As many as one-third of hospitals will close as a result of reform-induced consolidations, and more than half the newly formed integrated healthcare systems will fail, according to predictions outlined in a new industry overview.
The publication, Health Gain, is a 114-page document developed by Minnetonka, Minn.-based Allina Health System; Irving, Texas-based VHA; and the national consulting firm of Deloitte & Touche.
The handbook, billed as an "environmental assessment" of the U.S. healthcare system, compiles, organizes and analyzes data from a variety of sources. The findings reflect the experience of other industries and trends identified by surveying physicians, executives and governing board members.
While it provides a common-sense overview of the trends leading toward integration, it also points out many hurdles organizations will have to leap.
"The market is saying, `We aren't going to tolerate this fragmented delivery system,"' said Gordon Sprenger, chief executive officer at Allina and American Hospital Association chairman-elect. "It's the market that's driving it. It's not government yet," he added.
Most institutions say they are planning to attempt integration by the end of the century. For example, 81% of the 1,191 hospitals Deloitte & Touche surveyed earlier this year said they would not operate as stand-alone institutions within five years. More than half the respondents also said they foresee their organization joining a network of providers, without an ownership agreement.
As healthcare organizations look for clues to guide them toward integration, smart reaction to market forces will determine their fate, said Merlin Olson, a principal at Deloitte & Touche in Houston.
And, recognition of the market in which providers exist will be a crucial assessment, according to VHA Vice President Jerry Senne. "Healthcare is and remains a local market phenomenon," he said.
VHA sponsored a series of meetings this fall for its members to apply the findings of extensive integration studies it conducted this year (Aug. 8, p. 84). Participating hospitals found "the perpetual question is one of timing," Mr. Senne said.
According to Mr. Senne, indicators of market conditions are:
The degree of physician consolidation.
Local HMO market share.
The influence of key employers and purchasing alliances.
The concentration of providers (independent vs. large systems).
"You can't afford to be too far ahead of the market or too far behind," Mr. Olson said.
Healthcare leaders sense change in the air; however, the mechanism for making transitions may not exist. Most providers are ill-equipped to handle four key business processes identified by VHA research: managing networks, risk, care and information.
Winners will implement integrated information systems to stay in the game, Mr. Sprenger said.
Organizations will also need to readjust definitions of success. "The score card used to be: How big is your market, and what's your market share? Now it's: Measure the community health status today, and measure it a year later. If we've improved, then we've done a good job," Mr. Olson said.
The main obstacle to integration is resistance to change, said Hank Walker, who participated in the VHA integration meetings. Mr. Walker is president and CEO of Tucson-based HealthPartners of Southern Arizona, a new integrated healthcare organization (See related story, p. 20).
The highly penetrated managed-care market of southern Arizona prompted participants in HealthPartners to improve costs and access through a two-year integration process.
Attempts at consensus pitted common vision against the realities of the present. "It's much more difficult to agree on current reality," Mr. Walker said.
In agreements that work, traditional compromises won't be enough, he said.
An integrated system should provide better healthcare delivery than the sum of its parts. "If you can't create something better by pulling together all the elements, don't do it," he advised.
Underestimating the importance of working in collaboration with physicians will ruin the chances for success, Mr. Walker said. More specifically, he added, "a specialty-dominated model is virtually guaranteed to fail."
But don't look for any of the predictions in Health Gain to come true tomorrow. "I think you're talking about a decade of change," Mr. Sprenger said.