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Trend: Rural Hospitals Remain at Risk of Closure - Rural hospitals in the US continue to go out of business at a high rate, and many are at risk of future closure. More than 90 rural hospitals in 26 states have closed since 2010, primarily in the southern US. Another 430 facilities (or one in five US rural hospitals) are at high risk of closure due to financial troubles, according to a recent analysis by Navigant. Rural health providers struggle to maintain profitability due to higher populations of low-income and uninsured patients, lower overall patient volumes, and reduced Medicare reimbursements. The highest closure rates have occurred in Texas, Tennessee, and Georgia. States facing the highest rate of future closures include Mississippi, Alabama, Kansas, Georgia, and Minnesota. Some health care systems try to fill the gap by developing emergency care clinics, with no overnight beds. Others are setting up vast telehealth networks so that remote patients can consult with physicians digitally. But some rural residents lack access to sufficient care when serious events such as heart attacks and births occur.
Industry Impact - Hospital operators in rural settings must improve outreach and solidify revenue sources to ensure continued operations. When hospitals are shuttered, health systems struggle to provide contingency care, and local medical professionals may be forced to leave their communities.
Health Care Reform - Government health reform efforts are changing how medical care is acquired and paid for in countries around the globe. In the US, the Affordable Care Act (ACA) aims to make health coverage available to all Americans and to keep health care costs low. Provisions of the law include health insurance exchanges, expansion of Medicaid, more medical training, and the establishment of health care technologies that improve efficiencies. Reimbursements are increasingly influenced by how well providers manage patient outcomes and cost efficiencies. For instance, hospitals that don't succeed in cutting readmission rates receive lower Medicare reimbursements. In Europe, some governments are working to control costs by cutting health budgets and reducing payments for providers, pharmaceuticals, and devices.
Shortage of Physicians and Nurses - Demand for health care workers is increasing, but the available labor pool is inadequate. The Association of American Medical Colleges predicts a shortage of up to 120,000 doctors by 2030, a problem compounded by health reform, the aging US population, insufficient residency opportunities, and impending retirements of older physicians. The American Association of Colleges of Nursing projects a nursing shortage as some one million RNs are expected to retire by 2030. Other analyses, however, say that shortages are regional rather than countrywide and may be met with incentives for providers to practice in rural and other underserved areas.
Containing Rising Costs - Prescription drug prices, aging populations that require more care, and the increasing cost of medical technology have contributed to the rising cost of health care in recent years. Countries around the globe are working to control costs through proposals including the adoption of electronic health records, more focus on quality and efficiency, emphasis on less-expensive preventive care over more expensive services, and government regulation to keep insurance premiums and treatment payments low.
Dependence on Reimbursement Rates - Most medical bills are paid by various third-party health care insurers, and health providers are dependent on gaining competitive managed care contracts with payers. Exclusion from provider lists and reductions in reimbursement rates could have a significant effect on revenues. The consolidation of third-party payers in the past decade has produced a number of large payers that frequently follow Medicare's lead in setting rates. Large hospital organizations such as Tenet deal with thousands of managed care contracts, which can make it difficult to efficiently bill and process accounts.
Medical Errors - The incidence of medical errors resulting in hospital readmission or patient death is an issue of critical importance to the health care industry. To encourage hospitals to improve care quality, Medicare has established penalties for hospitals with high rates of preventable medical errors, such as catheter-associated urinary tract infections. Hospitals are looking at ways to reduce readmissions and patient deaths, including electronic medication tracking, procedural checklists, and safety training.
Malpractice Insurance - Malpractice insurance costs are significant for health care practitioners. Providers are subject to legal action that can involve significant defense costs and large monetary claims. Facilities typically purchase professional, general, and umbrella liability insurance coverage to protect against excessive claims. A rise in premiums or claims may lead doctors to practice defensive medicine, such as by ordering more tests. Many doctors support tort reform, which would reduce or limit jury awards for damages. Several states impose caps on awards, which state officials say help them retain and recruit physicians. However, some states have reversed caps in recent years.
Disclosure Rules - Under the US Sunshine Act, manufacturers of covered drugs, medical devices, biological products, and medical supplies have to report to Medicare any payments to physicians and teaching hospitals, such as investment interests, ownership, or other transfers of value. The law took effect in 2014, requiring manufacturers to compile the information annually. The Sunshine Act is designed to make transactions between manufacturers and physicians transparent to patients and others.
Increasingly Informed Patients - Consumers are more aware of their health status and appropriate diagnostic care. Many patients use the Internet to access websites such as WebMD to research diseases and symptoms, and join online communities to discuss health issues and concerns. With insurance companies limiting doctor office visits to as little as five minutes, many patients are now taking it upon themselves to increase their medical knowledge, unwilling to rely solely on the advice of hurried medical professionals.
Employment Continues to Rise - Despite a pending shortage of doctors and nurses in the coming decade, employment in the US health care sector increased more than 20% over the past 10 years. Employment in the sector is expected to increase about 18% by 2026 (from 2016), with the strongest growth expected in health care support occupations, health care practitioners, and technical occupations.
Consolidation - Changing reimbursement practices and other reform measures have spurred unprecedented consolidation in the health care industry, altering the competitive landscape. Hospitals have been buying competitors, independent physician groups, and insurance companies, all to get a better handle on cost containment, patient care data, and revenue streams. Physicians are joining group practice organizations or affiliating with hospitals to gain efficiencies and reduce risk. Participation is growing in accountable care organizations (ACOs), which are networks of hospitals, physicians, and other providers that coordinate patient care.
Outsourcing Services - To lower operating costs, hospitals and clinics are increasingly outsourcing services to third-party providers. Food service, housekeeping, laundry, IT, pharmacy, inpatient care management, and ER services can be outsourced to independent contractors, boosting margins and increasing efficiencies.
Health Information Technology (HIT) - Health information technology (HIT) integrates electronic health records, decision support systems, and computerized physician order entry for medications. Hospitals and physicians that invest in HIT may be able to improve scheduling, lower nurse administrative time, improve drug use, and lower the risk of adverse drug reactions. The US government has put financial incentives in place to encourage the adoption of HIT as a way to ultimately improve medical care and lower costs. However, hospitals have found that development of HIT is complex and expensive and may outweigh eventual cost savings. Interoperability among providers is a barrier to success, as companies may use software programs that don't speak to each other.
Aging US Population - The aging US population both strains and presents opportunities for the American health care system over the next decade. Health care spending per person for those over 65 is about three times as much as for the rest of the population. The US population 65 and older is expected to increase by about 49% between 2016 and 2030, compared to a 10% increase in the population as a whole.
Personalized Medicine - Personalized medicine uses a person's genetic profile to identify potential risk for diseases such as cancer, diabetes, heart disease, and kidney failure. Since the 2003 sequencing of the human genome, scientists and physicians have begun to identify treatments and strategies for complex conditions that can be tailored to individuals.
Preventive Medicine - Medical advances show that many disorders can be prevented or delayed through early intervention, such as lowering cholesterol. Insurers and employers that provide health care benefits have a vested interest in promoting less-expensive preventive care to avoid expensive surgical procedures. This may benefit physicians who actively manage their patients' overall health. Hospitals are hiring professionals tasked with overseeing a patient's stay and providing preventive care counseling to reduce readmissions, length of stay, and errors.
Telemedicine - Doctors are accustomed to using videoconferencing and online technology to consult with other doctors; now they are using the same technology to treat patients. Telemedicine allows doctors to consult with and treat patients who live in rural areas. It also lets patients see specialists who may be unavailable in a local market. Insurance companies are rolling out telemedicine consultations to their networks as a way to increase access to care and control costs.
Handheld Technology - Handheld devices such as portable ultrasound machines will let doctors and emergency responders gather medical data in the field and transmit it to a hospital or emergency room. Other devices such as smartphones and health applications are making inroads into the health care field as well. However, the FDA has determined that certain smartphone health apps (those that could put patients at risk if they don't work properly or that impact the functionality of traditional devices) are to be classified as medical devices requiring approval.
Growth of Noninsurance Practices - Some doctors are seeing fewer patients, but charging them more, with the bulk of the cost paid for by the patient rather than a third-party payer. So-called concierge practices may serve only 300 patients rather than the typical 1,000, but charge each an annual fee of $1,500 to $2,000 for regular checkups and advice. At the other end of the spectrum, doctors are offering similar services to patients who can’t afford health insurance and who may pay between $15 and $75 per month. Though the costs are low, doctors can recoup expenses because they avoid complex insurance billing systems.
Copyright 2019, Hoover's Inc., All Rights Reserved. This data cannot be copied, sold, or distributed in any manner without the written permission of First Research.
Demand: Driven by medical advances and demographics
Need efficient use of labor and equipment
Risk: Healthcare reforms and limited coverage from insurers
Revenue (in current dollars) for US healthcare, a sector that includes physicians, dentists, hospitals, home healthcare, nursing homes, and daycare services, is forecast to grow at an annual compounded rate of 6 percent between 2019 and 2023. Data Published: January 2019
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