One Industry, Two Views: Which will be our Future State?

Two major national meetings last week showcase the current landscape in U.S. healthcare: the Annual Membership Meeting of the American Hospital Association in Washington and the Inaugural HLTH: The Future of Healthcare Summit in Las Vegas. They illustrate a useful comparison of roles and perspectives in our industry.

The AHA represents 5000 hospitals ranging from critical access providers to regional mega-systems and national multi-hospital owners. Its member institutions are publicly, privately and investor-owned and they rally around AHA’s advocacy efforts against reimbursement cuts and price gauging by drug companies and for the easing of regulatory burdens among many issues. The AHA meeting was themed “Redefining the H” calling attention to the sector’s widening role beyond inpatient and emergency care. The agenda featured prominent industry leaders, policymakers and media notables who shared views about the politics and policies of our system. HHS Secretary Alex Azar, closed the meeting Wednesday forewarning that the shift away from fee for service payments to value-based alternative payment programs would likely accelerate.

HLTH was a new entrant to the healthcare event scene. It attracted 4000 attendees to its showcase of 204 exhibitors and presentations by 325 speakers across the continuum of policy, delivery, financing, and technology. The event combined the expansiveness of JP Morgan’s annual showcase for healthcare investors and the health IT superstore associated with HIMSS’ meetings. The organizers of this event including some who were new to healthcare. Their bet was that healthcare needed a “big tent” to define its future beyond conventional ways each sector plots its pathway. By any measure, HLTH was a huge success.

Two big events: one aim—to offer a perspective about the future of our industry.

AHA sees the transformation of America’s hospitals from inpatient and outpatient facilities to systems of health that manage health, wellbeing and affordability for communities. HLTH sees a future void of sectarian barriers that reinforce old ways of doing business. It envisions technology-enabled solutions that deliver better care at a lower cost.

Both AHA and HLTH recognize that the status quo is not sustainable. Both see the same trends:

  • Clinical innovation that’s changing how conditions are diagnosed and treated and by whom.
  • Technologies that are replacing people and improving processes.
  • Public policy that is piecemeal, unclear and prone to political gamesmanship.
  • Clinicians who are fed up by administrative hassles.
  • Costs that are getting higher.
  • Prices that are inaccessible nor understandable.
  • Regulations that are piling up.
  • Politicians that are piling on.
  • Consumers that want more for less.

How the two organizations respond is a key differentiator: AHA is the frontline for societal issues about affordability, equitable access to care for disadvantaged populations, and efficient and effective care that’s evidence-based and patient centered. Its members are not delusional: they recognize that acute care is only a piece of the puzzle and others are equally important. They embrace transparency and alternative payment models so long as the methodologies are valid and reliable. They’re not afraid to take risk but they want a reasonable timeframe to adjust. And they think hospitals are the engines for the needed changes in the health system beginning in each community.

HLTH’s followers see the same opportunity. They differ over the pace and roles. They envision a health system landscape that’s unconstrained by sacred cows that reinforce each sector’s control of its own turf. They fear solutions filtered through incumbents that are prone to incrementalism. They see immediate opportunity to radically reduce inappropriate care, administrative redundancy, labor intensity and lack of meaningful engagement by consumers. They reject the notion that hospitals and their aligned physicians are the system’s hub for health system transformation: they think disruptors who bring fresh strategies and technologies are the catalysts. And they are prone to seek forgiveness rather than permission from regulators believing consumers and employers will respond favorably.

In many ways, these meetings are a reflection of where our industry is today. Hospitals believe they own the moral ground in healthcare; others see alternative models that combine financing and delivery that’s predictable, comprehensive and affordable. Hospitals jealously guard their roles as major employers in their communities as justification for their sustainability; disruptors see a bloated workforce ripe for technologies, outsourcing and process improvements that work better and cheaper. Hospitals think healthcare is local; outsiders think the market more fluid adding virtual care, digital connectivity to the delivery mix.  Hospitals call them patients; HLTH adherents call them consumers.

My take:

The reality is this: at 18% of our GDP and $10,348 in per capita expenditures, healthcare is a big market. Conventional players have had a good run in recent years: most enjoyed steady growth as healthcare spending grew 5% annually averaging 2% above GDP. But last year, that gap shrank to .5%.

In the last year, the federal deficit has grown (4.2% of GDP in 2018 vs. 3.4% in 2017). Healthcare spending, especially in Medicare and Medicaid, is a major contributor along with the effect of the Tax Cuts and Jobs Act. Growing concern about health spending has sparked mega-deals across sectors aka Cigna-Express Scripts, CVS-Aetna, Optum-Davita Medical Group as well as consolidation among major health systems. And most major health systems are diversifying: more than 100 now sponsor insurance plans, the majority employ physicians and many are adding post-acute and retail health facilities to their portfolio. Hospitals are becoming wider and bigger in a landscape where the lines between financing and delivery are blurring.

But those gathered in Vegas seemed focused beyond health systems that offer integrated delivery and financing on a larger scale. They believe the consumer will be in the driver’s seat. They see new ways to reduce unnecessary costs in every sector at every stage of supply chains. They are betting that innovators can monetize strategies that address social determinants of health. They envision the democratization of medical knowledge, equipping individuals to play more active roles via technology-enabled tools and coaching. They think hospitals might play a role but imagine most will take avoid risk to maintain a conventional bricks and sticks view of the future.

The AHA and HLTH confabs illustrate a fascinating reality in our industry: incumbents are focused on playing within rules set by regulators and tradition; disruptors are inclined to create a new set of rules.

In other industries, change has been dramatic where technology, capital and the vision of disruptors are harnessed to create alternatives. AHA is an important player in the future of our system but HLTH might be the impetus for an expanded view of our system.

These two meetings were held at the same time 2430 miles apart.  I suspect the destinations they see for healthcare are not that far apart, but their strategies and pace might be a major distinction in how they travel.   

Paul