Futurescan

1. Futurescan Healthcare Trends and Implications2012–2017

2. Futurescan Co-sponsored by: • Society for Healthcare Strategy and Market Development of the American Hospital Association • American College of Healthcare Executives • With Support From VHA Inc.

3. American College of Healthcare Executives • Professional society of more than 40,000 healthcare executives—Leaders Who Care • Board certification in healthcare management as ACHE Fellows (FACHE®) • Foremost continuing educator for the field • Leading healthcare management publications: • Health Administration Press books • Journal of Healthcare Management, Frontiers of Health Services Management and Healthcare Executive • Fulfilling our vision to be the premier professional society for healthcare executives dedicated to improving healthcare delivery

4. Society for Healthcare Strategy and Market Development Personal membership group of the American Hospital Association Serves more than 4,400 healthcare planning, marketing and public relations/communications professionals Committed to helping members meet the future with more knowledge and opportunity as their organizations work to improve health status and quality of life in their communities

5. Futurescan 2012–2017 Healthcare Reform: The Transformation of America’s Hospitals—Economics Drives a New Business Model Healthcare Reform: States Grapple With Health Insurance Exchanges Access to Capital: The Gold Rush Is On Demographics: Will the Baby Boom Be a Boon to Hospitals? Don’t Count on It Community Connections: An Expanding Hospital Role Includes Community Well-Being Bending the Cost Curve: Hospitals Challenged to Lead With Quality to Reduce Costs Clinical Integration: Déjà Vu All Over Again Physician Strategies: Employing Physicians—The Future Is Now

6. “The hospital—altogether the most complex human organization ever devised …” Peter Drucker Drucker, Peter F. (2002). Managing in the Next Society. New York, New York: St. Martin’s Griffin.

7. Actions We Should Start, Stop and/or Continue We should start..... We should continue..... We should stop.....

8. FutureScanning Implications of this Trend? Implications of this Trend? Trend Implications of this Trend? Implications of this Trend? Implications of this Trend? At least 1 positive, and 1 negative. Implications of this Trend?

9. Healthcare Reform The Transformation of America’s Hospitals: Economics Drives a New Business Model Kenneth Kaufman Mark E. Grube

10. Transforming America’s Hospitals:A New Business Model The Economics of the 21st century will force healthcare delivery to be value based. • Don’t wait for change to come from federal or state governments. • Focus on outcomes, quality and access rather than volume. • Move from physician-centric to team-based care. • Emphasize teamwork, discipline and humility as organizational values.

11. Transforming America’s Hospitals: Downward Trends Reimbursement and utilization will decline over time on either a relative or absolute basis. • Breaking even on Medicare patients will be key. Aggressively pursue this goal. • Rethink service offerings and examine care processes in order to achieve efficiencies. • Adopt a team-based approach that focuses on population health rather than just individual patient care.

12. Transforming America’s Hospitals: Technological Innovation The rapid emergence of new technologies that improve health outcomes and reduce costs will disrupt clinical practice and competitive strategy. • Invest in disease management systems that monitor patients in their homes in order to promote health and reduce readmissions. • Develop hospital-branded “apps” for smartphones that provide health information to consumers and best-practice information to clinicians. • Make technological innovation and adaptation an essential part of your management strategy.

13. Transforming America’s Hospitals:Boundaries Blur The traditional hard lines between various types of healthcare providers and participants will begin to break down. • Carefully monitor the trends in your community regarding employed physicians, integrated services and ACO development. • Consider participating in joint ventures between for-profit and nonprofit providers. • Look for opportunities for collaboration between health insurers and provider organizations.

14. Transforming America’s Hospitals: Consolidation Price and quality competition from large organizations will be intense, and it will be increasingly difficult for small independent organizations to survive. • Look for ways to achieve economies of scale by partnering with other community or regional organizations. • Use group purchasing alliances to reduce costs. • Educate the board and medical staff on the realities of the new healthcare landscape so that they are prepared for change.

15. Healthcare Reform States Grapple With Health Insurance Exchanges William W. Sneed

16. Health Insurance Exchanges: Sooner Rather Than Later It is very likely that the ACA will be judged constitutional and that all states will be expected to implement exchanges by January 2014. • Monitor the federal regulations closely as they evolve in response to comments from the field. • Be thoroughly familiar with your state’s intentions and progress regarding exchange development. • Project how an operational exchange will impact your facility in terms of both patient volume and cash flow. • Be prepared to act quickly.

17. Health Insurance Exchanges: Expanding Access Exchanges will enroll individuals without prior access to employer-sponsored insurance as well as employees of small companies. • Get involved in your state’s exchange development. Have a voice in determining its policies and implementation. • Monitor the local workforce environment so you can anticipate the exchange’s clients and their health status. • Serve as a resource to local small businesses as they consider dropping their health coverage in favor of an exchange.

18. Health Insurance Exchanges:Provider Risks Operating exchanges will create financial risks for provider organizations. • Run projections to determine the individuals most likely to join exchanges in your area, and their likely health status and health needs. • Be prepared for the competition that exchanges will create based on cost. • Be vigilant about pricing services below cost in an effort to maintain market share.

19. Health Insurance Exchanges:The Benefit Package The federal government will allow individual states to define essential benefits for its exchange. • Monitor the federal and state policy and legislation closely. • Closely monitor state agency-vendor relationships. • Actively advocate for a benefit package that maximizes quality at a reasonable cost.

20. Health Insurance Exchanges:Transparency Health insurance exchanges will promote transparency in an attempt to lower costs. • Begin making cost and quality information available now. • Use social media (website, Facebook and more) as a means to promote transparency of services and quality. • Devise strategies to help consumers understand what an exchange is and the various products that will be offered by the exchange. • Be an active participant in the design of the exchange.

21. Access to Capital The Gold Rush Is On Marian C. Jennings

22. Access to Capital: Unstable Markets Volatility in the credit market will likely continue, making access to timely, affordable debt challenging and uncertain. • Attend to key balance sheet and liquidity ratios NOW. Don’t wait until you need access to capital. • Cultivate relationships with local and traditional lenders. • Monitor competitors’ situations regularly. Don’t assume weak organizations will always be strapped for capital.

23. Access to Capital: A Widening Resource Gap The gap between the haves and the have-nots in terms of access to capital will increase. • Develop a five-year strategic financial plan that incorporates capital needs and links them to continued competitiveness. • Consider a variety of “what if” scenarios to best position your organization for the inevitable changes that will occur over the next five years. • Smaller facilities should consider partnerships with larger or regional systems.

24. Access to Capital: Competitive Advantage For-profit systems will use their ability to access capital as a competitive advantage and continue their aggressive acquisition mode. • When appropriate, look for a for-profit partner for new or existing projects. • All facilities—for-profit or nonprofit—should make planning for capital needs under various scenarios a key part of management. • In order to maintain your competitiveness, find ways to break even on Medicare reimbursement.

25. Access to Capital: More Demand Than Capacity Capital demand will outstrip capacity, even in the strongest and largest nonprofit systems. • Carefully examine criteria for capital projects or improvements. • Consider divesting underperforming assets sooner rather than later. • Be cognizant that bond holders expect a return on their investment. • Be sure to demonstrate your organization’s continued value to the community.

26. Access to Capital: An Urge to Merge The need for access to capital will result in more hospitals and regional systems merging with larger organizations. • While access to capital may drive a merger, other benefits of affiliation can be obtained without ceding control. • Be aware that merging with a smaller, struggling hospital could result in a credit downgrade or divert limited system resources. • Carefully monitor proposed federal legislation that would make newly issued municipal bonds taxable.

27. Demographics Will the Baby Boom Be a Boon to Hospitals? Don’t Count on It Jeff Goldsmith

28. Demographics:The 21st Century Retiree Many baby boomers will postpone retirement or look for new ways to make a meaningful contribution post-retirement. They will expect to maintain healthy and active lifestyles. • Offer programs that will help seniors remain healthy and active well past the traditional retirement age. • Develop expertise in orthopedic services, particularly joint replacement. • Provide volunteer or part-time consulting opportunities for talented seniors in your community. • Focus on patient satisfaction, as boomers will demand high-quality services.

29. Demographics: Cost-Sensitive Seniors Because of the economic downturn, Medicare-eligible boomers are more likely to opt for the cost-savings offered by Advantage programs. • Anticipate reductions in the use of hospital services by future—as compared to past—Medicare recipients. • Develop programs that help patients and their families manage and coordinate post-hospital care. • Engage Medicare Advantage programs in experimenting with new care models.

30. Demographics: Anticipate Needs The greatest needs of the boomer generation will be joint replacement surgery, diabetes-related care and cancer services. • Develop ambulatory centers for cancer treatment and imaging. • Develop specialized services for diabetes treatment and management. • Develop expertise in joint replacement and rehabilitation following surgery. • Carefully monitor the health and social needs of seniors in your community to identify opportunities for additional services.

31. Demographics: Break Even on Medicare In the long term, successful providers will need to break even on Medicare’s current DRG and APG systems. • Work with physicians, particularly intensivists and hospitalists, to reduce costs. • Implement aggressive infection control processes. • Develop systems that coordinate care. • Work with families to reduce post-care complications and readmissions.

32. Demographics: Innovations in Healthcare Delivery The CMS Innovation Center created by the ACA will promote innovations in healthcare delivery designed to control costs and ensure quality. • Be active participants in any field tests or experiments in order to learn to improve care and influence emerging models. • Actively involve physician leaders in any new models. • Look for new ways to deliver primary care, care transitions and follow-up care.

33. Community Connections An Expanding Hospital Role Includes Community Well-Being Connie J. Evashwick, ScD, FACHE Eileen L. Barsi

34. Community Connections: Demonstrating Community Benefit There will be increasing pressure on hospitals to demonstrate their value to the community. • Nonprofit hospitals should ensure they are in compliance with the new community benefit requirements under the ACA. • Nonprofits should be prepared to respond to challenges regarding their tax exempt status. • Promote the importance of your organization’s economic impact on the community.

35. Community Connections: Population Health Hospitals will be expected to make good on their mission to improve the health of the community. • Assess your organization’s current engagement with the community now. • Have metrics in place that track your organization’s impact on the community’s health and well-being. • Work with churches and other community organizations to enroll qualified individuals in state Medicaid programs.

36. Community Connections: Wellness and Prevention Wellness and preventive programs will proliferate as employers and insurers look for ways to reduce healthcare costs. • Partner with insurers and employers to offer wellness programs and expertise. • Work with community-based clinics to expand access to preventive services. • Develop expertise in disease management that can benefit community providers and reduce healthcare costs.

37. Community Connections: Engagement As part of their community benefit, hospitals will need to be actively engaged with the community. • Incorporate community outreach as a key function of the organization. • Involve senior leaders in activities and strategies that benefit the community. • Choose governing or advisory board members who reflect and are sensitive to the needs of the broader community. • Communicate regularly with internal and external stakeholders.

38. Community Connections: Collaboration Collaboration with other community organizations will be a critical strategy for providing coordinated care. • Make sure that key leadership understands how your organization interfaces with other community agencies or providers. • Provide incentives for employees to volunteer with or provide expertise to other community agencies or providers. • Offer expertise to local health departments that may be seeking accreditation by the Public Health Accreditation Board.

39. Bending the Cost Curve Hospitals Challenged to Lead With Quality to Reduce Costs Nancy M. Schlichting, FACHE

40. Bending the Cost Curve: Deficit Reduction Challenges Pressures to reduce budget deficits—at both the federal and state levels—will target entitlement programs including Medicare and Medicaid. • Use proven strategies like Lean and Six Sigma to reduce costs associated with Medicare and Medicaid admissions. • Work with clinical staff to coordinate care in attempts to reduce costs. • Set a goal to “break even” on Medicare patients by 2014.

41. Bending the Cost Curve:A Demographic Tsunami The aging of the baby boom generation will create a tsunami of increased demand and high expectations for services. • Since seniors will likely be paying more out of pocket for healthcare services, emphasize the value of your care. • Pursue clinical integration with physicians to provide high-quality, efficient and coordinated care. • Design intake and discharge processes that are efficient and sensitive to the needs of seniors.

42. Bending the Cost Curve:Value-Driven Healthcare The expectations for quality and value in the delivery of healthcare services will increase. The bar will be set higher. • Use quality improvement techniques like Lean and Six Sigma to improve processes. • Investigate new models of care that will reduce complication and infection rates and improve efficiencies. • Make sure that information systems are flexible enough to capture meaningful performance indicators. • Focus on patient satisfaction.

43. Bending the Cost Curve: Readmissions Public and private payors will continue to penalize hospitals for high readmission rates. • Be aware that some patients may not have the financial resources for post-discharge care (e.g., home health, medications, etc.). • Use a transition coach who will help patients transition from the hospital to their homes. • Provide post-discharge clinics for patients at risk of readmission.

44. Bending the Cost Curve: Focus on the Intersections Successful providers will coordinate care across settings with payors and community organizations. • Work with community organizations to develop wellness and chronic disease management services. • Develop preferred relationships with organizations to provide home care and other post-discharge services. • Work with nontraditional caregivers like homeless shelters and free clinics. • Explore new models for providing primary care.

45. Clinical Integration Déjà Vu All Over Again Nathan S. Kaufman

46. Clinical Integration: Back to the Future Despite the failures of the 1990s, providers will look for ways to achieve clinical integration as the ACA is phased in. • Make sure that any strategies are compliant with FTC guidelines. • Early on, determine whether your organization possesses the infrastructure for clinical integration. • Exercise caution and carefully evaluate the organization’s readiness to form an ACO or vertically integrated system. • Pilot test any new network with health system employees and their beneficiaries before expanding to a larger patient base.

47. Clinical Integration:Rewards and Consequences In clinically integrated systems, performance-based rewards will be used to improve quality and efficiency. • Engage physician partners in determining which metrics will be monitored and used to reward performance. • Regularly review these indicators to determine their usefulness and validity. • Be sure information systems can track these indicators reliably and in real time. • Be prepared to deal with poor performers.

48. Clinical Integration: Core Competencies ACOs and other integrated organizations will only be successful if they master “2nd generation competencies.” • Adopt a common EHR that incorporates point-of-care protocols. • Create sufficient primary care capacity. • Implement evidence-based inpatient and outpatient care plans. • Incorporate proactive disease management programs. • Develop physician leadership and engagement.

49. Clinical Integration:More Than Physicians Clinical integration under a reformed health system will extend to all types and levels of healthcare providers. • Work with local health departments and community clinics for follow-up care and wellness services. • Develop relationships with organizations providing specialized post-acute care. • Partner with social services organizations that provide services that maintain individuals’ health and well-being. • Include behavioral health services in the network.

50. Clinical Integration: Failures Are Inevitable Many organizations will assume risk for integrated care without possessing 2nd generation competencies. They will likely fail. • Carefully evaluate your organization’s readiness before assuming risk associated with an ACO or integrated network. • Cultivate physician leadership and buy-in for reducing cost and improving quality. • Recognize that watchful waiting and learning from others’ experiences may be the best strategy for many organizations.