This post first appeared in Forbes.
The U.S. health care system today is fraught with wasteful spending that does not contribute to better outcomes for patients. The U.S. spends more on health care than any other country in the world on a per capita basis. We spend more on healthcare alone than the entire GDP of France, however average patient outcomes in the U.S. are on par with Cuba and Slovenia, in spite of newer hospitals and more varied technologies.
Three federal initiatives — the HITECH Act, the Health Data Initiative (HDI) and the Affordable Care Act (ACA) — are designed to improve clinical quality and the patient experience, and make health care more affordable. As a result of these changes, several trends are emerging, including movement toward outcome-based payments, higher labor productivity, decreased demand for hospital-based care and better, more efficient consumer markets.
Four major trends are driving these benefits for consumers and employers:
As we move from paper-based to digital, we are able to change what patients buy, how payors pay, and how doctors are reimbursed for care. Outcome-based payments increase the importance of care coordination, so providers will need increased technological capabilities to share data, form care teams, and perform predictive modeling to figure out which patients are at higher risk. Consumers benefit greatly from these models because a doctor’s success will be contingent on their patients doing better and spending less money on unnecessary services. It will also lead to more convenience for patients because doctors will want to see them on nights and weekends rather than send patients to the emergency room or readmit them to hospitals. Emails will also not go unanswered when it is in the doctor’s interest to make sure patients know what to do.
Astonishingly, healthcare has not been able to replicate the productivity gains of the broader U.S. economy over the last twenty years. As we age and expand coverage in an era where prices cannot consistently increase faster than GDP, health care providers will need to creatively address and improve labor productivity. Almost every other sector of the U.S. economy has improved labor productivity, achieved better value and, in some cases, reduced prices. Health care providers who develop more productive ways to deliver care should improve margins, gain market share and improve the competitiveness of their businesses. This is good for patients, payors, and providers as waste is eliminated and reliability improves.
Lower demand for hospitals
Even considering the nation’s aging demographic, most hospitals will continue to have excess capacity. As reimbursement systems increasingly reward cost efficiency and reductions in readmissions and complications, many markets may become over-bedded. Additionally, alternative, less expensive treatment settings should become more common, including urgent care centers, high intensity primary care and extensivist models, and home-based care models as remote monitoring is perfected and new therapies continue to shift care from inpatient to outpatient settings. Those patients left in hospitals will increasingly be limited to the most complex patients.
Better functioning markets
Millions of newly covered health care consumers will join the ever-increasing numbers who already have high cost-sharing health plans. Even in subsidized Silver-level Exchange plans consumers will have 30% cost sharing up to their out-of-pocket maximum if their incomes are about 350% of the federal poverty level. This group will be sensitive to differences in price and value, resulting in a more engaged patient consumer base and will cause the health plan and provider marketplaces to become more competitive. Patients will have access to more data and new applications to help them shop for health care based on price, quality, and convenience; hospitals may compete on outcomes and experiences; doctors will seek to differentiate their services and likely further specialize around particular conditions and types of patients they are expert in caring for.
Health care reform will also cause the roles of health plans, hospitals and doctors to evolve in several ways:
Health plans will offer a more rewarding member experience
Health plans are already responding to these trends by creating more engaging, consumer-centric ways to get people to care about, and improve, their health, such as sponsoring wellness programs and member education; developing their own health care delivery systems which offer unique member care experiences; and offering analytic support for providers to help them better achieve population health goals cost effectively.
Hospitals will have to compete on care outcomes and total value
In a health care system where consumers have easy access to information on hospital cost, quality and patient experience, it may be difficult for hospitals to compete on factors such as the newness of the facility or the breadth of services offered and may instead need to compete on their ability to deliver superior outcomes at a better cost. We anticipate that all hospitals will want to take action to assure that their doctors adhere more often to evidence-based practices, comply with cost-effective care processes, and support efforts to reduce complications and readmissions.
There will be a race to employ doctors
Today, slightly more than half of all practicing doctors in the U.S. are employed by hospitals. Employing physicians helps hospitals by enabling them to better manage what happens to patients before and after the hospital, encourage the use of cost-effective supplies and medical devices, implement clinical pathways, and work well in team-based care models. Health plans are also beginning to employ doctors to better manage risk, enable population health management, and help create unique products and, perhaps, specialized delivery systems.
Bottom line: the ACA, the HITECH Act, and the HDI are moving the U.S. toward a health care system that can be more cost effective, more accessible, and deliver better outcomes. These initiatives, coupled with the new innovations emerging in health care IT, will help drive this change and are making it an exciting, and better, time in health care for consumers, entrepreneurs and investors alike.