Six Converging Megatrends For HealthCare Industry. How to DO MORE WITH LESS for Hospitals.

Most corporate strategic plans have little to do with strategy. They are simply three-year or five-year rolling resource budgets…. Calling this strategic planning creates false expectations that the exercise will somehow produce a coherent strategy. — By Richard Rumelt.
Don’t misunderstand this quote. Professor Rumelt isn’t denying the importance of budgeting; he goes on to call these plans “essential management tools.” His point is that “resource budgets simply cannot deliver what senior managers want: a pathway to substantially higher performance”.

To assist healthcare leaders in their quest to find that pathway for their organizations, we provides some fascinating insights on strategic issues of importance to all healthcare leaders. It is up to the individual organization to determine how specific implications will play off one another and what the overarching impact of the confluence of these trends will be.

MESSAGE TO HOSPITALS: DO MORE WITH LESS
If one surveys the broader landscape and assimilates the trends, society appears to be sending a clear, overarching message to the nation’s hospitals: Take care of more people who have growing expectations and more complex medical needs while providing increasingly sophisticated care with relatively fewer resources. This message is summed up in six converging megatrends:
1.    Growing utilization in both the inpatient and ambulatory arenas, while length of stay declines.
2.    Policy and payment initiatives by politicians and payers to increase coverage and improve quality of care while containing payment to providers, in part through pay-for-performance plans and consumer-directed health plans. (See, for example, this year’s essays on tax exemption and policy.)
3.    Consumerism, which is being fueled by an estimated 50 sources of provider information (e.g., HealthGrades, Subimo, Castle Connelly Top Doctors) and the growth in out-of-pocket spending.
4.    Increasing clinical sophistication, driven both by clinical technology (e.g., miniaturization, fiberoptics, imaging, wireless technology, battery power) and by growing physician subspecialization. With more than a dozen potential areas of subspecialization in surgery, there are fewer and fewer true “general surgeons.” (See, for example, this year’s essay on technology.)
5.    Competition, not only from neighborhood hospitals, but also from national brands, such as Massachusetts General and Mayo, offering online diagnoses; international providers in Thailand, Mexico, India, Singapore, and Malaysia offering fixed-price packages [1] combining cost, quality, and exotic travel; MinuteClinics® (think Wal-Mart®with a stethoscope); and, of course, ambulatory care centers.
6.    Human resource shortages, most notably for aging physicians and nurses, but for other workers as well.

As a result of the confluence of these megatrends, some observers have begun to admonish hospitals to prepare for the consumer revolution. While out-of-pocket spending has increased and consumers must be attended to, the amount of personal healthcare paid for out of pocket is still relatively low. Most providers would be better advised to keep an eye on federal and private-sector payers. There are at least two questions here: Will federal and private-sector payers become consumer brokers on behalf of their beneficiaries? Will payers incent patients to act like consumers through consumer-directed health plans?

Although early reports indicate consumer-driven products have reduced costs, employer interest remains limited, and there are public policy fears that higher quality, highcost providers will be inaccessible to the poor. In addition, decision support for consumers remains limited. Although the Internet is an important source of health information, barriers to its use include a lack of standardized performance measures, a lack of comprehensive information, and inconsistent information.

Booz Allen Hamilton recently commissioned a Harris Interactive poll of almost 3,000 consumers and 600 physicians to examine how the transition to a retail market in healthcare is affecting decision making and influencing behavior (Ahlquist et al. 2007). The survey report said it clearly: “People with greater cost responsibility are beginning to act like true retail consumers… We are in the early stages of this transition, however, and for many products and services consumers lack the ability to easily compare options and alternatives.” The Booz Allen research highlights two critical points: The transition to consumer-driven healthcare will be evolutionary, not revolutionary, and cost, not quality, has been the driver to date.