Reprinted courtesy of MCOL.
Perspectives on a Selected Key Topic | April 2011/May 2011 | Volume Three Issue Two
Will a material number of hospitals and their core medical staffs, that are relatively independent, evolve into highly integrated delivery systems during this decade, and why?
William J DeMarco MA, CMC
President and CEO, Pendulum HealthCare Development Corporation
The great momentum brought about by government and private payers demand for more accountability is unstoppable. Rapid consolidation of hospitals and consolidation of physicians by physician groups, hospitals and now insurers will shift referral patterns and consumer preference. 1 out of 4 hospitals will fall short of providing value and close or be absorbed within 10 years.
Physicians will be offered higher prices to sell out to insurers and investors who value the short supply of PCPs and will try to control care demand by retooling the care system building ASC and small scale short stay hospital.
True clinical integration will follow for the survivors. The ability to prospectively develop clinical budgets and bundles of services will connect regional tertiary and quaternary care facilities to local hospitals so integration can be regionalized across larger populations and payer segments.
Once these delivery systems realize they need a product recognizable to individual consumers they will seek alliance with select insurers or create their own insurance company thereby achieving the true definition of integration which is to integrate financing and delivery of care.
This offers the shared savings with themselves and stabilizes patient flow and overhead to achieve value to purchasers and users of care.
We think these opportunities will be at a tipping point on a market by market basis over the next 5 years and will be a national definition of success within 8 years. We believe this will happen because already the bond rating companies are looking at physician alignment and payer alignment as factors in establishing credit worthiness of hospitals for expansion and mergers.
Director, PricewaterhouseCoopers LLP’s Health Research Institute
Integration is certainly on the rise. The notion of independent physicians may be a myth because so-called independent physicians are becoming increasingly financially tethered to hospitals. In fact fifty-six percent of physicians PwC surveyed want to more closely align with a hospital in order to increase their income. The new health reform law focuses on population health and adopts a Medicare compensation model that penalizes poor quality and rewards cost savings and electronic information sharing. Some commercial payers are also pushing this business model.