What’s Trending? Observing the Impact of Healthcare Reform

Healthcare reform and evolving reimbursement models are transforming the way care is and will be delivered and paid for. This has incited myriad responses by hospitals and physician groups, as well as other stakeholder groups, across the country. By working with healthcare systems and providers throughout the United States, ECG has an all-access view of how reform and the transition to value-based care are playing out in different regions. Here are some prominent trends we are observing.

Expansion of Consolidation

Health systems keep adding hospitals and services to their portfolios, and hospitals continue integrating with medical groups and physicians. What’s particularly interesting is the fact that we are seeing the introduction of nontraditional entrants into the world of acquisition, such as insurers and private equity firms. This is changing the way that providers are thinking about the value they bring to the market and prompting hospitals to develop strategies for strengthening relationships with referring physicians. Additionally, many of the fair market value and regulatory considerations that hospitals must contend with are nonfactors for these new players. Hospitals, therefore, must demonstrate value to physician partners in ways that overcome purchase price considerations.

Shifts in Physician Compensation Models

As shown in ECG’s 14th annual National Provider Compensation, Production, and Benefits Survey, health systems transitioning to clinically integrated models of care are modifying physician compensation plans to include quality, panel size, adherence to evidence-based medicine, and patient satisfaction scores as indicators of performance. Hospitals and health systems are also embarking on efforts to more closely align compensation strategies with organizational goals and performance.

Clinical Integration

Clinical integration efforts continue to expand as hospitals and providers are expected to improve the quality, availability, and cost of care under the ACA. To achieve these goals, patient-centered medical homes, accountable care organizations, and clinically integrated networks, among others care delivery models, are proliferating in markets across the country.

Performance Improvement

The charge, for many organizations, is essentially to “do more with less.” In turn, health systems and providers are increasingly focusing on operational and financial performance. Organizations can’t afford to maintain redundant processes or poor financial results, and they’re seeking opportunities to fundamentally improve the performance of the group practice or physician enterprise they’ve affiliated with or acquired. This is particularly true for those service lines that are driving revenue into the organization – such as cardiology, oncology, orthopedics, and neuroscience.

Aggressive Cost Reduction

Reducing the cost of care is a critical component of performance improvement. Health systems are changing their inpatient focus and looking to build ambulatory networks in an effort to lower infrastructure costs, improve operational performance, and minimize waste. Organizations are also trying to maximize investments in their physician enterprises, as rising provider compensation and lower production have resulted in unsustainable losses.

Changes to the Insurance Market

The market remains fluid. As the small group and large group markets shrink, insurers are diversifying their portfolio of services by looking to Medicaid and Medicare Advantage plans. As I previously mentioned, one way they are doing this is by entering into the medical group acquisition game. This strategy is converging with the formation of provider-sponsored health plans to compete with public and private payors. The friction between these strategies is contributing to an increasingly volatile insurance market. We’re going to see an era of great change and conflict as insurers become more provider-like and providers become more insurer-like.

This blog post is adapted from an article that appeared in Executive Insight. Click here to read the full article.

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