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Healthcare
Leading Themes in Healthcare Today
From strategies for mitigating costs to new approaches for treating patients, these are the most pressing issues and opportunities facing the healthcare industry in 2018.
April 26, 2018

In a world of 2 to 4 percent operating margins and fee-for-service rate cuts, hospitals and healthcare systems are increasingly seeking out innovative approaches to solve the most urgent challenges facing the industry.

Whether it’s the process-improvement opportunities presented by Big Data or the myriad operational and clinical difficulties imposed by the widespread opioid crisis, these are the topics on the minds of healthcare executives in 2018.

Harnessing the Power of Big Data

Rising costs are a top concern for any healthcare organization—but having access to actionable data now makes it possible to identify and address disparities in the cost of specific healthcare procedures.

One healthcare system based in the Western US reviewed their systemwide cost data for all elements of total knee replacement surgeries to determine the average cost per case per physician. The analysis revealed tremendous variation in the expense of each aspect of the procedure, even for physicians who were below average on total cost—showing that almost all physicians can work to minimize waste in their practice.

In another Big Data investigation, the same healthcare system compared two hospitals’ procedural costs to determine why one had especially high lab costs for coronary artery bypass grafts. Their analysis revealed the largest disparity per case was in general chemistry lab costs—specifically, in the test for blood gases. Data analysis can allow organizations to drill down to see small factors contributing to larger costs.

Because many cost disparities can be traced to physician practice, part of the Big Data challenge is convincing physicians to review and, if necessary, alter their practice protocols. To that end, organizations should:

  • Include physicians in the development of data analyses: Creating meaningful apples-to-apples comparisons among clinicians requires clinical understanding and often can’t be done using data alone.
  • Take an educational approach: Physicians want to keep healthcare affordable for their patients—often they simply aren’t aware of treatment costs.
  • Explore incentives: To encourage participation, it may be worthwhile to offer benefits to a physician’s department for reaching cost-containment goals, taking into account legal and patient safety considerations.

 

No matter how sophisticated its algorithms, Big Data’s ultimate effectiveness may depend on how well it’s able to influence behavior.

Battling the Opioid Crisis

The nationwide opioid crisis is putting a financial strain on healthcare systems all over the country. Repeated overdoses, serious comorbidities and reliance on Medicaid among many opioid users can have a significant financial impact unless providers find a way to treat this population effectively.

In the short term, some providers are changing pain management protocols to reduce opioid prescriptions, or treating patients with anti-craving drugs like buprenorphine to lower re-admissions and reduce the total cost of care. Others are working with community partners like law enforcement and first responders to distribute overdose-reversing naloxone kits, participate in needle exchange programs and collaborate in gathering data.

The crisis also requires long-term solutions. Sustained medication-assisted treatment and behavioral therapy can support recovery, but current healthcare payment mechanisms tend to reimburse a treat-and-release model. Compounding the issue, the Medicaid reimbursement for treating opioid overdose patients is generally inadequate.

Working with an organization that specializes in treating substance use disorders can address the need for long-term care. Healthcare systems may want to consider private funding sources, such as for-profit entities and private equity funds, to create extended treatment options. Grant-making foundations are more focused on the crisis and receptive to applications from providers for opioid use data collection, naloxone kits and partnership development with other community and healthcare resources.

The Consumer Burden of Out-of-Pocket Medical Expenses

A JPMorgan Chase Institute analysis of out-of-pocket healthcare spending provides a snapshot of the consumer experience between 2013 and 2016 for 2.3 million de-identified core Chase customers aged 18 to 64:

 

  • Three groups spent the highest percentage of take-home income: older people, lower-income people and women
  • Dental services was the highest spending category in 2016, with an average cost of $465 per family
  • Just 10 percent of households accounted for nearly half of all 2016 spending
  • Families spent more in months when their incomes rose: during tax refund season in March and April, as well as October and December
  • There were dramatic variations across and within the 23 states studied, with Colorado families spending the most money, California families spending the least money, and Louisiana and Oklahoma families spending the highest percentage of their gross income

 

Shifting to a Consumer-Driven Healthcare Model

Patients increasingly expect digitally enhanced and mobile service, and healthcare systems are adapting by providing a more retail-based patient experience.

Under this new model, it’s critical for healthcare systems to live up to their brand promises. The emphasis shifts from creating a relationship once a patient is actively receiving care to building a strong brand connection before a patient even needs care.

Patients want real-time responses, immediate scheduling availability, a simple process, price transparency and a variety of bill-pay options. Some systems have responded by instituting policies that return copayments or forgive deductibles for patients who report a poor healthcare experience, while others have introduced processes to book same-day appointments for procedures like mammograms as an added convenience for patients.

Along with more transparent access to quality assessments and cost estimates, the future of healthcare for consumers may include telehealth services or educational campaigns to encourage healthier patients to bypass the emergency department in favor of lower-cost primary or urgent care clinics—particularly as insurers push back on reimbursing unnecessary emergency treatment.

Building a Strategic Advantage

Major hospitals and healthcare systems have found that a strategic advantage may lie in investing in startups that develop cutting-edge healthcare solutions or in strategic funds that offer access to a broad portfolio of innovative companies.

While some healthcare systems may seek out these alternative investments as a way to diversify their portfolio and improve operating margins, the potential financial gains are often secondary motivators. Rather, the primary purpose for investing is to build a pipeline of emerging companies whose services can resolve specific operational issues or even transform the delivery of care across the continuum.

Investing in healthcare innovation can also enhance a system’s reputation and help recruit creative and entrepreneurial-minded leaders. A leader with a personal passion for innovation can help to nurture the investment and its resulting technological and operational advances.

Healthcare organizations can consider four degrees of participation in alternative investments, depending on how involved they’d like to be:

  1. Direct investment is the highest-risk option that also offers the greatest upside potential and maximum control. However, health systems often don’t have the due diligence and investment management capability necessary for it.
  2. Strategic fund investment offers smaller-stake access to a broader number of companies. Organizations participate in the equity upside through a customer relationship.
  3. Internal innovation centers can be a good fit for institutions that don’t know how much capital they want to commit. They can start by investing in built-for-purpose concepts and commercializing ideas generated by principal investigators.
  4. Accelerator partnerships are the lowest-involvement option. Conservative investors can subsidize incubators with marketing dollars.

 

Curiously, the move toward alternative investment instruments by hospitals and healthcare systems has slowed recently. If this means that systems aren’t finding value in their investments, in the future they may instead collaborate with other systems that are investing well rather than going it alone. They may also become better partners to young, innovative companies to help them plug in more easily and scale faster.

Looking Ahead

As new treatment challenges emerge and consumer expectations rise, healthcare organizations need to re-examine their processes to better serve patients and adapt to industry changes. Organizations can look to emerging resources like Big Data, technology investments and strategic partnerships to help improve patient outcomes, build loyalty to their brands and prepare for the future of healthcare.


This material is provided to you for informational purposes only and any use for any other purpose is disclaimed. It is a summary and does not purport to set forth all applicable terms or issues. It is not intended as an offer or solicitation for the purchase or sale of any financial product and is not a commitment by J.P. Morgan as to the availability of any such product at any time. The information herein is not intended to provide, and should not be relied on for, legal, tax, accounting advice or investment recommendations. J.P. Morgan makes no representations as to such matters or any other effects of any transaction. You should consult with your own advisors regarding such matters and the suitability, permissibility and effect of any transaction. In no event shall J.P. Morgan be liable for any use of, for any decision made or action taken in reliance upon, or for any inaccuracies or errors in, or omissions from, the information herein.

 

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