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Five health care trends and their implications for dental care
Accepted Manuscript Five Healthcare Trends and their Implications for Dental Care
PII:
S0011-8486(14)00138-1
DOI:
10.1016/j.denabs.2014.04.002
Reference:
YMDE 2095
To appear in:
Dental Abstracts
Please cite this article as: , Five Healthcare Trends and their Implications for Dental Care, Dental Abstracts (2014), doi: 10.1016/j.denabs.2014.04.002. This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.
ACCEPTED MANUSCRIPT
Five Healthcare Trends and their Implications for Dental Care Commentary by Kenneth Kaufman, Chair, Kaufman Hall For Dental Abstracts
RI PT
Today, healthcare spending in the U.S. stands at 17.4 percent of the gross domestic product,1 significantly higher than the rate for any other developed nation.2 Despite some recent slowing in the rate of growth, healthcare spending still threatens the stability of our nation’s economy. Without a significant change in the healthcare cost structure, the nation faces the need for more cuts in federal spending for core services and higher out-of-pocket expenses for consumers, among other negative effects.
SC
This high level of healthcare expenditure is not matched by high levels of health. For example, the U.S. ranks 26th in life expectancy in the most recent survey of 34 OEDC nations.3
M AN U
This unsustainable state is giving rise to a transformation of the healthcare business model from a focus on providers, volume, inpatient services, and sickness care to a focus on consumers, value, outpatient services, and wellness. Ultimately, the reorganized healthcare system may see the emergence of a new entity that owns the infrastructure of care and organizes its delivery to consumers from multiple sources using multiple channels. Dental care is undergoing its own transformation. With utilization dropping and a significant number of Americans without dental insurance coverage, dental care providers are struggling to integrate dental care into the continuum of healthcare in an era of increased competition, cost pressure from insurers, and consumerism.
TE D
Evidence of the U.S. health system transformation can be seen in five key trends that have critical implications for healthcare providers in general and dental care providers specifically. Trend #1: Population Health Management
EP
Population health management arises from the goals of reducing the cost and overutilization of care while improving health. It is designed to coordinate care across the continuum and place financial accountability on providers for the health and efficient treatment of a defined population.
AC C
What It Means for the Healthcare System The population health management model focuses on the health of the individual in all settings, removing the silo-like treatment of services related to wellness, preventive, primary, acute, post-acute, rehabilitative, long-term nursing, and home health and hospice care. The clinical challenges for providers are to integrate wellness into their fabric of services, proactively identify individuals and groups at risk of developing disease, pre-emptively manage patients with chronic conditions, and intervene in the early stages of disease to improve health and avoid or reduce costs. In addition, population health encourages the use of the lowest cost appropriate providers, such as so-called physician extenders. Population health management also involves providers assuming financial risk for a defined population. This approach reflects the shift from fee-for-service to value-based payment in our healthcare system. Under the value-based model, payment is designed to reward low cost and high quality, often through a 1
ACCEPTED MANUSCRIPT
RI PT
fixed per-member per-month payment for the covered population. If the costs of caring for that population are less than the payment, the savings are shared among providers. Value-based payment is slowly gaining traction in both Medicare and commercial insurance plans, with the latter moving more aggressively into such arrangements. The care-delivery and contracting mechanisms for population health management may be an accountable care organization, a medical home, a physician-hospital organization, or a similar model. What It Means for Dental Care
SC
Dental health is an important contributor to overall health, and studies have shown that consumers receiving dental care have lower overall healthcare costs.4 Prevention and wellness—critical components of population health management—have long been a focus of dental care and will only increase as the nation’s oral health continues to improve and reduce the need for restorative dental care, which also creates an expanded opportunity for appropriate preventive care to be performed by non-dentists.
M AN U
Despite these foundational connections to population health management, dental care has not emerged as a frequent participant in accountable care organizations, medical homes, and similar arrangements. Nor are insurers asking that dental providers bear financial risk for oral health. The frequent segregation of dental and health insurance coverage is one reason for this lack of integration, including the fact that Medicare does not cover dental care and Medicaid inconsistently covers adult dental care. In addition, the number of adults without dental coverage is three times as large as the number of adults with health insurance coverage.5 Thus, integrating dental care and healthcare is an important public health and business challenge for policymakers, insurers, and providers moving forward.
TE D
Trend #2: Employer and Insurer Market Transformation
Transformation in employer-sponsored health plans has the potential to shift the business fundamentals of hospitals and health systems more than other forces currently at work in the healthcare industry.
EP
What It Means for the Healthcare System
AC C
America’s corporations are moving their employee health plans from defined-benefit to definedcontribution structures. Up to this point, commercial health insurance has been dominated by employer-sponsored, defined-benefit health plans. Under such plans, employers identify the benefits to be offered to their employees and the expected costs employees would cover. Insurers bear the risk for unknown levels of utilization and cost, and employers bear the risk of higher future premiums if costs are out of line. Increasingly unwilling to shoulder risk for rising costs, many employers are shifting their employees into defined-contribution plans by using a private exchange benefits administration model. Under such plans, an employer contributes a fixed amount toward each employee’s health insurance. Employees determine how and where to spend the money for their healthcare coverage. Individuals generally select an insurance plan and its provider network from an array of options offered through the exchange. And those plans frequently are high-deductible plans, greatly increasing the amount that a consumer spends out of pocket on healthcare, thus potentially reducing unnecessary utilization and encouraging price-shopping for the lowest price and highest quality providers.
2
ACCEPTED MANUSCRIPT
The transfer of employees from employer-sponsored insurance to the public exchanges is garnering recent attention, but the movement of employees into private exchanges is likely to have greater impact in many areas of the country.
RI PT
Insurance products offered through both public and private exchanges typically limit the number of providers in the network, narrowing patients’ choice of hospitals and physicians to those that offer what the plan administrators define to be quality services at lower costs. Providers that can compete along the required quality/cost dimensions may sign on to narrow networks, accepting revenue discounts with the expectation of increased volume. What It Means for Dental Care
AC C
EP
TE D
Figure 1. Source of Health and Dental Expenditures
M AN U
SC
The payer mix for dental care is significantly different from that for healthcare overall. As shown in Figure 1, private insurance is the predominant payment source for dental care, followed closely by outof-pocket payment. Government programs fund a small percentage of dental care, although that percentage has increased in recent years. For U.S. health expenditures overall, private insurance and out-of-pocket payment play smaller roles, with government programs constituting a much greater proportion of spending.
Thus, in dental care, insurance is not yet changing to the same degree as in healthcare overall. There is not the same movement away from employer-sponsored insurance for dental insurance that is being seen for health insurance. Beneficiaries are paying higher deductibles through dental preferred-provider organizations, but typically not through high-deductible plans. However, in other ways, dental insurance is experiencing some of the same transitions as health insurance. Pediatric dental coverage is being offered through the public exchanges, although usually in a separate insurance plan from other healthcare. Insurers are increasingly holding dental providers more accountable for costs, and insurers are narrowing their provider networks to favor dental providers with lower costs.
3
ACCEPTED MANUSCRIPT
Trend #3: Healthcare as a Retail Transaction As consumers bear more financial responsibility for their healthcare costs, are given more choice, and have more tools to compare providers and plans, successful healthcare organizations must reorient their services and market presentation for a retail environment.
RI PT
What It Means for the Healthcare System
Defined-contribution and high-deductible insurance plans put decisions about purchasing healthcare squarely in the hands of consumers, who base their decisions on criteria including quality, price, convenience, service, provider relationships, and brand trust.
M AN U
SC
Consistent, consumer-friendly information about price and quality is lacking in healthcare today, which is both a significant challenge and opportunity to healthcare providers, payers, and entrepreneurs. Lacking such consistent information, consumers still have numerous sources to draw on, including hospital, physician, payer, and employer information. Recommendations from friends, information from health websites, ratings from consumer websites, and posts and discussions on social media all play a role as well. And with the rise of mobile technology, consumers expect ready access to the information they need from and about their healthcare providers. In this increasingly retail environment, customer satisfaction is an imperative for success. Healthcare organizations must determine how to engage, keep track of, and retain these individuals. What It Means for Dental Care
EP
TE D
For dental care, a retail orientation is a tradition because of the relatively high number of consumers who purchase dental care directly rather than through employer-sponsored or public insurance. As utilization of dental care continues to decline among adults, and as dental care increasingly competes with other healthcare costs for consumers’ limited dollars, a strong retail strategy will be even more important for dental providers. They will need to have a strong brand presence, to communicate clearly about pricing, to have convenient locations and hours, and to have positive online visibility, both through their own web presence and through social media and online rating services. TREND #4: THE FORMATION OF MEGA-SYSTEMS
AC C
The healthcare industry is consolidating as hospitals and health systems seek economies of scale, strong market presence, and an ability to assume financial risk for population health. Especially notable is the trend toward “mega-systems.” What It Means for the Healthcare System Mega-systems, which often bring together two already strong organizations, create systems with significant market penetration, geographic reach, provider assets across the continuum of care, and health plan expertise. Such systems also have the financial strength for further investments in care sites, technology, clinicians, and other requisites for the transformation to population health management. Such entities are positioning themselves as a dominant force in delivering care and managing financial risk in an environment moving toward population health management. The long-term ability of these
4
ACCEPTED MANUSCRIPT
arrangements to redesign care and reduce costs is not yet known, but their impact on other providers in the region may be significant. What It Means for Dental Care
RI PT
Dentistry also is beginning to move toward enhanced scale. Although most dentists continue to be in solo practice, that percentage is declining, while the percentage of dentists in group practices is growing. Equally notable, the number of dentists in dental service organizations—organizations that offer administrative support to multiple practices—is growing faster than the industry as a whole.6
Trend #5: Emergence of New Competitors
M AN U
SC
Large group practices and dental service organizations strive to achieve some of the same goals as large healthcare systems. They seek economies of scale in matters such as supply purchasing and administrative functions, with the intent to drive down the overall cost of care. They offer dentists relief from some of the administrative burdens of practice management along with stability in the volatile healthcare field. They assist with enhanced brand presence and retail service in an era of consumerism. And they provide an established network of providers for purposes of contracting with health plans.
The overhaul occurring in healthcare is creating opportunities for non-traditional competitors to emerge and position themselves to finance, organize, and deliver care in a way that reduces costs, ensures quality, and engages consumers. What It Means for the Healthcare System
EP
TE D
The new healthcare competitors blur the traditional lines and roles of industry stakeholders. For example, expanding beyond a pharmacy role, Walgreens is entering the healthcare business in a big way. It has been providing basic care to millions of people through retail clinics staffed primarily with physician extenders. These clinics are meeting needs for convenient, after-hours access to primary and preventive services. Walgreens announced that its retail clinics are now venturing into the diagnosis, treatment, and monitoring of patients with chronic conditions, such as diabetes, asthma, and high blood pressure.
AC C
Additionally, insurers are moving into the care-provision space. For example, not-for-profit Highmark Health Services (Blue Cross Blue Shield of Pennsylvania) acquired West Penn Allegheny Health System and two other hospitals in order to build an integrated healthcare delivery system that would compete with the dominant provider in western Pennsylvania based on high quality and low cost. What It Means for Dental Care In dentistry today, competition typically centers on independent practices competing with larger group practices and practices that are part of dental service organizations. The competitive leverage of the larger practices and networks is price, convenience, brand recognition, and managed care contracting. Solo practices tend to compete based on service and relationships. However, new competitors may be emerging. Recently, a handful of dental practices opened in Walmart stores. These practices are part of a dental service organization and not owned by Walmart. However,
5
ACCEPTED MANUSCRIPT
the presence of a powerful retail brand like Walmart in the realm of dental care signals the potential for new competitors with significant market power. Strategic Implications
RI PT
The emerging healthcare system overhaul puts enormous pressure on healthcare providers to leave the hospital-centric business model and invent and embrace a model that is more community- and outpatient-centric. This involves rightsizing the business, reworking organizational structure, reengineering care delivery, matching cost structure to expected revenue, and developing an effective retail orientation.
M AN U
SC
Competition already is occurring among entities seeking to be at the center of the revamped healthcare system. Ultimately, these entities are likely to be positioned between consumers and payers on one side and providers on the other. These entities will own the infrastructure of care. They will sometimes own care providers and sometimes “rent” care that can demonstrate high quality and low cost. And they will organize and deliver that care to consumers using multiple channels, with consumers and other purchasers opting for the best quality, lowest cost, and most convenience. Changes of this magnitude are difficult to conceptualize and execute. They require a significant shift in mindset, along with extensive financial, human, technological, and intellectual resources. Because of the difficulty of the transition, some organizations will be unable to execute quickly enough to be leaders in their markets.
TE D
Dental care also is on the cusp of significant change. Challenges include declining utilization of dental services, lack of dental insurance, and rising healthcare expenses among consumers. Demands for cost accountability by insurers, emergence of large dental networks, and a need for improved retail strategies are inevitable outgrowths of these challenges. Dental and public health leaders will need to find effective ways to integrate dental care into the overall continuum of care in a population health model.
1
EP
Dentists—like all healthcare providers—need to confront these challenges with a deep understanding of the changing market, a willingness to embrace new models of care delivery, and recognition of the resources needed for success in the new business model.
AC C
Center for Sustainable Health Spending: Health Sector Economic Indicators. Spending Brief, Altarum Institute, March 13, 2014. 2 Organisation for Economic Co-operation and Development: OECD Health Data 2013. 3 Organisation for Economic Co-operation and Development: OECD Health Statistics 2013. 4 United Healthcare: Medical Dental Integration Study. March 2013. 5 Rowland, D.: Oral Health in the U.S. Henry J. Kaiser Family Foundation, June 19, 2012. 6 Diringer, J., Phipps, K., Carsel, B.: Critical Trends Affecting the Future of Dentistry: Assessing the Shifting Landscape. American Dental Association, May 2013.
6
PII:
S0011-8486(14)00138-1
DOI:
10.1016/j.denabs.2014.04.002
Reference:
YMDE 2095
To appear in:
Dental Abstracts
Please cite this article as: , Five Healthcare Trends and their Implications for Dental Care, Dental Abstracts (2014), doi: 10.1016/j.denabs.2014.04.002. This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.
ACCEPTED MANUSCRIPT
Five Healthcare Trends and their Implications for Dental Care Commentary by Kenneth Kaufman, Chair, Kaufman Hall For Dental Abstracts
RI PT
Today, healthcare spending in the U.S. stands at 17.4 percent of the gross domestic product,1 significantly higher than the rate for any other developed nation.2 Despite some recent slowing in the rate of growth, healthcare spending still threatens the stability of our nation’s economy. Without a significant change in the healthcare cost structure, the nation faces the need for more cuts in federal spending for core services and higher out-of-pocket expenses for consumers, among other negative effects.
SC
This high level of healthcare expenditure is not matched by high levels of health. For example, the U.S. ranks 26th in life expectancy in the most recent survey of 34 OEDC nations.3
M AN U
This unsustainable state is giving rise to a transformation of the healthcare business model from a focus on providers, volume, inpatient services, and sickness care to a focus on consumers, value, outpatient services, and wellness. Ultimately, the reorganized healthcare system may see the emergence of a new entity that owns the infrastructure of care and organizes its delivery to consumers from multiple sources using multiple channels. Dental care is undergoing its own transformation. With utilization dropping and a significant number of Americans without dental insurance coverage, dental care providers are struggling to integrate dental care into the continuum of healthcare in an era of increased competition, cost pressure from insurers, and consumerism.
TE D
Evidence of the U.S. health system transformation can be seen in five key trends that have critical implications for healthcare providers in general and dental care providers specifically. Trend #1: Population Health Management
EP
Population health management arises from the goals of reducing the cost and overutilization of care while improving health. It is designed to coordinate care across the continuum and place financial accountability on providers for the health and efficient treatment of a defined population.
AC C
What It Means for the Healthcare System The population health management model focuses on the health of the individual in all settings, removing the silo-like treatment of services related to wellness, preventive, primary, acute, post-acute, rehabilitative, long-term nursing, and home health and hospice care. The clinical challenges for providers are to integrate wellness into their fabric of services, proactively identify individuals and groups at risk of developing disease, pre-emptively manage patients with chronic conditions, and intervene in the early stages of disease to improve health and avoid or reduce costs. In addition, population health encourages the use of the lowest cost appropriate providers, such as so-called physician extenders. Population health management also involves providers assuming financial risk for a defined population. This approach reflects the shift from fee-for-service to value-based payment in our healthcare system. Under the value-based model, payment is designed to reward low cost and high quality, often through a 1
ACCEPTED MANUSCRIPT
RI PT
fixed per-member per-month payment for the covered population. If the costs of caring for that population are less than the payment, the savings are shared among providers. Value-based payment is slowly gaining traction in both Medicare and commercial insurance plans, with the latter moving more aggressively into such arrangements. The care-delivery and contracting mechanisms for population health management may be an accountable care organization, a medical home, a physician-hospital organization, or a similar model. What It Means for Dental Care
SC
Dental health is an important contributor to overall health, and studies have shown that consumers receiving dental care have lower overall healthcare costs.4 Prevention and wellness—critical components of population health management—have long been a focus of dental care and will only increase as the nation’s oral health continues to improve and reduce the need for restorative dental care, which also creates an expanded opportunity for appropriate preventive care to be performed by non-dentists.
M AN U
Despite these foundational connections to population health management, dental care has not emerged as a frequent participant in accountable care organizations, medical homes, and similar arrangements. Nor are insurers asking that dental providers bear financial risk for oral health. The frequent segregation of dental and health insurance coverage is one reason for this lack of integration, including the fact that Medicare does not cover dental care and Medicaid inconsistently covers adult dental care. In addition, the number of adults without dental coverage is three times as large as the number of adults with health insurance coverage.5 Thus, integrating dental care and healthcare is an important public health and business challenge for policymakers, insurers, and providers moving forward.
TE D
Trend #2: Employer and Insurer Market Transformation
Transformation in employer-sponsored health plans has the potential to shift the business fundamentals of hospitals and health systems more than other forces currently at work in the healthcare industry.
EP
What It Means for the Healthcare System
AC C
America’s corporations are moving their employee health plans from defined-benefit to definedcontribution structures. Up to this point, commercial health insurance has been dominated by employer-sponsored, defined-benefit health plans. Under such plans, employers identify the benefits to be offered to their employees and the expected costs employees would cover. Insurers bear the risk for unknown levels of utilization and cost, and employers bear the risk of higher future premiums if costs are out of line. Increasingly unwilling to shoulder risk for rising costs, many employers are shifting their employees into defined-contribution plans by using a private exchange benefits administration model. Under such plans, an employer contributes a fixed amount toward each employee’s health insurance. Employees determine how and where to spend the money for their healthcare coverage. Individuals generally select an insurance plan and its provider network from an array of options offered through the exchange. And those plans frequently are high-deductible plans, greatly increasing the amount that a consumer spends out of pocket on healthcare, thus potentially reducing unnecessary utilization and encouraging price-shopping for the lowest price and highest quality providers.
2
ACCEPTED MANUSCRIPT
The transfer of employees from employer-sponsored insurance to the public exchanges is garnering recent attention, but the movement of employees into private exchanges is likely to have greater impact in many areas of the country.
RI PT
Insurance products offered through both public and private exchanges typically limit the number of providers in the network, narrowing patients’ choice of hospitals and physicians to those that offer what the plan administrators define to be quality services at lower costs. Providers that can compete along the required quality/cost dimensions may sign on to narrow networks, accepting revenue discounts with the expectation of increased volume. What It Means for Dental Care
AC C
EP
TE D
Figure 1. Source of Health and Dental Expenditures
M AN U
SC
The payer mix for dental care is significantly different from that for healthcare overall. As shown in Figure 1, private insurance is the predominant payment source for dental care, followed closely by outof-pocket payment. Government programs fund a small percentage of dental care, although that percentage has increased in recent years. For U.S. health expenditures overall, private insurance and out-of-pocket payment play smaller roles, with government programs constituting a much greater proportion of spending.
Thus, in dental care, insurance is not yet changing to the same degree as in healthcare overall. There is not the same movement away from employer-sponsored insurance for dental insurance that is being seen for health insurance. Beneficiaries are paying higher deductibles through dental preferred-provider organizations, but typically not through high-deductible plans. However, in other ways, dental insurance is experiencing some of the same transitions as health insurance. Pediatric dental coverage is being offered through the public exchanges, although usually in a separate insurance plan from other healthcare. Insurers are increasingly holding dental providers more accountable for costs, and insurers are narrowing their provider networks to favor dental providers with lower costs.
3
ACCEPTED MANUSCRIPT
Trend #3: Healthcare as a Retail Transaction As consumers bear more financial responsibility for their healthcare costs, are given more choice, and have more tools to compare providers and plans, successful healthcare organizations must reorient their services and market presentation for a retail environment.
RI PT
What It Means for the Healthcare System
Defined-contribution and high-deductible insurance plans put decisions about purchasing healthcare squarely in the hands of consumers, who base their decisions on criteria including quality, price, convenience, service, provider relationships, and brand trust.
M AN U
SC
Consistent, consumer-friendly information about price and quality is lacking in healthcare today, which is both a significant challenge and opportunity to healthcare providers, payers, and entrepreneurs. Lacking such consistent information, consumers still have numerous sources to draw on, including hospital, physician, payer, and employer information. Recommendations from friends, information from health websites, ratings from consumer websites, and posts and discussions on social media all play a role as well. And with the rise of mobile technology, consumers expect ready access to the information they need from and about their healthcare providers. In this increasingly retail environment, customer satisfaction is an imperative for success. Healthcare organizations must determine how to engage, keep track of, and retain these individuals. What It Means for Dental Care
EP
TE D
For dental care, a retail orientation is a tradition because of the relatively high number of consumers who purchase dental care directly rather than through employer-sponsored or public insurance. As utilization of dental care continues to decline among adults, and as dental care increasingly competes with other healthcare costs for consumers’ limited dollars, a strong retail strategy will be even more important for dental providers. They will need to have a strong brand presence, to communicate clearly about pricing, to have convenient locations and hours, and to have positive online visibility, both through their own web presence and through social media and online rating services. TREND #4: THE FORMATION OF MEGA-SYSTEMS
AC C
The healthcare industry is consolidating as hospitals and health systems seek economies of scale, strong market presence, and an ability to assume financial risk for population health. Especially notable is the trend toward “mega-systems.” What It Means for the Healthcare System Mega-systems, which often bring together two already strong organizations, create systems with significant market penetration, geographic reach, provider assets across the continuum of care, and health plan expertise. Such systems also have the financial strength for further investments in care sites, technology, clinicians, and other requisites for the transformation to population health management. Such entities are positioning themselves as a dominant force in delivering care and managing financial risk in an environment moving toward population health management. The long-term ability of these
4
ACCEPTED MANUSCRIPT
arrangements to redesign care and reduce costs is not yet known, but their impact on other providers in the region may be significant. What It Means for Dental Care
RI PT
Dentistry also is beginning to move toward enhanced scale. Although most dentists continue to be in solo practice, that percentage is declining, while the percentage of dentists in group practices is growing. Equally notable, the number of dentists in dental service organizations—organizations that offer administrative support to multiple practices—is growing faster than the industry as a whole.6
Trend #5: Emergence of New Competitors
M AN U
SC
Large group practices and dental service organizations strive to achieve some of the same goals as large healthcare systems. They seek economies of scale in matters such as supply purchasing and administrative functions, with the intent to drive down the overall cost of care. They offer dentists relief from some of the administrative burdens of practice management along with stability in the volatile healthcare field. They assist with enhanced brand presence and retail service in an era of consumerism. And they provide an established network of providers for purposes of contracting with health plans.
The overhaul occurring in healthcare is creating opportunities for non-traditional competitors to emerge and position themselves to finance, organize, and deliver care in a way that reduces costs, ensures quality, and engages consumers. What It Means for the Healthcare System
EP
TE D
The new healthcare competitors blur the traditional lines and roles of industry stakeholders. For example, expanding beyond a pharmacy role, Walgreens is entering the healthcare business in a big way. It has been providing basic care to millions of people through retail clinics staffed primarily with physician extenders. These clinics are meeting needs for convenient, after-hours access to primary and preventive services. Walgreens announced that its retail clinics are now venturing into the diagnosis, treatment, and monitoring of patients with chronic conditions, such as diabetes, asthma, and high blood pressure.
AC C
Additionally, insurers are moving into the care-provision space. For example, not-for-profit Highmark Health Services (Blue Cross Blue Shield of Pennsylvania) acquired West Penn Allegheny Health System and two other hospitals in order to build an integrated healthcare delivery system that would compete with the dominant provider in western Pennsylvania based on high quality and low cost. What It Means for Dental Care In dentistry today, competition typically centers on independent practices competing with larger group practices and practices that are part of dental service organizations. The competitive leverage of the larger practices and networks is price, convenience, brand recognition, and managed care contracting. Solo practices tend to compete based on service and relationships. However, new competitors may be emerging. Recently, a handful of dental practices opened in Walmart stores. These practices are part of a dental service organization and not owned by Walmart. However,
5
ACCEPTED MANUSCRIPT
the presence of a powerful retail brand like Walmart in the realm of dental care signals the potential for new competitors with significant market power. Strategic Implications
RI PT
The emerging healthcare system overhaul puts enormous pressure on healthcare providers to leave the hospital-centric business model and invent and embrace a model that is more community- and outpatient-centric. This involves rightsizing the business, reworking organizational structure, reengineering care delivery, matching cost structure to expected revenue, and developing an effective retail orientation.
M AN U
SC
Competition already is occurring among entities seeking to be at the center of the revamped healthcare system. Ultimately, these entities are likely to be positioned between consumers and payers on one side and providers on the other. These entities will own the infrastructure of care. They will sometimes own care providers and sometimes “rent” care that can demonstrate high quality and low cost. And they will organize and deliver that care to consumers using multiple channels, with consumers and other purchasers opting for the best quality, lowest cost, and most convenience. Changes of this magnitude are difficult to conceptualize and execute. They require a significant shift in mindset, along with extensive financial, human, technological, and intellectual resources. Because of the difficulty of the transition, some organizations will be unable to execute quickly enough to be leaders in their markets.
TE D
Dental care also is on the cusp of significant change. Challenges include declining utilization of dental services, lack of dental insurance, and rising healthcare expenses among consumers. Demands for cost accountability by insurers, emergence of large dental networks, and a need for improved retail strategies are inevitable outgrowths of these challenges. Dental and public health leaders will need to find effective ways to integrate dental care into the overall continuum of care in a population health model.
1
EP
Dentists—like all healthcare providers—need to confront these challenges with a deep understanding of the changing market, a willingness to embrace new models of care delivery, and recognition of the resources needed for success in the new business model.
AC C
Center for Sustainable Health Spending: Health Sector Economic Indicators. Spending Brief, Altarum Institute, March 13, 2014. 2 Organisation for Economic Co-operation and Development: OECD Health Data 2013. 3 Organisation for Economic Co-operation and Development: OECD Health Statistics 2013. 4 United Healthcare: Medical Dental Integration Study. March 2013. 5 Rowland, D.: Oral Health in the U.S. Henry J. Kaiser Family Foundation, June 19, 2012. 6 Diringer, J., Phipps, K., Carsel, B.: Critical Trends Affecting the Future of Dentistry: Assessing the Shifting Landscape. American Dental Association, May 2013.
6