A second wave of healthcare provider consolidation is on the horizon, rivaling what occurred in the 1990s and is guaranteed to bring a new round of challenges and opportunities for providers across the country. Although the number of mergers and acquisitions has been modest for the past five years, six key environmental forces are converging to create a new tidal wave of consolidation.
Insurance industry consolidation. Consolidation in the health insurance industry is creating fewer, larger companies and an increasing imbalance of power between these large companies and the fragmented providers with whom they negotiate contracts.
Tightening capital markets. While the capital needs of providers are growing rapidly, the worsening of the overall industry balance sheet and poor national credit situation, such as the subprime crisis, bond insurer poor financial performance, means that capital access will tighten and be less available to many.
Expense increases outpace reimbursement. Continuing inflation and flattening public and private payor reimbursement, combined with escalating uncompensated and undercompensated care, will undermine the financial situation of vulnerable organizations.
Workforce shortages. Growing workforce shortages combined with the changing recruitment markets, favor larger, well-heeled organizations that can compete for personnel in a broader market.
Physician practice dynamics. Physician shortages and the fact that physicians entering practice want employment, either by hospitals, systems, or large medical groups, also favor the larger organizations that can support such structures and put smaller hospitals at a substantial disadvantage.
Large number of financially fragile providers. The growing gaps between the financially strong and weak will widen with a disproportionate impact on small, inner-city and rural organizations. The inevitable consequence is that failures and consolidations will escalate.
In this more volatile environment, some leaders can position their organizations as consolidators, while many others must be realistic about their likelihood of survival if they go it alone.
Most health systems have flourished for the past several years, benefiting from a generally healthy economy, both inside and outside of healthcare, and a return to sound business fundamentals. Marginal operations have been pruned, focus has returned to core businesses, and a number of years of solid performance have strengthened these organizations.
In the next few years, many will have the opportunity to become a consolidator--either locally or nationally.
Can or should your organization be a consolidator?
Part of the answer lies in the impact of market forces in your community and region. How consolidated are and will be the insurance companies? How able is your organization to manage the capital access situation? What is the underlying financial strength of your hospital or system?
The nature of the opportunities available will be another important variable. Perhaps of greatest importance when deciding whether to be a consolidator is your ability to scrutinize each deal to see if it brings clear, significant revenue growth and expense reduction benefits. Unlike the last wave of consolidation in the 1990s, speculative, hypothetical benefits or the lack of vigorous pre-merger planning and post-merger implementation could lead to failure rather than just underperformance.
For organizations unable to take on the consolidator role, the issue will be one of survival and, if so, in what form. Healthcare organizations tend to avoid giving up their independence and autonomy until the organization is bankrupt or nearly so. Under these circumstances, attracting a partner can be grueling and reversing the organization's downward spiral, even if a partner exists, can be nearly impossible.
Weaker organizations must seek partners while they still have value. Nonprofit hospitals should emphasize continued service to their communities--not autonomy or protecting individual facilities. Continuance of mission is the essence of responsible governance. By recognizing when to come in from the cold, providers maintain some negotiating leverage in merger and acquisition situations and their missions are much more likely to survive in a reasonable form.
As systems grow and expand over the next five to 10 years, the industry must manage this change in a more business-like manner than the previous wave of consolidation. To maximize the chances for success, providers should drive toward six main categories of benefits:
Capital rationalization and access
Cost reduction
Access to scarce personnel and expensive technologies
Revenue enhancement
Quality improvement
Improved care for the vulnerable
Ensuring that management processes are in place to secure these benefits, post-merger and acquisition, means that this next surge of consolidation, while disruptive and unsettling, could ultimately lead to stronger, healthier, sustainable healthcare organizations that are better suited for meeting community needs.
Alan M. Zuckerman, FACHE, FAAHC is president of Health Strategies and Solutions, Inc. in Philadelphia, PA. He can be reached at azuckerman@hss-inc.com.
More than a decade ago, one of my patients told me that the result of her knee replacement surgery was terrific but that her experience in our hospital was so negative that she would not return for her second knee replacement.
It was at that moment that I realized the patient experience is absolutely critical to the success of my practice and that my patients' time in the hospital had been neither effective, efficient, or patient/family friendly. A new model of care was needed.
It didn't take much investigating to see that the patient care process at the hospital was disjointed. Each department lived in a self-contained silo with little, if any, interaction with other silos, other than some casual hall conversation amongst the various caregivers. No one was focusing on service from the patient's point of view.
Patients don't perceive the episode of care as a hand-off from one caregiver to another. They actually think that everyone is working together and that providers communicate regularly with each other. As a surgeon, I had to stop complaining and collaborate with the administration and clinical staff to develop a solution. With the hospital as a partner, I led a team that set out to develop a vastly improved model of patient care. The hospital could not develop a service line for us surgeons; it could only do it with us. A service line is, after all, a team effort.
The continuum of care As part of our evaluation, I learned that the education I provided for my patients often conflicted with the information provided at the hospital. For example, I might tell the patient that the length of stay would be three days, but the hospital pre-admission testing might indicate a four day stay, leaving the patient confused.
When developing the service line, each patient interaction must convey the same messages, in and out of the hospital, to create a seamless continuum of care. Here is how the cycle should work on a step-by-step basis:
Step 1: Community education. The patient knows he or she has a problem and wants to learn more about the causes and the solutions. This is the information-seeking phase. Quality information can be provided through educational seminars, the hospital Web site, health screenings, articles in newsletters, and interactive electronic Q&A sessions. This is when the patient becomes aware of your branded service line.
Step 2: Primary care physicians. PCPs are looking for help and should be involved in the service line. They welcome help with their patients through educational information, seminar and screening dates, in-service education on the developing service line, and direct links to specialist's offices. They are not equipped to answer all questions about specialty areas so the program becomes a great asset to them.
Step 3: Specialists' offices. All parts of the office should be learning centers for the patient and their family members. Verbal education is often inconsistent and ineffective; it takes a great deal of time but very little of the information is retained by the patient. Therefore, I provided education through videos, written materials, and physician/patient interaction. This saved hours of my time and provided much better education/retention for the patient.
Step 4: Pre-operative teaching and testing. One thing that we learned early in our service line development: It is essential to set expectations for both the patient and the family. Therefore, we established a pre-op class for about two weeks before the surgery. This prepares everyone for pre-operative readiness, the hospital stay, and discharge preparation. As a result, the patient does better and the family members feel comfortable bringing the patient home.
Step 5: Designated team and designated unit within the hospital. In order to become a branded service line, there has to be a designated interdisciplinary team for the program and a designated space for it--with a sign. The designated team of nurses and therapists become experts in this area of care. In addition the team becomes a valuable resource for the surgeon. A dedicated team is able to assess clinical protocol changes and their effectiveness.
Step 6: Post-operative follow up. We realized that it was critical to involve extended care facilities, home health organizations, and outpatient physical therapy in the continuum of care. Transitional treatment plans were developed so that these caregivers would follow our pathways. We also developed vehicles for the transfer of information.
Step 7: Measurement/outcomes/results. To complete the continuum of care, we realized that patients want to know the effectiveness of the service line. More than 10 years ago we began tracking outcomes, aggregating the data, and posting the results for everyone to see. This served several purposes. First, measurement kept our pulse on the areas of the program that were strong as well as those that needed further attention. Second, it let us know if new clinical elements (anesthesia protocols, physical therapy exercises, pain or nausea prevention treatments, etc.) were effective. And third, monthly patient luncheons (focus groups) provided relevant information on the patient experience.
This new model of care has led to some very positive results, including: Increased patient satisfaction, lower per case costs, increased volumes, rapid recovery, improved surgeon efficiency, and community/regional recognition. With the increase in competition, developing a service line from the patient's perspective connects all stakeholders into a unified and educated voice. As a result of this model, the hospital has become well-known for its care of joint patients.
Marshall K. Steele, MD, is the President of Marshall Steele & Associates. He has consulted with over 250 hospitals and now leads a team that provides service line development services for hospitals nationwide. He can be reached at msteele@marshallsteele.com or jjones@marshallsteele.com.
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Dr. H. Lee Adkins, a primary care physician who runs Ft. Myers Family Medicine in Florida, recently changed his Web site, posting what he charges for everything from office visits to lab work. His move is part of a national push toward greater transparency in healthcare, as more Americans go without health insurance and there's expected to be an increase in people moving to high-deductible health plans that force them to consider the cost of services. Thirty-three states, including Florida and Michigan, have laws that require price transparency, according to the Deloitte Center for Health Solutions. Some medical and policy experts believe greater transparency will lower care costs.
The media are filled with reports of consumers seeking more control over their own healthcare. But we've found that with a few exceptions, healthcare executives and physicians are slow to adapt to this trend. Are the executives and physicians correct to move so slowly? Is the media correct in its assessment? Or has the emergence of consumerism in healthcare been over-hyped?
Rhea + Kaiser Marketing Communication's Healthcare Group set out to quantify whether a genuine disconnect exists between consumers and healthcare executives and physicians.
We engaged Synovate, a global research firm in Chicago, IL, to manage the study implementation and data tabulation using a random sample of their 72,000 household national consumer panel. In our recent online survey, 659 consumers representing the U.S. adult population responded..
The study clearly showed that most hospitals aren't adapting their organizations to embrace the sea change of consumers taking a much more active role in making healthcare decisions. The same disconnect extends to the vast majority of physicians, too.
The underlying reasons include the following:
Serious affordability concerns by consumers
A lack of pricing and performance transparency on the part of hospitals and physicians
Not providing consumers with the convenience and responsiveness they've come to expect from other retail service organizations
In the absence of objective measures, the majority of consumers rate their primary care physician and specialists as the same as other physicians or they don't know. Quality is assumed. There's nothing new here.
The study clearly shows that in this new era of consumerism, physician and hospital selection will be based on other differentiators.
Four themes emerged from our study. Consumers want:
Transparency to aid decision making
Convenience
Responsiveness
The same level of online connectivity they've come to experience from other retail service organizations
We suggest that forward-thinking hospital CEOs and physicians should shift their view from "inside-out" to "outside-in" by getting closer to their customers. By changing their viewpoint, hospitals and physicians will focus on the priorities consumers find important and appealing.
The most successful ones will reorder their priorities. Then they will communicate their shift in priorities to consumers in a differentiating and engaging fashion as any retailer would do.
What's important and appealing to consumers
There is generally a high degree of correlation between what's important and what's appealing to consumers.
Consumers expect their hospital and physicians to keep them well and to have access to the best. It's a given.
Our study then confirmed what we hypothesized: That consumers' idea of what is important and appealing in their hospital and physicians aren't what most hospital CEOs and physicians are focused on. Five of the top ten attributes ranked "most important" by consumers, and seven of the top 12 attributes ranked "most appealing" by consumers related to transparency in pricing and outcomes, convenience and responsiveness.
The following are the most important attributes, listed in order of importance, followed by the percent of respondents responding:
Keeping me well (73%)
Immediate access to specialist at forefront of medicine (68%)
Letting me know prices in advance (59%)
PCP at forefront of medicine (56%)
Receiving test results in 24 hours (51%)
MD ranking vs. peers (47%)
Hospital ranking on outcomes (44%)
MD and hospital treats most difficult cases (37%)
MD has EMR (30%)
hospital retains non-profit status (30%)
The following are the most appealing attributes, listed in order of importance, followed by the percent of respondents responding:
Keeping you well (80%)
Scheduling appointments online (72%)
Immediate access to specialists at forefront (66%)
Test results in 24 hours (67%)
Letting me know your prices in advance (66%)
Able to order prescriptions via the internet (64%)
Ranked in U.S. News & World Report (63%)
PCP at forefront of medicine (61%)
MD ranking vs. peers (60%)
Physician or hospital has EMR (60%)
Hospital ranking on outcomes (57%)
Regardless of age, consumers want online access for a variety of reasons related to convenience and responsiveness. It was surprising that the second most appealing attribute was being able to schedule appointments online over the Internet.
These results clearly shatter the old myth that all consumers think their physician has an electronic medical record. Prior research conducted in 2004 indicated at that time most consumers felt if their physician used a computer they had an electronic medical record. Today, most recognize their physicians don't have them. The consumer has become better educated.
Summary Conclusions and Recommendations
Physician quality and performance is viewed as a commodity by 60% of consumers. Quality is the price of entry. As a result it will be the other attributes related to transparency, convenience and responsiveness that will drive initial choice and loyalty.
We believe decisions about hospital and physician choice are now made with the same expectations as other retail transactions.
With few exceptions hospitals and physicians have a long way to go. But seismic shifts now occurring in healthcare have happened in other American industries. Examples include:
The automotive industry
The airline industry
The banking and financial services industry
Curt Ippensen is with Rhea + Kaiser Marketing Communications in Naperville, IL. For more information on this topic, contact Sue LaBarbera, management supervisor at R+K, via e-mail at slabarbera@rkconnect.comor by phone at 630-955-2533.
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Riley Hospital for Children, part of Clarian Health in Indianapolis, has developed an ongoing awareness campaign to promote child safety. During the colder months of the year Riley Hospital for Children was seeing scald injuries that, with some safety precautions, could be prevented. With that motivation, the health system decided to start the second wave of their safety awareness campaign complete with an original, informative, approach.
To get things started, Clarian looked to their injury protection experts to establish how to convey the messages of safety properly. According to Holly Vonderheit, Marketing Manager for Riley Hospital for Children, nurses in the burn units were seeing a lot of injuries resulting from children in the kitchen. "A lot of food companies have developed products that children can easily cook themselves, like macaroni and cheese, however most microwaves are usually above stoves or in a place where children would have to reach up and pull the food down." Though there are other ways scalding injuries can occur, it was from this concept that Riley Hospital got the inspiration.
Using the public advocacy message "Kids scald fast. Cool it first," designed with help from Clarian's agency The Heavyweights, also located in Indianapolis, Riley Hospital developed a full-scale campaign to help get the message across complete with an interesting piece of collateral: microwave clings.
"Educational materials can only go so far," says Vonderheit, "we needed a visual reminder for families." The clings, which were distributed at schools, through civic groups, and also at local appliance retailers, are safe for the microwave or refrigerator door, removable, and clearly get the message across in an eye-catching way for both parents and children.
With an effective concept, Clarian Health and Riley Hospital for Children created a campaign that also helped to form an important and valuable relationship with the Indiana Department of Child Services, which helped to expand the reach and exposure of the campaign by dedicating portions of their radio buys to the message.
"This campaign was a great way for two groups, whose missions focus on safety, to work together," says Vonderheit.
For additional information on the safety awareness campaigns visit www.acalltochange.org.
Kandace McLaughlin is an editor with HealthLeaders magazine. Send her Campaign Spotlight ideas at kmclaughlin@healthleadersmedia.com If you are a marketer submitting a campaign on behalf of your facility or client, please ensure you have permission before doing so.
For the past week bloggers and reporters for marketing and advertising pubs have been typing furiously about Nationwide Children's Hospital in Columbus, OH, which plans to name its trauma center after local clothing manufacturer Abercrombie & Fitch, which donated $10 million to the hospital.
The retailer's marketing, aimed at teens, is racy and provocative, damages the self-esteem of young girls, promotes unrealistic body images and exacerbates eating disorders, says the Boston-based Campaign for a Commercial-Free Childhood.
The group has launched a letter-writing campaign urging the hospital to drop its naming plans. The call-to-action page comes complete with pictures from Abercrombie & Fitch ad campaigns, some of which have black bars across the racy bits.
When I wrote last fall about accepting donations from charitable organizations (see A Money Mission and What's in a Name?), opinions were varied about the concept of naming hospitals or parts of hospitals after corporate donors. Some said that hospitals should proceed with caution; others said it was downright irresponsible.
Children's, I should point out, was confident in its decision, in part because it had buy-in from community leaders and in part because charitable giving to Children's is so ingrained in the fabric of the community that it is seen in a positive light, according to Jon Fitzgerald, president of the hospital's foundation.
So who was right--the experts who warned of dire consequences for the hospital or those who were confident that the hospital's brand wouldn't be harmed?
It's still early to tell, but it does seem as though Abercrombie is taking the brunt of the beating on this one.
A psychiatrist quoted in the advocacy group's press release calls Abercrombie & Fitch a "corporate predator." The form letter that group wants supporters to sign reads, in part: "When it comes to sexualizing children, Abercrombie & Fitch is among the worst corporate offenders. These naming rights will entwine an institution of healing with a company whose advertising is notorious for undermining children's wellbeing and will promote the exploitive Abercrombie brand to children in a hospital setting."
So Abercrombie is predatory and exploitive, but the hospital is an institution of healing. And, after all, no one is asking Children's to give back the $10 million.
So what's the problem?
The problem is that the hospital never had control over Abercrombie's brand. And now it's lost control of its own image and message. The popular press and online chatters are not making the distinction that Abercrombie did not buy naming rights for $10 million, but rather the hospital named the trauma center after the company as a way to honor its generosity, as it does for all of its major donors.
It's a subtle but important distinction that's lost in the din of sensationalism, sex, and protests.
Take note: The deadline to throw your organization's hat into the ring for the HealthLeaders Media Top Leadership Teams, which honors the best in senior leadership teamwork at hospitals, health plans and medical group practices, is March 27. This year's conference will be held October 16-17 at The Drake Hotel in Chicago--our 2008 marketing awards will also be held in Chicago, on October 15. The deadline to submit entries for that program is May 30.
Gienna Shaw is an editor with HealthLeaders magazine. She can be reached at gshaw@healthleadersmedia.com.