Healthcare is a constantly evolving space. As a result, it’s essential to keep watch for trends in the industry. But which shifts are temporary, and which should cardiovascular service lines be planning for?
To learn more about which trends are on the horizon, we spoke to Kevin C. “Casey” Nolan - the Managing Director of Navigant Heath Systems and the leader of their Healthcare Provider Strategic Planning practice. With more than 35 years of strategic planning experience, his industry insight is invaluable. In a series of seven “C’s”, Nolan spoke to us about the most vital emerging trends that he predicts will affect the healthcare industry over the next few years.
7 Healthcare Trends Worth Planning for
1. Compression of Margins
The first trend Nolan identifies is compressing margins. “We see expenses growing faster than revenues at virtually every one of our clients around the country,” says Nolan. It’s been that way for the last few years, and he expects it to continue into the future as well.
Medicaid payments to providers and Medicare payment rates are not rising at the same levels. Commercial insurers pay for less of an increase on an annual basis than they used to, while expenses continue to rise. As a result, the compression of margins is and will continue to be a major issue.
2. Contraction of Inpatient Volumes
Nolan believes the average occupancy of hospitals in the United States today may be less than 62%. “I'll be in a hotel tonight, and if they were at 62%, they'd probably be out of business,” he continues. Most facilities currently have more inpatient capacity than they need, and that's likely going to continue.
In the same vein, outpatient volumes have doubled in the last 10 years. Nolan notes that “the mix of services, and the locale of where those services are delivered, has changed substantially.” He points out that in 2016, for the first time in history, hospitals in the United States received more overall revenue from outpatient services than from inpatient services. He expects outpatient treatment to continue to grow while inpatient treatment declines.
"The mix of services, and the locale of where those services are delivered, has changed substantially."
Navigant Consulting, Inc.
3. Changing Delivery Models
“We have created a healthcare infrastructure in this country that is beautifully designed to treat acute illnesses,” says Nolan, before adding, “It’s not very good at treating chronic illnesses.” The majority of healthcare spend in the U.S. goes towards treating a few major chronic diseases – namely heart disease, cancer, stroke, COPD, and diabetes. As a result, there is a fast-growing focus on care for chronic conditions. And, as Nolan points out, if you’re dealing with a chronic condition, not all of the care you receive will be inside the four walls of a hospital.
“It's at home. It's at the doctor's office. It's in the ambulatory center. It's the nursing home. It's at the home care agency,” says Nolan. There has been a recent explosion in the number of companies focused on changing care processes, all while supporting healthy behavior and providing data support. This number will continue to grow as more people seek to treat chronic conditions.
4. Consolidation of Care
Care consolidation can be seen in the grouping of independent hospitals into systems. “If you go back to 1990 in the United States, only about 38% of the hospitals in the country were part of a multi-hospital system. Today, it's upwards of 80%,” remarks Nolan. This is a trend Nolan expects to see moving forward, potentially evolving into system-to system consolidation down the line.
Consolidation doesn’t only take place at the hospital level – it applies to physicians, too. “It's not unusual to see physician groups that are 500, 600, 1,000 physicians,” says Nolan. The days of one- and two-person practices are fading. Consolidation can even be seen at the vertical level, where national pharmacy brands acquire healthcare businesses. The resulting businesses, like Minute Clinics, have a direct impact on consumer behavior.
"...businesses, like Minute Clinics, have a direct impact on consumer behavior."
The shift away from transaction-to consumer-oriented healthcare is a trend that “is growing by leaps and bounds literally every day,” according to Nolan. This is driven by the fact that more and more people rely on high-deductible health plans – if a person is spending more of their income on healthcare, they are more likely to shop around for services.
This shift is also fueled by the availability of information on the internet – Nolan points out that nearly one in every twenty searches online is for health information. The trend will only continue as companies with loyal consumers like Amazon and Apple start to play in the health care space.