Mergers, acquisitions, downsizing, rightsizing, early retirements, cross-training, clinical utilization controls, integrated physician-hospital networks and insurance partnerships will dominate healthcare systems' workload in 1994.
In preparing for the inevitable journey into the risky world of managed care, healthcare systems are seeking to reduce costs. Greater efficiency and network building will be the name of the game this year.
Those systems with lower per-patient costs will be the ones that win managed-care contracts. No system executive worth his or her salt can avoid the implications of some experts' predictions that managed care will represent 80% to 90% of all premium dollars within five years.
Before systems or hospitals simply act to reduce costs, they should assemble the physician, hospital and insurance pieces and put the data systems together to monitor costs and outcomes. After that's done, if layoffs, early retirements or downsizing are necessary, then do it, experts said.
As in 1993, long-range system priorities will continue to be the integration of physicians, clinical services, outpatient clinics and information systems.
While past obstacles have included physicians, chief executive officers and hospital trustees, healthcare reform has acted as a unifying force, in some cases, to unite disparate groups toward a common goal of increasing revenues. As a result, hospitals and systems will continue to trim expenses through a combination of strategies.
|Reducing manpower through layoffs and attrition. That's the easiest way to cut costs. Some 54% of hospitals' inpatient expenses, or $225 billion, was attributed to employee payroll and benefits in 1991, the most recent year for which the American Hospital Association reported such data.
Since 1985, hospital full-time-equiv-alent employees have risen 18% to more than 3.5 million, according to AHA data, and many hospitals are overstaffed, based on their censuses.
|Cutting construction and capital equipment expenditures. Some 25% of hospital executives in a recent survey indicated they would forego or reduce capital and building projects in the future (Dec. 6, 1993, p. 14).
|Reducing utilization through clinical improvements. For example, many hospitals and systems have experienced 25% to 50% reductions in lengths of stay through improved utilization management, clinical protocols and by providing physicians with more information on how they treat their patients. Others are working to reduce unnecessary testing.
|Creating hospital-physician-insurance networks and placing all three at financial risk under capitated contracts.
Most systems won't get to that last strategy in 1994, but most of the 350 to 400 healthcare systems ought to be able to address the first three goals this year.
On the mergers-and-acquisitions front, not-for-profit healthcare systems will be faced with pressure from such investor-owned giants as Columbia Healthcare Corp., HealthTrust-The Hospital Co. and OrNda HealthCorp to acquire their not-for-profit neighbors. Their goals are to build competitive managed-care networks, win contracts and boost revenues.
Several not-for-profit hospitals have accepted deals to become tax-paying entities. Winter Park (Fla.) Memorial Hospital near Orlando partnered with Columbia last December, and Nashville Memorial Hospital in Madison, Tenn., announced its intention to be acquired by HealthTrust.
Not-for-profit systems have been moving slowly to match offers, but many will do so in 1994. The hospital wars of the late 1970s will pale in comparison with the battles that for-profit chains and not-for-profit systems will wage this year over independent hospitals and managed-care contracts.
"There will be some very innovative partnerships (in 1994). Partnerships with physicians will be key, along with expansion of primary-care networks. We'll see joint ventures with insurers and rearrangements of the methods by which healthcare delivery systems function. Clearly, there's also been a lot of downsizing and reducing expenses."
chief executive officer,
Baystate Health System,
"Regional networks, at least in larger areas, must achieve some level of critical mass if they are to have any ability to exploit the efficiency curve for cost control. Absent critical mass, such systems are relegated to economies of scale, which have generally been oversold as a system benefit."
National Health Advisors,
"We are trying to find ways of collaborating with hospitals around us in a network. It's important in rural areas to develop those linkages. The key is to provide better access. Patients shouldn't have to travel 130 miles to get healthcare services. We are collaborating in emergency, cardiac and psychiatric services. We are always trying to find areas of opportunity to work together to provide better care to our patients."
chief operating officer,
Good Samaritan Health Systems,