According to the government’s monthly jobs report healthcare companies shed 6,000 positions in December, the first monthly decline since July 2003. The hardest hit areas were nursing homes, which lost 3,900 jobs, followed by home health care, with a loss of 3,700 positions. Hospitals got rid of 2,400 jobs. Physicians’ offices reduced staff by 1,200. For the year, healthcare added only 207,600 jobs, down from 320,600 a year earlier. It was the slowest year of growth since 1999.

Several notable hospitals, including the Cleveland Clinic, reported layoffs last year as the federal government cut reimbursement rates and patient care shifts more to outpatient and urgent care clinics. In fact, outpatient care centers were the only part of the healthcare sector to boost jobs last month, adding 3,600 positions.  So the question to ponder now: is this a new paradigm in the healthcare industry or is it just a blip in the radar and therefore, should not be taken seriously?

Until now we were apprehensive about the shortage of healthcare staff to take care of an aging US population.  This was primarily driven by some hard facts. Per the Census Bureau 1 in 4 of us will be 65 and older by 2030.   However, thanks to modern healthcare we are living longer.  Life expectancy in US and other industrialized nations has doubled since 1800 to more than 75 years in a period of only 10 or so generations! While some anticipate [1] that the person who will live 150 years has already been born an article published in the New England Journal of Medicine in 2005 argued that in US obesity and its complications like diabetes or coronary heart disease could reduce life expectancy at all ages in the first half of the 21^st century [2].  Given the fact that American Medical Association (AMA) has now declared obesity as a ‘disease’ and renewed initiatives have been taken both at the state and federal levels in my opinion obesity will be eventually controlled and possibly reversed like any other communicable diseases of the 19^th and 20^th century.  We know from our experience that if people live longer and the population gets older there will be more demand on healthcare services – mostly in the chronic care.  This is why the shortage of physicians, nurses and technicians becomes a significant issue in the care delivery equation.  Primary care practices are struggling to adjust to recent cuts in reimbursement with some even contemplating folding their practices altogether. Nurses are getting older and retiring at a higher rate than ever before.  So everyone foresaw a supply side gap which appears to be already here or going to happen real soon.  In the middle of all such arguments arrives this job report showing a decline in healthcare jobs! So what is going on here? Are we overreacting to the impending danger of care delivery shortfall? The devils are always in the details.

The Accountable Care Act or ACA has made some significant changes with regards to how care will be delivered in the future.  The monolithic care delivery architecture with the large hospital at the center has been broken down into a decentralized, just-in-time, low cost intervention paradigm.  (Well, not quite yet but that is the intent when the law was signed.)  Clayton Christensen in his book ‘The Innovators’ Prescription’ argued that healthcare is a business that needs to and will in the future transform from expensive, centralized services to affordable and localized offerings just like other industries (e.g. telecommunication or computers) did years ago.  Ken Olsen, then President, Chairman and Founder of Digital Equipment Corporation, famously said in 1977 “there is no reason anyone would want a computer in their home”.  Famous last words indeed! We all know how that world changed in the 80’s as reduced cost and accessibility of computers proliferated.   Industry structures and the associated value chain usually evolve to abosrb a disruption and finally new paradigms get firmly established.  This, we believe, has begun to happen in the US healthcare market.  Payment models have been changed to drive pay for quality instead of pay for volume, thus over-crowding of the ER room is not desirable or even viable.  Instead of admitting more patients to ‘fill bed capacity’ health systems are forced to evaluate options of ‘keeping them out’! This is BIG change for a monolithic paternalistic industry like healthcare which is carefully guarded by strong special interest lobbies.  If anything, the new job report is a harbinger of that change. And, it is only the tip of the iceberg.

Clearly, health systems are realizing that the new model of care will be based on managing the health of a population to deliver better health outcomes for everyone and with a greater emphasis on timely intervention.  This requires shifting focus – from procedure volumes to preemptive prevention, from costly in-patient care to lower cost ambulatory care, from ambulatory care to even lower cost care via telemedicine.  Healthcare systems are taking proactive measures by shifting their workforce allocation to address these trends.  In 2014 and beyond we might see this trend to accelerate further.  That means less job growth in hospital centric care and more in outpatient, ambulatory and community care clinics.

Christensen also predicted that large general hospitals will eventually be disrupted by specialty providers focused on single procedures, specialty providers will be disrupted by general practitioners, general practitioners will be disrupted in turn by nurse practitioners and “doc in the box” services and will meet the same fate in the hands of online or automated self-service tools that will emerge in the future.  We are beginning to see the emergence of such changes via the rapid growth of retail clinics (25-30% annual growth rate), renewed interest in telemedicine applications and patient-centric medical home initiatives among various health systems. A coherent ecosystem that is required to sustain a major shift, however, is still absent and has to be built.  It might take another decade.  But we hope it will be sooner!

The healthcare reform train has left the station.  The obstacles are still many and the road is long and winding.  Policy and Politics may hinder its journey temporarily.  But no one, those who are in the train or those who want to stop it, can control its journey.  As John Steinbeck, Nobel Prize winning author of Travels with Charley: In Search of America famously said – “a journey is like marriage. The certain way to be wrong is to think you control it”.

References

[1] John Nosta, ‘The First Person to Live to 150 years Has Already Been Born Revisited’, Forbes, 2013 http://www.forbes.com/sites/johnnosta/2013/02/03/the-first-person-to-live-to-150-has-already-been-born-revisited/

[2] S. Jay Olshansky, Ph.D et.al, A Potential Decline in Life Expectancy in the United States in the 21st Century, N Engl J Med 2005; 352:1138-1145March 17, 2005DOI: 10.1056/NEJMsr043743