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Principal Perspectives: Healthcare Trends for 2014

Principal-Perspectives

As we head into 2014, hospitals and health systems are confronting a number of challenges to remain competitive in their respective markets. The emphasis on cutting costs and reducing reliance on hospital utilization will be felt across the entire healthcare industry, but there are unique obstacles – and solutions – facing each different type of organization.

One strategy hospital systems have adopted is purchasing physician groups and outpatient facilities to shift their focus to primary care and become more outpatient-driven. But this massive growth on the physician services side requires health systems to focus on improving physician practice performance. Addressing unsustainable losses on physician compensation plans, fixing basic business office performance issues, improving clinical output, optimizing IT systems, and cutting cost structures are some key approaches that might contribute to better financial performance.

Academic medical centers (AMCs), on the other hand, are encountering a slew of unique challenges not seen in traditional hospital systems. AMCs are historically high-cost providers, and by their very nature, are not well positioned to adjust to the new order of care delivery. They place very little emphasis on primary care or on training medical students to practice under the care models taking root across the country. Medical school education is considerably more focused on clinical experience than on the two factors that most characterize the new care models: team-based care and shared decision making. As a result, AMCs must grapple with how medical education fits into the evolving healthcare delivery system.

AMCs are also under increasing pressure to reform their financial models. Dwindling funds from the National Institutes of Health and state governments are wreaking havoc on their balance sheets and forcing them to reconsider their current models. For example, AMCs are considering reducing their number of graduates to meet their own market needs, amending research agendas to reflect their clinical objectives, and moving faculty physicians from university payrolls to hospital payrolls.

As healthcare organizations rethink their strategies to shed costs, capture market share, and transition to value, they need to stay focused on the changing realities of the U.S. healthcare system. Organizations are being pulled in multiple directions, especially with the competitive, financial, strategic, and regulatory burdens they will face in 2014, but they must continue being diligent in their long-term positioning to remain successful.

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