Can health care become pain-free?

By

Carole Faig

EY US Health Leader

US health transformation thought leader. Passionate about wellness and healthy living. World traveler.

12 minute read 10 May 2019

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The health care industry is going through tectonic changes. Find out how you can stay ahead of the game. 

The health industry is undergoing a tremendous transformation. Spiraling costs driven by aging populations and the rise of chronic disease mean that health systems and organizations are searching to find ways to operate more efficiently.

Simultaneously, health organizations are responding to a rising demand for digital health care and improved access to care that’s closer to where patients live and work. For instance, 95% of non-federal acute hospitals allowed patients to view their digital health information in 2015, increasing from just 40% in 2013.1

New entrants from the technology, consumer products, life sciences and insurance sectors further influence the industry’s transformation.2

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Chapter 1

Introduction

The future of health care requires organizations that are consumer-centric, outcomes-driven, prevention-focused and cross-sector.

In the United States, these changes are all taking place in an ambiguous regulatory environment. While the current Administration is working to unravel the Affordable Care Act, the legislation’s fate is unclear and resulting regulatory questions abound. In addition, today’s regulators and health consumers expect organizations to demonstrate an effective, proactive approach to risk and compliance capable of preventing or promptly mitigating costly exposures, such as data privacy breaches.

Mere compliance, however, is no longer a sustainable business model, nor an indicator of success. Leading health organizations have learned to foresee and prepare for regulatory changes on the horizon. Integrated compliance capabilities help build confidence among shareholders, members and regulators, which empowers management to create the opportunity for growth as health care organizations move into uncharted territory. Moving beyond “react and respond” to a proactive stance, robust compliance planning does more than protect the organization’s assets and reputation: it allows it to grow.3

As these trends illustrate, the US health sector landscape is undergoing an unprecedented transformation, moving from volume- to value-based care models, with increasing consolidation, consumerism and technological integration, and a continued drive for performance optimization and regulatory excellence.

To succeed in this shifting landscape, health organizations’ must build sustainable business strategies that place an increased focus on the following key areas: smart growth (including creative partnerships), technology and consumerism, performance optimization, regulatory excellence and mitigating risk.

The future of health care requires organizations that are consumer-centric, outcomes-driven, prevention-focused and cross-sector. It’s up to all players involved to embrace these changes and adapt.

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Chapter 2

Smart growth

Acquisitions will continue as a major tool to help achieve scale in this environment.

Growth is survival, but smart growth is success.
Gregg Slager
EY Global Health Transaction Advisory Services Leader

Health care no longer operates solely in a fee-for-service world. Instead, compensation models are increasingly outcomes-based, with an eye toward the consumer’s overall health and value for their money. Health companies are increasingly looking at M&A, alliances and joint ventures to expand their geographic footprint and to have more input into the continuum of care — all to gain the scope and scale of services and infrastructure and technology capabilities needed to compete and succeed in this new model.4

As health organizations must serve ever-growing populations with increasingly complex conditions, there is a new volume PLUS value paradigm. It is no longer enough to treat as many patients as possible, though the number of patients – as well as those with chronic conditions and multi-morbidities -- is certainly not decreasing: providers must deliver care more efficiently and effectively to maintain their bottom line. The new framework requires different approaches.

A forward-looking vision, with sensitivity to stakeholders and the necessary technologies to support strategic growth is essential. For example, payers that are embracing the Accountable Care Organization (ACO) model, which rewards providers for health outcomes rather than merely procedure volume, are encouraging health care stakeholders to implement coordinated care networks.

Organizations that are forming strategic partnerships with other health providers and upgrading their technology to capture and act on the data necessary to positively impact outcomes will be best positioned to capitalize on this shift.5

Acquisitions will continue as a major tool to achieve scale in this environment. In determining the appropriate growth path, there are three steps organizations should take that will clarify the goal, provide focus on the key issues driving a structural change, and help uncover the best possible pathways forward.

These steps include:

  1. Target the ideal strategic outcome or market positioning
  2. Identify the gaps or risk areas within current offerings or capabilities
  3. Look to the financial and operational metrics to help guide which structures are optimal.

It is best to examine all the variables simultaneously, including possible organizations to align with, the strategic next step, and the best organizational and financial structure for all the stakeholders involved.6

The next challenge is to capture the synergy opportunity and cost savings across the new, integrated organization. It is no longer the prize at the end of an acquisition. Planning for and realizing these savings requires time and dedication to the goal and will ultimately become much more important than the price paid for the acquisition – it will quite literally determine the final value of the transaction.

A focus on technology, tools, and digital devices — to track required outcomes and leverage analytics to increase operational and patient effectiveness – is an important component of ultimately realizing the savings.  Applying these principles and steps will help organizations not just survive, but thrive throughout health’s transformation. Smart growth will drive success

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Chapter 3

Digital technologies

As technology increases connectivity, patient-consumers are more networked, engaged, and empowered than before.

Technology is enabling health care organizations to adjust their approach to business, whom they collaborate with and how they interact with their patients.
Rachel S. Hall
EY US Advisory Health Digital Leader

The amount of data health organizations have access to is dizzying. The increase in inputs due to digitization means that health care data is growing at 48% year over year.7 How organizations gather and optimize that data is key.

To win in digital health, organizations need to align cost, quality, provider and patient engagement and customer experience. As technology evolves, government policies and requirements become more stringent for health organizations. These organizations are adapting IT solutions to help simplify and streamline their operations, enhance clinical decision support systems and encourage patient engagement, in addition to ensuring regulatory compliance.8

In addition, as health organizations shift to a volume plus value model, they are also accepting the additional responsibilities, risks and opportunities of population health management. This integration and enhancement of care requires partnerships with IT companies, payers, start-ups and even other industries. Patients need to be at the center of it all, particularly as they become more empowered and informed consumers.

As technology increases connectivity, patient-consumers are more networked, engaged, and empowered than ever before. In fact, the global market for connected wearable medical devices and remote patient monitoring systems is expected to grow from US$123 billion in 2015 to US$612 billion by2024, driven by the adoption of mHealth devices, wearable technologies and the IoT.9

Patients are accustomed to technology making their lives easier, speedier and more connected. They’re demanding a similar experience in their health and wellness with simple, coordinated interactions as they receive and pay for care across the health spectrum. Technology will equip health consumers to participate in their own care.

The future winners in health will be those that can best recognize the impact of the digital and technological future and adapt accordingly. They will focus on core competencies and outsource tasks others can do better and more efficiently.

They will team up more quickly, collaborate in a more meaningful way and invest in dynamic capabilities. But, most of all, they will overcome the inertia to change, as well as the perceived risks of adapting and diversifying their business model.10 Embracing technologies for efficiencies is one of the most important ways of optimizing costs.

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Chapter 4

Performance optimization

Demonstrate progress, if not perfection.

In today’s complex health landscape, cost avoidance does not necessarily produce overall savings. Instead, organizations should take a longer-term view and smartly seek ways to innovate and optimize operations in ways that curtail total costs.
Leisa Maddoux
EY US Health Performance Optimization Leader

Health organizations live under increasing expectations not only to lower costs but also to provide more value to consumers. Given these financial pressures, it’s tempting for administrators to adopt a strict cost-avoidance approach. But cost avoidance alone is short-sighted in a landscape that’s growing more sophisticated, streamlined and efficient in its approaches to patient care.

When an organization chooses an initiative or strategy only to save money, the end result can be detrimental to patient outcomes and long-term revenue, leading to a higher overall cost of care. What’s needed is a parallel approach: investigating the short-term needs of the organization to ensure financial health, while utilizing an operating model strategy, evidence-based protocols, and advanced analytics and innovations to decrease the overall cost of care. By adopting this new approach, organizations can smartly save money in specific areas that affect patient care the least, while making choices that can achieve better and more sustainable outcomes for the long term.

Investments in optimization include a mix of strategies that produce more efficient, effective and sustainable care delivery models. In this approach, alignment among the operational, clinical and IT teams of an organization is crucial to ensure optimization across the whole of the care delivery spectrum.

Today’s health environment provides ample tools for organizations to approach cost optimization in a truly innovative way. Emerging technologies, such as robotic process automation (RPA) and new approaches to redesign and improve the digital consumer experience, for example, are already changing the market and the way we do business and can provide radical process change resulting in long-term shifts to the cost curve.

As an organization makes the transition to an optimization model, they are able to take a proactive response to the changing regulatory and reimbursement environments and the implications for their business.

Through purpose-led transformations, such as performance optimization, organizations realize a type of financial stability that empowers them to look past the present and invest in opportunities for growth and exceptional patient care.

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Chapter 5

Creative partnerships

The prevalence of small to midsize organizations has increased, and the environment is becoming highly competitive.

No one company can solve the unprecedented issues facing the health sector today. Transformative solutions will come from places that may surprise you, from stakeholders across and outside the health sector thinking creatively together.
Alex Jung
Managing Director EY-Parthenon

I’m struck by the rate of change in the health sector. Market forces continue to add significant pressure, creating impediments to growth, and uncertainty continues to cloud strategic planning.

Rising costs are placing an incredible strain on health care system and have reached unsustainable levels. In the US alone, health care expenditures accounted for 17.8% of overall GDP in 2015, rising 5.8% to $3.2 trillion.11

Recent deal making has been primarily focused on controlling these costs and finding ways to drive scale and efficiency. Affordability also continues to be a major driver for both consumers and providers. As consumers struggle to afford rising deductibles and out-of-pocket costs, they are less likely to seek non-essential care and invest in what they view as unnecessary wellness technologies.

At the same time, many of these technologies are struggling to meaningfully quantify their health outcomes for early adopters. For providers, stagnant reimbursement rates, political uncertainty, and an increased responsibility for outcomes have meant more work and risk for less money. While the sector has increasingly focused on improving quality, outcomes and efficiency, more work is needed.

Finally, industry convergence and the rise of the “super consumer” in health care have significantly accelerated development and adoption of new technologies. New technologies are offering a chance for organizations to shift their approach, re-evaluate whom they collaborate with and how they interact with their patients. But knowing where to invest resources is tricky.

Big solutions will be required to solve the issues of today. These solutions will come from collaboration between stakeholders from across and outside of the health sector – the problems are simply bigger than any one company can handle.

Collaboration is needed to build adoptable, value-adding platform solutions that are scalable. Large organizations are certainly the most likely to generate the level of scale needed but may be hesitant to look for partnerships among similarly sized organizations given the low regulatory success rate for large mergers.

The prevalence of small to midsize organizations entering the space has increased, and the environment is becoming highly competitive. While many anticipated the deal making momentum seen in 2016 would continue in 2017, the current regulatory environment is proving to be a significant headwind.

Despite these challenges, creative partnerships can be a great vehicle to turn to in this environment. Joint ventures, alliances, vertical integration activities and the like can provide organizations with several key benefits.

Add strategic capabilities to portfolio – as new technologies and analytics from outside the sector reach the market, health organizations can create strategic plans that will maximize the return for integrating new offerings.

Build scale across populations – partnerships that take advantage of successful approaches for managing one population may show benefit for others. For example, predictive models built by combining available data may find use in other regions or populations within the same state.

Improve and solidify market positioning by filling gaps – partnerships that grow networks, fill holes in infrastructure or complete capabilities for serving the entire continuum of care for a population are an attractive way of filling gaps without starting over again.

  • 1“Hospitals that Enable Patient Digital Data Access 2012 – 2015,” Internet Trends 2017 Code Conference Presentation: Mary Meeker for Kleiner Perkins, 31 May 2017, via ONC/AHA Annual Survey Information Technology Supplement 2012-2015, ©Kleiner Perkins.

    2 “EY launches new approach to develop interdisciplinary, global solutions for the future of health care,” EY website, www.ey.com/newsroom, 30 July 2015.

    3 Driving healthy growth: 5 Insights for executives, EY, 2013.

    4How do you prepare today for the health care of tomorrow? New horizons September 2016 edition, EY, 2016.

    5 24th Annual Health Sciences Tax Conference: Issues in population health management and clinical integration networks, including accountable care organizations, EY, 2014.

    6How do you prepare today for the health care of tomorrow? New horizons September 2016 edition, EY, 2016.

    7 “Increasing Digitization of Inputs = Healthcare Data Growing at 48% Y/Y,” Internet Trends 2017 Code Conference Presentation: Mary Meeker for Kleiner Perkins, 31 May 2017, via IDC and EMC,© Kleiner Perkins.

    8How do you prepare today for the health care of tomorrow? New horizons September 2016 edition, EY, 2016.

    9The patient-centric health ecosystem,” Disrupt or be disrupted: The future of health is digital, EY, 2017

    10 Disrupt or be disrupted: The future of health is digital, EY, 2017.

    11 2015 National Health Expenditure Fact Sheet, CMS, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet.html

Summary

In this transformative phase for the health care industry, the need is to find sustainable business strategies that place an increased focus on smart growth (including creative partnerships), technology and consumerism, performance optimization, regulatory excellence and mitigating risk.

About this article

By

Carole Faig

EY US Health Leader

US health transformation thought leader. Passionate about wellness and healthy living. World traveler.