2 Pain Points Strategy Leaders Are Talking About Right Now

Healthcare CEOs are looking to their peers for potential strategies on how to succeed in the midst of the industry's transformation.

The challenges facing senior healthcare executives vary from one hospital or health system to the next, but the growing pains they feel across an industry in transition have quite a few things in common.

Those commonalities naturally rise to the top of a conversation whenever CEOs gather to speak freely in a group with their peers about the challenges, opportunities, and tactics they see in their respective markets. In recent conversations, HealthLeaders CEO Exchange participants have highlighted several of the current pain points they share.

Here are two of the topics the CEOs cited:

1. Controlling Costs Through Clinical Consistency
 

Healthcare provider organizations are constantly looking for ways to deliver care more consistently and cost-effectively across the board.

"In my prior role and in my current role, one of the top topics of conversation across the health system is what we call clinical variation reduction," Keith Alexander, a regional vice president for Universal Health Services, based in King of Prussia, Pennsylvania, said during a recent conference call.

Alexander, who served previously as a systemwide senior vice president and regional president at Memorial Hermann Health System in Houston, said each organization tends to have its own nuanced interpretation of what the phrase "clinical variation reduction" means, but senior healthcare leaders everywhere are looking for success stories to find solutions that deliver real-world results.

Event: More Info on the HealthLeaders CEO Exchange, September 25-27, 2019

While each organization has its own approach, they are all pursuing that goal in the context of business models that are shifting—to one degree or another—away from fee-for-service arrangements and toward value-based payment models. That shifting context may determine in large part which strategies are successful, said Russell M. Howerton, MD, FACS, senior vice president of Wake Forest Health Network and health system chief medical officer, during the call.

"Variation reduction, in my opinion, would have two forms," Howerton said.

The first form would be directly related to costs in situations when providers have a margin, such as with diagnostic related grouping (DRG) payments, he said. The second form would be when providers have some upside/downside risk with a payer, such as with risk-based contracts.

"They're kind of different animals," he added.

2. Connecting With Consumers Amid Disruption
 

Another major pain point CEOs cite is the competitive threat posed by potential disruptors, especially as that threat plays out in an increasingly consumer-centric healthcare environment.

Incumbent leaders are closely watching how CVS Health's massive Aetna acquisition, the Amazon-backed healthcare venture Haven, and other major developments could soon restructure the relationships among providers, payers, and patients.

When asked about the threat these potential disruptors pose, more than two-thirds (68%) of executives surveyed said they expect the CVS-Aetna deal to have "a major impact on the competitive landscape among U.S. healthcare providers within the next three years," according to the HealthLeaders Intelligence Report "Navigating the M&A Landscape" published earlier this year. About half (49%) said they expect Haven to have such an impact.

Full Report: Download 'Navigating the M&A Landscape: Achieving Clinical and Financial Objectives'

Although the CVS-Aetna deal is still awaiting final approval from a federal judge and Haven has yet to outline precisely how it hopes to quell what Berkshire Hathaway Chairman and CEO Warren Buffet described as healthcare's "hungry tapeworm" effect on the U.S. economy, healthcare leaders are already grappling with a trend toward consumerism that's well underway.

Howerton said health systems are adapting by making themselves more available to consumers. That includes on-demand scheduling, walk-in access for certain services, more convenient hours of operation, a proliferation of telehealth offerings, and care management that differs from the traditional evaluation and management (E/M) visits and procedures, he said.

Many incumbent provider organizations are still dependent upon traditional revenue sources, such as technical fees, procedure fees, and E/M visits, so they are keeping a close eye on how potential disruptors might interfere in their relationships with the patient populations they serve, Howerton said. Even if a competitor sticks to low-acuity care settings, such as retail clinics and urgent care centers, disruption at a health system's proverbial front door could have broader consequences, he added.

"We cross-subsidize a lot of things, and we have a wide funnel to get people in the traditional doors," Howerton said. "But these disruptors, I believe, have the perception that if they can get the touch on the patient, they can turn us into price-taking commodity providers."

Conversations to Come
 

Healthcare executives will convene September 25–27, 2019, for the HealthLeaders CEO Exchange at the Stein Eriksen Lodge, Deer Valley, in Park City, Utah, where they will discuss these and other topics in a roundtable format with their peers.

The CEO Exchange is one of six healthcare thought-leadership and networking events that HealthLeaders holds annually. While the events are invitation-only, qualified healthcare executives, director-level and above, will be considered. To inquire about the HealthLeaders Exchange program, email us at exchange@healthleadersmedia.com.