Smaller Hospitals and Health Systems Struggle to Deliver Value-Driven Care; Financial Future at Risk

New York, 13 July 2017

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EY survey of U.S. health care providers reveals top priorities and challenges for 2017

Competing priorities and regulatory uncertainty are making it difficult for health care organizations to transition from fee-for-service to fee-for-value, according to a new report released today by the Ernst & Young LLP Advisory Health practice. The report details insights from a national survey EY conducted with 700 qualified health care professionals. It presents prominent factors that are challenging health organizations’ performance and growth and notes that organizations can address these obstacles through a transformation that can lead to a competitive advantage and better health outcomes for patients.

The report points to four key factors that are challenging the value-driven transformation that is essential to the U.S. health care industry’s future sustainability:

  1. The escalating cost of care delivery, driven by system inefficiencies
  2. Clinical workforce challenges that increase the potential exposure of patients to medical errors
  3. A lack of standardization in how quality is defined and measured
  4. Lack of trust between providers, payers and regulators

The report also identifies a gap in capabilities and core competencies between large and small hospitals and health systems in the ongoing transition to value-driven care. It suggests small organizations often lag far behind large ones in key components of the transition, putting themselves at financial risk.

The EY report recommends transforming culture to deliver improved clinical outcomes, relative to the optimal cost of care, within an environment that fosters the right patient experience. It also emphasizes that value is most effectively delivered through a clinical and administrative workforce that is engaged and satisfied, and through technology and data analytics that allow for well informed decisions across the care continuum.

“It is insightful that among hospitals and health systems with revenues of less than $1 billion, few have embraced strategies or made progress toward value-driven care,” said Yele Aluko, MD, an executive director in the Advisory Health practice at EY, a former hospital system physician-executive and a co-author of the report. “This creates a competitive disadvantage for smaller hospitals, and quite frankly, puts their financial futures, sustainability and corporate existence in jeopardy. The new world order in healthcare will require clinical, administrative and financial innovation to meet the needs of consumerism and industry demands for value transparency. Many smaller hospitals and health systems lack the strategic management processes, corporate resources and capabilities to remain competitive in the short term or relevant in the long term.”

Additionally, the report reveals several other notable trends among U.S. hospitals and health systems of all sizes:

  • A lack of urgency and action around medical error reductions: Only 76% of respondents said reducing medical errors is a priority. Furthermore, only 58% of respondents are actively undertaking initiatives to reduce medical errors in 2017, and 18% have these initiatives planned for this year.
  • A persistent void in talent engagement: While 51% of respondents believe that employee satisfaction in health care drives patient satisfaction, only 35% of respondents reported that their organizations have initiatives underway to create a more positive work environment, and only 10% of respondents have undertaken employee surveys to solicit employee input.
  • Capturing patient voice is still not a top priority: 93% of respondents are undertaking initiatives to improve patient experience. However only 26% selected patient access/satisfaction as one of their top three priorities for the year.
  • A "value gap" in cost optimization efforts: While 95% of respondents are undertaking cost control measures, 25% do not have any “value-based” reimbursement initiatives planned for 2017.

“Transitioning to value-driven care is hard. It demands a whole new approach to operations and patient care, the adoption of advanced data analytic technologies, and an enormous shift in culture,” said Dana Alexander, an executive director in the Advisory Health practice at EY, a former health system chief nursing officer and a co-author of the report. “But the hospitals and health systems that make these strategic changes will see a huge payoff in terms of financial resiliency, a more engaged workforce and improved patient outcomes. What that means for the health of individual Americans and the overall American health care system cannot be understated.”

To read the report, and to view a related video, please visit

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This news release has been issued by Ernst & Young LLP, a member of the global EY organization that provides services to clients in the US.