|By Young, David W|
Hospitals should develop strategies around four forces that will affect their financial performance in the next five to 10 years.
Hospitals and health systems will face a variety of financial challenges over the next decade, including pressures related to the economy, healthcare reform, and increased demand for care. Addressing these challenges will require, at a minimum, an understanding of the costs associated with care delivery. It also will require that healthcare organizations develop an ability to controlrather than simply understand- their costs.
Combined with pressures related to healthcare reform, the financial challenges facing hospitals and health systems present a "call to action." These organizations will need to conduct more in-depth analyses of the cost implications of care processes and delivery than most have done to date. In particular, they will need to concentrate on four forces that will affect their future costs:
* The impact of demographic changes on the
* Morbidity in the non-
* The complex nature of the healthcare market
The Four Forces at Work
Collectively, the first three forces will create intense pressures on healthcare costs; the fourth- the complex nature of the healthcare market- limits the ability of market mechanisms to control cost increases.
Demographic changes. The exhibit on page 58 shows how annual inpatient days per person change as people age. This is not surprising: As people grow older, they tend to use more inpatient care. The problem is that members of the "baby boom" generation- those born between 1945 and 1955- are now in their late 50s to mid 60s. If the historical pattern of healthcare use continues, the demand for inpatient care for baby boomers will increase geometrically. This idea is supported by an analysis from the
Morbidity in the non-
The complex nature of the healthcare market. The healthcare market is unlike any market described in an economics textbook. In no other market that we know of does Person A (a patient) receive services ordered by Person B (a physician) that are delivered by Person C (a hospital) and paid for by Person D (an insurer), whose revenue comes from Person E (the insured). The result is five separate markets:
* A premium- sharing market (between an employer and its employees)
* A per-member-per-month market (between an employer and a managed care plan)
* A deductible market (between a patient and a managed care plan)
* A copayment market (between a patient and a provider, usually either a physician or a hospital)