Key Healthcare Trends

Economic Recession Weakened Hospitals' Financial and Operating Performance

Hospitals are facing rising bad debt and increasing charity care as a result of unemployment and increasing populations of the uninsured. Volumes are declining as patients defer non-emergent care. State budget shortfalls are impacting Medicaid payments to providers. The economic impact on hospitals and health systems is exacerbated by uncertainty regarding reimbursement and healthcare reform. The consequence has been a renewed emphasis on cost take-out in revenue cycle and supply chain management. To be sure, the focus will shift toward P4P and bundled payments.

Capital market crisis creating balance sheet stress -

Hospitals have experienced an almost unprecedented loss of investment income and deterioration in liquidity. Not surprisingly, credit downgrades continue to exceed upgrades threefold. Capital rationing has resulted in project "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 -

As hospitals drive down costs - sharing of resources, economies of scale, leverage with payers and vendors will become top of mind with every executive team. Market share growth will include consolidation and positioning through acquisition. What has been interesting is that acquisition has been opportunistic, not just for underperformers. 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 delivery continues to shift from inpatient to lower-cost outpatient settings. Aging facilities are inefficient, and technologies drive different space needs. Patient expectations are increasing, and hospitals need to capture new markets. The impact we're seeing is hospitals are becoming more willing to reevaluate existing facilities and consider a new paradigm for development based upon reconfiguration, size and cost of new facility projects, ROI and efficiency. Hospitals are expanding their delivery model / sites of care to reflect patient types and where they elect to receive care.

Hospital-physician alignment: move toward consolidation -

Healthcare reform is looming, and reimbursement changes may include changes such as bundled payments. Congress will continue to scrutinize physician ownership and JVs. An accelerating technology imperative, many physicians are facing conversion to electronic medical records. As a result, there is heightened interest in employment by physicians. Continuing acceleration of employment of primary care physicians and selected specialties is resulting in multiple models.