Before the pandemic, hospitals were moving towards a solution that paid tribute to the head and bed model, with very low profit margins. They are investing in specialists to perform elective surgery in-house. They become more efficient at discharge, transfer care beyond the four walls through skilled nursing, and transition to family health.
Then there is Covid-19.
Suddenly, the hospital was crowded with emergency patients who needed to stay in the hospital for several weeks. They are forced to shut down elective surgery to protect resources. In any case, patients usually dare not enter their buildings. These meager profit margins have shrunk further.
Now, as the pandemic begins to fade, executives are at a crossroads. After bearing the brunt of Covid-19, they must decide how to rebuild, let the lucrative business flow again, and take advantage of all the changes.
The good news is that the window of opportunity has opened. If anyone wants to use this moment, the floor is theirs.
The main pivot at hand
In all markets except smaller markets, performing elective surgery in-house may no longer make sense. As inpatient codes are moved to remote locations and payers demand cost reductions, outpatient surgery centers (ASCs) have taken an increasing share of selective businesses. This is likely to continue. With lower management fees and fixed costs, their cost advantage can be as high as 50%.
In response, we have seen large-scale integration between ASCs, with hospitals purchasing external centers to regain market share and use them as feeder systems. For example, in December, Tenet HealthCare, a 65 hospital system centered in Dallas, Indicates that up to 45 ASCs will be awarded From SurgCenter Development.A month later, it announced the plan Buy up to 40.
There is also a renewed trend towards value-based care, where the commitment of the government and payers has never been higher. This is especially true in the management of chronic diseases. If it is not controlled, it can easily become a bigger problem.
Inspired by comprehensive kidney care contracts, some systems are undergoing internal dialysis (CKCC) Procedure.Others did the opposite, signing up with companies like this In pursuit of healthStrive uses artificial intelligence to predict the progression of kidney disease, provides advanced care plans, and encourages the use of home dialysis. The ultimate goal: to prevent hospitalization while reducing costs by up to 30%.
Perhaps the biggest lesson learned from the pandemic is the success of the transition to home care. At the height of the crisis, the system met the urgent need to vacate beds through innovation, such as providing a home hospital mode for non-Covid-19 patients. Now, the key is to maintain this sense of invention and apply it to the pre-pandemic efficiency mission, especially in terms of residence time.
We have seen greater investment in wound care. Hospitals are increasingly focusing on reducing adverse outcomes and transferring patients home faster—without reducing the quality of care. As Covid-19 tells us, this view can be applied to many diseases. Simply evaluate the performance of your system, identify areas that can be improved, and apply the same sense of urgency and innovation that you used to get through the pandemic.
As a former hospital executive, I know all this is easier said than done. The hospital is a unique species. Their importance to the community makes the stakeholder roster wider; consensus building is slow. When you are dealing with people who are very sick, the fear of interruption will naturally be incorporated into the process.
Another very real problem is the limited capital. Any action will cost you, and surgery centers are not cheap. For most hospitals, there is not much room for development.
However, it is wrong to only look at the list price without carefully checking the opportunity cost behind it. Buying ASC is cheaper than building multiple operating rooms on site, especially the reimbursement changes we have seen. Cooperation with companies such as Strive requires less capital, resulting in shared savings that you can withdraw from suppliers.
These decisions have a certain urgency. Preparing for the post-Covid world is triggering a series of activities. The window of opportunity is expected to close in the next 12-18 months. If the hospital wants to use it, the time is near.
For executives, finding their place may be uncomfortable. In the past, the hospital was fortunate to bring deals for them, not the other way around. The need to be proactive is not so urgent. For many people, this will be uncharted territory.
For those with limited experience in M&A, now is the time to work with M&A consultants who can help develop integration strategies and obtain capital. Any decision requires certain analytical skills and strong strategic thinking to imagine what a better, value-based system might look like.
Even if conditions do not allow immediate action, it is wise to start these discussions now. The game field is changing rapidly. At this unique moment, the hospital’s traditional wait-and-see approach will soon bring unnecessary costs.
Image: Getty Images, Mykyta Dolmatov