship managers who focus only on political relationships at the governor’s mansion and the legislature may not achieve their desired impact if they don’t invest in deeper relationships with other state-level healthcare decision makers.
Hospital and other state healthcare associations find themselves in a bind because their members’ interests compete with one another. Healthcare organizations are focusing more than ever—in terms of dollars, sophisticated talent, and senior management time—on achieving and sustaining the right relationships with state governments.
The employer-health plan relationship is gaining attention. Employers differ not only by size and industry but also by how they intend to approach managing healthcare costs. Employers with young work forces are going one way while those with skilled office workers are going another and those with hard-to-find skilled blue-collar workers are going in yet another direction. Self-insured employers are becoming more aggressive in demanding tailored approaches. Some employers are working with consultants or brokers to establish new cross-state programs.
Ambulatory care also is receiving increased attention. Many health systems are returning to the basics, considering how they might best achieve marketplace dominance in primary and ambulatory care with the right locations and the right complement of services and accessibility. This strategy, as a complement to consolidation, has the overall goal of serving the largest population with the most logical and sustainable service area.
Health systems and physician groups also are exploring whether they need to adjust their ambulatory care offerings to appeal to local residents and the extent to which demographics are changing in their ZIP codes. Key considerations include whether it makes strategic sense within a given location to emphasize services such as virtual visits, wrap-around services, and telehealth; whether the organization’s ambulatory facility needs adjustment; whether patient satisfaction scores point to a positive patient experience; and whether there is sufficient ease of access between primary care and specialty care.
Many believe that value-based payments for commercial, Medicare, and Medicaid patients will continue to grow, which suggests giving higher weights to the primary care-patient relationship, the primary care-specialty relationship, the primary care-health system relationship, and primary care payment incentives.
All these factors are pushing ambulatory strategies higher on health system leaders’ lists.
Organizational images are being re-tooled. Many healthcare decisions—by patients, by voters, and even by analysts—are being made based on information that is poor, too narrow, or biased. Every healthcare leader is working hard to improve performance-based quantitative targets. But what if these targets have little to do with how those outside the industry will judge performance? Most of us are underweighting the impact on nonquantifiable factors outside of our control.
In times of uncertainty and change, people tend to rely more on instinct and trust. Healthcare organizations therefore are revisiting how they present their image, asking whether the image they’re cultivating is current and whether it will influence most important audiences.
Integration partnerships are being adjusted. Rebalancing the portfolio requires reassessing integration issues such as whether the organization has the right partners in its clinically integrated network and joint ventures, whether the partnerships are accomplishing what was expected, and whether leader-to-leader relationships are working as they should.
Balancing the Weights
If organizations invest more in these five areas—state government, the employer-payer linkage, ambulatory care, image and reputation, and integration partners—they also should understand the implications of this increased investment. For health systems or health plans with large financial margins, reweighting probably means simply adding some costs and management focus—that is, investing a little more now for a bigger return later. But for those without margin, investing more in these areas may create a bind from uncertainty about which areas should be given a lower weight, with less investment. For some organizations, new investments may be required now to preempt new competitors.
Regardless of each organization’s situation, it’s time to take a look, and to rebalance.