Health care has been begging for disruption for decades. That disruption appears be upon on us — and with growing momentum. Last year’s health care trends article highlighted the evolution underway in the health insurance market. For 2019, this evolution is expected to continue and pick up even more steam, as the evolving insurance landscape will continue to create greater market need for technology, tools and products designed to understand health care costs and better manage health care quality, with the goal of enhancing value.
Health Care Spending Trends
Growth in health care spending per capita has slowed, according to National Health Expenditure Data. Health spending in the 2000s was 5.6% but has declined to 3.6% from 2010-2017. The rate of spending growth has varied by service type, with growth in spending on prescriptions outpacing growth in spending on hospitals and physicians/clinics. However, since 2010, the growth in spending on both prescriptions and hospitals has declined to be more in line with spending growth on physicians/clinics (Source: CMS National Health Expenditure Data).
Health care spending growth trends should continue to decline, with the insurance landscape evolving and placing greater pressure on prescription cost control and downward pressure on hospital utilization and prices.
- Pressure on cost and utilization of traditional health care services is increasing: Health care spending has focused largely on prescription spending, as well as hospital utilization and costs in recent years. With spending in these categories more in line with physicians/clinics, focus may expand into all three categories, and we could see more pressure on physicians and clinic costs in 2019 (Source: CMS National Health Expenditure Data).
- Further disruption in care models is expected: Growth in health care spending will be a national focus in 2019 and will continue to fuel evolution in the insurance, technology and health care product space. Hospitals, clinics and other providers should anticipate further disruption in the industry and their own health care systems.
- Value is emerging from alternative venues: Value is emerging from peer coaching and other high-touch lower cost options to support patients, particularly with chronic diseases and behavioral health challenges — often more effective at changing patient behaviors that improve patients’ health and wellness than traditional models of care.
Shifting Utilization Patterns
Another byproduct of market disruption in the health care insurance market and competition has been the pressure on utilization in the hospital (specifically the use of hospital services such as surgery) and a shift to outpatient-centered procedural care.
Patients are becoming more educated and aware of differences in pricing between hospital settings. This, along with insurance pressure and higher deductibles, will continue to push utilization to lower cost outpatient settings such as urgent/quick care and ambulatory surgery centers.
- Continue to monitor hospital volume trends and conduct periodic market analysis to gauge larger market trends that may trigger a competitive response.
- Hospitals should assess their competitiveness in the market and their ability to fill gaps in service mix between acute inpatient, hospital outpatient, lower cost ambulatory, and retail care.
In 2018, we saw several high-profile announcements around health care innovation, including the health care partnership of Amazon, Berkshire Hathaway and JPMorgan Chase, and high-profile mergers, including Express Scripts and CVS Health-Aetna. We anticipate this trend in non-traditional health care partnerships to continue in 2019.
Non-traditional health care partnerships will create further disruption the health care market place in 2019, by leveraging their size for greater negotiating power for health care products, services, and pricing.
- Hospitals should prepare to demonstrate quality and cost competitiveness as innovative insurance models push for even greater transparency and make contracting decisions based on more available and reliable data.
- Assess price competitiveness through periodic revenue cycle assessments and pricing analysis.
Rural Health Care
Rural hospitals, such as Critical Access Hospitals, are starting to feel the impact of the insurance model evolution. With many rural areas already facing declining population, Medicare Advantage Plans are trickling into the payer mix of rural hospitals in some areas of the country, putting pressure on highly subsidized services, such as hospital swing bed and 340b programs.
Patients are becoming more mobile, and insurance plans want to incent patients to seek out lower cost care in urban areas. As these trends push patients away from rural hospital care, hopefully we will see more federal trials and research into alternative delivery models for rural hospitals, such as freestanding outpatient centers.
- Hospitals should stay abreast of any opportunity to enhance and optimize reimbursement through existing mechanisms such as 340b, provider-based status, Rural Health Clinic status and other reimbursement structures. Hospitals should also monitor new innovative programs and alternative delivery platforms as they emerge.
Contact Wipfli to learn more about how these 2019 trends may impact your health care organization.