A new Definitive Healthcare survey polled healthcare leaders on the most important trends of the year.


Industry consolidation was listed as the most important trend of the year, leading the way with 25.2% of the votes, followed by consumerism at 14.4%.

Definitive tracked 803 mergers and acquisitions along with 858 affiliation and partnership announcements last year, a trend that is not expected to slow in 2019.

Thirty-five percent of healthcare M&A activity occurred in the long-term care field, according to CEO Jason Krantz.

Widespread industry consolidation as well as the growing influence of consumerism registered as the most important trends healthcare leaders are paying attention to in 2019, according to a Definitive Healthcare survey released Monday morning.

Industry consolidation was listed as the most important trend of the year, leading the way with 25.2% of the votes, followed by consumerism at 14.4%.

Other topics that received double-digit percentages of the vote were telehealth at 13.8%, AI and machine learning at 11.4%, and staffing shortages at 11.1%. Cybersecurity, EHR optimization, and wearables rounded out the list.

The top results are generally in-line with some of the top storylines from the past year in healthcare, including focus on several vertical megamergers and longstanding business models being redefined by consumer behavior.

Jason Krantz, CEO of Definitive Healthcare, told HealthLeaders that healthcare is becoming increasingly more complicated and leaders are looking at a host of business strategies to navigate industry challenges or emerging market conditions.

“Something that’s on the mind of all of the people that [Definitive Healthcare] has been talking to, whether they are pharma leaders, healthcare IT companies, or providers, is that they’re constantly grappling with all of these new regulations, consolidation, and new technologies,” Krantz said. “[They’re asking] ‘What does that mean for my business and how do I address my strategy as a result?'”

In 2018, Definitive tracked 803 mergers and acquisitions along with 858 affiliation and partnership announcements, a trend Krantz does not expect to slow in 2019.

While Krantz cited some of the major health system mergers from last year as examples, he said another area that is experiencing widespread M&A activity is the post-acute care side.

Thirty-five percent of healthcare M&A activity occurred in the long-term care field, according to Krantz, and this is indicative of hospitals seeking to control costs and drive down rising readmission rates.

It also relates to another issue likely to accelerate in the coming years, which are the staffing shortages facing providers.

The sector currently suffering the most are long-term care facilities, which struggle to maintain an adequate nursing workforce due to the advanced age of most doctors and nurses in the face of the rapidly aging baby boomer generation. Krantz warns that all providers are likely to face these issues going forward.

Krantz also expects consumerism to hold steady as a top issue facing healthcare, citing the growing popularity of urgent care centers and the interconnection of telehealth services to provide patients with care outside of the traditional delivery sites.

However, the growth of these are reliable business options are all dependent on figuring out an adequate reimbursement rates for telehealth services rendered, Krantz said, which has not been fully addressed.

“I think until [telehealth reimbursement rates] get completely figured out, it’s hard for the providers to invest heavily in it,” Krantz said. “This is why you see a lot of non-traditional providers getting into telehealth, but I think it is something that people are thinking about and they know they need to adjust to, though nobody’s stepping up and being first in [telehealth] right now.”

For AI, machine learning, wearables, and cybersecurity, though the responses are split into smaller amounts, Krantz emphasized their combined score, which encompasses more than 25% of total votes, as a sign that healthcare leaders are paying attention to the area despite market complexity.

He added that they are all interconnected issues that deal with technological changes health systems are aware they will have to address in the coming years.

One issue related to harnessing technological change is EHR optimization, which Krantz believes leaders on the provider side are finally starting to gain excitement around. He said most leaders who have waited years to set up a comprehensive EHR system and input data are in-line to now utilize the data in their respective system.

“There’s a lot of great data in there and people are starting to figure out how to utilize that and improve patient outcomes based on the sharing of data,” Krantz said. 





Cybersecurity is top issue for hospital IT professionals

HIMSS survey suggests focus on other IT priorities may lag; influence of security leaders may cause tension.

Cybersecurity, privacy, and security are creating such pressing issues for hospitals, other technology projects may be waylaid and discord among IT leadership could occur if the emerging influence of security professionals is not handled properly, according to the 2019 HIMSS U.S. Leadership and Workforce Survey.

The annual study included feedback from 269 U.S. health information and technology leaders between November 2018‒January 2019. The 30th edition of the survey examines trends and provides insights into the rapidly changing market for healthcare and IT professionals.

Among the key takeaways for hospitals:

  • The emergence of information security leaders as the third influential member of hospital IT leadership teams—following CIOs and senior clinical IT leaders—may create tensions for some organizations.
  • The top issue for hospital IT leaders is cybersecurity, privacy, and security.
  • The focus on security is so predominant, authors of the study suggest that other technological priorities may be put on the back burner.

Information about trends and issues for vendors and non-acute care facilities are also addressed in the full report.


The study examines employment trends for specific job titles and, in some cases, compares rates to the prior year. Information security leaders continue to expand their presence in hospitals.

While employment of CIOs and senior clinical IT leaders remains fairly steady; employment of senior information security leaders at hospitals rose by 14% between 2018 and 2019. The study also documents how many hospitals employ professionals for other emerging technology leadership roles, such as chief technology, innovation, and transformation officers, but does not provide comparisons to previous years.

Hospital employment of IT leaders in the following positions for 2019 includes:

  • Chief Information Officer 84% (-3% compared to 2018)
  • A senior clinical IT leader (CMIO, CNIO, CHIO) 68% (+1% compared to 2018) 
  • A senior information security leader (CISO) 56% (+14% compared to 2018)
  • Chief Technology Officer 36%*
  • Chief Innovation Officer 19%*
  • Chief Transformation Officer  7%*
  • None of the above  9%*

“The emergence of a third leader overseeing a hospital’s information and technology efforts is bound to result in internal tensions as competing interests and overlapping jurisdictions present themselves,” says Lorren Pettit, MS, MBA, vice president at HIMSS in a news release. “These challenges have the potential to stymy a hospital’s progression if hospital leaders are not careful to manage these hurdles effectively.”

The report further elaborates that unless roles and responsibilities are clearly delineated, the influence of security professionals could impede a hospital’s progression on information and technology priorities as leaders “work through internal territorial challenges.”


The survey gauges interest from IT professionals about 24 topics. While cybersecurity outranked all other responses, “improving quality outcomes” and “clinical informatics and clinician engagement” also was highly rated for hospital respondents. Telehealth ranked ninth; innovation took the twenty-first spot.

Survey participants ranked these topics on a scale of one (not a priority) to seven (essential priority). Following are the ranking and mean scores for hospital respondents:

  1. Cybersecurity, Privacy, and Security 5.81
  2. Improving Quality Outcomes Through Health Information and Technology 5.28
  3. Clinical Informatics and Clinician Engagement  5.24
  4. Process Improvement, Workflow, Change Management 5.03
  5. Culture of Care and Care Coordination 4.92
  6. Data Science/Analytics/Clinical and Business Intelligence 4.91
  7. Leadership, Governance, Strategic Planning 4.90
  8. User Experience, Usability and User-Centered Design  4.86
  9. Telehealth 4.82
  10. Consumer/Patient Engagement & Digital/Connected Health 4.80
  11. Population Health Management and Public Health 4.77
  12. Safe Info and Tech Practices for Patient Care 4.62
  13. HIE, Interoperability, Data Integration and Standards 4.62
  14. Public Policy, Reporting, and Risk Management 4.31
  15. Healthcare App and Tech Enabling Care Delivery  4.20
  16. Social, Psychosocial & Behavioral Determinants of Health 4.06
  17. Consumerization of Health 3.75
  18. Clinically Integrated Supply Chain 3.66
  19. Healthy Aging and Technology  3.60
  20. Health Informatics Education, Career Development & Diversity  3.53
  21. Innovation, Entrepreneurship and Venture Investment 3.47
  22. Precision Medicine/Genomics  3.47
  23. Disruptive Care Models 3.39
  24. Grand Societal Challenges 2.88


Study authors characterized the prioritization of cybersecurity, privacy, and security by providers as “remarkably higher” than the next highest priority. The focus is so predominant, the authors suggest that other technological priories may be put on the back burner.

“Of the array of priorities presented respondents, ‘cybersecurity, privacy, and security’ was one of the only ‘defensive’ business tactics respondents were asked to consider,” states the report. “That providers (especially hospital respondents) responded so passionately to this priority suggests a growing number of provider organizations realize the need to protect existing business practices before aggressively pursuing other information and technology issues. If true, then there are potential downstream implications for the market as other information and technology priorities considered in this study may be put on hold or ‘slow walked’ until the security concerns of organizations are settled.”

In addition to this survey, HIMSS also released a related report last week, the 2019 HIMSS Cybersecurity Survey, which sheds additional light on some of these issues. Among the highlights:

  • A pattern of cybersecurity threats and experiences is discernable across U.S. healthcare organizations. Significant security incidents are a near universal experience with many of the initiated by bad actors, leveraging e-mail as a means to compromise the integrity of their targets.
  • Many positive advances are occurring in healthcare cybersecurity practices and healthcare organizations appear to be allocating more of their IT budgets to cybersecurity.
  • Complacency with cybersecurity practices can put cybersecurity programs at risk.
  • Notable cybersecurity gaps exist in key areas of the healthcare ecosystem. The lack of phishing tests in certain organizations and the pervasiveness provides insight into what healthcare organizations are doing to protect their information and assets, in light of increasing cyber-attacks and compromises impacting the healthcare and public health sector.




Cybersecurity for revenue cycle should be a KPI

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The revenue cycle is an important target for cybercriminals because of the information that flows through it.

Intermountain Healthcare’s chief information security officer Karl West kicked off the HIMSS19 Revenue Cycle Solutions Summit with a strong message for his captive audience. If you’re a revenue cycle leader, you need to understand a fundamental reality: There’s a whole host of data available for hackers in your rev cycle. Not only is there payment information, there is also member information and all of your PHI. All of those are sources of cyber risk.

For example, patient portal credentials are highly valuable for hackers at around $1,500 or more according to one study, West said.

As such, there needs to be a strong partnership between your cyber organization/operation and your revenue cycle. You also need to understand what are the threats and sources of loss. First, there’s phishing. It’s common and proven to be effective. At Intermountain, they phish their employees four times a year to test their proclivity to fall victim. Even though some find the measure frustrating, it’s essential to flushing out vulnerability.

Malware is also a significant security threat. To thwart such threats, it’s important to keep your systems patched. In your system, you need to have someone watching for vulnerability and patching.

“That’s the basic blocking and tackling,” West said.

Another source of loss is the misconfiguration of public-facing systems, which occurs when at build time, the proper protections are not built in.

And then there are nation-state actors, which are harder to protect against because smaller organizations do not have the resources to spend a lot on cybersecurity. Intermountain has a 24/7 security station/operation with eyes on such threats.

Finally, there are theft or loss/inadvertent accidents that involve employee error or bad action.

“If you aren’t, those are things you should be considering,” West said.

As consumerism continues to drive healthcare, the revenue cycle must move with that trend, and in a consumer-driven revenue cycle organization, fraud, breach, patient card information, PHI, personally identifiable information and the cloud are both assets and areas of risk.

As such, vulnerability management in the revenue cycle should be a big part of your operation and claims processing.

“When a caregiver gives care, they must be current on flu shots and vaccines,” West said. “It’s not an option. It’s a condition of employment. It means that the caregiver is protected to the best ability that we can. In the cyber world, it’s the same. Your networks, laptops and servers, how are you protecting them?”

While updates are annoying, vulnerabilities do need to be patched. Most healthcare organizations patch on an annual basis. At Intermountain, however, it is on a weekly or monthly basis. It’s a different mindset, West said. That is because not only did healthcare cyber attacks increase 320 percent between 2015 and 2016, but the attacks are also growing in sophistication. They don’t just slow systems down – they can cripple them for days, weeks or even months.

So, it is important to know that your patches are in place and your action plans are in place, he said. Have arrangements with vendors and partners. And for the many who have migrated to the cloud to streamline and cut costs, develop a strategy that isn’t just focused on one cloud but the whole cloud and know the controls required to protect you. West asked, does your cloud partner have a vulnerability and what are their safety practices?

“Have an inventory of your partnerships and manage them. Establish governance. As the primary organization, you are the one accountable to your patients,” he said.

Have an inventory of your data – where it is stored, where will it move to, and how it will move safely and securely. This should be a key performance indicator (KPI). Classify your data as public, restricted, private, classified or confidential, such that it is properly protected, and have data loss protection tools.

“When you wonder how did one system get taken down and not another, it’s your patching and practices,” West said.


Why The Next Evolution Of Global Health Care Will Be Blockchain-Based

This distributed ledger technology can improve security, efficiency, and the coordination of health care systems as an answer to aging legacy infrastructures.

Health care systems are cornerstones of all modern societies since they provide vital services. As they grow, however, many become less efficient and secure, which can make health care services more expensive and less accessible to the general public. Beyond being the buzzword of 2017, blockchain opens the door to solutions in an increasing global healthcare expenditure that is expected to increase to USD $10.059 trillion by 2022.

Healthcare Today

While the digitization of healthcare has paved the way for modern infrastructure, current privacy laws, software, and databases have slowly taken the power from the patient. Our existing software faces a few key problems that have both short-term and long-term implications—affecting both healthcare providers and their patients. Inefficiency, disjunction between databases, the disempowerment of patients, high expenses, and security concerns are just some of the many problems the healthcare industry faces.

With a move towards ease of access to data and decentralization in a world where security continues to pose a serious risk, blockchain is becoming the answer to many industry-wide obstacles. Here is how blockchain is applied to many of industry’s burgeoning issues:


Healthcare systems are being targeted by cyber attacks because their legacy infrastructures make data vulnerable. In 2017, the ransomware “WannaCry” crippled the National Health Service (NHS) in the United Kingdom and affected over 150 countries. In 2018 and 2019 respectively, hackers broke into Singapore’s government health database and most recently the HIV status of over 14,000 people leaked online, Singapore authorities say.

Given that blockchain is a distributed ledger technology and does not require third-party interventions, it allows institutions to decentralize their databases. Hence, by using blockchain, health care systems can significantly reduce their risk of being subject to cyber threats. It would take too much time and energy for hackers to access all of the nodes within the network and to infect the system.

It is highly important to create an environment where clinicians, administrators, and patients (also known as consumers of healthcare) know that their privacy and data are protected. Such an ecosystem can be enabled by blockchain, either by allowing users to own their information by joining the chain or by helping hospitals to secure their servers and distribute the data on a network.

Efficiency & Coordination

Health care systems are remarkably inefficient. Since they operate with many independent databases, especially in large centralized systems, there is a lack of cohesive communication between these distinct silos. By creating a unified ecosystem of data, distributed ledger software encourages cooperation between networks, improving payment processing, patient tracking, and enterprise workflow.

Sectors like the food industry are already seeing wins with blockchain that healthcare can emulate in regards to supply chain management.  Companies like Walmart implemented IBM’s blockchain for food traceability, impacting pharmaceutical stakeholders to participate in the non-profit Center For Supply Chain Studies DSCSA and Blockchain Phase 2 Study. The FDA who is behind this initiative, as declared by current FDA Commissioner Gottleib requires all entities governed under FDA  “full implementation of the Drug Supply Chain Security Act, [and] to make sure that every link in the U.S. Drug Supply must be secure.”

Other emerging use cases such as clinical trials involve the management of numerous locations, sources, and stakeholders, along with supervision of substantial amounts of sensitive data. Since blockchain may facilitate data storage, the technology can fuel innovation, as researchers will have greater access to medical record information.

The Future of Healthcare

Blockchain technology is expected to transform the way key players in health care systems interact with each other. Nonetheless, this technological revolution can only succeed with consortium thinking, which implies collaboration between all stakeholders in the sector. In the United States, Synaptic Health Alliance, a diverse consortium of healthcare organizations and other emerging startup consortia are working to identify and monetize shared opportunities in the blockchain space.

Blockchain is not without its problems.

Right now the initial costs can be high, and the integrations need to happen. Currently, most blockchain networks are designed so transactions are publicly accessible. While blockchain systems can be made private and permissible, making it so only certain parties can access boils down to aligned incentives. But it’s clear that the technology is there and can change healthcare for good.





Top 12 takeaways from the 2018 JP Morgan Healthcare Conference — while the destination is uncertain, the direction is clear

The recent breathtaking flurry of mega-mergers coupled with increasingly challenging market forces and an ever shifting political landscape has cast a cloud of confusion regarding where the U.S. healthcare delivery system is heading.  

So, where do you go to find the map?

Every year, the JP Morgan Healthcare Conference provides an incredibly efficient snapshot of the strategies for large healthcare delivery systems, the hub for healthcare in the U.S. Most of these organizations are also the largest employers in their respective states. The conference took place this week in San Francisco with over 20 healthcare systems presenting, including Advocate Health Care, Aurora Health Care, Baylor Scott & White Health, Catholic Health Initiatives, Geisinger Health System, Hospital for Special Surgery, Intermountain Healthcare, Mercy Health in Ohio, Northwell Health, Northwestern Medicine, Partners HealthCare System, WakeMed Health & Hospitals and many of the other big name brands in the market. Each provided their strategic roadmap in a series of 25-minute presentations from their “C” suite. If you’re looking for the GPS on strategy and a gauge on the health of healthcare, this is it.  

How do their strategies differ? What direction are they heading in? There is a great line from Alice in Wonderland that goes, “If you don’t know where you’re going, any road will take you there.” You would think that line applies perfectly to the U.S healthcare system, but the good news is it actually doesn’t.

While the exact destination for everyone is TBD, the direction they are heading in is actually pretty clear and consistent. It turns out that they are all using a very similar compass, which is sending them down a similar path.

So, what are the roadside stops health systems consider absolutely necessary to be part of their journey to creating a more viable and sustainable value-based business model?

Based on the travel plans for over 20 of the largest and most prestigious healthcare delivery systems in the country, here’s your GPS and list of 12 things you “must do” on your journey.

1. You Must Scale

Clearly the headline at #JPM18 was the flurry of major announcements regarding major mergers. With that said, two of the mergers were front and center: teams were there to present from Downers Grove, Ill.-based Advocate and Milwaukee-based Aurora, which will be a $10 billion organization with 70,000 employees, as well as San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, which will be a $28 billion organization with 160,000 employees. The size and scale of these mergers is pretty stunning. While the announcement of these and the other recent mega-mergers has forced many into their board room to determine what the deals mean to them, the consensus at the conference was this: There are a number of different paths forward to achieve scale. Some, like Baylor Scott & White in Texas, have aggressive regional expansion plans. Others are betting on partnerships to provide the same or even more value. Taking a pulse of the room, two things were clear. The first is there is no definition of scale any more in this market. The second is that, despite this flurry of mergers, “getting really big” is not the only destination.  

2. You Must Pursue “Smart Growth” and Find New Revenue Streams

Running counter to the merger narrative in the market, Salt Lake City-based Intermountain provided a good overview of the movement to what is called an “asset light” strategy of “smart growth.” This is a radically contrarian approach to the industry norm, which is the capital intensive bricks and mortar playbook of buying and building. As part of their strategy, Intermountain will open a “virtual hospital” delivering provider consultations and remote patient monitoring via telehealth. The system will also launch a number of healthcare companies every year, leveraging their considerable resources in a manner they believe will produce a higher yield. Other health systems outlined a similar stream of initiatives they have in motion to diversify their revenue streams and expand their business model into higher margin, higher growth businesses. One example is Cincinnati-based Mercy Health, which achieved strong growth and leverage via their investment in a revenue cycle management company. Advocate in Illinois formed a partnership with Walgreens. Together, they now operating 56 retail clinics and Advocate has seen a significant impact on driving new patients and downstream revenue to their system. The bottom line is all now recognize that they must think and act differently to be able to continue to fund their clinical mission and serve their community.

3. You Must Measure and Manage Cost and Margins

While some are moving aggressively to get scale, everyone is looking to more effectively use the resources they have and get more operating leverage. Margin compression was a consistent theme, with many systems now moving into consistent, stable operating models around managing margins versus launching reactionary initiatives when they find a budget gap. What is emerging is a new discipline and continuous process around managing cost and margins that is starting to look similar to the level of sophistication we have seen in the past for revenue cycle management. To that end, there has been major movement in the market to implement advanced cost accounting systems, often referred to as financial decision support, which provide accurate and actionable information on cost and help organizations understand their true margins as they take on risk-based, capitated contracts. Some during the conference referred to it as the “killer app” for the financial side of driving value. Regardless of what you call it, all are moving aggressively to understand the denominator of their value equation.

4. You Must Become a Brand

Investing in and better leveraging their brand has become a strategic must for health systems. The level of sophistication is growing here as providers shift their mental model to viewing patients as “consumers.” Aurora in Wisconsin cited their dedicated Consumer Insights Group and outlined their “best people, best brand, best value” approach that has been incredibly effective both internally and externally. At the same time, the bigger investments for many health systems relative to brand are more on brand experience than brand image, with a focus on understanding and radically rethinking the consumer experience. As an example, at Danville, Pa.-based Geisinger, close to 50 percent of ambulatory appointments are scheduled and seen on the same day. And every health system is making meaningful investments in their “digital handshake” with consumers, creating and leveraging it via telehealth as well as mobile applications to enhance the customer experience.

5. You Must Operate as a System, Not Just Call Yourself One

One clear theme at #JPM18 is different organizations were at different points along the continuum of truly operating as a system vs. merely sharing a name and a logo. There are a number of reasons for this, but you are increasingly seeing tough decisions actually being made vs. just kicking the can down the road. There has been a great deal of acquisitions over the last few years coupled with a new wave of thinking relative to integration that is more aggressive and more forward-looking. This mental shift is actually a very big deal and perhaps the most important new trend. Many health systems are heavily investing in leadership development deep into their organization to drive changes much faster.   

6. You Must Act Small

The word “agile” is quickly becoming part of everyone’s narrative with health systems looking to adopt the principles and processes leveraged in high tech. Chicago-based Northwestern Medicine is an example of an organization that has grown dramatically in the last five years, now approaching $5 billion in revenue. At the same time, they have still found a way to operate small, leveraging daily huddles across the organization to drive their results. The team at Raleigh, N.C.-based WakeMed has achieved a dramatic financial turnaround over the last few years, applying a similar level of rigor yielding major operational improvements in surgical, pharmacy and emergency services that have translated into better bottom line results.

7. You Must Engage Your Physicians

Employee engagement was a major theme in many of the presentations. With the level of change required both now and in the future, a true focus on culture is now clearly top of mind and a strategic must for high-performing health systems. That said, only a handful articulated a focus on monitoring and measuring physician engagement. This appears to be a major miss, given that physicians make roughly 80 percent of the decisions on care that take place and, therefore, control 80 percent of the spend. One data point that stood out was a 117 percent improvement in physician engagement at Northwestern. Major improvements will require clinical leadership and a true partnership with physicians.

8. You Must Leverage Analytics

Many have reached their initial destination of deploying a single clinical record, only to find that their journey isn’t over. While health systems have made major investments big data, machine learning and artificial intelligence, there was a consistent theme regarding the need to bring clinical and financial data together to truly understand value. Part of this path is the consolidation of systems that is now needed on the financial side of the house with a focus on deploying a single platform for financial planning, analytics and performance. The primary focus is to translate analytics not just into insights, but action.

9. You Must Protect Yourself

As organizations move deeper into data, there is increased recognition that cybersecurity is a major risk. Over 40 percent of all data breaches that occur happen in healthcare. During the keynote, JP Morgan Chase CEO Jamie Dimon shared that his organization will spend $700 million protecting itself and their customers this year. Investments in cybersecurity will continue to ramp up due to both the operational and reputational risk involved. Cybersecurity has become a board room issue and a top-of-mind initiative for executive teams at every health delivery system.

10. You Must Manage Social Determinants of Health in the Communities You Serve

Perhaps the most encouraging theme for healthcare provider organizations was the need to engage the community they serve and focus on social determinants of health. As Intermountain shared: “Zip code is more important than genetic code.” To that end, Geisinger refers to their focus on “ZNA.” They have deployed community health assistants, non-licensed workers who work on social determinants of health and have implemented a “Fresh Food Farmacy,” yielding a 20 percent decrease in hemoglobin A1c levels along with a 78 percent decrease in cost. Organizations like ProMedica Health System in Ohio have seen similar results with their focus on hunger in Toledo. WakeMed has an initiative focused on vulnerable populations in underserved communities that has resulted in a significant decrease in ER visits and admissions and over $6 million in savings.

11. You Must Help Solve the Opioid Epidemic

The opioid issue is one that healthcare professionals take very personally and feel responsible for solving. It came up in virtually in every presentation, and it’s an emotional issue for the leaders of each organization. This is good news, but the better news is that they are taking action. As an example, Geisinger invested in a CleanState Medicaid member pilot that resulted in a 23 percent decrease in ER visits and 35 percent decrease in medical spending, breaking even on their investment in less than 10 months. While many would rightly argue that the economic rationalization isn’t needed for something this important, the fact that it’s there should eliminate any excuse for anyone not taking action.

12. You Must Deliver Value

The Hospital for Special Surgery in New York is the largest orthopedics shop in the U.S. and a great example of how value-based care delivery is taking shape. Perhaps the most revealing stat they shared is that 36 percent of the time patients receive a non-surgical recommendation when they are referred to one of their providers for a second opinion. This is exactly the type of value-based counseling and decision-making that will help flip the model of healthcare. Some systems are farther along than others. Northwestern currently has 25 percent of its patients in value-based agreements, but other systems have less. As the team from Intermountain re-stated to this audience this year, “You can’t time the market on value, you should always do the right thing, right now.” Well said.  




Healthcare as a zero-sum game: 7 key points

This article sets out seven thoughts on healthcare systems.

The article discusses:

  1. Types of Healthcare Systems
  2. Mergers and Key Questions to Assess Mergers
  3. Headwinds Facing Systems
  4. The Great Fear of Systems
  5. What has Worked the Last 10 Years
  6. What is Likely to Work the Next 10 Years
  7. A Few Other Issues

Before starting the core of the article, we note two thoughts. First, we view a core strategy of systems to spend a great percentage of their time on those things that currently work and bring in profits and revenues. As a general rule, we advise systems to spend 70 to 80 percent of their time doubling down on what works (i.e., their core strengths) and 20 to 30 percent of their time on new efforts.

Second, when we talk about healthcare as a zero-sum game, we mean the total increases in healthcare spend are slowing down and there are greater threats to the hospital portion of that spend. I.e., the pie is growing at a slower pace and profits in the hospital sector are decreasing.

I. Types of Healthcare Systems

We generally see six to eight types of healthcare systems. There is some overlap, with some organizations falling into several types.

1. Elite Systems. These systems generally make U.S. News & World Report’s annual “Best Hospitals” ranking. These are systems like Mayo Clinic, Cleveland Clinic, Johns Hopkins Hospital, NewYork-Presbyterian, Massachusetts General, UPMC and a number of others. These systems are often academic medical centers or teaching hospitals.

2. Regionally Dominant Systems. These systems are very strong in their geographic area. The core concept behind these systems has been to make them so good and so important that payers and patients can’t easily go around them. Generally, this market position allows systems to generate slightly higher prices, which are important to their longevity and profitability.

3. Kaiser Permanente. A third type of system is Oakland-based Kaiser Permanente itself. We view Kaiser as a type in and of itself since it is both so large and completely vertically integrated with Kaiser Foundation Health Plan, Kaiser Foundation Hospitals and Permanente Medical Groups. Kaiser was established as a company looking to control healthcare costs for construction, shipyard and steel mill workers for the Kaiser industrial companies in the late 1930s and 1940s. As companies like Amazon, Berkshire Hathaway and JPMorgan Chase try to reduce costs, it is worth noting that they are copying Kaiser’s purpose but not building hospitals. However, they are after the same goal that Kaiser originally sought. Making Kaiser even more interesting is its ability to take advantage of remote and virtual care as a mechanism to lower costs and expand access to care.

4. Community Hospitals. Community hospitals is an umbrella term for smaller hospital systems or hospitals. They can be suburban, rural or urban. Community hospitals are often associated with rural or suburban markets, but large cities can contain community hospitals if they serve a market segment distinct from a major tertiary care center. Community hospitals are typically one- to three-hospital systems often characterized by relatively limited resources. For purposes of this article, community hospitals are not classified as teaching hospitals — meaning they have minimal intern- and resident-per-bed ratios and involvement in GME programs.

5. Safety-Net Hospitals. When we think of safety-net hospitals, we typically recall hospitals that truly function as safety nets in their communities by treating the most medically vulnerable populations, including Medicaid enrollees and the uninsured. These organizations receive a great percentage of revenue from Medicaid, supplemental government payments and self-paying patients. Overall, they have very little commercial business. Safety-net hospitals exist in different areas, urban or rural. Many of the other types of systems noted in this article may also be considered safety-net systems.

6. National Chains. We divide national chains largely based on how their market position has developed. National chains that have developed markets and are dominant in them tend to be more successful. Chains tend to be less successful when they are largely developed out of disparate health systems and don’t possess a lot of market clout in certain areas.

7. Specialty Hospitals. These are typically orthopedic hospitals, psychiatric hospitals, women’s hospitals, children’s hospital or other types of hospitals that specialize in a field of medicine or have a very specific purpose.

II. Mergers and Acquisitions

There have seen several large mergers over the last few years, including those of Aurora-Advocate, Baylor Scott & White-Memorial Hermann, CHI-Dignity and Mercy-Bon Secours, among others.

In evaluating a merger, the No. 1 question we ask is, “Is there a clear and compelling reason or purpose for the merger?” This is the quintessential discussion piece around a merger. The types of compelling reasons often come in one of several varieties. First: Is the merger intended to double down and create greater market strength? In other words, will the merger make a system regionally dominant or more dominant?

Second: Does the merger make the system better capitalized and able to make more investments that it otherwise could not make? For example, a large number of community hospitals don’t have the finances to invest in the health IT they need, the business and practices they need, the labor they need or other initiatives.

Third: Does the merger allow the amortization of central costs? Due to a variety of political reasons, many systems have a hard time taking advantage of the amortization of costs that would otherwise come from either reducing numbers of locations or reducing some of the administrative leadership.

Finally, fourth: Does the merger make the system less fragile?

Each of these four questions tie back to the core query: Does the merger have a compelling reason or not?

III. Headwinds

Hospitals face many different headwinds. This goes into the concept of healthcare as a zero-sum game. There is only so much pie to be shared, and the hospital slice of pie is being attacked or threatened in various areas. Certain headwinds include:

1. Pharma Costs. The increasing cost of pharmaceuticals and the inability to control this cost particularly in the non-generic area. Here, increasingly the one cost area that payers are trying to merge with relates to pharma/PBM the one cost that hospitals can’t seem to control is pharma costs. There is little wonder there is so much attention paid to pharma costs in D.C.

2. Labor Costs. Notwithstanding all the discussions of technology and saving healthcare through technology, healthcare is often a labor-intensive business. Human care, especially as the population ages, requires lots of people — and people are expensive.

3. Bricks and Mortar. Most systems have extensive real estate costs. Hospitals that have tried to win the competitive game by owning more sites on the map find it is very expensive to maintain lots of sites.

4. Slowing Rises in Reimbursement – Federal and Commercial. Increasingly, due to federal and state financial issues, governments (and interest by employers) have less ability to keep raising healthcare prices. Instead, there is greater movement toward softer increases or reduced reimbursement.

5. Lower Commercial Mix. Most hospitals and health systems do better when their payer mix contains a higher percentage of commercial business versus Medicare or Medicaid. In essence, the greater percentage of commercial business, the better a health system does. Hospital executives have traditionally talked about their commercial business subsidizing the Medicare/Medicaid business. As the population ages and as companies get more aggressive about managing their own healthcare costs, you see a shift — even if just a few percentage points — to a higher percentage of Medicare/Medicaid business. There is serious potential for this to impact the long-term profitability of hospitals and health systems. Big companies like JPMorgan, Amazon, Berkshire Hathaway and some other giants like Google and Apple are first and foremost seeking to control their own healthcare costs. This often means steering certain types of business toward narrow networks, which can translate to less commercial business for hospitals.

6. Cybersecurity and Health IT Costs. Most systems could spend their entire budgets on cybersecurity if they wanted to. That’s impossible, of course, but the potential costs of a security breach or incident loom large and there are only so many dollars to cover these costs.

7. The Loss of Ancillary Income. Health systems traditionally relied on a handful of key specialties —cardiology, orthopedics, spine and oncology, for example — and ancillaries like imaging, labs, radiation therapy and others to make a good deal of their profits. Now ancillaries are increasingly shifted away from systems toward for-profits and other providers. For example, Quest Diagnostics and Laboratory Corporation of America have aggressively expanded their market share in the diagnostic lab industry by acquiring labs from health systems or striking management partnerships for diagnostic services.

8. Payers Less Reliant on Systems. Payers have signaled less reliance on hospitals and health systems. This headwind is indicated in a couple of trends. One is payers increasingly buying outpatient providers and investing in many other types of providers. Another is payers looking to merge with pharmaceutical providers or pharmacy and benefit managers.

9. Supergroups. Increasingly in certain specialties and multispecialty groups, especially orthopedics and a couple other specialties, there is an effort to develop strong “super groups.” The idea of some of these super groups is to work toward managing the top line of costs, then dole out and subcontract the other costs. Again, this could potentially move hospitals further and further downstream as cost centers instead of leaders.

IV. The Great Fear

The great fear of health systems is really twofold. First: that more and more systems end up in bankruptcy because they just can’t make the margins they need. We usually see this unfold with smaller hospitals, but over the last 20 years, we have seen bankruptcies periodically affect big hospital systems as well. (Here are 14 hospitals that have filed for bankruptcy in 2018 to date. According to data compiled by Bloomberg, at least 26 nonprofit hospitals across the nation are already in default or distress.)

Second, and more likely, is that hospitals in general become more like mid-level safety net systems for certain types of care — with the best business moving away. I.e., as margins slide, hospitals will handle more and more of the essential types of care. This is problematic, in that many hospitals and health systems have infrastructures that were built to provide care for a wide range of patient needs. The counterpoint to these two great fears is that there is a massive need for healthcare and healthcare is expensive. In essence, there are 325,700,000 people in the United States, and it’s not easy to provide care for an aging population.

V. The Last 10 Years – What Worked

What has worked over the last five to 10 years is some mix of the following:

  1. Being an elite system has remained a recipe for financial success.
  1. Being regionally dominant has been a recipe for success.
  1. Being very special at something or being very great at something has been a recipe for success.
  1. Being great in high paying specialties like orthopedics, oncology, and spine has been a recipe for success.
  1. Systems have benefited where they provide extensive ancillaries to make great profits.

VI. The Next 10 Years

Over the next 10 years, we advise systems to consider the following.

  1. Double down on what works.
  1. Do not give up dominance where they have it. Although it may be politically unpopular and expensive to maintain, dominance remains important.
  1. Systems will need a new level of cost control. For years hospitals focused on expanding patient volume, expanding revenue and enlarging their footprint. Now cost control has surpassed revenue growth as the top priority for hospital and health system CEOs in 2018.
  1. Systems will have to be great at remote and virtual care. More and more patients want care where and when they want it.
  1. Because there will be so much change, systems must continue to have great leadership and great teams to adjust and remain successful.
  1. As systems become more consumer-centric, hospitals will have to lead with great patient experience and great patient navigation. These two competencies have to become systemwide strengths for organizations to excel over the next decade.

VII. Other Issues

Other issues we find fascinating today are as follows.

1. First, payers are more likely to look at pharma and pharma benefit companies as merger partners than health systems. We think this is a fascinating change that reflects a few things, including the role and costs of pharmaceuticals in our country, the slowly lessening importance of health systems, and payers’ disinterest in carrying the costs of hospitals.

2. Second, for many years everyone wanted to be Kaiser. What’s fascinating today is how Kaiser now worries about Amazon, Apple and other companies that are doing what Kaiser did 50 to 100 years ago. In essence, large companies’ strategies to design their own health systems, networks or clinics to reduce healthcare costs and provide better care is a force that once created legacy systems like Kaiser and now threatens those same systems.

3. Third, we find politicians are largely tone deaf. On one side of the table is a call for a national single payer system, which at least in other countries of large size has not been a great answer and is very expensive. On the other hand, you still have politicians on the right saying just “let the free market work.” This reminds me of people who held up posters saying, “Get the government out of my Medicare.” We seem to be past a true and pure free market in healthcare. There is some place between these two extremes that probably works, and there is probably a need for some sort of public option.

4. Fourth, care navigation in many elite systems is still a debacle. There is still a lot of room for improvement in this area, but unfortunately, it is not an area that payers directly tend to pay for.

5. Fifth, we periodically hear speakers say “this app is the answer” to every problem. I contrast that by watching care given to elderly patients, and I think the app is unlikely to solve that much. It is not that there is not room for lots of apps and changes in healthcare — because there is. However, healthcare remains as a great mix of technology and a labor- and care-intensive business.


Hospital ER worker fired for allegedly selling patient records

Image result for stealing patient records

An employee at Kings County Hospital’s emergency room stole nearly 100 patients’ private information and sold it through an encrypted app on his phone, according to New York Daily News.

Orlando Jemmott, 52, has worked at the city-run Brooklyn hospital for more than 10 years, where he was in charge of charting patient demographic data into the hospital’s computer system. But between December 2014 and April 2015, he allegedly sold patient data to Ron Pruitt, 43, a buyer in Pennsylvania.

FBI agents arrested Mr. Jemmott in February after receiving a tip in June 2017. A tipster told the FBI she had learned two years earlier that Mr. Jemmott was stealing and selling health records.

Hospital officials told the publication that Mr. Jemmott sold the names of 98 patients, and he accessed the private health records of at least 88 of those patients.

Kings County fired Mr. Jemmott in April. He has been negotiating a plea deal with prosecutors since.

“We have zero tolerance for anyone who intentionally violates our patient privacy rules,” Kings County Hospital CEO Sheldon McLeod said in a written statement to the New York Daily News. “The privacy of patient information is an important foundation for the care we provide.”