For several years now, Florida's employers have been applying unrelenting pressure to drive healthcare costs down, and the squeeze on the health dollar will continue to have a major impact on the state's health-services industry in 1997. Managed care has gained a strong foothold in the state, and health maintenance organizations (HMOs), physician groups and hospital networks are poised to become more sophisticated about cutting healthcare costs and providing quality care.
Part of the formula for success this year will involve additional consolidation among HMOs and hospitals to build even larger and more efficient healthcare networks. But saving money will not be the only concern that healthcare providers must face. In 1997, the providers will try to turn the vague art of measuring the outcome of treatment into a science. Healthcare consumers, say experts, will soon be able to shop for healthcare with more exact information about how well providers deliver it.
Where The Jobs Are The largest health services, ranked by average monthly employment in 1995 Hospitals 209,895 Medical doctors' offices 108,000 Nursing & personal care facilities 77,979 Home healthcare 45,107 Dentists' offices 31,456 Where The Money Is The top-paying health services, ranked by average annual wages per worker in 1995 Medical doctors' offices $53,700 Osteopathic physicians' offices 41,625 Dentists' offices 29,661 Medical & dental laboratories 29,313 Other healthcare practices 29,295 Source: Florida Department of Labor & Employment Security
Managed care
Membership in Florida HMOs in 1997 is expected to continue to increase dramatically. In 1995, HMO enrollment reached 24% of the population, or 3.8 million people, according to the Florida Hospital Association. By the year 2000, that number will soar to 50%.
In 1997 the state will help boost Medicaid managed care enrollment to more than 95% of its 1.6 million recipients as part of a state policy requiring new Medicaid recipients to enroll in a managed care program.
Medicare HMO enrollment also is expected to rise in some parts of the state. Only one-fifth of Medicare recipients are now HMO members. But if the American Association of Retired Persons endorses a particular managed care company, as anticipated, the elderly may flock to the plan.
As the number of managed care patients increases, competition will become even more fierce among providers. HMOs will demand deeper discounts from physicians and hospitals. Edward Dauer, M.D., a member of the Florida Board of Medicine, says physicians will have to improve utilization rates of medical services, decrease the length of hospital stays and order fewer diagnostic tests to stay competitive.
Dauer and other healthcare experts also predict more consolidation in the HMO market. 'The competition is intense,' Dauer says. 'The weaker HMOs will merge with the stronger ones to survive.'
Hospitals
In 1997, Florida hospitals will continue to develop their networks by merging and consolidating. The state's urban areas, where many hospitals operate at a 50% occupancy level, are likely to see more intense consolidation activity, according to Jeff Crudele, vice president of finance for Columbia/HCA South Florida Division.
The push to perform more procedures in a less-expensive outpatient setting has left the state with too many hospital beds. 'We could close about 20 hospitals and have no negative impact on the delivery of healthcare services,' says Scott Hopes, chairman of Healthcare Management Decisions, a national healthcare consulting and management firm based in St. Petersburg.
Some hospital experts believe that within five years virtually all hospitals will become critical care centers. All other patients will be treated in alternative settings, including outpatient centers, physician clinics or in their homes. As a result, home healthcare is one of the fastest-growing segments of the marketplace.
'Home health is an explosive growth industry. Every hospital that has the resources is setting up its own home health agency,' says Marc S. Kaufman, M.D., M.Sc., president of Acute Care Medical Associates, a company that works with HMOs to provide care in office and hospital settings. 'As we become more efficient and have shorter hospital stays, the hospitals are finding new ways to maintain their revenue streams.'
Nationwide, home healthcare has grown from a $1.3 billion industry in 1980 to a $27.9 billion industry in 1997. As more resources are funneled to home care, this segment of the market is projected to grow to $45.9 billion by 2000, according to Kim Streit, vice president of healthcare research and information for the Florida Hospital Association.
Physicians
Florida physicians have seen their incomes squeezed by managed care and by an increasing administrative burden. Although many physicians still work as solo practitioners, more will begin to form groups and affiliate with practice management partners.
'We are going to see physicians begin organizing themselves. They are going to seek out partners to help them,' says Hopes, of Healthcare Management Decisions. 'Physicians are going to require some creativity and some risk as they become more involved in working together.' In 1997, large numbers of physicians will either join established groups or migrate to newly forming groups because they fear being locked out of managed care contracts.
'There is still a huge amount of physicians who are independent and unaffiliated. Only 30% of doctors are in a group practice of more than three,' says Stephen A. George, M.D., chairman and CEO of First Physician Care, a practice management organization based in Atlanta. 'Physicians who will survive and thrive will be flexible, adaptive and open-minded to the market demands.'
George adds that physicians' access to capital and support will be a key component. Those physicians who are already in large groups of 30 to 50 physicians will look to grow externally and quickly through mergers and acquisitions to create more leverage with payers.
Some physician groups will join forces with hospitals and form Physician Hospital Organizations. These PHOs will negotiate with managed care companies for physician and hospital services.
The first generation of HMOs sought to get a better price for healthcare services by bringing patients to physicians for an agreed-upon fee. Now physicians and physician networks are beginning to take responsibility for managing patient care and the healthcare dollar. Under this practice, known as capitation, physicians receive a flat monthly fee for every patient they take on, regardless of services provided.
'Physicians are being put in the position of having more control over patient care. With that comes some fiduciary responsibility,' Hopes says.
Healthcare Industry Trends HMO Enrollment 1992 1993 1994 1995(*) Commercial HMOs 1,561,000 1,840,000 2,158,000 2,476,000 Medicare HMOs 308,000 332,000 408,000 449,000 Medicaid HMOs 239,000 317,000 417,000 433,000 * Through September 1995. Source: Florida Hospital Association Hospital Consolidation 1992 1993 1994 1995 1996(*) Not-for-profit & public 2 8 10 8 2 Investor-owned 5 10 9 7 5 * Through June 1996. Source: Florida Hospital Association Internal Data
Individual physicians and groups will have to become more savvy about the business of medicine as they take more financial risks.
Outcomes
Some healthcare experts believe the concept of measuring quality of care will become an industry buzzword in 1997. As competition continues to grow, providers and managed care organizations will try to create more advanced ways of quantifying the quality of care provided and of measuring patient satisfaction.
'Outcomes measurement is gaining in its level of focus and sophistication,' says Columbia's Crudele. 'There is a real serious focus by the industry to take that information and use it in a very forward manner to improve the quality of care and communicate it. It is important to understand that many of these systems are in the developmental stage. The good news is that there are attempts by all of us to improve these systems so that ultimately patents and doctors can understand who is doing a good job and who is not.'
Expect providers and payers to use this information to distinguish themselves and build some 'brand-name' awareness. Companies that can offer the highest quality service and best value will end up being the big winners.
'There is this cry from the public for greater accountability,' according to Kim Streit of the FHA. 'There is a movement to publish this type of data for the public to use to make a purchase decision. Unfortunately, the data is not there yet.'
