Consolidating an Industry to Improve Patient Health, Provider Performance
Kevin Dahill | March 2018
The traditional hospital, both in physical structure and scope of services, is not what it once was, as market pressures and reform measures are transforming these institutions into non-centralized points of care. While the most severely ill will always need the high-tech services found in an acute care hospital setting, and indeed, these patients will comprise the bulk of hospital beds, the remainder of the population will increasingly find care in community-based outpatient settings, clinics, and practices. But these places of care, although geographically dispersed, are organized more and more under one corporate umbrella.
About a decade ago, hospitals began to join forces and realized their bargaining power with commercial health plans and supply/product manufacturers improved when hospitals entered into affiliations, mergers, and other joint agreements with other hospitals and large health systems. Early on, clinical expertise, best practices, and group purchasing perks were the benefits driving the “economies of scale” approach. Today, a hospital’s survival depends upon its ability to provide integrated care, both vertically and horizontally, that addresses disease states from chronic to acute and every phase between and before, including prevention and wellness. As a result, hospital consolidations and mergers are accelerating and yielding institutions that can successfully operate in a “value-based” market that rewards providers who can, ironically, keep the patients out of the acute beds, but not necessarily out of the system.
This approach has the broadest implications for chronic disease. The Centers for Disease Control and Prevention (CDC) note that one in every two adult Americans has at least one chronic disease. Also according to the CDC, chronic disease is the leading cause of death and disability in the United States. But most chronic diseases are preventable and with the right care in the community these illnesses can be managed well before costly complications take hold. The CDC estimates that 86% of U.S. healthcare costs are attributed to chronic disease.
Overwhelmingly, age is a risk factor for chronic diseases, as are other disparities such as poverty and ethnicity. Ten thousand baby boomers a day turn 65 and enroll in Medicare. In fact, the Centers for Medicare and Medicaid Services (CMS) estimate that by 2029 18% of the U.S. population will be 65 plus, resulting in 81 million Medicare beneficiaries. For those with low incomes, Medicaid is the predominant insurer. Yet, both Medicare and Medicaid pay hospitals substantially less than the cost of care. This is why government and commercial payers are embracing a value over volume reimbursement system and are rewarding providers for managing the disease state over time, including investing in prevention and wellness programs and new technologies to assist with care management. These technologies include telemedicine, mobile applications for remote monitoring and text messaging for medication reminders.
The emphasis is on keeping patients well and caring for all the patients’ needs, both medical and social, so that higher upstream costs related to disease complication are avoided. There is a plethora of research that confirms a person’s health improves when they have a job, access to affordable housing and nutritious food, or a clean and safe environment, among other social determinants of health. This is why hospitals are collaborating with local community-based organizations to ensure that those needs outside of the hospital’s walls, such as transportation and housing, are met. These social factors heavily influence health outcomes and have a bearing upon a patient’s recovery. Under the Medicare program, readmission within 30 days of hospital discharge triggers non-payment to hospitals.
In terms of physical space, we are seeing the re-purposing of hospital-owned properties into space for more ambulatory care and outpatient-based primary care, and other continuum of care uses. For example, Ellenville Regional Hospital is the first in New York State to partner with a for-profit developer to build affordable senior housing on its campus.
Westchester Medical Center Health Network in Kingston is re-working itself into a medical village, offering patients one-stop convenience for primary care and behavioral healthcare needs, as well as pharmacy services and wellness and support services. In 2016, HealthAlliance became a member of the Westchester Medical Center Health Network. The Westchester-based facility has established a presence in other regions throughout the Hudson Valley through its partnership with MidHudson Regional Hospital in Poughkeepsie and the Bon Secours Charity Health System, which has hospitals in Suffern, Warwick, and Port Jervis. Similar consolidations have taken place throughout the Hudson Valley. Two of these include Northwell Health, which now includes Northern Westchester Medical Center and Phelps Memorial Hospital, and Montefiore Health System, which now includes Burke Rehab, Montefiore Mount Vernon, Montefiore New Rochelle, St. Luke’s Cornwall, and White Plains Hospital.
Re-configuring space and acquiring locations requires capital investment. Philanthropy helps fund a portion of major construction and expansion projects, but public investment is also needed. New York State in recent state budget agreements has allotted funds, now nearing a total of $3.3 billion, for capital investment and transformation projects that will enable hospitals and health systems to successfully operate in a value-based market paradigm. Most of the state funds are offered through a competitive grant process with the most recent round of Statewide Health Care Facility Transformation Program II capital and capital-related funding applications due in late March.
Consolidations among hospitals will continue, as competition for patients and dollars tightens under federal and state payment reforms and even as the commercial insurance industry undergoes its own consolidation process. Added to the merger mix are more innovative alliances such as the recent CVS and Aetna deal and the recent joint venture between Amazon, Berkshire Hathaway, and JP Morgan Chase. All these mega partnerships and hospital consolidations are aimed at controlling costs, improving care by better coordinating and streamlining its delivery, and enhancing access by offering convenient and comprehensive care to patients of all ages, income levels, and other demographics.