3 Essentials for the Hospital of the Future

hospital FFS

As hospitals grapple with costs that are rising faster than revenue, they are reconsidering what the future might look like. Value-based care has taken hold, and with it, a new healthcare economy has emerged.

The numbers tell the story. PwC’s Health Research Institute projects a 6.5 percent medical cost trend (increase in costs to treat patients) in 2022 on top of a 7 percent medical cost trend expected for 2021. Hospitals are experiencing an estimated $24 billion in additional labor costs and an 18.3 percent increase in supply expenses compared to pre-pandemic levels, according to the American Hospital Association.

This fiscal pressure will accelerate the trend to redistribute services from an inpatient model to “care everywhere,” which can include outpatient visits, telehealth, and home healthcare. Additionally, hospitals must maintain control of service delivery in order to avoid loss of revenue.

The reality for most hospitals and health systems, however, is more one of grinding incrementalism in addressing consequences of the pandemic and pragmatically assessing current options.

The balance between opportunity and vulnerability for an organization is largely influenced by its status before and after the pandemic. Organizations that were capital poor and performing weakly on a financial basis before the pandemic are particularly vulnerable to the damage of the pandemic. Organizations that have survived the pandemic with the balance sheet intact, possessing adequate reserves and scale that allowed return to profitability, will find opportunity in this disrupted market. The majority of hospitals and health systems reside between these two models.

Undoubtedly, the hospital of the future will look much different than the hospital of today. Here are three essential elements the hospital of the future must have.

1. Sustainability in a simultaneous fee-for-service and value-based care environment

While all eyes have been on value-based care (VBC), that model isn’t penetrating hospitals as quickly as in other settings, such as primary care and specialty practices. After all, it’s difficult to translate care in the emergency department, for example, to value-based payments.

Even the Centers for Medicare & Medicaid Services (CMS) knows full-risk models aren’t going to overtake fee-for-service (FFS) anytime soon at the hospital level. During a recent accountable care conference, CMS COO Jon Blum shared the agency’s vision for value-based care, asserting that CMS won’t be promoting “models that have more risk just for the sake of having more risk.”

Value-based models have not proven to be a transformative factor in hospital payment, having some impact but not driving the agenda exclusively. Fundamentally, the health system continues to be driven by the FFS model since the FFS claims submission process is still the primary means for capturing the broader encounter data need for analysis and payment. Even in the active Medicare Advantage market that has attracted venture capital money, the emphasis is on coding optimization in the FFS model.

Therefore, hospitals need to balance future forecasts, preserve their service lines for the full spectrum of their patient populations, and operate simultaneous FFS and VBC models.

One option to consider is a hub-and-spoke approach that allows hospitals to maintain control of care delivery across the continuum. While the “hub,” or the hospital core, can offer more intensive care, the “spokes” become secondary sources, potentially focusing on just one specialty each to optimize talent and equipment.

Hospitals can also establish partnerships with existing facilities to retain patients and provide essential revenue to fill the potential shortfalls in high-acuity areas. By decompressing the core, hospitals also grow deeper into the community, delivering care how and where patients prefer it, helping to reduce leakage.

The idea with this transformative business structure is to right-size costs by streamlining services to reduce overhead. In this model, hubs and spokes must stay connected through enabling technology.

2. The ability to deliver care everywhere at scale

As hospitals evolve, specialized clinics, such as those for pediatrics, oncology, or geriatrics, will become more prevalent. Providing care in these tertiary settings frees up the hospital hub to handle those patients with higher acuity, while serving other patients more profitably — even in a VBC model. Hospitals can decrease overhead by migrating lower-cost services out to the periphery, while still maintaining the same high standard of care.

Another option based on geography rather than specialty is creating “micro-hospitals” that offer a wider range of benefits to a smaller community footprint. Situated within neighborhoods, these facilities can provide good quality and reduce travel time for patients who need routine care, while keeping hospital beds available for more acute needs.

But why should patients travel at all? Telehealth visits surged during COVID-19, spurring a year-over-year increase of 64.3 percent from 2019 to 2020, with an expected seven-fold growth predicted by 2025. This underscores the need for a comprehensive strategy that extends care beyond the hospital and office setting and into patients’ homes.

Of course, virtual visits are just one piece of the puzzle. Remote patient monitoring (RPM) is gaining traction as a way to keep patients engaged and to catch condition deterioration early. With efficiency in mind, most RPM platforms collect patient data automatically and cue clinicians only when out-of-range results appear.

This data-driven care modality decreases time devoted to observation, so that patients are no longer using beds in the core hospital that could be otherwise allocated. RPM can also free up staff time to focus resources on high-value activities.

However, RPM will still need adequate oversight. The hospital of the future will have intelligent, integrated systems that act as a force multiplier, so less staff can care for many more patients. Also, smart systems will enable improvements in self-care activities.

3. Excellent patient experience

Finally, the hospital of the future must deliver a positive patient experience. If patients aren’t satisfied with the wait time in the emergency department or the attentiveness of a nurse, for example, they are likely to choose a competitor for future visits. Comfort and convenience can be the competitive differentiators that earn patient loyalty and repeat business.

Another way the hospital of the future can stay connected with patients is through an easy-to-use patient portal. Today’s consumer expects a user-friendly interface, just as they find in shopping or banking apps, accessible on their smartphones. While portals haven’t caught on with most patients, the hurdles typically involve clunky interfaces that are less intuitive than other consumer-facing applications, lacking the sophistication and user experience that patients want.

For the hospital or health system with resources intact, this is an area of opportunity driven largely by technological innovations and new digital applications. An inventory of current practices measured against desired and affordable innovation is one step. Attention to perceptions of service and incremental interventions can add up to competitive improvements even in the absence of large investments.

As the healthcare industry continues to evolve, systems of all sizes are realizing they must reimagine how they deliver care. Because hospitals are still the “big box store” of healthcare — retaining many of the services as well as the talent to deliver those services — they can endure as the nexus for care delivery. However, the hospital of the future will only succeed when it pivots to reach patients in a variety of settings in the most cost-effective way.

Hospitals and health systems reimagining their futures count on Canton & Company to deliver deep market data and detailed strategies aligned with the emerging healthcare economy. Ready to create your future plan with the hands-on execution needed to deploy it? Start a conversation today!