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Table of Contents

Introduction. 2

5 Issues in the US health care industry. 2

Most important economic influence of these issues. 3

Issue 1: Addressing the cost to provide health care. 3

Issue 2: Transitioning to care based on value. 5

Issue 4: Problems in achieving the scale. 5

Specific strategies to mitigate these Issues. 6

Strategy to mitigate Issue 1. 6

Strategy to solve Issue 2. 7

Strategies to mitigate Issue 3. 8

Strategies to mitigate Issue 4. 8

Strategy to mitigate Issue 5. 9

Strategic manner to apply best economic practices. 9

Likeliness to adopt the strategies to address the issues. 9

Conclusion. 10

References. 10

Introduction

One country that spends more on the industry of heath care than any other nation in the world is United States with an estimate of 17.7 percent GDP of US health care spending in the year 2013 which has outstripped the revenues as a GDP percentage. The industry furthermore is expected currently to grow in future at a projected growth of 4.9 percent every year and can increase to GDP of 17.9 percent by the end of the year 2018. Although investment growth was slow during the times of recession but still it has continued to develop in a slow manner in comparison to what was historically seen. Why is this growth slow? There are various pressing issues that exist across US healthcare industry such as containing and decreasing the high costs persistently existing in the health care industry further attributed to factors of demography and economy related concerns. The funds and coverage of insurance in the US health care industry have undergone important transition through the Affordable care act of 2010 (Duerden et al, 2011). The act helped in expanding Medicaid and also introducing mandatory insurance of health as an effort for increasing coverage approximately from 85 percent population and also slowing the increasing costs of health care. But still even if the customers are able to gain coverage in health insurance, by no means they are able to insulate themselves from the health care costs burden (Duerden et al, 2011). Customers pay enhanced part of their premium health plan and experience high cost sharing out of their pocket for every health care service type used by them. Such enhancement is expected to consistently remain the same because the employers are shifting to higher offering deductibles and people gain coverage by their marketplaces of insurance called often as the exchange of public health insurance.

Such pressing issues require discussion and therefore this report has been prepared in order to focus on the current and future based economic issues present in the industry of health care in US. Furthermore, the scope of this report lies in analysing the most pressing economic impact of the issues on the industry of healthcare through examples suggesting particular strategies that should be adopted for every selected issue, determining the strategic way in which US can apply best practices of economy from other nations that are able to address the issues and assessing the government likelihood to address the issues effectively.

5 Issues in the US health care industry

The following Figure 1 has been adapted from a report delivered by Deloitte indicating the most prominent issues of US health care in 2015.

(Duerden et al, 2011)

These issues as already mentioned before exist because of factors such as the employers are shifting to higher offering deductibles and people gain coverage by their marketplaces of insurance called often as the exchange of public health insurance. Also the government estimates of spending in the health care sector does not take into consideration discretionary spending of the customer over a wide range of products and services. The issues defined in the figure above will be discussed in the next section.

Most important economic influence of these issues

Issue 1: Addressing the cost to provide health care

The biggest issue in US health care and also an issue for all health care systems across the world in the year 2015 is to address the cost of delivering health care. This is true certainly for U.S which is the only nation without a budget on health care (Duerden et al, 2011). While other countries spend what is under their affordability, the traditional U.S spending depends upon what is required to be spend. In the year 2013, the result was estimated at 2.8 trillion dollars in spending related to health care and also depicted consistent cost enhancement projections. Spending on every capita in United States is roughly double than other developed nations.

Increased pressure for containing the costs of health care and for demonstrating value comes from every side:

Payments based on medi-care fee for services should be under replacement (Duerden et al, 2011). If Congress takes the decision of passing reform at a sustainable rate of growth based on a legislation then United States can acknowledge more focus on paying for only quality and alternative methods of payment.

Even without the reform of Medicare, it is likely for physicians to see more patients because United States population is steadily comprised of more aged individuals. Increasing number of patients is more likely to be covered under plans of managed care that focus on narrowing the networks and more based on payment approaches based on value.

Diagnostics advancement and continued therapeutics have only contributed to further rise the costs. Unraveling the genome of human beings, targeting various therapies and new devices of medical range are exciting but they can also be expensive (Duerden et al, 2011). The way in which the spending is to be prioritized and pay for such advancements is a concurrent challenge.

Coverage of patients is also changing. More patients have the likeliness to be covered under the Medicaid (typically which pays lesser than the payers in the commercial sector and by exchange.

Furthermore, employers shift the costs of health insurance. Employees aren't active in changing the payment basis but they are still shifting the costs for their employees especially by following a deductible strategy.

Patients have become more sensitive to price. Patients have the likeliness to become more conscious to cost as they have higher deductibles cost and therefore they face large services based on cost sharing inclusive of pharmaceutical specialty and devices of medical aid. Customers are more likely at seeing transparency of pricing.

Even though systems of health and hospitals need to benefit from reducing the uninsured individual's percentage but still they may consistently acknowledge high deductibles prevalence for individuals with employers and coverage in the marketplace (Duerden et al, 2011). As a response, providers require development of newer strategies that can help in capturing enormous payment proportion or risk incurring increased bad debt levels. An example can be quoted here of some hospitals that use analytical techniques and strategies of advanced technologies for supporting the efforts of collection. Such programs further help the hospitals to monitor outcomes and like them to rates of reimbursement especially under the models of value based payment such as ACO (Accountable Care organizations).

Issue 2: Transitioning to care based on value

The United States evolution of health system transitioning from volume based to value based care is still under its way and has spurred through widely spread measures of controlling costs, improving outcomes and obtaining more value for the spent money. As this evolution influences all the stakeholders of health care, value based care should have a future which depends upon physicians because of their immanent role in delivering health care. In a survey conducted by Deloitte Center in the year 2014, Physicians said that they are well aware of the fact that a shift is needed to value based care and this is happening with inevitability. As a matter of fact, they anticipate that payment models based on value will be equivalent approximately to 50 percent of the total compensation in the coming decade but they are still reluctant at participating because they prefer the status quo due to the pressurizing concerns on the impact of financial risk, for example being obligated under accountability for perspectives that are not in their control.

Issue 3: Problem in adapting to a realigned market

Approximately 8 million residents in U.S have a selected plan of insurance through the measures of Health Insurance Exchanges facilitated by state and federal government during the first half of annual period of enrolment from 2013 to 2014. A same number is expected for enrolling in the years to come. Most of the enrollees selected plans of Bronze and Silver which are both such packages that have narrow networking providers. As the rolls of the patient's increases and narrowing of the networks takes place, it may be required to adapt to market force realignment (Duerden et al, 2011). Small players may feel they are in danger of being excluded from the narrowed down network. On the contrary, players dominant in the market have a likeliness to have immunity from being excluded and they have the ability of negotiate from strength's perspective. Dominance partly comes from being large and from the requirement of being big that drives the sector on consolidation basis. The way in which hospitals and health systems are aligned or realigned within a market is dependent upon their position in the hierarchy of health care.

Issue 4: Problems in achieving the scale

Imprtant changes in regulation, innovation of technology, pressures from financial consideration and dynamics in the market are all such change based considerations that set the stage for rapid consolidation amongst the providers in the health care (Duerden et al, 2011). From the year 2009 to 2013, the volume of deal in the hospital increased annually by 14 percent. Rapidly the physicians are seen moving from practicing privately to a well-established model as employees and acquire through systems of health and plans of health. Both that is consolidation by vertical systems and horizontal ones has increased tremendously even after the increased scrutiny of regulation. Additionally, convergence of cross-sectors has an expectation of increasing. It will be very likely for them to become more general for a plan in the health care system to offer services in clinical domain not only professionally but also technically (Foot et al, 2010). Even though, generally consolidation is inclusive of mergers and acquisitions from a traditional perspective but still from the perspective of modernization and globalization, options like joint ventures, affiliations and even collaborating with larger institutions can help in proving attractive as systems of health care are looking for building the scales, adding capabilities, increasing the power of purchase, streamlining services and reduce costs. An example can be quoted here of transition to value based care that is likely to need systems of health to differentiate themselves based on innovation and diversification of services. Some health systems have resources of financial and organizational needs to go further on their own and fulfill such strategies. However there are others that still remain especially due to heightened scrutiny in regulatory measures.

Issue 5: Managing regulation and risks

The regulatory environment of health care has a likeliness of continuing towards change an grow in terms of complicatedness especially in the present era as guidance, enforcement measures and rules present in relation to ICD-10, 3408 and transparency of ACA are released through the policy makers at the federal level and state level (Ham, 2010). In response to this, the providers of health care need to completely assess their present programs of compliance and if needed they need to invest in newer HIT and techniques for meeting the requirements of reporting. This is a proposition with daunting aspects specifically for those systems of health that are smaller in size as they lack inadequacy and funds for meeting the needs.

Specific strategies to mitigate these Issues

Strategy to mitigate Issue 1

Rates of growth are driven through factors as already discussed above such as increasing health care use specifically with new technologies that are highly expensive, general inflation in price, medical services beyond common inflation of price and population aging. Strategies for reducing the costs can be as follows:

Methods of contribution by the employer: The premium costs of the employers was less by 480 dollars average especially when more than 2 plans are offered by the employers and they made a fixed contribution to dollar regardless of the chosen plan in comparison to making fixed contribution to the dollar and offer two plans only.

HMOs and competing: In highly competitive markets, HMOs reduce costs through substitution of hospital visits ambulatory care.

Managing care and a state mental mandate for health parity: After 3 years of introducing a managed health care plan behaviorally by an insurer in UK (2010), mental health costs resulted in approximately 39 percent (Ham et al, 2011). This is a measure which was taken as a response to a mandate of health parity according to State mental authority implemented with an aim of leading high costs of health care. Such study did not measure any impact on the care quality.

Strategy to solve Issue 2

The only strategy that can help health care systems transition to value based care is through value based care model effective implementation in United States. The main strategy that can be adopted will be 3 fold inclusive of 3 main factors that say to evolve, integrate and lead. In particular evolving is the first step to adopt the transition. Specifically it is important to look at how hospitals will have the ability of driving revenues. Hospitals will not be able to depend on the services for inpatient's as the major focus of the health care industry will be on providing care with higher quality that can help in reducing readmissions and in turn decrease expenditure. CEO's here will require to look for newer ways that are substitutes of revenue streams (Kot et al, 2010). Considering provision of nutrition and opening wellness centers as well as pharmaceuticals through mail and opening clinics based on employees are required. The next step is Integration. Most professionals in the health seek integration in the clinical dimension as the man way that helps in succeeding the market which works on the model of value based on payments. Consequently, the CEO will need to take into consideration the strategies that help in aligning physicians helping them to provide care and manage it outside the settings of hospitals. The third step is leading. By following leadership, a facility can transition to a system based on value. It is required therefore to have a successive growth of strong nature, retention ability and programs to develop leadership that are key to ensure the facility is transitioning. Also, it was seen that there was one problem which was the inappropriate participation of physicians (Marmot Review, 2010). For boosting the value based care physicians participation, partners in health care need to develop strategies centered on physician around the resources of clinical and business based resources, skills and capabilities that respondents in the survey discussed in above section said that they needed help with. Such strategies are inclusive of expanding capabilities of clinical support, allowing technological growth, integrating Information technology, accessing non-physician staff for coordinating the care of patient and expertise of managerial techniques and knowledge in business.

Strategies to mitigate Issue 3

In order to tackle the issue of realignment with a view to make it successful, it is required that markets are realigned based on equally positioning the hierarchy in health care systems (Parsonage et al, 2012). The present system of healthcare does not have alignment with the requirement of US population. A new alignment model therefore should be designed as a strategy to low cost and enhance quality through creation of patient care based value. Furthermore, this advanced model should be such that it repositions all the health care systems as equally strong.

Strategies to mitigate Issue 4

The consolidation in health care systems has to be taken up through pursuing them in a cautious manner given the increased scrutiny from regulatory authorities. In addition, stakeholders in the other industries may be not aware of the plans in the health systems and customers who at some times have experienced prices to rise as a consequence of consolidation. Therefore the healthcare consolidation should be viewed from an economic lens and then its strategy should be devised. The strategies are as follows:

Ø Ensuring that every investment, charter of project, values and groups at work are aligned across the strategic pillars of an organization.

Ø Defining value milestones mapping to the consolidated goals of strategy clearly articulating the way in which value is measured (Pirmohamed et al, 2004)

Ø Enforcing a model of organization that revolves around orienting information

Strategy to mitigate Issue 5

The only strategy that can help mitigate Issue 5 that is management of regulations and risks is through the strategy of efficient monitoring and integration of IT to ensure security and privacy.

Strategic manner to apply best economic practices

The practices to manage economic risk factors is only based on managing the hospital through efficient practices that only promote outcomes such as high quality and higher productivity. The transition however should take place slowly starting first through transforming the structure of health systems to value based care systems. The only strategy that can help health care systems transition to value based care is through value based care model effective implementation in United States. The main strategy that can be adopted will be 3 fold inclusive of 3 main factors that say to evolve, integrate and lead (Powell et al, 2008). In particular evolving is the first step to adopt the transition. Specifically it is important to look at how hospitals will have the ability of driving revenues. Hospitals will not be able to depend on the services for inpatient's as the major focus of the health care industry will be on providing care with higher quality that can help in reducing readmissions and in turn decrease expenditure.

In order to align the remaining strategies in a strategic manner the above mentioned strategy should first be implemented and then the remaining should follow.

Likeliness to adopt the strategies to address the issues

There is a likeliness for all the recommended strategies to be adopted either by the government or the private sector in the health care industry. The reason behind this is the credibility and value of this report. This report has been prepared through concisely registering facts and figures in a specific manner resulting in highlighting the value of this report. Furthermore, each of these strategies are renowned ones and they have been adopted only because in several similar developed and developing nations have practically implemented them to reduce the costs (Purdy, 2010). There is a probability for these to work in the case of United States as well. Also, these strategies have the ability to in turn influence in a positive manner the economic stability of any nation which is most desired by U.S based health care industry.

Conclusion

Health care industry in all nations is equally important and equally important are the challenges that this industry faces today. Therefore, there is a requirement to follow concise steps and take measures such as those discussed in this report in order to mitigate the risks and make the health care industry of U.S based on value and quality of care.

References

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Ham C, Dixon J, Chantler C (2011). ‘Clinically integrated systems: the future of NHS reform in England? ' British Medical Journal, vol 342: d905.

Kotz D, Stapleton JA, Owen L, West R (2010). ‘How cost-effective is “No Smoking Day”?'. Tobacco Control, vol 20, no 4, pp 302-4.

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Parsonage M, Fossey M, Tutty C (2012). Liaison Psychiatry in the Modern NHS. London: Centre for Mental Health. Available at: www.centreformentalhealth.org.uk/mental_physical_health/liaison_psychiatry.aspx

Pirmohamed M, James S, Meakin S, Green C, Scott A, Walley T, Farrar K, Park B, Breckenridge A (2004). ‘Adverse drug reactions as cause of admission to hospital: prospective analysis of 18,820 patients'. British Medical Journal, vol 329, pp 15-19.

Powell Davies G, Williams AM, Larsen K, Perkins D, Roland M, Harris MF (2008). ‘Coordinating primary health care: an analysis of the outcomes of a systematic review'. Medical Journal of Australia, vol 188 (8 suppl), pp S65-S68. Available at: www.mja.com.au/public/issues/188_08_210408/pow11099_fm.html

Purdy S (2010). Avoiding Hospital Admissions. What does the research evidence say? London: The King's Fund. Available at: www.kingsfund.org.uk/publications/avoiding_hospital.html