Key Healthcare Trends

Financial Volatility

Economic recession weakening hospitals' financial and operating performance -

Hospitals are facing rising bad debt and increasing charity care as a result of unemployment and swelling populations of the uninsured. Volumes are declining as patients defer non-emergent care. State budget shortfalls are impacting Medicaid payments to providers. The impact on hospitals and health systems is heightened uncertainty, especially regarding reimbursement and healthcare reform. There is an emphasis on cost take-out in terms of revenue cycle and the supply chain. Increasingly, the focus is on quality measurement including P4P and bundled payments. Hospital executives are now facing challenges to their NFP status ... and ultimately they are suffering from decision making paralysis.

Capital market crisis creating balance sheet stress -

As the recession wears on, hospitals are seeing decreases / losses in investment income which effects liquidity. They are experiencing limited or no access to external debt markets . Defined benefit plans and declining philanthropy are adding to the stress on hospital executives. As a result of this financial volatility, currently there are 3x credit downgrades to upgrades. Capital rationing has resulted in project frosts and freezes. Healthcare organizations with strong credit are seeking third-party funding and diversifying sources of capital to fund new developments. And whether the time is right nor not ... technology has become an imperative and must be funded!

Growth through consolidation: M&A will accelerate -

Hospitals need to drive down costs - sharing of resources, economies of scale, leverage with payers and vendors is top of mind with every executive team. Market share growth requires consolidation and positioning through acquisition. Smart technology enables size and scale. The big trend we're seeing is that acquisitions are opportunistic, not just for underperformers. There is potential to accelerate dormant capital projects. While there is integration risk, hospitals should consider there may be a "first mover" advantage ... survival will be more difficult for freestanding hospitals.

Demand and need for new facilities continues -

Care is shifting from inpatient to lower-cost outpatient settings. Aging facilities are inefficient, and technologies drive different space needs. Consumer expectations are increasing, and hospitals need to capture new markets to survive and thrive. The impact we're seeing is hospitals are becoming more willing to reevaluate existing facilities for reconfiguration. Size and cost of new facility projects (not on hold) are scaled back, with a focus on ROI and efficiency. Hospitals are expanding their delivery model / sites of care ... to capture new markets and new services.

Hospital-physician alignment: move toward consolidation -

Physicians are plagued b economic uncertainty. Healthcare reform is looming, and reimbursement changes include moving to bundled payments. There is continuing scrutiny by Congress on physician ownership and JVs. Adding to the stress is the technology imperative, and many physicians are facing conversion to electronic medical records. As a result, there is heightened interest in employment by physicians and less interest in other economic ventures. Continuing acceleration of employment of primary care physicians and selected specialties is resulting in multiple models. Technology a requirement ... and the enabler.