Healthcare organizations will need more than party hats and noisemakers to ring in the new millennium.
With the aging of America, the relentless pace of managed-care penetration and increasing government clout over health programs and quality, the next century poses "major changes and challenges," a new report concludes.
Now is the time for healthcare organizations to roll up their sleeves and do the dirty work of cutting costs and creating integrated, customer-driven systems of care, according to the report by the national healthcare practice of Deloitte & Touche and VHA, an Irving, Texas-based hospital alliance.
The pair released the report exclusively to MODERN HEALTHCARE.
Reciting long-heard mantras in the industry, they said healthcare systems must be prepared to demonstrate value to payers, which will require the use of emerging information technologies. They also said physicians will play an increasingly important role in management and government policymaking.
In their latest assessment of the healthcare environment, Deloitte & Touche and VHA identify what they believe to be the major trends influencing change and offer strategies for reacting to those changes (See graphic, next page).
The report, titled Redesigning Health Care for the Millennium, is packed with industry statistics culled from a plethora of sources. It is a road map, of sorts, plotting where the industry is and where it's headed.
"The tide is turning on the cost side," said Daniel P. Bourque, senior vice president of corporate and public affairs at VHA, which represents 1,300 healthcare organizations nationwide. The medical-care price index, for example, dropped below the U.S. Consumer Price Index in the second quarter of 1996, while the increase in employee health insurance costs fell to almost zero.
"Now the real challenge is to deliver to the consumer the benefits of all this change," he said.
Healthcare organizations also will have to satisfy government demands. The deep-pocketed giant behind Medicare and Medicaid is becoming a more powerful force to be reckoned with. According to the 118-page assessment, government health programs are growing faster than private-sector plans.
In 1995, state and federal government picked up 45% of the nation's healthcare tab compared with 25% in 1965, the report said. Over the same period, private sources' share of national healthcare expenditures dropped to 55% from 75%.
As government moves more patients into managed care, "providers will be required to take greater risk and absorb payment cutbacks," the report said. And, as a result of its growing investment, government, ultimately, will define the quality and outcome measures that healthcare organizations must produce, it said.
These measures will pertain not just to patient care but to "total health management," which encompasses health improvements at the community level and related costs.
"I think that the concept of managing healthcare more broadly and managing consumer demands and expectations is an important force," and the federal government will be part of it, said Merlin I. Olson, a principal with Deloitte & Touche in Houston.
VHA's Bourque said he wouldn't be surprised to see the government require certain guarantees or impose regulatory requirements in exchange for offering beneficiaries a choice of HMOs or provider-sponsored organizations.
As providers take more financial risk for the health of populations, it's to their benefit to commit themselves to the broader concept of community health, he added.
Crafting delivery systems that can meet the demands of payers, patients and the community at large will require continued consolidation and integration, the report noted. Because, for all the talk about mergers, there's been little reduction in capacity.
Healthcare needs "fewer players more tightly bound together," Olson explained. He also expects a continuing focus on customers' needs. "That, too, has had a lot of lip service over the years."
The evolving system will look increasingly to the physician to be the decisionmaker, according to the 1997 assessment. The authors anticipate abounding opportunities for physicians seeking executive or management roles and increased formation of physician groups.
But to better manage patient populations, tomorrow's physician leaders will need good information. Investments in computers used to be an afterthought, Olson said. Today, upgrading infrastructure and integrating these systems in a multivendor environment is a top priority of healthcare organizations, the report said.
"It is no longer a piece of infrastructure; it is a critical necessity for successful performance," Olson said.
One cautionary note: Some healthcare providers and managed-care plans have stumbled in their quest to integrate. "Many integrated delivery systems have made major investments in facilities and personnel, which give them high fixed costs and make them susceptible to disappointing operating performance," the report said.