2013 Healthcare Industry Outlook: Scrambling to Prepare for 2014 Healthcare Reforms

With less than one year until major reforms in the Affordable Care Act go into effect on January 1, 2014, the U.S. healthcare industry is in a full-out sprint to transform. Despite budget constraints and clinician shortages, hospitals, physicians, and insurers will continue putting in place the building blocks for handling new payment and care models and the expected influx of newly insured patients, according to The Camden Group's 2013 annual Top 10 Trends in Healthcare.

"With the countdown underway to the biggest overhaul of U.S. healthcare since the enactment of Medicare and Medicaid more than 50 years ago, it's do-or-die time for many institutions," says Steven T. Valentine, president of The Camden Group. "The changes are painful for all concerned. But they must adapt, while simultaneously operating under the current system, or become increasingly irrelevant."

With time short, the challenges are immense, as reflected in The Camden Group's trend predictions for 2013:

• Progress is a double-edged sword.
  • Efforts to reduce readmission rates and length-of-stay are positioning providers for new payment models but the resulting declines in volume leave them with big gaps to fill.
  • Unrelenting revenue pressure (hence pressure to reduce costs) will lead to healthcare employer-employee conflicts; providers will reduce hours, outsource and enact layoffs, likely prompting labor strife. They also will offer more incentive compensation to achieve quality, cost, and customer service targets.

• Mergers and acquisitions accelerate.
  • Hospitals and physician groups will rush to capture scale, lower costs, and gain a greater portion of the healthcare continuum.
  • Health plans will continue consolidating while also diversifying into related businesses, from buying medical groups to adding support services for population health management. A small but growing number also is teaming up with hospitals to offer private-label health plans, starting with the provider's and other local self-insured companies' employees.

• Physicians (and primary care in particular) remain the dance partner of choice.
  • As the linchpin to treating across the continuum of care, physicians will be wooed by hospitals and medical groups through new arrangements including patient-centered medical homes, bundled payments, joint ventures, and accountable care organizations.
  • A must-do is setting up an incentive system for rewarding doctors for improved quality, lower costs, and strong patient satisfaction.
  • In a bid to chart their own course, some doctor groups will adopt new care models and create accountable care networks on their own.

• Government is a wild card.
  • States and federal government are searching for solutions to cope with Medicaid and Medicare expansion, insurance exchanges, government employee costs, and infrastructure costs to manage the changes.

• Investments rise despite poor financial outlook.
  • Healthcare operating expenses will continue to outpace payment increases.
  • IT will consume a greater portion of providers' budgets. The right technology is essential for operating in the new era of health reform, from electronic medical records and computerized physician order entry to data warehouses and health information exchanges that will enable population analytics and web portals for patients and physicians.
  • In an environment of no per-capita volume growth, providers will seek to build market share, through acquisition and mergers to increase through more and different access points, including retail clinics and relationships with a broader network of community providers.

• Employers keep up the pressure on providers, health plans, and employees.
  • With continuing double-digit premium increases over recent years, employers will continue to pass along costs to employees, with high-deductible and narrow network health benefit plans here to stay. During labor negotiations, hospitals and non-hospital employers will trade wage increases for creative health benefit designs that drop low-value providers.

About The Camden Group
With offices across the country, The Camden Group is one of the nation's leading healthcare business advisory firms. The firm provides a broad array of healthcare consulting services such as strategic and business planning; mergers, acquisitions, and other transactions; physician-hospital alignment; clinical integration; and developing accountable care organizations. Since its founding in 1970, The Camden Group has advised more than 2,000 hospitals, medical groups, outpatient facilities, and other healthcare organizations nationwide. For more information, visit us online at www.TheCamdenGroup.com.