Last month, we discussed our outlook for healthcare staffing in 2014 and the underlying trends in supply and demand for employment in the industry. This month, we dig a bit deeper into other changes under way in healthcare that will impact staffing this year and beyond: shifts in the way consumers access healthcare and the new models through which providers are paid.
Over the last several years, we have witnessed a wave of consolidation in the healthcare industry, with large hospital systems continuing to grow by snapping up the practices of independent physicians. Particularly prevalent in the disciplines of cardiology, oncology and primary care, this trend has been driven in large part by the evolution of the Medicare payment system, under which the same services performed in a hospital outpatient setting may be reimbursed at a rate 30 percent or more above those conducted at a physician’s office. In addition, larger organizations are better able to rationalize technology investments by leveraging their scale through greater purchasing power.
Being bigger doesn’t necessarily mean you can do everything cheaper, however, as certain procedures can be performed more economically in an ambulatory setting than in a large facility. Thus, many local health systems are evolving into a hub-and-spoke model, in which a main hospital centralizes management and provides certain types of care while other functions are handled at satellites.
For the healthcare staffing industry, the upshot of this consolidation trend is that it creates larger customers to target. When a solid client grows by acquiring a competitor, it can be like a new business win with zero associated sales expenditure. However, such a change in structure can also lead to increased competition and price sensitivity, particularly if you were dealing directly with a facility that has been acquired and become a spoke, with staffing decisions now relocated to the associated hub. Standards in terms of education and training for the workers you supply may become more stringent. Moreover, hospitals have historically had a higher temporary penetration rate relative to other care settings like community health centers and ambulatory care facilities, so staffing firms may face something of a learning curve when selling into these new channels.
Though the broad expansion of insurance coverage through the Affordable Care Act should factor into the changes in how Americans access healthcare, the nature of its impact might not be strictly intuitive. For instance, many observers predict a relative decline in emergency room (ER) admissions as the newly insured are able to access treatment through more appropriate channels. However, Massachusetts actually experienced a spike in ER utilization following its in-state expansion of coverage, as the backlog of care seekers caused wait times on the order of months for an appointment at a doctor’s office. On the whole, though, the demographics of the newly insured are generally younger and healthier than the general population, and thus are anticipated to skew more heavily toward usage of outpatient, primary care and preventive services.
Perhaps to an even greater degree than changing settings of care, healthcare staffing is going to be impacted by new payment structures. Both government and private payers are adopting models that reward positive health outcomes in contrast to the current fee-for-service paradigm. For an Accountable Care Organization (ACO), revenue is linked less to the number of bed days and more to lower rates of readmission and hospital-acquired conditions. Bundled payments, through which healthcare providers are reimbursed on the basis of the expected cost for an episode of care (i.e., the collection of care provided to treat a particular condition for a given period of time), are likewise becoming more common.
On its face, this shift may be seen as a negative for staffing firms, as procedure volume has historically been the primary driver of demand. However, multiple studies have shown that staffing levels correlate with results that value-based care rewards, such as lower readmission rates and reduced unfavorable outcomes. It is critical, then, for staffing firms to engage more closely with clients, determine their underlying needs and objectives, and articulate how you can help meet them.
As the U.S. healthcare system is in the midst of a transformational period, change may be the only constant we can expect in the near term. Successful staffing firms will increasingly position themselves as solutions providers, not just temp suppliers. We know from our surveys that healthcare buyers are more reticent to use staffing than those in other industries. This state of flux offers the opportunity to flip that dynamic on its head and become — or, more accurately, finally be recognized as — a critical partner.
