Health Care of the Future: What It Means for Independent Healthcare Businesses
November 12, 2015
If you have an equity stake in an independently owned healthcare business, the future of health care should be of particular interest to you. As home health care agencies, hospice agencies, physician practices, and other types of health care services continue to consolidate, the goal seems to be the creation of larger and larger organizations that provide health services to the masses.
For the last decade the government has repeatedly cut reimbursement while increasing regulation for home care services and physician services paid for by Medicare and Medicaid. Smaller companies are increasingly squeezed with no end in sight. This begs the question: how will it all shake out in the end? How will the evolving health care system affect your practice or agency and how you provide care? Although the end game remains somewhat of a mystery, we can perhaps visualize the progression by studying the elements that are driving consolidation:
- Cost containment is, and will continue to be, an essential focus for providers and payers. Costs are contained by increasing efficiencies within the system and by educating patients to live healthier lifestyles and prevent disease. Expenses are reduced by rehabilitating patients as quickly as possible and educating them to reduce accidents and prevent disease.
- Technology continues to be a key driver not only to increase back office efficiency but also to give providers access to key patient data, thereby allowing more efficient collaboration among providers.
- Integration of health care systems will continue to align hospitals and care providers across the continuum of care, with the goal of improving patient outcomes and increasing efficiencies through economies of scale. If the health system can closely monitor the patients after hospital discharge, the risk of hospital admission may be reduced.
- There is a steady increase of health providers partnering with insurance companies to reduce costs and improve patient outcomes. Before the Affordable Care Act, insurers and providers each had their own distinct roles of providing care and paying for services, respectively. Now the financial risks are being shifted from payers to physicians, hospitals, and home health care and hospice agencies. Pay is becoming dependent on cost containment and quality of care provided. Private insurers will share their technology and data capabilities to partner with integrated health systems to share the risk.
How does all this consolidation affect your healthcare business? Since we are much better at describing the past than predicting the future, we can only speculate. If the result is a handful of massive health systems providing all things to all people, then successful companies will be the ones who go big, become highly specialized and technology savvy, and provide more unique and higher quality services than everyone else. If you can achieve those goals within a reasonable cost structure, your physicians practice, homecare agency, or behavioral health practice will have an edge over others and will be an attractive target for affiliation, joint venture, or merger with a large integrated health system.