The U.S. hospital sector is in the midst of the most pronounced change it has seen in decades. This evolution is being shaped, in large part, by technological developments, a relentless wave of mergers and acquisitions (M&A), and the Affordable Care Act (ACA).
However, the goal for hospitals should not be just to weather this perfect storm. Simply acquiring a hospital system to gain scale or merging with another organization will not guarantee success or survival.
As part of Prudential Retirement’s ongoing efforts to help our healthcare industry clients tackle their biggest challenges, in collaboration with The Economist Intelligence Unit (EIU), we surveyed more than 300 CFOs and benefits executives at rural, urban and suburban hospitals of varying sizes and demographics across the country.
What we found is that those organizations are coping with a number of challenges, but three big ones stood out:
• The War for Talent
• Business Model Innovation
• Unlocking the Power of Data
Those healthcare institutions with the will, foresight and ingenuity to solve these three challenges will likely emerge as leaders once the storm clouds clear. What may be even more surprising is that your retirement plan may actually play a significant role in addressing some of these challenges—and not in ways you may suspect.
Challenge #1: Winning the War for Talent
Ultimately, the quality of a healthcare institution depends on the quality of its people. Healthcare-industry leaders understand this, with 74% believing their own organization needs to pay more attention to attracting and retaining the best talent. Yet most executives surveyed are still not making talent management their top priority.
Concerns about the talent pipeline are supported by government research. A report to Congress published by the Health Resources and Services Administration projects that “if current trends continue, the growing supply of intensivists [critical care physicians] will be insufficient to provide the optimal level of care to future populations through 2020.”
The American Association of Medical Colleges estimates that by 2025, the shortfall in medical, surgical and other healthcare specialists in the country will be between 28,200 and 63,700. According to the EIU survey, 65% of respondents see an ageing workforce presenting a problem in the long-term, with talent costs and the need for newer areas of expertise driving this challenge.
So, how can your retirement plan help with your talent-management efforts? Optimizing your retirement plan is one way to align it with your business goals, such as talent recruitment and retention.
Your employees aren’t all the same. They do different jobs and hold different value to your organization. Furthermore, your retirement benefits are more important to certain groups of employees than others. So why offer uniform retirement benefits to all your employees?
The short answer is you don’t have to. You can design your retirement plan strategically to provide enhanced benefits to highly valued employees you want to retain or recruit. This will help you provide attractive retirement benefits that may outshine those offered by competitors.
Design changes may also allow you to improve plan efficiency while introducing behavior incentives in order to drive better outcomes for employees without necessarily increasing the budget.
Challenge #2: Business Model Innovation
Four out of five hospital executives surveyed (81%) by EIU expect to transform their business models in the next three years.
When executives describe the business-model innovation their hospital is likely to adopt over the next three years, the leading activities they cite are an increased focus on niche areas of healthcare expertise; an increase in the use of e-health, m-health and non-traditional service delivery; and the use of technology to outsource services (45%, 39% and 36%, respectively).
There is no one clear path forward for all hospitals. Business-model innovation is unlikely to be easy. It will require cooperation between hospitals, physicians and other staff. It will also often require significant capital expenditure.
This is why aligning your retirement plan with your broader business goals is a smart move for hospitals looking to position themselves for future success. The contributions of almost four in five (78%) of the 337 retirement plans examined by Prudential Retirement’s Defined Contribution Optimization services were either deemed “inefficient” or “ineffective.”
This means that by improving efficiency, many of those plans may be able to spend less money on their retirement plan while still driving the same outcomes for employees. Any savings can then be reallocated to other business initiatives.
Challenge #3: Unlocking the Power of Data
Healthcare industry executives believe in the potential of analytics to improve services and care, according to the EIU survey respondents: 60% think Big Data will transform patient management and outcomes in the future, while 57% say it can be a game changer for operational performance in hospitals.
At present, however, nearly two thirds (63%) say the value of the data hospitals hold on patients and outcomes remains largely untapped. Indeed, healthcare organizations lag in exploiting the wealth of data they possess. Not only have hospitals delayed investing in analytics, but just 37% of executives expect their hospitals to invest specifically in analytics (to improve patient outcomes and administrative efficiencies) over the next three years.
Traditional institutions risk missing the boat or being scooped by competitors. Again, this is an area where improving retirement plan efficiency may be an effective strategy to free up funds for such endeavors without decreasing employee retirement benefits or harming outcomes.
If hospitals fail to respond to these challenges, competitors will emerge, which will further unsettle the healthcare landscape. Established hospitals must act quickly and creatively to identify solutions that will enable them to thrive in the new healthcare landscape.
For more information about the pressing challenges facing the hospital sector or to read the research report, visit healthcare.prudentialretirement.com.
Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, CT, or its affiliates. PRIAC Is a Prudential Financial company.
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 Internal Prudential analysis as of May 2, 2016.