Five Keys to Effective Planning in the Face of Healthcare Reform

Just over a year after the historic signing of the Affordable Care Act, the healthcare reform law remains as controversial as ever. Whether you are for or against it, one thing is certain: Hospitals and healthcare organizations will be affected. The question is, by how much and in what way?

One medium-size health system conducted its own analysis, taking into consideration the possible new reimbursement deductions for Medicare. The outcome estimated that the system could lose $12-13 million a year in reimbursements. With razor-thin margins already, how will they make ends meet?

This scenario is not unique. Many hospitals, already under pressure due to a lingering recession and credit crisis, are teetering on the brink of closure. So if the 4,686 U.S. hospitals providing patients with Medicare¹ wish to survive, they will need to boost their productivity.

Seeking avenues to cut costs is one way hospitals are coping, but it is not enough. Healthcare systems cannot downsize as manufacturers do; their workforce is too labor-intensive, and their nurses and surgeons cannot be replaced by equipment. Yet hospital systems are now expected to improve quality while decreasing expenses. Furthermore, the government—and the general public—is looking for a higher level of accountability and documented results. Soon, especially in order to receive government incentives, hospital systems will have to do better with less.

Life in the new normal

Healthcare reform and the current stagnant economy have altered life as we know it. Healthcare systems now exist in a "new normal." What does this mean? Capital resources are limited as never before. Hospitals are operating on extremely thin margins, and they have to make do with far less while increasing quality. To top it all off, 30-40 million more people are planned to be incorporated into the system. The U.S. healthcare system consists of 5,800 hospitals, 950,000 beds, and $730 billion in annual operating expenses², and now with the possibility of Accountable Care Organizations (ACOs), processes will be scrutinized for increased quality and efficiency.

The creation of ACOs is covered in just seven pages of the massive new healthcare law, yet it has become one of the most talked about provisions. An ACO is a network of doctors and hospitals that shares responsibility for providing care to patients. In the new law, an ACO would agree to manage all of the healthcare needs of a minimum of 5,000 Medicare beneficiaries for at least three years.

It offers doctors and hospitals financial incentives to provide good quality care to Medicare beneficiaries while keeping costs down. The ACO initiative is scheduled to launch in January 2012. While ACO structures and needs have not yet been clearly defined, healthcare organizations are compelled to form their own structure. One thing is certain, with so many unknowns and challenges, healthcare organizations can no longer continue with their current process of planning.

It is time to change how we plan

For the average hospital system across America, planning has become a precursor to architecture. Typically, a need is identified and then all aspects of master planning are built up around solving this need. There is nothing inherently wrong with this foundation unless the true needs of the organization are inaccurately identified or not readily seen.