In a keynote address to attendees at the 9th Annual Orthopedic, Spine and Pain Management-Driven ASC Conference in Chicago on June 10, Joe Flower, a healthcare futurist, discussed trends in healthcare delivery and where he sees the industry moving in the next 10 years.
Mr. Flower said healthcare is currently at a key turning point in its history, and as the industry works to improve quality and lower cost, a number of new healthcare business models will emerge.
Significant changes with or without reform
While the Patient Protection and Affordable Care Act has drawn a great deal of attention to the need of significant changes in the healthcare delivery system to control growing healthcare costs, Mr. Flower said healthcare delivery as we know it will transform even if the PPACA doesn't survive constitutional challenges.
According to Mr. Flower, the survival of the PPACA will rest in the decision of Supreme Court Justice Anthony Kennedy. Challenges to the PPACA have already reached the Circuit Court of Appeals and if any of the three-judge panels reviewing reform cases overturn the law, the issue would move to the Supreme Court, where Justice Anthony Kennedy, known for being the Court's moderate Justice, is likely to deliver the swing vote.
With or without an individual mandate, societal changes — most notably the aging of Baby Boomers — will force healthcare payors along with providers to develop new approaches to healthcare delivery to deal with rising costs, said Mr. Flower.
One group particularly driving efforts toward new delivery models are employers. "Across the country, employers have driven down the cost of healthcare by significant percentages by getting involved in the lives of employees," says Mr. Flower. For example, Boeing has reduced its costs for employees with certain chronic diseases by 20 percent and Safeway reduced its healthcare costs by 14 percent through its CIGNA Choice Fund. Other employers, such as Utah-based Questar have contracted directly with health systems to oversee employee care, said Mr. Flower.
Many states are also working vigorously to lower healthcare costs and this is expected to continue. Massachusetts, for example, beat the federal government in instituting an individual mandate, and Vermont is currently attempting to develop a single-payor program.
The end of fee-for-service
Most new business models introduced by payors, employers and states will move away from the fee-for-service model toward pay-for-performance and bundled or capitated models, all of which redistribute risk among payors, providers and consumers. Consumers and providers will take on more risk, which will lead to different behaviors for both groups and among payors. Some of the new behaviors Mr. Flower expects include:
Consumer behaviors
Payor behaviors
Health system behaviors
Where ASC can compete
However, Mr. Flower says several areas exist where ASCs can prosper under new delivery models:
Mr. Flower said healthcare is currently at a key turning point in its history, and as the industry works to improve quality and lower cost, a number of new healthcare business models will emerge.
Significant changes with or without reform
While the Patient Protection and Affordable Care Act has drawn a great deal of attention to the need of significant changes in the healthcare delivery system to control growing healthcare costs, Mr. Flower said healthcare delivery as we know it will transform even if the PPACA doesn't survive constitutional challenges. According to Mr. Flower, the survival of the PPACA will rest in the decision of Supreme Court Justice Anthony Kennedy. Challenges to the PPACA have already reached the Circuit Court of Appeals and if any of the three-judge panels reviewing reform cases overturn the law, the issue would move to the Supreme Court, where Justice Anthony Kennedy, known for being the Court's moderate Justice, is likely to deliver the swing vote.
With or without an individual mandate, societal changes — most notably the aging of Baby Boomers — will force healthcare payors along with providers to develop new approaches to healthcare delivery to deal with rising costs, said Mr. Flower.
One group particularly driving efforts toward new delivery models are employers. "Across the country, employers have driven down the cost of healthcare by significant percentages by getting involved in the lives of employees," says Mr. Flower. For example, Boeing has reduced its costs for employees with certain chronic diseases by 20 percent and Safeway reduced its healthcare costs by 14 percent through its CIGNA Choice Fund. Other employers, such as Utah-based Questar have contracted directly with health systems to oversee employee care, said Mr. Flower.
Many states are also working vigorously to lower healthcare costs and this is expected to continue. Massachusetts, for example, beat the federal government in instituting an individual mandate, and Vermont is currently attempting to develop a single-payor program.
The end of fee-for-service
Most new business models introduced by payors, employers and states will move away from the fee-for-service model toward pay-for-performance and bundled or capitated models, all of which redistribute risk among payors, providers and consumers. Consumers and providers will take on more risk, which will lead to different behaviors for both groups and among payors. Some of the new behaviors Mr. Flower expects include:Consumer behaviors
- Consumer shopping. Healthcare consumers, who will take on more financial responsibilities for care, will shop for providers that provide the best care for the least money.
- Consumers will delay expensive surgery. Consumers may do nothing or may choose medical management, which Mr. Flower describes as "ibuprofen and yoga," over surgery. "[Your] competition does not have to be better, it just has to be cheaper and good enough," he says.
- Doctor's orders count for less. Mr. Flower believes as patients become more informed consumers, they may view their doctors' opinions with less reverence than they've done in the past.
Payor behaviors
- Increased use of comparative effectiveness research. Mr. Flower said payors, both private and Medicare/Medicaid, will lean on comparative effectiveness research to justify not paying for certain procedures. He noted that comparative effectiveness research funding has increased from $300 million to $1 billion since President Obama has taken office.
- Paying for outcomes and quality. Fee-for-service will decrease as payors move to pay-for-performance models. Mr. Flower pointed out this could actually be an advantage for providers that can provide good outcomes.
- More aggressive advice. Payors will increasingly talk to consumers about healthcare options before they come to providers for care. Mr. Flower expects the use of health coaches — provided by insurers, employer or even hired by patients directly — to help patients navigate the healthcare space to increase.
Health system behaviors
- Consolidate and diversify. Advanced, integrated health systems will acquire additional providers along the continuum of care, leading to increased consolidation. "Weaker hospitals will not be able to stand this onslaught," said Mr. Flower.
- Accept greater financial risk. Because risk provides greater financial rewards, integrated systems will increasingly enter into bundled and capitated contracts to oversee care from primary care outward.
Focus on systemic cost savings
In order to lower costs and profit more under capitated models, systems will focus on driving out services that create significant costs. To do this, systems will 1) rebuild inefficient processes through Six Sigma, Lean and other techniques 2) better coordinate care to avoid duplicate treatments and ensure right-level treatments, 3) avoid unnecessary treatments, 4) reduce primary care provided in the ER and 5) better control chronic diseases to reduce ER services and admissions related to unmanaged chronic conditions.What it means for ASCs
Although ASC reimbursements are currently significantly lower than hospitals and a chief bragging point of ASCs, as health systems drive costs out of their systems, they will offer increasingly lower bids to payors in order to win contracts. This means the gap between hospital and ASC rates will narrow.Where ASC can compete
However, Mr. Flower says several areas exist where ASCs can prosper under new delivery models:
- Bundling. ASCs will be able to compete with hospitals by offering bundled care. These bundles could feature a single price for facility, anesthesia and physician fees and include warranties for guaranteed outcomes and timing.
- Safety. ASCs can compete with hospitals on safety, making the case that surgery centers are safer sites of care for surgical procedures.
- Surgical management. ASCs may also benefit by partnering with hospitals to provide outpatient surgical care efficiently. "[Health systems] are promising to do things they may not be able to deliver," said Mr. Flower. If hospitals are unable to meet efficiency goals they've promised to payors, "[ASCs'] strongest rivals could become their best customers."