Challenges faced by providers

Patient-centered healthcare. Multiple providers delivering coordinated medical services across a continuum of care. Transformational changes driven by a multitude of economic and quality-of-care factors and enabled by investment in the information technology used to support them. Every aspect of a provider’s operations — financial, clinical and administrative — needs to share information seamlessly, streamline clinical and business transactions throughout the revenue cycle, and facilitate supply chain transactions. Healthcare’s collaborative, sustainable future depends on this generation of heath information technology (HIT).

The tangible, long-term benefits of HIT investments can be difficult to calculate. Yet studies show that the growing use of HIT among providers has lowered the cost of care, reduced medication errors and improved patient outcomes. The industry-wide adoption of electronic health records (EHRs) will amplify these benefits. The Obama administration, recognizing the huge potential benefits of EHRs, is setting national standards and using stimulus package funding to help bring providers online. HIT benefits providers with better business intelligence, simplified billing, real-time claims adjudication and cross-industry solutions for online transactions. And Medicare now offers financial incentives to providers for e-prescribing.

Market forces are changing the landscape of HIT. The market for proprietary patient health record systems is growing and consolidating. Competition is increasing. The separate roles of developers, vendors and integrators are merging. These commercial efforts may help establish de facto standards for security, portability and interoperability.

These challenging financial times discourage all but the most prudent, high-return investments. Advanced, enterprise-wide HIT should head your list of "must have" capabilities. Effective HIT can dramatically improve your bottom line right away. Over the longer term, it will help you become a more powerful competitor.

Many factors slow your cash flow and keep your margins slim. These include:

• Fierce and relentless competition
• High, fixed expenses and labor costs
• Escalating workforce shortages
• Regulated, value-based government reimbursements
• Increased dependency on consumers for revenue
• High-revenue procedures moving to specialty outpatient facilities and physicians' offices

Despite some positive signs of economic recovery and recent indications of improving hospital financial performance, ominous signs are on the horizon. High unemployment continues and uncompensated care is rising. Federal stimulus funding, which has helped states pay for rising Medicaid costs due to recession-related job loss, will end in December 2010, leaving states with few options for reducing Medicaid expenses but to cut support for programs such as mental health, community clinics and medical education. Hospitals are facing cost increases and ongoing margin pressures as both payments and volume come under fire. Many are having problems finding additional cost-cutting methods, having cut to the bone. Incentives for establishment of meaningful use of EHR systems begin to decline in 2011, even as some hospitals only now are contemplating such large capital projects. And the effective date for costly conversion to ICD-10 is looming.

Competition is relentless and pressing. So are the demands from all quarters that you deliver better care for less money. Consumer choices, reimbursement restrictions and investments in information and medical technologies squeeze your already-slim operating margins. You can no longer stay competitive by delivering traditional models of patient care. You need to adapt your services and business processes to keep both your patients and your bottom line healthy.

The challenges you face are many and varied. Your growth strategy must address them better, faster than your competitors. Quality differentiates your organization in a competitive marketplace. But quality care is more than a business strategy. It is your organization’s mission and reason for being.

Today’s healthcare providers face unprecedented obstacles to profitable growth, including increased competition, physician entrepreneurs and global expansion of large providers. Meanwhile, consumers, looking for quality and value, are choosing new care models like wellness programs, genomics and personalized medicine, disease management, tele-monitoring and at-home medical care. They’re spending more of their healthcare dollars at specialty providers and retail health clinics. They’re seeking low-cost or alternative care in developing countries. Although the overall healthcare market continues to expand, capturing a profitable share of it poses a growing challenge.

To thrive in today’s consumer-driven, competitive culture, you need to make your facilities and services attractive to consumers, earn their trust, and develop — and communicate — a reputation for quality care.

Risk-resilient healthcare organizations assume risks profitably while effectively managing the complexities of a rapidly evolving regulatory and compliance environment. By integrating risk management, internal control and compliance systems, management decisions can be made with increased confidence and clarity. Effectively designed enterprise-wide risk management also enables the ability to provide transparency to key stakeholders, such as community boards, public bond authorities, government regulators and valued employees and patients.

Risk-resilient organizations understand how to effectively align business processes to minimize compliance risks. Healthcare providers understand the increased scrutiny occurring in a new wave of regulatory activity. Increasingly enterprise-wide assessments are indicating the need for integrated compliance programs that drive down risk while increasing value. So for example, billing compliance remediation leads to more patient revenue, and preparation for recovery audit contractor reviews leads to operational and quality improvements.

Mapping of the human genome. The advent of widespread genetic testing. Advances in genomic and proteomic science. Development of "targeted" diagnostics and therapeutics that leverage knowledge of an individual’s genetic makeup to create a more personalized approach to healthcare. The new science of personalized medicine has the potential to eliminate unnecessary treatments, reduce the incidence of adverse reactions to drugs, increase the efficacy of treatments and ultimately, improve health outcomes.

Personalized medicine is often defined as "the right treatment for the right person at the right time." It encompasses products and services that leverage the science of genomics and proteomics (directly or indirectly) and capitalize on the trends toward wellness and consumerism. This includes everything from high-tech diagnostics to low-tech foods to technologies that enable storage, analysis and linking of patient and scientific data.

Personalized medicine is a disruptive innovation that requires new business models, particularly for health industry players. As the boundaries between traditional healthcare offerings and wellness products and services blur and the trend toward consumer-focused healthcare accelerates, companies outside the health industry are finding new opportunities. Non-health companies could be formidable competitors, due to their skills and experience in targeting consumers. To compete in this market, traditional health industry players will need new approaches, new relationships, and new ways of thinking.

Mergers and acquisitions (M&A) remain robust in the hospital industry despite a struggling economy. Many providers see M&A as part of their growth strategies because of shrinking profitability, increasing capital needs, impacts of health reform and/or restrictions on access to capital. In addition, new accounting and reporting standards dramatically change the way companies account for mergers and acquisitions that affect how deals are negotiated. Some of the changes will increase earnings volatility. Others may affect your organization’s deal structures and acquisition strategy.

If your organization is searching for ways to increase market share and expand, acquisition is one execution strategy your organization is probably considering. However balancing capital needs, governance structures, and cultures while performing the appropriate financial, tax and operational due diligence and completing the necessary regulatory filing requirements can be tricky. In addition, integrating operations and cultures can be time consuming, complicated and frequently requires the advice and assistance from experienced advisors.

If your organization is cash constrained or burdened with debt, the sale or divestiture of all or a portion of your operations may be inevitable. You may choose to sell under-performing assets to raise much-needed cash and respond to stakeholder pressures for improved financial performance. For some providers, declines in credit ratings and the market value of investment portfolios severely limit their options. Pursing an M&A option may be a viable strategy in uncertain times.