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1 October, 2012 Posted by John G. Self Posted in Current Affairs, Healthcare, Recruiting
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We Live In Interesting Times

Posted October 1st, 2012 | Author: John G. Self

Two days to the first presidential debate, 36 days to Nov. 6, 92 days to the fiscal cliff…

In a speech in South Africa in 1966, Robert Kennedy said:

“There is a Chinese curse which says ‘May he live in interesting times.’

“Like it or not we live in interesting times. They are times of danger and uncertainty; but they are also more open to the creative energy of men than any other time in history.”

Today, no sector in the economy faces more uncertainty than healthcare. Regardless of who the voters select on Nov. 6, healthcare will undergo major changes—more than we currently see defined in the Affordable Car Act.  There is no avoiding that. To use former President Clinton’s phrase, it is just the arithmetic [of deficit reduction].

That context aside, I have absolute faith in our system and those real industry leaders who will chart a new course for healthcare delivery in the United States.  In other words, I do not see these interesting times as a curse, but as a blessing, loaded with many opportunities.

Change is hard, but it is better to acknowledge the reluctance—the pain, stress, and conflict—of redesigning a healthcare organization, than to mistakenly hold on to the belief that, in the end, it will be business as usual.  For those organizations that wait too long to prepare, there will be almost no hope of survival.

Here are some of the changes I think we will see over the next three to seven years:

  • Major corporations in increasingly larger numbers will shift from traditional healthcare benefit plans by providing employees with an annual allocation to buy coverage in the open market.  Companies hope this approach will lead to lower healthcare costs which, in turn, will improve their profitability as well as their global competitive position.  This change will pose some revenue risks for hospitals.
  • Hospitals, especially those with a significant Medicare payer mix, will have to reduce their costs below Medicare rates to maintain a margin. Commercial payers will follow Medicare’s lower rates.  This will spark the inevitable transformation of the healthcare delivery business model.
  • More than 500 hospitals will be forced to close and more than 425,000 healthcare jobs, at a minimum, will be lost.
  • The investor-owned hospital industry will shrink in size—revenues and numbers of facilities—by 15-25 percent as industry growth slows and companies shed assets that produce a drag on earnings.  Ironically, some of these hospitals will be picked up by larger not-for-profit health systems. 
  • Health systems will carefully evaluate their regional assets against the metrics of margin, service commitments, and their eventual role in a population health management model.
  • Healthcare real estate investment trusts will become a growth industry as health systems sell off real estate to bolster their balance sheets. 
  •  Architectural firms will retool to design facilities for well-care, not the more expense inpatient sick-care facilities that we construct today.  Most of the major construction will be for smaller, more space-flexible hospitals.
  • Consultants, including executive and management recruiters, will face client demands for lower costs and increased value—performance-based fees and longer placement guarantees.  Some high-cost/high-overhead firms will decrease or eliminate their presence in the healthcare provider segment where the expense pressures will be the greatest.
  • Law firms in the healthcare sector will begin charging clients “project fees”, versus the traditional hourly billing structure, to reduce costs. Some firms who have been traditional players in this area will eliminate their healthcare practices in favor of higher margin lines of business.
  • Traditional emergency medical services (EMS) providers, primarily operated by government agencies with taxpayers subsidizing the costs, will face similar cost-control pressures.  Fort Worth’s regional MedStar system is an example of one EMS system of the future.  A highly efficient, non-union government EMS authority that operates successfully without tax support, MedStar created a Community Health Program, a “house call model” that has dramatically reduced the number of transport of chronically ill uninsured patients by monitoring their care in the home. Since its inception, MedStar’s CHP has saved more than $7.4 million in emergency room charges, and reduced 9-1-1 use by these patients by 86.2 percent in 12 months post-enrollment, saving $1.6 million in EMS charges.  Look for the creation of more collaborative EMS models such as MedStar.
  • Home care, concierge medicine, and long-term care will be growth industries. 

© 2012 John Gregory Self

© 2018 John Gregory Self

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