Hospitals are in trouble. Why? Because the conventional wisdom on how to respond to the transition from fee-for-service to value-based payment programs does not seem to be working.
Consultants insist that consolidation of independent hospitals into regional integrated systems, employing physicians and assuming more financial risk will lead to success. But the results so far are not promising.
MD Anderson Cancer Center in Houston lost $266 million on operations in 2016, and Partners HealthCare in Boston lost $108 million on operations in the same year, according to an article from the Harvard Business Review. Cleveland Clinic, meanwhile, experienced a 71% decline in operating income for 2016, and Providence St. Joseph Health on the West Coast reported a $512 million drop in operating income and a $252 million operating loss in 2016.
Seven years ago, I anticipated this development and proposed that hospitals must totally rethink their mission and strategy by becoming Community Hubs of Wellness and Health. The traditional clinical delivery system model—organized around a centralized hospital that provides diagnosis, treatment and disease management—simply no longer makes sense.
Community Hubs of Wellness and Health would:
- Support a community’s embrace of the Healthy People 2020 program goals, which provide science-based 10-year national objectives for improving the health of Americans
- Create links between hospitals and other community groups
- Become a meeting place that is seamlessly integrated into the community
- House a trusted repository for advice on how to use new technologies—such as digital devices, AI virtual reality—to attain wellness
- Connect with diverse communities as the demographics of a community changes.
A recent New England Journal of Medicine Catalyst article outlines a similar analysis of the challenges facing hospitals in 2018. This article envisions a “smaller, faster, more cost-effective [system] in which healthcare is more accessible, more affordable, more personal and closer to home.”
The authors describe a decentralized care delivery model that is not centered around the hospital and features:
- Virtual health and remote monitoring as care migrates away from the hospital
- Community paramedicine modeled after the Geisinger Health System Mobile Health Team
- Reimagined emergency departments that provide alternatives to inpatient hospitalization
Making this transition from a centralized to a decentralized clinical delivery system will be difficult. Indeed, comments from hospital executives at the recent J.P. Morgan Health Care Conference indicate that regardless of their stated goal to keep people healthier and out of the hospital, “the truth is they still want their inpatient beds filled whenever possible,” as Axios reported.
Geisinger CEO David Feinberg, M.D., however, has been quoted in the Wall Street Journal as stating: “I think my job ultimately is to close every one of our hospitals.”
When I have shared this quotation with state hospital and medical societies, the pushback has been immediate and ferocious. Feinberg may be overstating his case, but he is on the right track. We must reimagine the clinical delivery system—sooner rather than later.
Kent Bottles, M.D., is a lecturer at the Thomas Jefferson University School of Population Health and chief medical officer of PYA Analytics.