Becker's Hospital Review

Register Today! Becker's Hospital Review CIO and CEO Strategy Roundtables - Nov. 4 and 5, 2014 - Chicago 8 2. Growth of accountable care organizations. The success of ACOs is not ubiquitous and their long-term effects are not yet clear, but this model is gaining traction after experiencing a slow start. A May 2014 analysis from Salt Lake City-based Leavitt Partners identified 626 ACOs around the country. The total number of ACO-covered lives is approximately 20.5 million. We expect to see the formation of more physician- and hospital-led ACOs for Medicare, Medicaid and commercial health plans. 3. Intensity of rivalries. While hospitals fight over patients, physicians and payer contracts, we are seeing rivalries grow in intensity from community to community. Some of these battles play out locally whereas others reach a na- tional or even international scale, such as Rochester, Minn.-based Mayo Clinic and Cleveland Clinic. As healthcare grows nationally, the sprawling competi- tion for market share, physicians and clout with payers remains intense. 4. Reduced inpatient procedures. Inpatient procedures have always been incredibly important to hospital revenues. An average inpatient proce- dure may generate six to 10 times as much as an outpatient procedure. Due to economics and advancements in technology, we are seeing a reduction in inpatient procedures in many markets. Researchers with Kaufman Hall studied inpatient and outpatient numbers from 2010-12 at 71 hospitals in a seven-county area around Chicago. They found a 4.6 percent drop in inpa- tient utilization across all age groups in that timeframe, and almost all service lines experienced lower utilization rates. By analogy, this finding is relevant for many other regions in the country. 5. Layoffs. Becker's Hospital Review has covered approximately 100 hospital layoffs so far this year. The reasons for layoffs can vary, from reduced volume to reduced reimbursement to a closed department. Often the layoffs are oc- curring against the backdrop of recent terrific results and seem to be antici- patory for a reduction in revenues going forward. Also, a few hospital and health system leaders have blamed their states' nonparticipation in Medicaid expansion as a reason for workforce reductions. 6. Narrow networks. Some health insurers selling policies through the Patient Protection and Affordable Care Act health insurance exchanges have turned to narrow provider networks to appeal to consumers with lower pre- mium prices. Narrow provider networks generally take one of two approach- es: They either include only low-price providers in their limited networks, or they give incentive payments to providers that meet certain quality metrics and help the insurer achieve the federally required medical loss ratio thresh- old of 80 percent. Moody's Investors Service has said hospitals included in the networks face potentially decreased revenue by accepting lower payment rates than what they would receive from broader contracts. Further, those hospitals that are excluded risk losing market share. 7. Shift from fee-for-service to population health/managed care. The national healthcare economy is preparing for this shift. While the estab- lishment has been long concerned about this transition, as the economics of traditional fee-for-service erode, more systems will happily embrace man- aged care models that are pay-for-performance and similar approaches. Last month, a study commissioned by McKesson found 90 percent of payers and 81 percent of hospitals currently offer or have signed onto a mix of fee-for- service and other reimbursement models. The study also found payers and hospitals anticipate two-thirds of payments will be based on complex reim- bursement models with value measures by 2020. 8. Huge growth in health IT spending. The amounts spent on health IT, data analytics and similar efforts have exploded. In a 2014 survey from Pre- mier, nearly half of hospital executives said their largest capital investment over the coming year will be in health IT. Throughout the country, health systems often budget at least 4 percent of revenues for health IT. While these capital investments can negatively affect organizations' financials in the short-term, there are long-term gains. This spring, Moody's said hospitals that invest dol- lars in IT and outpatient services are most likely to survive challenging operat- ing conditions. While there are constant complaints regarding satisfaction with electronic medical records and other health IT platforms, this is a cost trend we expect to continue for several more years. 9. Competition for physicians. The huge demand for physicians and the relatively small supply poses a great challenge for health systems, particularly those in rural areas that have a harder time recruiting. The Association of American Medical Colleges estimates the U.S. physician shortage will grow to more than 130,600 physicians by 2025. Another study published in Health Affairs found a distinct need for trained specialists to care for an aging popu- lation that is expected to nearly double from 2013 through 2025. Physicians and health IT staff seem to be the two relative untouchables in a challenging economic environment. 10. Staying independent. More than ever, the reasonably healthy stand- alone hospital has great concern over its ability to stay independent. Whether it is a hospital with annual revenue of $100 million or $300 million, there is huge concern as to whether the hospital will have enough clout with payers to maintain patient access and obtain reasonable rates, not to mention move toward pay-for-performance contracts and invest in health IT. The decrease of physicians who practice independently also affects the fate of these stand- alone hospitals. Of the 792,594 practicing physicians in 2013, 36 percent of them were independent, and 53 percent of those independent physicians were intent on staying that way. n than 500 miles south of Florida to the Cayman Is- lands. That is where India's most renowned heart surgeon Devi Shetty, MBBS, MS, took a model of healthcare that he has already had significant suc- cess with in India and transferred it to Health City Cayman Islands, a facility some see as the future of healthcare. By providing quality healthcare for a fraction of the U.S. price, Health City may be where your patients schedule their next medical visit. As Mother Teresa's cardiac surgeon, Dr. Shetty en- tered the limelight in the early 1990s. His name is now associated with revolutionizing the way healthcare is offered, which has gotten the atten- tion of many healthcare providers in the U.S. Dr. Shetty is chairman of Narayana Health, a sys- tem of 18 cardiac-care hospitals across 14 cities in India. Narayana Hrudayalaya Heart Hospital in Bangalore, India has been described by Fast Company magazine as "Wal-Mart meets Mother Theresa," and was the subject of a widely cited Harvard Business School case study. The hospi- tal offers complex surgeries, such as open-heart surgery, for about $2,000 — substantially less than other hospitals in India and a fraction of the $20,000 to $100,000 the procedures would cost in the U.S. This year, Narayana Health in partnership with nonprofit health system Ascension Health, a Catholic healthcare organization headquartered in St. Louis, opened Health City Cayman Islands. Currently, Health City focuses on cardiac and total joint surgery, and the hospital charges less than half the U.S. price for surgical procedures. In addition, Health City features some of the best technology available and is connected via a foot bridge to a five-star hotel. According to Chandy Abraham, MD, CEO of Health City, the hospital's next center of excellence will provide services in oncology and neurology. To charge such low prices for surgical procedures, some might think quality of care is sacrificed, but that is not the case. Narayana Health hospitals have had outstanding results, and the same con- cept is behind Health City, with many of the same people providing care there. Stemming from Dr. Shetty's vision that no one's so- cioeconomic status should determine their access to healthcare, Health City's primary focus is making healthcare accessible and affordable to the masses. Quality care for one-tenth the U.S. price How does Dr. Shetty do it? This question can be answered with one word: volume. By driving huge volumes, Narayana Health has been able to drive down the cost of healthcare in India, and that is the same concept Dr. Shetty is using at Health City. 10 Concerns and Trends Facing Hospitals Right Now (continued from cover) Health City Cayman Islands: Where Your Patients Might Be Headed For Healthcare (continued from cover)

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