Viewpoint

Navigating the Changing Tides of Health Care: 5 Areas for Leaders To Watch


Zachary Hafner
Advisory Board

It’s hard to imagine an industry more embroiled in change than American health care today. Somewhere among changing payment models, big data, evolving customer expectations, and incredible uncertainty, today’s health care leaders are navigating uncharted waters.

Questions abound. Which trends will take hold—and which will fizzle? What will market conditions be like six, 12, or 18 months from now? Are there moves to make without compromising what you’ve worked so hard to achieve?

I don’t have all the answers, but here is my Top 5 edition of issues that health care leaders should be paying close attention to and key implications for planning going forward:

1) The consumer revolution. The buzz surrounding the consumer-driven health care market is everywhere, but is there really a consumer revolution underway? Clearly, consumer financial exposure to health care cost is on the rise and transparency is improving on a daily basis—but how quickly and comprehensively this will translate to a full-blown retail marketplace has significant ramifications for localized strategy.

Implication: Be intimately familiar with the pace of change in your market and prioritize “no-regret” moves that enhance your relationship with your customers under any set of circumstances.

2) Care management. The promise of population health management is directly tied to longitudinal care management that spans multiple care settings and participants. In today’s regulatory environment, however, not all of the information necessary for effective care management can be shared across independent entities. With so much in health care in flux, it is difficult to know what will be permissible and to invest accordingly.

Implication: Continue to ensure that patients do not fall through the cracks and leverage the structures that enjoy broad-based support, such as clinically integrated networks and ACOs for broader reach.

3) Merger mania. Every day seems to bring a new headline about yet another health care consolidation. But how much of this M&A activity is delivering near- or even long-term value? Consolidation has reached fever pitch, making it hard to watch from the sidelines without getting queasy with FOMO and worrying that your ship has sailed. But mergers of desperation rarely yield the intended benefits.

Implication: Consolidation may or may not be a right answer for your organization. Either way, it must be evaluated thoughtfully. Make sure you have a solid strategic rationale with a roadmap for realizing the value potential.

4) Medicare Advantage. Industry interest in Medicare Advantage has spiked in recent years as providers and insurers alike are recognizing the financial arbitrage opportunity associated with improving outcomes and managing chronic disease for “top of the pyramid” patients (i.e., the top 5% who account for about 50% of the total spend within a Medicare population). In reality, succeeding in Medicare Advantage is a complex and risky endeavor that requires nuanced skills drawn from both payer and provider areas of expertise.

Implication: Ensuring the proper set of integrated skills is make-or-break for Medicare Advantage. In many cases, strategic partnerships may yield better results than going it alone.

5) Medicaid. While a variety of approaches to Medicaid are under consideration as part of the Republican health care revision, most call for reducing the number of covered lives and the total amount of benefit dollars. This has many stakeholders concerned that uncompensated care will explode and with it, commercial insurance cross-subsidization.

Implication: Predicting exactly how this will play out is impossible, but broader access to lower-cost care settings with a variety of payment options will be needed to prevent a backslide to broken health system economics and unsustainable cost shifting.

With so many unknowns blurring line-of-sight to the future, it may be tempting to sit back and take a wait-and-see approach. But by keeping an eye on these Top 5 issues and implications, leaders will have an edge in charting a successful course.

Zachary Hafner leads the Advisory Board’s strategy consulting practice.

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