Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Practice Management News

4 Hospital Business Models for Consumer-Centric Healthcare

Healthcare consumerism is changing how hospitals operate, resulting in new hospital business models that will help providers meet consumer demands and remain competitive.

Hospital business model and healthcare consumerism

Source: Thinkstock

By Jacqueline LaPointe

- When a member of Gurpreet Singh’s family broke his wrist, they didn’t go to a hospital emergency room or an academic medical. Instead, the family headed to an urgent care center to triage the situation and develop a care plan.

That choice between going to the hospital or an urgent care center is exactly why hospital business models need to change in the current healthcare economy, Singh, PwC’s Health Services Leader recently explained to RevCycleIntelligence.com.

“The major driver of that change is the patient as the consumer,” Singh stated. “Many vertical and horizontal integrations are all happening because there's opportunity to serve the patient more like a consumer and the consumer is demanding better access, better choice, and hopefully better costs. All of the players that surround the consumer are making major adjustments and changes to deliver services to that consumer.”

The shift in the healthcare economy is putting stress hospitals and providers. Many of the high-margin services are likely to go to retail players, like urgent care centers.

“Services are getting pulled away from the provider and as a result, the provider may focus more on tertiary or quaternary care if they're in an academic medical center, or they may focus on primary care,” he said.

READ MORE: Hospital Utilization Management Can Reduce Denials, Improve Care

“But those tend to be very difficult to make money on and grow because of the margination,” he added. “That's the problem statement and as a provider you need to make some choices.”

Hospitals and health systems will face a crossroads if they want to succeed in a consumer-driven healthcare economy. The traditional business model, which puts hospitals at the center of healthcare, will not create value and attract customers.

Singh and his colleagues at PwC’s Health Research Institute (HRI) found that hospitals will likely adopt one of four hospital business models to stay open and succeed in the shifting landscape. The models are the Product Leader, Experience Leader, Integrator, and Health Manager.

The Product Leader

Delivering the most advanced care and best outcomes is the motto of Product Leaders.

Hospitals and health systems in this business model deliver the highest quality, most advanced care that generates predictable outcomes for one or more clinical outcomes, HRI explains. The organizations provide “best-in-class” care to their geographic region, as well as to patients who travel to receive care at the organization.

READ MORE: Preparing Providers for the Healthcare Consumerism Shift

Product Leaders tend to see patients who are frail and elderly and/or suffer from chronic conditions, especially complex chronic diseases that affect multiple body systems.

The Product Leader will achieve its care quality and outcome goals by prioritizing clinical models and culture over cost reduction and consumer experience.

“The Product Leader will major in clinical model and culture, creating incentives based on curing patients, as success will be measured by the ability to provide a long-term solution to problems,” HRI states. “It may alter its clinical model by making moves such as backfilling its diagnostic needs by outsourcing abroad, using artificial intelligence or relying more heavily on temporary staff to stay competitive.”

Ensuring the hospital or health system has provider partners who can address the patient’s whole health needs is also critical to the Product Leader. Therefore, the organization must robustly use referrals or engage in healthcare mergers and acquisitions (M&A) to deliver best-in-class care to individuals across the country and the world.

But HRI warns Product Leaders that growth through M&A could dilute the hospital’s brand, which results in less consumer-driven care.

READ MORE: WA Makes Healthcare Price Transparency Consumer-Friendly

“This provider type should engage only in those collaborations that would complement its culture. The culture must encourage the innovation and research necessary to establish and maintain a renowned brand name,” researchers insist.

Mayo Clinic in Minnesota and the Cleveland Clinic in Ohio are current examples of health system’s aligning with the Product Leader business model. Both systems are internationally known for their highly specialized care.

Cleveland Clinic even announced that it will open facilities in London by 2020 to extend its international footprint. The system already operates facilities in the United Arab Emirates, China, and Canada.

The Experience Leader

Hospitals and health systems selecting the Experience Leader business model will place customer satisfaction at the top of their priority lists.

“The Experience Leader captures and retains patients by positioning itself as providing the premier customer experience when compared with the competition,” HRI states. “It emphasizes experience over cost while still delivering quality care, and can operate locally or on a wider scale.”

Experience Leaders must understand consumer preferences and identify methods for delivering consistent experiences across all providers in the system, and even those in the virtual space. Investing in concierge-like services will be vital to supporting a high-quality consumer experience.

Healthy patient populations with be the primary target for the Experience Leader. Although, the organization may also focus on individuals with chronic conditions that only affect a single body system and require simpler disease management.

The patient populations will have different consumer needs. Therefore, Experience Leaders must use consumer preference and social data to proactively engage with consumers, HRI explains. Cost transparency will also be key to delivering high-quality consumer experiences.

Meeting consumer needs will rely on the use of health IT systems. Experience leaders will need online and mobile platforms that enable digital, convenient scheduling, bill pay, health data access, and care coordination.

Data sharing will also be critical. “Customers will demand a seamless experience, and the Experience Leader will need the right mix of digital and physical touch points to deliver it,” the report states.

“That means sharing data across different platforms and between different entities. This will require a heavy investment in information technology and a change in attitude about sharing data with outsiders, which is still rather nascent, according to HRI research.”

One health system aligning itself with the Experience Leader business model is Texas Health Resources. The large non-profit health system employs a Chief Patient Experience Officer who uses data to deliver a “seamless, holistic consumer experience across the entire Texas Health organization.”

The Integrator

Emphasizing value through greater scale and scope is the aim of the Integrator business model.

The Integrator is a hospital or health system with a multiregional or national reach. Through its large footprint, the organization achieves value through a broad network of providers, especially those who are low-cost.

With such a wide reach, all patient populations are a target consumer market for the Integrator hospital.

Lower costs are a top priority for the Integrator business model. As the popularity of high-deducible health plans continues, patients are putting more focus on the cost of care when selecting a provider. The Integrator is a position to show patients different care options along the cost spectrum.

“Providers should show the cost savings associated with receiving care in a lower cost setting, such as a retail clinic, alongside the comparative benefits of receiving care in a more expensive setting,” HRI remarks. “Providers pursuing this route will do so horizontally with other providers, including retail clinics, and vertically with different companies throughout the supply chain.”

Healthcare M&A and cost reduction may be the major focuses for the Integrator. But the hospital will also have to prioritize health IT implementation to succeed with creating value through scale.

“Integrators also will be competitive in information technology, focusing on systems’ interoperability and data sharing across geographies and entities,” the report states. “Combine the connected systems with artificial intelligence, and providers will be able to perform advanced analytics that can improve all aspects of care, including selecting the right care team and increasing billing efficiencies.”

A health system currently pursuing key components of the Integrator business model is Intermountain Healthcare in Utah. The health system recently partnered with six other systems to form a non-profit generic drug company to reduce prescription drug costs and prevent drug shortages.

The Health Manager

Hospitals using the Health Manager business model are all about enhancing the health of an entire population over time.

“A Health Manager improves the health of entire populations over time as it focuses on finding ways to serve complex populations and address the social determinants affecting health,” HRI reports. “This model likely will contract directly with the public sector and employers; however, an understanding of the underlying consumer markets, especially its target segments, will still be integral to a Health Manager’s strategy.”

A Health Manager hospital will not resemble the traditional care delivery setting. Instead, the hospital may operate as a community organization or integrated care provider to deliver services beyond the scope of traditional healthcare.

Addressing social determinants of health is key for the Health Manager hospital. Health disparities stemming from the social risk factors account for $102 billion in direct medical costs each year.

Health Managers focus on addressing health equity to create value in healthcare.

But to overcome the social determinants of health, Health Managers will need to engage in risk-based alternative payment models in order to get paid for delivering services outside of traditional healthcare.

“They will play heavily in the value-based care world and must have the right infrastructure to efficiently gather the data necessary for reimbursement,” the report states. “Advanced, differentiating capabilities also include being able to successfully contract directly with employers and the public sector, and understanding the economic incentives necessary to align clinicians and other employees with the organization’s mission of improving population health.”

Notable health systems currently using the Health Manager business model include Geisinger Health System in Pennsylvania, which formed an initiative to improve the community’s health through preventative care, behavioral health, and household economics, and Kaiser Permanente in California, which recently partnered with Hunger Free Colorado to screen patients for food insecurity.

Selecting a hospital business model for the future

While the hospital business models all aim to align with healthcare consumerism, each business model has a unique goal and includes unique capabilities need to achieve that goal. So which model is the most appropriate for your organization?

The decision should be made based on the local healthcare market, Singh explained.

“It becomes a decision based on what your core capabilities are and what your right to win in the market is. For example, if you have a very competitive market and you are a community hospital, you have competition up and down the street from you,” he said.

“Well, when we did some of our research, we found that about 35 percent of consumers shop around for a medical procedure or health service and 47 percent of the consumers didn't understand the cost of the hospital procedures ahead of time,” he continued.

Providing cost transparency and lower cost care compared to local competitors can help the community hospital attract and retain patients.

Understanding what consumers demand in the local market will be key to choosing the hospital business model that fits.

“You have to think about what the consumer wants in your market,” he concluded. To understand which direction you would want to head in, you need to understand your consumer base.”

X

Join 30,000 of your peers and get free access to all webcasts and exclusive content

Sign up for our free newsletter:

Our privacy policy


no, thanks

Continue to site...