Specialize to compete
Specialization is a strategy that will likely become more common in the reform-era world, Wunker says. Hospitals must find their competitive advantage by examining what makes them indispensible and what services are dispensable. Some hospitals may differentiate themselves by being low-cost providers and more hospitals may vie to become destination providers. There could also be an increase in organizations that seek market domination through mergers and acquisitions.
Another result of such specialization: The so-called technology arms race may begin to cool. Now, many hospitals feel pressure to invest in clinical technology even if they won't often use it because their competitor down the street has it. Owning the latest piece of equipment is a shorthand way to show your organization is cutting edge. But specialization as well as increasing transparency about quality and outcomes data may mean hospitals do not need the technology to prove their worth, Wunker says.
How organizations choose to specialize depends on several factors, chief among them market dynamics.
A consolidated system with a large chunk of market share has more ability to succeed by creating change in the healthcare system, Wunker says. On the East Coast, for example, Massachusetts-based Partners Health System is well poised to dominate with advanced IT systems and a large stable of physicians. "They should push those advantages as far as they can," he says. But, he adds, in some crowded markets with many different independent organizations, it would be difficult for one dominant force to emerge. "If we're talking about South Florida, then it may be that trying to become the colossus there is too difficult—it's too fragmented."
Meanwhile, the big brand-name players are expanding into new markets through acquisitions and affiliations—they'll continue to do so and will likely succeed with that strategy, he adds.
Joint ventures with ancillary service providers is another way for hospitals to focus on their core business as well as improve efficiency and reduce costs.
One of the toughest challenges facing hospitals today is ED overcrowding, which is predicted to get worse when roughly 30 million new patients are insured under healthcare reform.
If a pessimist sees the difficulty in every opportunity and an optimist sees the opportunity in every difficulty, Jim Greenwood, CEO of Concentra, an urgent care provider based in Addison, TX, that runs 300 clinics, is surely the latter. There is a "tremendous opportunity" for urgent care models to help alleviate ED overcrowding, he says. And they won't necessarily be stealing patients from hospitals—especially if the hospitals partner with them.
Founded in 1979, Concentra originally partnered with larger employers to care for employees who had sustained work injuries. But, Greenwood says, the company recently realized that there was a need to control rising healthcare costs due in part to unnecessary and expensive ED visits. (A trip to the clinic costs about $125 while an ED visit costs an average of $600 for the same type of condition.) The company partnered with three school districts that wanted to put more focus on health, wellness, and preventive care for their combined 25,000 employees. "We need to get people to the right care, at the right time, for the right price, and we need to focus on prevention," he says.
The business doesn't necessarily compete with hospitals, he says. In fact, it has entered into 10 joint ventures with hospitals. Concentra manages and delivers care in the clinics; inpatient care is a collaborative effort with the hospitals.
Such models—with closer collaboration between providers and employers in an outpatient setting or on the job—will continue to thrive, Greenwood predicts.
Increasingly, hospitals and health systems have begun to align with facilities beyond outpatient clinics?especially those that provide postdischarge care, including long-term care facilities, home health agencies, and outpatient clinics, in part to prepare for payment changes that will penalize readmissions and reward quality.
One of Pavarini's firm's clients is a large long-term care provider that delivers postacute, hospice, home, and nursing home care. The firm is working to connect the organization with hospital systems to perform these services for them under accountable care—a far stretch from simpler models such as bed reservations. At one time, a request for such an extensive partnership would have "fallen on deaf ears," he says, but a large hospital quickly expressed an interest.
"Collaboration is now not theoretical. It is real and present, and I think we're going to see more traction than ever before," he says.