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Failure To Embrace A Patient-Centered Model Threatens The Future Of U.S. Healthcare System

A broken U.S. healthcare delivery system will start next year in much the same way it began this one–in critical condition–as it wrestles with self-inflicted wounds that were decades in the making.

Covid-19 is well behind us, but it has left a painful legacy. With more than a million American lives lost, and hospitals and health systems left financially devastated, it all should have been a sobering wake-up call to providers that the traditional fee-for-service (FFS) payment system on which they relied was no longer sustainable. But as we look at what’s happening across the healthcare delivery landscape now, it is both evident and unfortunate that most executives have not learned this lesson.

According to our Numerof & Associates 2024 US Healthcare Delivery Outlook, more strenuous days await a battered industry in the throes of gut wrenching transition. Long standing economic, operational, and other challenges will persist into 2024 and beyond, with the net of these forces only raising the urgency to pivot to a new patient-centered model.

In May 2023, the Covid-19 federal Public Health Emergency (PHE) expired, bringing to a close the worst health crisis to hit America in more than a generation. But the damage inflicted by the disease is still very much unfolding.

The pandemic exposed two glaring weaknesses inherent in FFS. One is the perverse financial incentive it creates for hospitals to maximize their own reimbursements by testing and treating patients more than is prudent, and to not fully utilize the continuum of care. As I’ve explained previously, when the virus arrived, those in underserved communities, the elderly and those with serious underlying health conditions fell through the system’s cracks. It was simply folly to believe the health of any population can be independent of its most at-risk segment.

Second, hospitals which relied on lucrative revenue streams from elective surgeries and “non-essential” procedures started hemorrhaging cash once those services were halted at the pandemic’s outset. Healthcare executives ignored this vulnerability, and their organizations paid a high price for their disastrous miscalculation.

Last year, many hospitals and health systems reported huge financial losses, to the tune of billions of dollars in some cases. According to some analyst projections, next year’s outlook for not-for-profit hospitals, which account for almost 60% of all hospitals in the United States, “will remain challenging.” Persistent clinical staffing shortages, growing labor disputes, widespread staff layoffs and wage and general inflation are all drivers of a rapidly “deteriorating” situation.

“Our not-for-profit hospitals and health care systems are hanging dangerously from this cliff and they’re getting tired,” said the head of the Minnesota Hospital Association (MHA). With the Covid federal assistance spigot now turned off, hospitals will be left largely on their own to fix decimated balance sheets, which has accelerated consolidation across the industry.

Consolidation across healthcare delivery is literally changing the face of the industry. The uptick in mergers and acquisitions (M&A) is being driven by downward reimbursement pressure and pandemic induced financial bleeding, among other factors. While ‘scaling up’ continues to be a rallying cry for industry executives as the mechanism to enable the delivery of so-called “world-class” health care, it is fraught with peril.

As I’ve written in my columns and my book, Bringing Value to Healthcare, hospitals are by nature too often dysfunctional, siloed and highly bureaucratic institutions where doctors are paid to diagnose and treat illness, which encourages higher utilization of tests and other diagnostics. This leads to higher costs and, with no linkage to outcomes, declining quality of patient care. From an operational standpoint, the union of two organizations with obvious shortcomings creates a larger one with the same limits. And if integration isn’t well handled by the leadership team, differences in culture and management style can leave the players worse off than when they started.

All of this raises troubling questions about where this path leads. Despite all the upbeat pronouncements that accompany every merger, those are not consistent with the experience of many consumers. For many, the prospect of a healthcare system that is Too Big to Fail, and at the same time, Too Big to Care is not far-fetched. Indeed, some would say, we’re already there.

That’s certainly the way the Administration behaved when elective procedures, which are hospitals’ revenue bread and butter, were canceled. At that moment of crisis, the federal government allocated $175 billion to keep the doors open, which conjured up eerie memories of the 2008 banking crisis when hundreds of billions of dollars were spent to rescue big banks in order to stabilize the nation’s financial system. Had hospitals adopted a different business model, based on capitation and health maintenance verified by meaningful outcomes, it could have stemmed the bleeding. As for becoming too big to care, we see that playing out in very public ways.

For years, healthcare delivery organizations have fiercely resisted attempts to repair a system that is fragmented, confusing, opaque, expensive, and sometimes downright dangerous. The Centers for Medicare and Medicaid Services (CMS) learned this in their 40-year journey to try and control rising healthcare costs while improving quality and patient safety, all while demanding accountability and price transparency in the process.

One of CMS’ most recent and basic reforms was hospital price transparency. After all, healthcare is one of the few industries where consumers typically have no idea what a medical test or service is likely to cost, and what the implications are for savings and outcomes if they get treatment somewhere else. While the hospital lobby fought the CMS rule tooth and nail and lost, they continue to flout it at every turn, with compliance, today, abysmally low.

The great irony with the perilous position healthcare delivery finds itself in today is that all of the system’s stakeholders say they want “better health outcomes at lower cost.” But the journey in getting to a new market-based model, one defined by transparency in cost and quality, accountability for care across the continuum, with payment connected to outcomes that matter as well as making a clinical argument for the way in which they operate, remains very much a slog.

Moving forward, delivery organizations cannot pursue business as usual any longer as they have and will continue to pay dearly for past missteps and opportunities lost. The challenge from here is that the battlefront only widens, as weary patient-consumers and not-in-kind retail disruptors frustrated with healthcare as we know it, have made it clear they no longer have the patience or appetite to rescue a ship that is listing badly and in danger of going down.

Source : Forbes