Hospitals must rethink their mission and strategy due to escalating health costs, insurer consolidation, ACA implementation and increased price sensitivity by employers and consumers. Operating margins are diminishing and pressure to keep premiums down is increasing. Therefore, increased enrollment is simply necessary stay in business and consequently the commercial insurance market is shrinking. Many plans are asking hospitals to “partner” in bundled payments and ACOs to share risk and so as the insurance sector continues to consolidate, the tensions between hospitals and plans intensifies.
Data released last Tuesday by the CMS suggest that health spending increases will average 5.8% annually through 2024, which is well above the 4% average increase from 2007 to 2013. With slow GDP and wage growth, escalating health costs will impact employers and consumers the most. This is why industry leaders must consider the answers to these difficult questions:
- Is our "best" strategy to contract with multiple plans or secure a strategic partnership with one? Should we sponsor our own plan and go head to head, or take our chances with others?
- Is our cost structure competitive and our pricing conducive to volume growth? Can we differentiate on the basis of our outcomes, safety and patient experiences while also being the low cost provider?
- Are physician leaders prepared to step up? How prepared is our clinical team organized and equipped to manage results and coordinate care beyond the operational confines of our clinics and facilities?
- What businesses do we need to integrate into our enterprise to increase our scale and reduce the leverage of third party payers? Do we understand how to operate these businesses effectively, or do we need partners?
Ultimately, consolidation among healthcare insurers is going to accelerate and the risks for hospitals and health systems will intensify. Market leaders must answer these tough questions and create better solutions so that patients can get the care they deserve at a price they can rightly afford.
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