What is in this article?:
The Healthcare segment has shown some of the strongest growth in the U.S. foodservice market over the past year and is poised to do the same in 2013
Accountable Care is on the Cusp
The Accountable Care Act is creating waves across the healthcare segment, including healthcare insurance markets, especially with its expansion of Medicaid in states that embrace that option. Both for-profit and not-for-profit insurance organizations and hospitals are maneuvering to tap the increased spending this represents, despite its many uncertainties. (You can read how Florida's largest insurer, Florida Blue, is responding to this opportunity here.)
Some of the Act's requirements were buttressed in a major report released by the Institute of Medicine (IOM) in September. It concluded that America's health system has become too complex and costly and that a variety of inefficiencies and other factors in it are hindering progress in improving health outcomes, costs and equity. The IOM estimate suggests 30 percent of healthcare spending—more than $750 billion—is wasted on unnecessary services each year (Access the report, as well as various infographics, associated presentations and executive summaries here.)
A key recommendation of the IOM report is that healthcare systems implement payment models that link performance to patient outcomes and better healthcare delivery team coordination.
It is clear that a strong emphasis on cost management will continue to drive the overall healthcare environment. And while foodservice departments are not major contributors to hospital cost structures, they remain under the same scrutiny as other departments in terms of offering potential cost savings via FTE cutbacks and other measures.
Meanwhile, Accountable Care will
Carrots and Sticks
On the carrot side, pay for performance incentives are being tried as a way to improve Medicare outcomes while reducing costs. (For example, a major initiative begun last October will test whether a pilot project run by the Premier hospital network several years ago along these lines can pay dividends nationally). Nearly $1 billion in bonus Medicare payments will be paid out this year to the most highly rated hospitals as part of such efforts. And because this will be measured partly by patient surveys, hospitals are focused intently right now on improving the patient experience, which will mean a greater emphasis on face time with patients (including spoken menu and room service meal programs).
On the stick side, reimbursement penalties for hospitals that have too many readmissions will give administrators a strong taste of what Accountable Care will be like in coming years. By October of 2015, Medicare re-admission penalties can go as high as three percent of reimbursements and the (now limited) list of conditions covered by re-admission evaluations is set to expand.
Last fall, Medicare began implementing its first round of penalties for those hospitals it rated as having excessive re-admission rates. More than 2,000 hospitals were affected, with several hundred hit with the maximum penalty—a one percent reduction in Medicare payments for all regular Medicare patients in 2013.
The policy is controversial: hospitals with large percentages of patients who are sicker than average, who come from high risk groups or who live in poverty or other circumstances where post hospitalization care is limited believe they will face penalties for re-admission rates beyond their control.
Similar policies are being tried in New York City in plans to pay public hospital doctors based on patient discharge rates and followup outcomes and more programs along these lines are likely coming down the pike.
“Big systems are preparing for the lost revenue because of the ne re-admission regulations," says Maggie Stefanek, RD, senior associate at Innovative Hospital Solutions, a foodservice consulting organization.
“What this means for foodservice is that efficiency has to improve. The buzzwords are ‘faster, better, cheaper.’” Cost containment efforts "means there will be much more accountability in terms of hitting your financial and performance key performance indicators."
Multi-department management remains an important trend, especially in smaller systems.
Frequently, such changes are implemented via matrix-type management relationships that complicate lines of authority. It also means more directors will struggle to maintain food quality as larger campuses and regional networks require more satellite production and cross campus transport from central kitchens.
One result is that as systems consolidate, foodservice directors often find themselves managing services and logistics at multiple locations and on larger campuses. Stefanek notes that even as cashless payments and sophisticated point-of-sale (POS) systems are becoming more important to retail initiatives, "implementation has been complicated by the integration issues resulting from consolidation."
In such an environment, getting administrations to understand that expanded foodservice retail operations can more than pay for themselves can be difficult and remains a major challenge for directors. But the idea that well-run retail food outlets can generate meaningful added revenue is a concept whose time may finally be coming.
Stefanek believes the interest in retail programs will also grow as administrations "begin to focus on this as a wellness industry, rather than ain illness industry. increasingly, there will be an interest in connecting healthy choices with wellness outcomes on a clinical basis. In retail, that means loyalty and pricing programs to change meal choice behaviors."