Industry Voices—How CEOs can compete as nontraditional partnerships reshape healthcare

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Before pursuing a new partnership, careful strategic planning can help the system lay the groundwork for productive collaboration. (Kritchanut/iStock/Getty Images Plus/Getty Images)

Healthcare now makes up nearly one-fifth of the U.S. gross domestic product, and this number is only expected to rise, along with the aging U.S. population and prevalence of chronic disease. Last year alone, employers spent close to $700 billion on employee healthcare coverage. (More large employers are cutting commercial insurers out of the equation, working directly with providers to self-insure their employees’ healthcare.)

As a result of these ballooning costs, the shift toward value-based care and rapid technological innovation, the healthcare sector is receiving closer scrutiny than ever before from policymakers, payers and the public. These factors place ever-mounting pressure on today’s healthcare executive to reduce the cost of providing care while improving patient outcomes. Fortunately, technological advancements coupled with digital innovation and the use of augmented intelligence to gather data and sharpen the benefits of population health have the potential to reduce the marginal cost of care, despite the larger overall spend.

The health system needs to manage not only the overall costs of operating the organization but also continued investment in new technologies and in identifying innovative ways to deliver care at a reduced cost.

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With the U.S. population aging, the demand for healthcare services will surely increase, as will the overall spend. Simultaneously, and fortunately, technological advancements can mean significantly more treatments available to care for this growing demographic.

Ideally, technological advancements (such as more targeted and effective cancer therapies) coupled with digital innovation and the use of augmented intelligence to gather data and sharpen the benefits of population health will increase the opportunity to reduce the marginal cost of care, despite the larger overall spend.

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Amid these trends and pressures, health systems have a tough balancing act: manage the overall costs of operating the organization while simultaneously continuing to invest in new technologies and new processes to deliver care at a reduced cost.

At the institutional level, horizontal integration often can help a system build scale and create efficiencies while building capital reserves to make the investments needed for the future. Historically, health systems have worked to expand into multi-corporate systems where the full continuum of care is offered—primary care, acute care, and post-acute care.

This horizontal expansion at the care level continues in today’s market, but with a new recognition that it may be missing two key components along the vertical axis of integration: (1) better control over the financial aspects of care funding and delivery, and (2) enhanced and integrated access to innovation to drive new ways to deliver services using an intensified focus on data analytics.

These two drivers have captured the imaginations of healthcare CEOs, and are fueling an onward push by health system CEOs to expand—but to do so in partnership with players beyond the health system’s traditional business lines, including teaming with entities historically not involved in healthcare. The overall aim remains the same: to maximize the health system’s ability to deliver the right amount of care, at the right time, in the right place, for the right price. 

Here's a look at two areas to consider before pursuing a new partnership:

Get your data in line 

Careful strategic planning can help the system lay the groundwork for productive collaboration. A prerequisite for any successful partnership—particularly one involving players that historically have not operated in the same subsector space, or even the healthcare sector at all—is to first know thyself. In the healthcare world, this means pooling and understanding your data.

The Catch-22 for many health entities, however, is that it is inefficient for every hospital or health system to create its own data center, yet health systems are often reluctant to utilize third-party cloud-based systems or to team with other health systems for fear of losing control of their data.  

What to do? The answer is to overcome the reluctance and team up. Partnering with other health systems or with a third-party cloud-based system, or both, can be a gateway to gaining insight through efficiency and innovation, and with measurable back-end results. Health systems can realize the full power of their data to reduce costs, boost efficiency and improve patient care, but achieving these results alone has become difficult, and perhaps impossible.

RELATED: Economists: Vertical mergers often pay off, but there should be more rigorous scrutiny 

Harness the power of tech partnerships

Once the health system has marshaled its data, whether in collaboration with another system or with a third-party cloud-based system, it has firmer footing to engage with non-traditional players outside of the health industry.

Tech companies, in particular, have tremendous resources at their disposal: not only financial capabilities but the knowledge of their engineers and analysts. Healthcare systems may have vast data, but tech companies have the tools necessary to help them actually deploy it in a meaningful way—all in a manner tailored to the individual health system’s needs so as to drive substantive change both in care delivery and through reinvigorated data processes.

Tech collaborations also empower a health system to position itself at the forefront of patient care innovation. In today’s environment of disruption coupled with mounting pressures around costs, an innovative tech partnership not only can help a health system maximize its ability to deliver better care and meet demands to minimize unnecessary costs—it can transform the health system from “disrupted” to “disrupter.” When done carefully and with eyes open, the traditional health system taking the plunge and teaming with the right disrupter can deliver improved care at a reduced cost. 

Stephen Bernstein is a partner at McDermott Will & Emery.

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