Is the sky falling? A classic children's story tells of the folly of a dear little chicken who insists the sky is falling

Healthcare Financial Management, March, 2006 by Ken Mack

"I saw it with my own eyes, and heard it with my own ears, and part of it fell on my head," she cries out to several friends she meets along her journey. In her fear and frenzy, Chicken Little ultimately drives herself and her friends straight into an actual threat--a fox's cave.

Though you, too, may have felt a "pebble" strike your hospital or health system, there are actions you can take now to make sure your organization's future maintains relatively clear skies.

Forecast for the Future

We recently conducted a national, qualitative survey among a cross-section of health system and hospital administrators to find out what CEOs and other top administrators felt were definitive trends in the healthcare industry. Of the more than 250 respondents from hospitals ranging from 20 beds to health systems with more than 1,000 beds, approximately 80 percent were CEOs and 20 percent were senior-level vice presidents.

In the survey, we solicited opinions on trends for the following healthcare segments:

* Primary care physicians

* Physician specialists

* Payers and self-insured employers

* Patients

* Hospitals

Most respondents agree that the nation's current healthcare system contains inefficiencies, remains fraught with opportunities for medical mistakes, and will be unable to absorb 30 cents out of every dollar needed to meet the imminent healthcare needs of the baby boomer generation. The most significant finding: Unless an organization remains proactive, physicians will take the most profitable part of the hospital business--that is, outpatient procedures--and perform services in their offices or unrelated facilities. This has the potential to leave the hospital in serious financial difficulty.

Whether from a large system or a small hospital, from the East Coast or the West, the consensus opinion presumes that the healthcare delivery system will change more in the next few years than it has in the past 50. The following sections forecast what the status of healthcare delivery will be by 2009. Each section includes suggestions that a proactive organization can take to most effectively handle each situation. Because healthcare delivery is not a national business model, but rather a local and regional one, some predictions have already begun to occur in certain regions.

Primary care physicians, In all but the smallest communities, primary care physicians will not be directly admitting or following their patients through the hospital. Once out of sight, the hospital will be out of mind. Because the primary care physician will not physically be at the hospital, any preference for a given hospital will likely wane.

Proactive solution. Adopt a physician relationship management approach in which dedicated staff regularly visit physician offices in the community to develop and maintain close relationships, keeping your hospital at the front of their minds. Another practical solution would be to employ primary care physicians.

Physician specialists. As subspecialists continue consolidating into large medical groups, they will begin to perform all profitable outpatient procedures within their own practices.

Proactive solution. Cultivate joint ventures that cover any and every opportunity to partner with specialty medical groups. In so doing, establish electronic links with medical groups and jointly contract for pay-for-performance reimbursement procedures.

Payers and sell-insured employers. A larger share of healthcare expenses will be shifted to employers by 2009. Employers will use disease management programs for high-risk insured employees, such as employees with diabetes, asthma, hypertension, and congestive heart failure.

Proactive solution. Adapt disease management programs developed for hospital and health system employees and offer them to self-insured employers and health insurance companies.

Patients. Patients of every age and category, including Medicare patients, will absorb a greater share of their healthcare costs. These healthcare consumers will shop for providers that have high-quality scorecards and offer low out-of-pocket rates.

Proactive solution. Work with the hospital's physician partners to achieve the highest-quality clinical outcomes and offer competitive rates, but not necessarily the lowest rates, for patients' out-of-pocket expenses.

Hospitals. Chicken Little focused on her fear instead of the facts. In the end, she allowed herself to be led away by a fox. Hospitals that wait to react to market changes will begin to feel the effects of a falling sky and soon will be prime targets for turnaround management companies.

Proactive solution. The most proactive steps that a hospital should take include the following:

* Build ongoing, personal relationships with key physicians.

* Based on these one-to-one contacts, seek ways to develop joint ventures with physicians to improve the quality of care and to increase market share.

* Contract with physicians for comanagement opportunities to improve operational efficiency and to decrease costs.