Originally published in the Coker Connection newsletter.  Reprinted with permission from the Coker Group.

By Max Reiboldt, President and CEO

All indications are for 2009 to be a challenging year, as we deal with a stressed economy and other issues in the healthcare industry. Unlike what some may say, healthcare is NOT immune from recession. In recession or not, all healthcare providers should have a plan of action to deal with the many challenges they encounter, which no doubt will increase in the coming year.

What are the top ten trends and issues that will create challenges in 2009?

Revenue and reimbursement. Reimbursement may be healthcare providers' top challenge. As in prior years, total payment for services continues to shrink, whether from government, commercial insurance, or directly from patients. With less money available in the various sectors, providers will continue to experience increased challenges to maximize reimbursement. This calls for a concerted plan of action through various efficiencies and expanded services.

Cost containment. The need to control expenses and overhead is greater than ever before. Hospitals and physicians alike feel that they have cut wasteful spending to the bone. However, it may be necessary to explore  somewhat difficult avenues that were not viable options in the past, such as;

* Reduced benefit expense including employer health insurance contributions

* Salary increases based on performance and incentives as opposed to cost of living and/or other annual adjustments

* Sharing office space and subleasing to other providers

Each organization should inventory its possibilities and be prepared to implement some cost containment measure in 2009. Some actions could be implemented now and relieved later when the economic downturn reverses.

Consolidation. Practice mergers, hospital practice acquisitions and employing physicians, joint ventures, and other physician/hospital alignment strategies are now a major strategic and operational consideration. Coker Group is actively involved in consolidation initiatives with both hospitals and private groups. Every provider should at least look at the options and consider viable possibilities for more integration. Merging with other groups is a major strategy that often makes good sense.

Technology. Implementation of additional technology, e.g., electronic health records, PACs, and other applications, may be delayed, but HIT advances cannot be ignored or eliminated. Technology can streamline operations and improve efficiencies and in turn increase productivity and should be a part of the strategic plan. Technology will take the place of many other costs and can help increase revenue. HIT requires a huge investment in time, resources, and capital, but in the long run, IT will improve many other areas.

Quality incentives. Payers will increase reimbursement to providers based upon quality performance initiatives. Physician quality reporting initiative ("PQRI") has been extended through 2008 and likely will continue in some form. Since, quality incentives will be invoked by private insurers, those practices that are positioned to demonstrate quality (usually through an efficient and well-implemented technology platform) will be the ones that reap the greatest benefits.

Growth in ancillaries. Virtually every medical practice in the US provides ancillary services as a means to financial survival. Hospitals continue to look for opportunities where they can expand services and in many cases in partnership with physicians. Regardless of the structure and format, hospitals and physicians alike should be looking for how to grow existing ancillary services' revenue and profit, and develop other initiatives.

Government oversight and involvement. With the new administration starting early in 2009, plus the Democratic controlled congress, apprehension is high relative to what new and more stringent government regulations will be invoked. This could even extend to a full-fledged single-payer system, or more likely, some hybrid model. Uncertainties abound, yet based on historical precedent the Democratic Party takes a more aggressive view of government involvement, regulations, and control. Our opinion is that this is not good news for healthcare providers and will continue to pose a major challenge. Reimbursement from the government is not a major area of opportunity other than the likelihood of quality initiatives. And if the government continues to run low on appropriations, quality incentives may actually be reduced or eliminated. Meanwhile, during lower reimbursement and enhanced government oversight, regulatory compliance initiatives will continue to add expense to providers.

So what should practices and hospitals do about government oversight? Certainly, a strategy should include voicing your opinion, lobbying congress and other components of government. Utilizing associations like the AMA, MGMA, HFMA, and specialty academies to let politicians know the realities that healthcare providers face will be more essential than ever.

Provider shortages. A major challenge in most areas of the US is physician shortages, from primary care to specialists to non-physician and allied healthcare providers. The problem has shifted from lack of patients to lack of patient access to providers. It is essential for practices to become more efficient, use technology, and maximize the productivity of existing providers.

Recruitment is extremely competitive and will increase. Unlike prior generations, young physicians coming out of training have many choices and are looking for quality of life-not working all the time or being married to their job. On the other hand, they must also consider stark (no pun intended) economic realities of the economy. So, recruiting hospitals and practices must consider the desires of the younger physicians, while demonstrating a well-managed practice that operates efficiently. Provider shortages will continue and are a reality that hospitals and physicians must contend with in 2009.

Compensation plans. The income distribution plan, or compensation incentive structure for both private practices and hospital-employed physicians and other providers are more important than ever. Coker's practice management and hospital service lines work with many hospitals and private groups redesigning compensation plans. For the most part, a fine line must be drawn between providing appropriate incentives (both individual- and group-based, mostly tied to productivity) and still instituting initiatives that entail some quality of life and most importantly to physicians, sound clinical protocol.

Physicians themselves must vet the compensation plans, typically through a compensation committee or work group to ferret the issues and ultimately build consensus of an appropriate compensation incentive structure to submit to practice owners and/or hospital administration. However, compensation plans must stand up to a reality check that is fiscally realistic and has financial accountability. Incentives are good and typically result in greater productivity; however, they require having in place and applying strong compliance plans.

Transparency. At the end of the day, 2009 will also prove to be a year that requires more transparency in virtually every area of healthcare. The patients or customers are asking for transparency in their clinical care. Within the businesses, physicians employed by hospitals and private groups also want to know more about their situation, its structure, their performance, and the details behind their individual practice. The government is stressing more transparency, though at the same time we cannot forget about privacy. (Whether these are mutually viable or totally averse remains to be seen.) Nonetheless, as healthcare providers, transparency will need to continue to be a major area of consideration in strategic planning. In many areas, technology implementation can go a long way toward achieving transparency.

These are the top ten considerations and trends we believe will confront hospitals and physicians. Being aware is imperative; having a response strategy is essential. Finally, every group should also have an operational strategy to respond to these initiatives.

For more information or discussion, contact Coker's president/CEO, Max Reiboldt, CPA, at 678.832.2007 or via email at mreiboldt [at] cokergroup [dot] com.