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Are Hospital Business Models on a Burning Platform? Not Yet, But It’s Inevitable.

From reading recent headlines, one might easily get the impression that hospitals are resistant — or at least ambivalent — in their pursuit and adoption of accountable care initiatives.

Are Hospitals Dragging their Feet on Accountable Care?

Commonwealth Fund: “only 13 percent of hospital respondents reported participating in an ACO or planning to participate within a year”

KPMG Survey: “(only) 27 percent of [health system] respondents said current business models were either not very or not at all sustainable over the next five years”

Health Affairs: “Medicare’s New Hospital Value-Based Purchasing Program Is Likely To Have Only A Small Impact On Hospital Payments”

The Bigger Picture

Do hospitals today perceive their current business model on the metaphorical “burning platform” — when the status quo is no longer an alternative?

The answer from the headlines above might suggest “no”, but I believe the correct answer is “not yet, but it’s inevitable”.  Hospitals are feeling the heat, but it’s just not yet hot enough to jump off the platform and abandon existing business models.

Fiscal forces are in play to continue to turn up the temperature to the point where change is inevitable. Modern Healthcare reported:

The AHA estimates that about 10% of Medicare revenue will be at risk in 2017 as a result of:

  • Value-based purchasing
  • Penalties for high rates of readmissions and hospital-acquired conditions
  • Incentives for participation in the inpatient quality-reporting program
  • Incentive payments tied to achieving meaningful-use standards in the use of electronic health-record systems.

None of these initiatives are dependent on the Accountable Care Act (ACA) legislation. The first three of these date back to the Bush administration.

With 10% of your revenues inevitably at risk in the near future, what’s a hospital CFO or CEO to do? While you might believe you can hold out for a year or two, the conclusion is inescapable: We must change.

Yes, I’m frustrated that more hospitals are not yet leading or engaging in accountable care initiatives. But, I’ll be patient. It’s just a matter of time.

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Comments

1.
On September 5th, 2012 at 5:44 pm, Paul Sonnier said:

Vince,
Great insights! While I’m also patient, I hope we’re not patients before the major changes take place, e.g. inpatient quality.
Paul

2.
On September 11th, 2012 at 7:24 pm, Vince Kuraitis said:

This post was republished on The Health Care Blog. There are some great reader comments and disagreements at http://thehealthcareblog.com/blog/2012/09/06/are-hospital-business-models-on-a-burning-platform-not-yet-but-it%e2%80%99s-inevitabl/

Mentions on other sites...

  1. Vince Kuraitis on September 5th, 2012 at 11:36 pm
  2. Paul Sonnier on September 5th, 2012 at 11:42 pm
  3. Bob Climko on September 5th, 2012 at 11:45 pm
  4. Stephanie Gaffin on September 5th, 2012 at 11:56 pm
  5. PointClear Solutions on September 6th, 2012 at 12:07 am
  6. Netspective Health on September 6th, 2012 at 12:25 am
  7. Michael Stanton on September 6th, 2012 at 12:25 am
  8. Aparna M K on September 6th, 2012 at 12:26 am
  9. Aparna M K on September 6th, 2012 at 12:26 am
  10. Michael Stanton on September 6th, 2012 at 7:36 am
  11. Healthcare Valuation on September 6th, 2012 at 12:52 pm
  12. Vince Kuraitis on September 6th, 2012 at 3:19 pm
  13. Charlene Marietti on September 6th, 2012 at 3:29 pm
  14. Mark Browne on September 6th, 2012 at 3:39 pm
  15. Donna Scott on September 6th, 2012 at 3:43 pm
  16. Amit Dhabalia on September 6th, 2012 at 3:57 pm
  17. Mediprocity on September 6th, 2012 at 4:08 pm
  18. Doug Della Pietra on September 7th, 2012 at 12:55 pm
  19. Randall Oates, MD on September 7th, 2012 at 1:58 pm
  20. Phil C. Solomon on September 19th, 2012 at 10:43 am
  21. Jon Mertz on October 25th, 2012 at 3:30 pm
  22. Vince Kuraitis on October 26th, 2012 at 7:12 pm
  23. Erik Pupo on October 27th, 2012 at 1:54 pm
  24. Kevin Bower on October 27th, 2012 at 2:12 pm