Healthcare's transformation is inevitable

A dynamic market. Intense cost pressures. Rapid retooling driven by technology and consumer demand.

New alliances, including some surprising ones. Which industry comes to mind? Banking? Airlines? Entertainment? Healthcare seems to be the best fit.

Sixty years of relative stability and then, wham! Reform. Unlike the cyclical changes familiar to some business sectors, the changes bearing down on healthcare have no precedent. We are entering unknown territory.

In many ways, our industry needed this jolt. That doesn't lessen the discomfort, but I believe the changes can be productive, leading to more efficient, effective ways of delivering care that is measurably better for patients.

• We will never have more resources to pay for healthcare than we do now. To providers, that means declining reimbursement for services—a big incentive to eliminate waste and duplication.
• Increased capital is needed to fund technology, equipment and additional access points for care—especially now that most Americans are expected to have health insurance coverage.
• More patients will need more care. Baby boomers' advancing age, obesity, diabetes and other lifestyle-related chronic diseases are converging to drive up the demand for care. And with expanded insurance coverage, patients will access the system more freely.

• Healthcare providers will need to demonstrate value, not volume. Value can be quantified in two ways: clinical outcomes such as fewer inpatient hospitalizations, fewer readmissions and better management of chronic conditions; and patient satisfaction through access to needed care, service quality and affordability. How do we achieve these goals? That's why all this uncertainty can be productive. It's forcing us to do better for our patients. Health systems that emerge as winners—there will be winners and losers—will have raised the bar.
• Inpatient care will decline, which is good because many services are provided more effectively and cost-efficiently in outpatient settings. What's unclear is how best to re-engineer our systems so the highest-quality outpatient care is accessible, and inpatient care re- mains financially sustainable and high quality.
• Healthcare providers are finding ways to rid our care models of excess cost, which is long overdue. The challenge is how to build in enough margin to cover care for the underserved, which many people view as “free” when it's not, and to provide the capital needed for ongoing clinical improvement. Providers who figure it out will thrive.
• The marketplace will put cost front and center in the form of deductibles, premiums and coinsurance. People will have reason to focus more on what they're getting for their money—to act like consumers. Still, healthcare is unlike other consumer transactions. The reality about healthcare “purchases” is that they often are made when people feel the most vulnerable. When the payer is an employer or insurer, there may be less emotion involved, but the stakes are just as high. The marketplace and the employer mandate will offer employers an exit from the risk of financing healthcare. How many will opt out? Will fewer employers risk self-insuring? How many insurance companies will mitigate their risk by buying healthcare providers?
• How far will consolidation go? In the pre-reform world, healthcare organizations consolidated based on the opportunity to raise rates. Looking ahead, opportunities will be sized up in different terms—cost reduction, operational efficiency, defensive positioning. Some people in the capital markets predict that in about six years, there will be 100 “super-regional” systems, with further consolidation five years after. Will healthcare mirror the waves of consolidation in financial services? The airlines? No one knows, but I suspect the line between for-profit and not-for-profit systems could blur along the way. And I expect more surprising alliances like a recent one where a specialty health services company acquired a large physician group.

Those are some of the major unknowns. We don't know all that we don't know. It would be dangerous to think otherwise. The Patient Protection and Affordable Care Act is suspenseful in itself. Layer on the technical operational delays with the new insurance marketplaces, the next election and general economic uncertainly, and you wonder if healthcare stability is possible.

I have ideas about how these changes will play out. If I had to predict what a winning healthcare system will look like in the future, I'd go with these markers: patient-centered care; enough capacity in the system to manage populations; outstanding customer service; meaningful integration of clinical and electronic health-record systems; smarter care designs; easy access to care; and solid relationships between providers and payers, government and academics.

Keep in mind: The marketplace or other portions of the Affordable Care Act could be repealed or modified. Even if that happens, healthcare transformation will inevitably continue. There's no going back.