PwC: New provider systems to supplant traditional hospital models
As the healthcare industry continues to evolve, hospitals are making moves to stay alive and avoid “facing death by a thousand cuts,” according to a new report from financial services company PwC. Over the next decade, health systems will rebuild into four new models that are expected to dominate the provider space, PwC predicted.
Treating wellness
Care delivery represents about two-thirds of the $3 trillion healthcare market annually, but more growth is expected toward wellness, according to an analysis by PwC’s Health Research Institute (HRI). That shift away from treating sickness to treating wellness could spell bad news for hospitals, which have already seen operating margins of just 2 to 3 percent since 2012.
Beyond changing payment systems, mass consolidation across the healthcare space is putting pressure on hospitals to evolve their models. Consumers are playing into this pressure, as well, with 78 percent of consumers stating they are interested in a menu of care options offered by multiple providers, according to a 2018 HRI survey.
“Philosophically, we see more and more entities realizing that caring for a patient is more than the inpatient bed or the pill,” Jane Sarasohn-Kahn, a healthcare economist and founder of the group THINK-Health, told HRI.
Hospitals won’t be able to skate by in the new healthcare landscape just by “fine-tuning their business models” either, according to PwC.
“They are going to have to recast themselves altogether,” the report reads.
PwC identified four new models that will emerge and dominate over the next decade: product leaders, experience leaders, integrators and health managers. All providers will need to achieve competency in numerous areas, but how the different models will tackle them will vary.
Product leaders
The product leaders are predicted to deliver the most advanced care and best outcomes for one or more clinical areas. Investing in the best and brightest specialists and clinical researchers will be the focus of this model more than being a low-cost provider. This model is likely to deliver best-in-class care to its region and to patients that travel for the specific care. Current providers that fit this type are Mayo Clinic in Rochester, Minnesota, the Cleveland Clinic in Ohio and MD Anderson Cancer Center in Houston.
That regional footprint approach could face some headwinds, according to PwC, and may have to rely heavily on telemedicine to make a national and international mark in care delivery.
“As its brand recognition increases, the Product Leader will have to figure out how to routinely deliver care across the nation—and maybe even across the globe—through virtual means while still delivering a positive customer experience,” the report reads.
This is supported by consumer preferences, as 60 percent said they would prefer that their hospital or physicians’ offices have a partnership with other providers with a strong national reputation, and 62 percent of consumers would rather have virtual access to a specialist at a high-quality health system instead of an in-person visit to a specialist at a health system with lower quality ratings.
When it comes to growth, M&A could dilute the brand name, so “growth and partnerships should be measured,” the report warns.
Experience leader
The experience leader differentiates itself as a model that puts a premium on the patient experience, emphasizing this over cost while delivering quality care. These models are more likely to offer concierge services that can provide high-quality patient experiences through virtual care and traditional settings. This type of care also focuses on overall wellness of a patient and retainment of customers.
Keeping in mind the growing consumer preference to know prices of healthcare services, the experience leader will have to be transparent about its prices. Enabling mobile and online options for billing, scheduling, access to health data and care coordination will also be essential to a good consumer experience. This will mean finding a balance between physical and virtual touchpoints and investments. Interoperability will be key.
“An ability to derive meaningful information from linking disparate data about patients becomes a differentiator for an organization in a competitive market,” Winjie Tang Miao, executive vice president and chief experience officer at Arlington, Texas-based Texas Health Resources, told HRI.
Integrators
Price point will be the central theme of integrators, as this care model leverages scale and scope to reach as many consumers as it can with a multiregional or national footprint. Today, this model is focused on growing, but “bigger may not necessarily mean better” in the future, and the model will have to find value in its networks and partnerships to become the low-cost choice of consumers.
The pending deal of CVS Health-Aetna and UnitedHealth’s purchase of DaVita Medical group are current examples of this vertical integration model.
“In a value-based environment, the more pieces of the supply chain that you can influence, the more you can impact utilization and cost, driving a win-win across providers, payers and patients,” Jane Sarasohn-Kahn of THINK-Health told HRI.
Consolidation across the market will put pressure on integrators to provide low-cost quality care. Mergers or acquisition partners must align economically for sustained growth, but integrators must also jump on vertical integration opportunities quickly.
Health managers
This population health model focuses on managing complex populations and addressing social determinants of health, likely contracting directly with employers and the public sector. Health managers could operate as community organizations or integrated care providers, but will have a broader scope and mission to work with other partners. This model will also focus on addressing health equity, playing heavily in the value-based care space.
“I spent $300k on my medical education; I’m the most important, right?” Dr. David Berg, cofounder of Redirect Health, a Phoenix-based company partnering with employers to simplify healthcare for lower-wage employees, told HRI. “Nope. The most important part of getting good results is not the knowledge of the doctors, not the treatment, not the drug. It’s the logistics, the social support, the ability to arrange babysitting.”
Pennsylvania-based Geisinger Health System’s initiative Springboard Healthy Scranton is one example of a community health manager, as is Kaiser Permanente’s partnership with Hunger Free Colorado to provide food security.
Not all providers will fit into these four categories, and hybrids are likely to take shape, but all hospitals and health systems will need to evolve over the next decade.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."