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have to understand what the play might do and then move in a direction that you've learned is the best place to get—and keep—a good look," he says. "Otherwise, if you're unable to anticipate what might happen, you get a 'closed look.' In that situation, when referees tiy to make a call, chances are, the call they make is a guess—and studies show that when referees guess, they get it wrong a huge percentage ofthe time. The same can be true in health care."

After a game, refs will re-review the calls made and reexamine the rules, often with other referees

who have more understanding, to tr)̂ to gain more perspective. "The more philosophies and experience you bring to the table in understand- ing the right call for a given situation," he says, "the higher the chances that the right decision will be made ifthe situation presents itself again.' Referring to hoth refereeing and husiness, Heilsherg says, "You have the best chance to make an even better call when you take the time to become better informed and keep open your- self to other people's perspectives."

What's New on Our Blog

Anticipating Utilization Trends Key to Adapting in an Evolving Market

Dawn Samaris

The following excerpt recently appeared on the hfm

Healthcare Finance Blog, hfma.org/hfmblog. The blog

includes posts from a wide range of experts in healthcare

finance, with new posts appearing at ¡east weekly.

Hospitals and health systems must prepare for utiliza-

tion declines as they navigate healthcare reform cou-

pled with changing demographics. Having a thorough

understanding of the organization's current positioning

and the likely impact of healthcare reform and market

forces is essential if a provider is to project utilization to

support an accurate multiyear financial plan. From

there, the provider can project trends in the communi-

ties it serves and develop and implement strategies to

achieve its objectives.

There is some debate about hov/ the forthcoming

changes will affect patient volumes, but we believe that

current trends and increasing market pressures will

drive overall utilization down over time. Inpatient vol-

umes already are on the decline. In a recent study,

encompassing nearly half of the U.S. population, we

found that inpatient use rates per 1,000 people fell

more than 5 percent between 2 0 0 6 and 2011 in

71 percent of participating states.

By contrast, outpatient utilization Increased. That

trend is expected to continue in the short term, driven

largely by increased physician visits through expansion

of health coverage to about 3 2 million uninsured

Americans under the Affordable Care Act. But

opposing forces ultimately will counteract that growth.

With "more skin in the game," patients are likely to

seek fewer services as they assume greater responsi-

bility for the cost of care with higher déductibles

and copayments.

Meanwhile, providers will be motivated to decrease

utilization by increasing care efficiency as they assume

more risk and face new quality incentives from both

government and commercial payers. Under a value-

based model, providers will have incentives to improve

care management. Through initiatives to improve

patient outcomes, such as providing at-home, follow-up

care to patients after they are discharged from the

hospital, organizations can lower utilization by reduc-

ing unnecessary readmissions.

Reducing utilization can help organizations decrease

costs and increase their eligibility for narrow or tiered

networks. To participate in these highly selective net-

works, hospitals and health systems need to demon-

strate to payers that they can reduce costs significantly

by driving utilization out of the system. In exchange,

payers agree to direct more patients their way and

potentially share a portion of the savings.

Several urban markets already have seen compelling

utilization declines as large regional providers position

themselves for success in this market. A major health

system in Pennsylvania, for example, reported an

18 percent drop in hospital admissions and a 7 percent

26 APRIL 2013 healthcare iinancial management

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decline in patient costs three years after launching its

patient-centered medical home model in 2 0 0 7

(Gilfillan, R., et al., "Value and the Medical Home:

Effects of Transformed Patient Care," The American

Journal of Managed Care, Augusi20^0).

Providers that do not proactively participate in new

value-based care and payment programs leave them-

selves vulnerable to utilization declines, without the

benefit of shared savings or value-based payments.

In addition to anticipating declines in utilization, hospi-

tals and health systems should expect changes In their

payer mix that are likely to decrease revenues. For

example, more people will become eligible for Medicaid

and new federal and state insurance exchanges, which

are expected to reimburse close to Medicare levels or

below. Estimates of the number of commercially

insured who will move into insurance exchanges range

from 4 to 4 0 percent.

Scenario modeling is vital. Organizations should

clearly define their credit goals and understand how

various volume and payment scenarios could impact

their ability to reach those goals. The key is anticipating

how forces—such as utilization declines or changes in

payer mix—might affect revenues and cash flow. By

proactively outlining the levels of performance

improvement required to maintain a healthy credit

profile under different circumstances, organizations

can ensure they are prepared to weather the changes

ahead.

Dawn Sama ris is a senior vice president in the strategic tinanciai planning practice at Kaufman, Hall & Associates, Inc. (dsamaris(^kaufmanhall.com). ,

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