Top Business Issues for Today’s Health Care Organizations

The challenges that face the health industry today will lead to transformation in the near future.

Change will be led by industry players that Accenture has identified as high-performance health organizations. Some of the hallmarks of these organizations: They share a relentless focus on health care business operations insight, continuous performance improvement and growth solutions. They empower their health care organizations with critical business information and anticipate and respond to market shifts, with business solutions enabling a greater focus on producers, segments and customers. The end result: high-performance health care for plans, providers, payers and—most importantly—patients.

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Many of the most pressing issues likely to confront health executives in the coming months are not necessarily new. Rather, they are perennial concerns caused by aging demographics; federal and state policies and budget pressures; progress in medical research and technology; and the state of the overall economy.

Businesses in the United States have faced serious challenges in recent years—the fear of terrorism and national security threats, the war in Iraq, a struggling economic recovery, a record budget deficit and a deeply divided political landscape. The health care industry was affected by these events and experienced its own unique set of issues, including the large number of uninsured, the burden of escalating health care and drug costs and the degree to which the private sector can provide adequately for other public health needs (such as flu vaccines).

One-third of the nation's 5,000 hospitals are losing money and another third are just breaking even, according to the American Hospital Association. In a recent report, Moody's Investors Service reinforced a negative outlook for the not-for-profit health care sector based on minimal volume growth, declines in the growth rate of reimbursement from payers, increasing expense pressures, unfunded capital needs and the uncertainties associated with management turnover.

While the national spotlight has been focused on quality for many years, recent reports indicate that there is still much room to improve patient safety. It has been several years since the Institute of Medicine estimated that as many as 98,000 people die from preventable medical errors in the United States each year. Earlier this year, Health Grades issued a report more than doubling those figures.

Industry analysts are predicting that the level of IT spending as a proportion of total revenue (historically only 2 to 3 percent in health care) will reach that of other industries (5 percent or higher). Hospitals and health plans are integrating technology across their organizations and into their core business processes. What is also new is the degree to which technology will be used to influence not just administrative practices, but clinical care delivery as well.

With medical costs continuing to rise, health organizations are taking a new view of care management. They are instituting new advanced disease management programs. These new programs are using advanced predictive modeling techniques to identify "at risk" patients who are about to incur large claims. Technology enables prioritized outreach to these people to encourage them to modify their behavior, to prevent complications and avoid costly hospitalizations or procedures down the road.

Public concerns about patient safety are one of the factors fueling an interest in information systems and electronic health records. The Department of Health and Human Services has estimated that a national health information network can save about $140 billion per year through improved care and reduced duplication of medical tests.

As a result of the financial issues they are facing, some hospitals will have more difficulty accessing capital markets. The strongest hospitals will still be able to float bonds and attract donations, but for others there will be limited ability to meet debt payments for new capital expenditures, acquire new technology or access needed skills.

Additionally, all sectors of the health industry will continue to undergo consolidation. Small, independent hospitals will align with larger health systems. Some health plans will seek to enhance their financial performance through structural changes such as mergers, acquisitions or conversion from public to private status.

Cost sharing through higher deductibles and copays, new consumer-directed health plans and health savings accounts will continue to grow, with employees paying about 19 percent of the total overall cost in 2005, a 15 percent increase from the year before. Hospitals, health plans and pharmaceutical companies will face increased government scrutiny of their governance practices. Executives from all sectors of the health industry will be very much aware of the attention that the government puts on their pricing, sales and charity policies (in the case of not-for-profit organizations).

Many issues remain to be resolved before shared electronic health records are widely adopted. The capital costs are significant, and many health executives are concerned about funding. Regulatory barriers to disseminating information technology must be addressed. Technical standards for interoperability must be developed, and the debate over use of universal patient identifiers resolved.

According to Accenture research on high-performance health organizations, those leading the industry commit to continuous performance improvement in administrative costs, medical management and technology infrastructure. Specifically, the top strategies for the industry to pursue should include:

• Implementing "pay-for-performance" practices that attempt to directly link reimbursement and quality that promote better outcomes and ultimately transform the health care system.
  
  
• Enhancing quality and outcomes reporting using business intelligence tools that are integrated with existing information systems and can help capture, store, retrieve and report quality information.
  
  
• Accelerating technology implementation by using computer systems to configure vendor products and automate coding, mapping and crosswalks.
  
  
• Evolving toward electronic health records to reduce medication errors and enhance the bottom line.
  
  
• Leveraging the Web to empower consumers to be more involved in their care and allow them to perform administrative functions that improve efficiency and lower costs.
  
  
• Finding new solutions to old problems through collaboration to improve administrative efficiency, customer service and clinical outcomes.
  
  
• Consolidating back-office functions to reduce overhead through IT-supported improvements in efficiencies, growth and additional mergers.
  
  
• Managing capacity to enhance service availability and revenue growth.
  
  
• Addressing new markets by extending the industry's technology focus from administrative efficiency to customer outreach.
  
  
• Leveraging strategic outsourcing to further drive cost savings and achieve performance outcomes that endure.

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