Are hospitals on a Blockbuster path?

Kenneth Kaufman, CEO, Kaufman Hall, sounded the alarm at HFMA’s recent annual meeting in Las Vegas: Hospitals must engage with patients in an increasingly outpatient-focused way, lower their cost structure, aggressively reposition for fee-for-value payment and prepare now for new competitive threats.

“We’re hitting a time in healthcare where we may see our story as Blockbuster to Netflix,” Kaufman said during his presentation, as reported on the HFMA web site.

Citing Medicare’s unsustainable spending trends and new uses of pharmaceuticals to replace certain surgical services, Kaufman urged attendees to prepare for rapid change.

Kaufman envisions a new-form healthcare organization emerging that will assist employers and patients to access hospital, physician, outpatient and continuum of care services, much like a cable TV company helps consumers access cable channels (HBO or ESPN) without actually creating content.

Just as Netflix displaced Blockbuster, these new companies could trump hospitals and other current providers in this role.

To survive, hospitals will need to move from providing aggregated, inpatient services to providing disaggregated outpatient services in the community. They also need to alter financial strategies by venturing into some value-based contracts and assuming risk now to gain experience.

“If you think you’re going to have time to change, you’re wrong,” he was quoted as saying. “You can’t time this change.”

Retail clinics, Walgreen’s Theranos business line (which provides 200 of the most commonly ordered blood tests based on one drop of blood) and price transparency are already changing market dynamics, he said.

High-deductible plans and the practice of employers directing patients to shop on private health insurance exchanges are already shaking up the insurance market as patients become price sensitized.  The article quotes Kaufman as saying that annual enrollment in private exchanges is projected to reach 40 million in 2018.