Hospital CEOs all across the country are losing sleep. From skyrocketing drug prices to technology, they have a lot on their minds. At Petra, we partner with health system and hospital CEOs every day, giving us keen insight into the unique challenges they face and are working to solve. Following Part 1 of our two-part blog series, in which we explored 4 things keeping hospital CEOs up at night, in this blog we’ll take a closer look at 4 more.
What’s Keeping Hospital CEOs Up at Night
- Shifting economic incentives
As healthcare continues to swing toward value-based pricing, focused on outcomes and resource management, hospital CEOs are faced with managing shifting economic incentives from value-based pricing in a world that’s still largely fee-for-service. The idea of hospitals receiving greater healthcare reimbursements as an incentive for improved outcomes and resource management just isn’t aligned with the fact that 90 percent of the market is still reimbursed according to the “old” fee-for-service method. It’s healthcare’s dirty little secret that proactive, preventive wellness care just isn’t reimbursed — although episodic care is. Considering hospital revenues are already disappearing — a recent Navigant study reports that average health system operating margins dropped a whopping 38.7 percent from 2015 to 2107 — it’s no wonder hospital CEOs are concerned about making changes that could slash them even further.
- Integrating technology
When it comes to technology — like robotics, electronic health records, and telemedicine — hospitals believed the if-you-build-it-they-will-come–type promises of investing in advancements: “If you buy it, you and patients will benefit.” Unfortunately, that’s just not the case.
Robotics have become ubiquitous in hospital environments, but their high investment costs aren’t proving to be worthwhile in actual usage, or how they’re integrated into the clinical space. Electronic health records (EHRs) also aren’t fulfilling their potential. EHRs have been linked to physician frustration, dissatisfaction, and burnout. Issues with interoperability also hinder the intended utilization of EHRs. A total of 75 percent of hospitals have more than 10 disparate EHR vendors in place, and the average health system has 18 across affiliated providers. With so many data sources within hospitals and health systems that don’t communicate — not to mention within the entire healthcare landscape — it’s no wonder the innovations promised with EHRs are roadblocked. Telemedicine also has also proven challenging. In short, without reimbursement, there’s no economic incentive for using it. Adding complexity to telemedicine adoption are compassion challenges, as illustrated by the recent Kaiser situation in which a remote doctor delivered end-of-life news to a patient via video screen on a robot.
The short story for hospital CEOs is this: They’re expected to keep up with technology, but that technology hasn’t yet closed the gap on delivering on its promises, creating an economic imbalance as well as a whole host of additional challenges.
- Competition around the edges
Hospitals just don’t compete with other hospitals anymore. They compete with other hospitals AND micro-hospitals, urgent care centers, freestanding emergency departments, ambulatory care centers, and surgery centers, some of which are actually their own kissin’ kin. It’s Economics 101: More supply equals less demand. And with less demand comes new challenges — namely, economic ones. Many hospital CEOs are jumping into the building fray, adding to their own portfolios with the “in it to win it” first-to-market mentality, while others are taking leaps of faith in more of an “if you can’t beat ‘em, join ‘em” approach. Bottom line: With so much competition around the edges, profitability emerges as the big hairy monster hospital CEOs are wrestling with at night.
- Escalating drug prices
Prescription drugs are a hot topic. Whether you turn on, tune in, click, or swipe, headlines about the soaring cost of prescription drugs are everywhere. High drug costs cause patients and policymakers to lose sleep too, but hospital CEOs have the one-two punch of managing escalating costs and their impact on their business as well as their impact on patient care. Unchecked, uncontrollable price increases are simply not sustainable and, according to the American Hospital Association (AHA), are a serious economic threat to patients and communities. A new report “Recent Trends in Hospital Drug Spending and Manufacturer Shortages” reveals staggering statistics, including: more than 90 percent of hospitals surveyed reporting the need to identify alternate therapies due to drug prices and shortages, 1 in 4 hospitals cutting staff to mitigate budget pressures, and the growth in expenditures per hospital admission on inpatient drugs exceeded the Medicare reimbursement update five-fold during the study period. With the burden of escalating drug prices impacting staffing and reimbursement, and potentially putting patient care at risk, it’s no wonder it’s keeping hospital CEOs up at night.
Today, everyone needs to do more with less. At Petra, this plays to our strengths, including providing financial predictability, maximizing return on capital, and balancing affordability and alignment. No other strategic planning and construction management firm understands the complex challenges of managing a healthcare organization like Petra does, because we’ve walked in your shoes. At Petra, we partner with hospitals and health systems to solve problems, creating new and better approaches that are unconventional, dynamic, and impactful. We’re setting the pace in the industry with game-changing ideas that raise the bar on expectations — and results. Contact us today to learn more.