Realities in Healthcare Strategic Planning

It used to be that companies set out a business or strategic plan that road-mapped their future over the next 3-5 years.  The best-performing companies had sophisticated plans that the leadership consulted frequently to make sure they were on track. Today, at least in healthcare, it is difficult to see how long-term planning can be as reliable as it once was.  Unpredictable regulatory changes, advancements in technology and accelerated consolidation are changing both national and local markets almost monthly, adding new challenges to healthcare strategic planning.

Certainly long-term vision and values drive businesses, but yesterday’s planning tools do not work for small and mid-sized healthcare companies.  Over the next few days, we’ll introduce some helpful tools that will help executives plan for the current healthcare marketplace.  The fact is, in today’s environment, most healthcare executives need an 18 to 24-month planning cycle, and here’s why.

Unpredictable regulatory environment:

Certainly we have seen regulatory disruption in healthcare before, but not this broad and deep.  There are three components to our current regulatory environment that make long term planning challenging:

  • Aggressive regulators. Whether perceived or true fraud, it is clear that regulators believe there is much to be gained in this area.  Third party auditors incentivized to find fraud are even more aggressive.  On top of that, the time it takes to appeal claims has tripled in the last 24 months.
  • Accelerated regulatory/reimbursement changes. Reductions in readmissions, lowered costs through readmissions and tightened qualifications for services have embolden CMS to accelerate implementation of other ACA-guided programs.  For instance, in home care, CMS has announced their intentions to pilot the pre-authorization of home care patients. This will add additional expense to margins CMS has been squeezing since 2010.  These types of onerous regulation are the new norm and will serve to increase the competitive advantage of the larger providers.
  • Advancements in value-based payments: As of 2014, 50% of hospitals and 30% of physicians participate in some form of value based payments. As bundled payment projects are launched in specific markets, usually led by hospital systems, they are picking a handful of partners. Where at one time they referred to 20 or 30 home care agencies and 8 or 10 skilled nursing facilities, now they are only referring to 3 to 5 and 2 to 3, respectively.  We hear some executives say, “In 3-5 years, we will be positioned to be part of value based care partnership.”  Unfortunately, partners are being selected now. If you aren’t ready in the next 12 months, you will likely miss out.

Advancements in Data Analytics:  

We all know there has been advancement in technology. The real innovation that matters now is knowing how to use the data coming from the technology.  A growing number of companies are learning a lot about their patient populations through data analytics, which is giving them more influence on how to direct their care. These providers will exert their influence over the patients, and other providers will end up as followers, not leaders.

Market Consolidation:  

Mergers, acquisitions, joint ventures and other forms of market consolidations have increased each year since the passage of ACA.  It has changed the competitive landscape in almost every segment of healthcare and shifted the competitive dynamics in many local markets.  There is no slow down insight; if anything, it is accelerating.  Scale matters, and the large providers are getting larger, theoretically more efficient and certainly more influential in the markets they serve.

These three major issues are changing markets and how providers and healthcare vendors compete.  Trying to anticipate change 3 to 5 years out, in this environment, is a difficult exercise.  The only thing that is guaranteed is more and faster change.  Executives need a new set of planning tools that allow them set a realistic objectives that move them incrementally forward over the next 18 to 24 months.  These objectives must do three things:  1) increase their competitiveness, 2) incrementally improve their performance and 3) increase their value. Over the next few days, we’ll introduce a set of helpful tools that will help executives accomplish these objectives.