The theme for the 2018 American College of Healthcare Executives (ACHE) Conference was change—big change is coming and leaders will need to be prepared to be part of it or face extinction. While conference attendees paved the streets of downtown Chicago as part of the annual fundraiser benefiting the Fisher House Foundation, we were reminded that strategy is not a sprint to the finish line, but a well-paced journey with checkpoints to re-assess our resources and approach. The 4,000-plus attendees were energized and empowered to think about how healthcare is evolving—from healthcare policy to leading business practices—and how hospitals will finance the resulting demands. Hospital leaders have challenges to create strategies that consider the future, in the shadows of PBM/insurer mergers, provider site of care, patient engagement, technological advances, and payment models. The old saying “read the tea leaves” comes to mind. There is no definitive answer. As hospital leaders consider business plans, they must move away from the traditional, highly structured and predictable models to a more nimble approach, with the capacity to change based on the wealth of data we have available—so much more than in previous decades.
The financial challenge of the future
As hospital leaders, we face challenges unlike ever before. Our communities are living longer (with women now living to age 92 and men to 88), and our costs to care for communities are rising, according to ACHE speaker Michael Nowicki, Texas State University professor of health administration. He cites information from the journal Health Affairs that shows that the gross domestic product percentage in healthcare has risen from 5.3% in 1960 to an all-time high of 17.4% in 2010. By 2023, we anticipate that for every five dollars spent by the government, one dollar will go towards healthcare, putting that GDP percent at 20%.
The cost for a family of four will average $40,000 in expenditures toward healthcare. At the same time, our “baby boomers” (75 million of them) began turning 65 in 2011, and approximately 1,000 more per day will turn 65 between now and 2029, according to the Pew Research Center. Our U.S. Medicare system will experience the greatest draws from 2030-2050, while the inputs from generation X, millennials, and generation Z will not have enough contributions to sustain the output. How will our government look through the lens to solve this challenge head-on? Will retirement age increase? Will Medicare withdrawal years decrease? Will reimbursement decline? Or will innovative healthcare improvements that reduce cost, improve quality, and lead to better patient outcomes meet the need?
Innovation is necessary, especially in tumultuous times. Moving forward, the industry will see greater demand for and emphasis on data analysis, information technology governance, and patient engagement in new practice settings. Those settings will include the use of more in-home devices to avoid in-person healthcare visits, non-traditional sites of care created for convenience, and the utilization of advanced practice clinicians, including pharmacists and nurses. Physicians will develop their roles as transformational leaders supporting health systems to create sustainable solutions with the highest quality. In an environment facing so many challenges, change is inevitable. If you don’t like change, you will hate extinction. Boundary-spanning will be necessary for healthcare executives to execute solid plans, utilize transformational management, and build strong relationships both inside and outside of their organizations. Thus, we will continue to see a rise in joint ventures, and mergers and acquisitions will continue to surface for hospitals and their partners when efficiencies can be gained for market share.
The way forward is with data. Data will assist leaders in making better decisions in a fast, driven, competitive market. The old way of business will no longer work. Leaders will be geared for building equitable and diverse teams to solve problems in a collaborative environment with transformational management as the center. Social responsibility and community engagement through thoughtful community needs assessments will ensure the right changes lead to a healthier community while making the most out of available resources.
How will rising drug prices be overcome? Who will pay for new gene therapy, specialty drugs, and technology advancements such as artificial intelligence? How will hospitals finance necessary equipment, software, and patient demands?
The answers to these questions are in strategic discussions now. Know your data. Know your power. Know your patients. Healthcare leaders come to work to make a difference; the difference between life and death. They are here to serve the one patient that received a $250,000 gene therapy for blindness, or the $40,000 cancer treatment; the one patient that received a chance at life. Hard decisions are ahead that will require leadership engagement. Know your winning strategy for execution.
When every dollar counts—whether in 340B, by ensuring charges are captured appropriately, or through cost accounting—Sentry will be with you in your journey, helping align your plans for the future of healthcare.