Everest Group offers solutions to help healthcare providers combat margin-crushing regulations, expenses, and risks in turbulent marketplace
A majority of healthcare providers in the United States suffered financial decline in 2017 amid the industry shift toward a value-based care system. Although many healthcare providers espouse a sound and logical strategy that focuses on people, process, and technology, few have been singing that song correctly, according to Everest Group.
In Everest Group’s recently published report, “Healthcare Provider Market: Addressing Issues Beyond Value-Based Care | What Healthcare Providers Need to Do to Address Myriad of Challenges,” the firm presents the challenges faced by healthcare providers in the market today and explains how most healthcare providers’ efforts to overcome those challenges have fallen short.
The key challenges facing healthcare providers include the following:
To engineer a turnaround in this bleak trend, U.S. healthcare providers still need to focus their investments on people management, process improvement and technology enhancement—but in smarter ways than ever before, according to Everest Group. In particular, healthcare providers need to be more targeted in their digital transformation investments and bolder in their ecosystem development endeavors, relying heavily on partnerships to effect greater change.
“One very real and pressing concern of many providers is the large investment they have already made in large-scale EHR implementations and the limited resources remaining for new investments,” said Manu Aggarwal, practice director at Everest Group. “To identify the path forward, providers need to outline a targeted set of investments instead of another round of large ones. Specifically, investments in automation and analytics can yield solid, quick wins and pave the way for future engagements without the need for high capital outlay.”
“Another ‘must’ for providers is ushering in a much more collaborative culture,” added Aggarwal. “For example, providers need real-time data sharing with payers in order to provide enhanced patient experience. Providers also need strong partnerships with technology vendors and business process service providers to deliver the modern, technology-driven services that patients demand. And, finally, broader collaboration among the health network is required for improving patient outcomes and maximizing reimbursements.”
Additional examples of the solutions recommended by Everest Group in the report include the following:
The transition to value-based care models is driving healthcare spending across the board, and IT is no exception.
Among providers, IT investments to support value-based care are expected to grow 34% over the next eight years from $600 million in 2017 to $6.4 billion in 2025, according to a report by The Everest Group. By that time, value-based care IT investments will account for more than half of all health IT spending among providers, which is projected to reach $11.7 billion over the next eight years.
Everest Group Evaluates VBC Adoption, Financial Performance of 40 Largest Health Systems
After enduring a slump in recent years, demand in the healthcare provider IT market is rebounding, driven primarily by value-based care (VBC) initiatives. In fact, according to Everest Group, growth of the overall healthcare provider IT spend over the next eight years will be completely driven by VBC initiatives, and by the year 2025, VBC will account for more than 50 percent of all healthcare provider IT spending.
VBC refers to efforts to align physician and hospital rewards with cost, quality and outcomes measures rather than quantity of services provided.
More than 75 percent of provider organizations have either adopted or are looking to adopt VBC in the near future, a trend that will drive the next wave of IT investments among healthcare providers.
“We expect that the VBC reimbursement model will take over the traditional fee-for-service model by 2025,” said Abhishek Singh, practice director at Everest Group. “Between now and then, healthcare providers make their most significant IT investments in the areas of patient engagement and compliance. In fact, in the next eight years, we forecast that an additional $5.8 billion will be spent on VBC-driven initiatives. Of that, $2.1 billion will be tied to patient engagement initiatives, and $3.3 billion will be tied to compliance initiatives.”
Other VBC-driven IT investments will fall into one of two general categories: diagnostics, treatment and monitoring; and financials and network management.
These findings and more are discussed in a recently published Everest Group report, “Healthcare Provider Annual Report 2017: Will the Real Value-Based Care (VBC) Please Stand Up?”
This report describes the current state of value-based care and provides an evaluation of the 40 largest health systems with respect to their VBC and financial performance. The report also recommends a framework that health systems can use to accelerate their value-based care initiatives and describes the expertise and service capabilities required for service providers to serve the needs of the market.
The State of VBC Adoption: Key Takeaways
Background on VBC
In the past, the U.S. healthcare system operated primarily on a fee-for-service model, which rewards healthcare providers for the volume of services delivered; for example, a physician is paid for every visit or procedure, regardless of patient outcome, the provider’s operational efficiency or the quality of the providers’ service delivery.
In contrast, in a VBC model, healthcare providers are reimbursed and incentivized based on quality of care rather than quantity. Although there are many different models and approaches to VBC, the objectives are to provide better care for individuals, improve population health management strategies (that is, how providers coordinate to provide the best care for patients), and reduce healthcare costs.
The relative success of VBC initiatives can be measured in many ways. Common patient care objectives include lowering readmission rates, mortality rates, and Medicare spending per beneficiary (MSPB); increasing patient satisfaction; reducing the number of hospital acquired conditions (HACs); and minimizing the time between check-in and check-out at the Emergency Department.
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These are potential side effects if the U.S. House of Representatives- approved American Health Care Act (AHCA) bill becomes a law. Let’s look at the impact the law would have on the key constituencies.
With the most needy (the sick and the elderly) portion of the population left uninsured, the healthcare providers will once again be expected to foot a large part of their healthcare bills due to lack of coverage, non-payments, use of ER services, etc.
With premium increases, credits/subsidies being based on age instead of income level, and states’ ability to change or waive pre-existing health condition coverage, a large percentage of older, lower income, and infirmed consumers would likely opt out of having coverage altogether. Young and healthy people would have less incentive to get insurance coverage.
The overall theme of the bill would result in a significant decline in volume of work managed by payers. That said, there would be numerous key operational implications for both private and government payers including:
With a decline in volume of work, it might not be surprising to see some of the larger payers insource certain processes.
A lesser volume of work across various value-chain segments would translate into lower revenue for third-party vendors. In fact, even though a law hasn’t yet been enacted, the healthcare business in some of the key players, such as Accenture and Cognizant, is already growing at a slower rate than their overall company growth rate. This impact could extend to the overall outsourcing industry. On the other hand, if states decided to exercise the power granted to them differently, service providers could also expect to see increase in the complexity of work around certain functions such as policy servicing and claims management.
Additionally, the ratified law might just be the impetus that mid-to-large buyers without GICs need to opt for bundled IT and BPO deals, which were traditionally a feature of mid-sized buyers.
Of course, the above-mentioned implications are for the bill in its current form. However, moderate Republican senators might well make massive changes to it, especially after the public outrage over certain parts of the bill.
It is going to be tough time of uncertainty for all stakeholders until a law – in whatever shape and form – is passed. In the meantime, payers and healthcare providers need to work closely with their respective service providers to ensure they stay afloat and come out on the right side of fence when the dust settles.
For a detailed analysis comparing the AHCA and ACA, please see our report titled: Acing Uncertainties in the Payer Market: The Trump Cards.