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Clinical Integration: There Will Be Winners and Losers

Due to increasing deductibles and our improving ability to care for conditions in outpatient settings, hospital admissions have declined consistently over the past few years, and industry experts do not expect this trend to reverse. In response, healthcare systems are investing millions of dollars in acquiring physician practices and affiliating with independent physicians through clinically integrated networks in an attempt to enlarge their patient base.

Though clinically integrated networks do enlarge the patient base, one of their aims is also to reduce the percentage of admissions from that base.

There is hardly a healthcare system in a competitive market in the U.S. that is not pursuing some form of clinical integration strategy, and competition is being felt in more and more communities. Healthcare leaders know our society is headed towards payment-for-value and away from fee-for-service payment, and they do not want to be found without a competitive value-oriented structure.

Leaders should not assume, however, that just because they invest in clinical integration that their patient bases will be adequately enlarged to keep their hospitals filled. Their competitors are also spending millions on clinical integration strategies in hopes of enlarging their bases! The base does not automatically enlarge because an investment is made. Ultimately, there will be winners and losers.

More Than a Marketing Strategy

Winners will tend to get their fully functional clinically integrated network to market quicker than their competitors and ultimately, winners must create networks that perform better than those of competitors. Specifically, they will do a better job than competitors at controlling the cost of care and demonstrating higher quality and service. The creation of a clinically integrated network must not be just a marketing or physician alignment strategy – it must truly enable effective population health management.

As quality, cost and service information on healthcare providers becomes more readily available, individual consumers and employers will choose networks that provide greater value. Competition will put pressure on under-performers. Some systems that have invested in clinical integration will go out of business or be acquired by more successful systems, which in turn will downsize or divest those facilities.

Physician Competition Heats Up

Likewise, competition among physicians will heat up as consumers have more data upon which to make educated choices. Again, there will be winners and losers. Physicians who chose to not join narrow networks will lose access to patients. If there is an over supply of certain specialists in a certain geography, those who have poorer access, service or quality outcomes will get fewer referrals than others.

We like to think that no healthcare facility or provider should be forced to change or go out of business. We like to think that all of us can grow our patient bases to sustain our hospitals. We often act as if just the right number of facilities was built in a geographic area and that just the right number of physicians decided to go into each specialty. But we know at the macroeconomic level that none of this is true. Informed consumers will give us incentive to change, and some will win through effectively managing change, and some will lose by ignoring reality.

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