Skip to main content


The Future of Healthcare: Challenges for Hospitals, Health Systems, and Physicians

Aug 20, 2015 09:03PM ● By MED Magazine

By Alex Strauss


Change is happening so quickly as medicine moves into its uncertain future that standing at the helm of a healthcare organization these days can feel a little like chasing a ball downhill. On one hand, providers are expected to provide better, more efficient, more technologically advanced care than ever at a lower cost than ever. On the other hand, they are being told that they must keep patients from needing care in the first place – but that they won’t be paid to do this.

Although much is still uncertain about the future of healthcare in America, with issues such as the ‘meaningful use’ of Electronic Health Records, the upcoming ICD-10 rollout, regulations regarding the management and dissemination of clinical quality data, and the quantum shift from fee-for-service healthcare pending, it seems clear that the future is certain to be very different from the past.

As we talked with regional CEOs (see sidebar) from both large and small health systems for our new series on The Future of Healthcare, we started by asking them to discuss what they see as the biggest challenges for hospitals and health systems – as well as for the clinicians who work within them – in the next five to ten years.

Jill Fuller, Prairie Lakes Healthcare System: Our biggest challenge will be the continued transformations in our business including the shift from inpatient to outpatient care settings and the transition from fee-for-service to reimbursement based on value.  We will need to adapt but there are risks to changing our business model either too quickly or too slowly. 

Collaboration is our greatest opportunity.  As we move into population health, we will need to partner with providers outside our own systems and organizations in order to reduce costs and improve outcomes. 

Paul Hanson, Sanford USD Medical Center: One of the biggest challenges will be organizations developing a sustainable business model that balances clinical, financial and operational initiatives.  Access to and management of capital, both human and financial, has never been more critical in assuring an organization’s success.  Integration is key in strategic positioning within a population health model.

Organizations are investing in their information technology systems at an unprecedented rate because we rely on data and the use of it to provide better care.  For those systems that have made the commitment to do so nearly a decade ago, the rewards of that investment will now be realized.  Sanford Health is one of those very few integrated systems that made the commitment and stayed the course. The level of connectivity within our society will continue to improve, and successful organizations must be able to adapt to these changes in a meaningful way that benefits our patients and providers.

On physician challenges: The cost of entry and the expertise required to operate independently as an organization or practicing physician is extremely difficult, if not nearly impossible, for any long-term strategy.  The expectations clinicians have from their patients, payers and regulatory agencies will only increase with time. 

Jason Merkely, Brookings Health System: The biggest challenge for healthcare organizations in the next five years is the shift from volume-based to value-based medicine and how we in rural America find ways to succeed under this reformed model and payment transition. Secretary Burwell announced in January 2015 a goal of tying 50 percent of Medicare payments to alternative payment models such as ACOs by the end of 2018 and also to tie 90 percent of all FFS payments to quality or value targets. Secretary Burwell’s announcement will undoubtedly accelerate the transition to alternate value-based payment models.

Although there is uncertainty regarding the pace of expansion of these models to rural hospitals and providers, Medicare and other third party payers are looking to contract with hospitals and providers who will collaborate to keep costs low while establishing and improving quality outcomes. In the next five to 10 years, those of us who provide healthcare to rural America will be challenged to do so under a much different strategy, model and payment system.

On physician challenges: Both independent clinicians and those employed by systems will need to find their role within healthcare reform and how they work with local communities to manage the health of the populations they serve given the transformation from fee-for-service to a more value-based reimbursement model.

Brent Phillips, Regional Health: Recruiting and retaining a quality healthcare labor force could be a significant challenge well into the future. We have a huge shortage of several hundred thousand doctors across the United States today, and that shortage is only going to manifest itself more in the face of an aging workforce and an aging population. Equal to (the shortage of doctors) are shortages in nursing and all of the other healthcare professions. The shortage impacts rural areas such as South Dakota to a greater extent than some urban areas.

In my opinion, the labor shortage exists because it is difficult to practice medicine today with all the rules, regulations, paperwork and litigiousness. To deal with the paperwork, the regulations, the insurance and all of that complexity – it’s a burden on patients, families, physicians and caregivers. It’s toughest for smaller medical practices. In order to be able to negotiate contracts with insurance companies or suppliers in the changing healthcare financing field, you have to be big. You can’t do it as a small player.

On physician challenges: The bureaucracy and regulations are a major challenge for physicians. Physicians are just as frustrated as patients. The other challenge is the ability – given the pace of change and the advance of science – to stay current with new discoveries and technology. It’s almost overwhelming.

Fred Slunecka, Avera Health: Regulatory and technology disruption will be a challenge. An example of regulatory disruption is the passing of MACRA, the Medicare Access and CHIP Reauthorization Act, last spring. MACRA fundamentally revamps how Medicare pays physicians by linking payments with quality, value measurements, and participation in alternative payment models.

The new model includes strong incentives for patient-centered medical homes, a concept Avera has been championing for many years. The payment structure involves bundled payments, like 90-day bundles with set fees for a given healthcare event, such as a knee replacement. So we’ll see new partnerships and collaborations as healthcare providers figure out how to most effectively provide quality care while covering expenses.

In the coming decade, we’ll also be continually challenged by emerging science and technology disruptions. From evolutions of patient medical records to advancements in genetics and the study of microbiomes, we will understand care at completely different levels.

On physician challenges: The rise of consumerism and consumers’ easy access to knowledge [will be a challenge for physicians]. Patients are extraordinarily resourceful and they have many options today from a watch that measures your heart beat, contact lenses that measure your blood sugar, and personal devices that monitor sleep patterns to websites that rate physicians and hospitals. So it’s a challenge for physicians to stay up to date and prepared for these very informed consumers.

Top administrators from a number of health systems around the region have been invited to participate in this series. This article includes insights from the following respondents (listed alphabetically):

Jill Fuller, President and CEO, Prairie Lakes Healthcare System

Based in Watertown in northeastern South Dakota, Prairie Lakes Healthcare System provides care for a ten-county service area of 87,000 people.  


Paul Hanson, President, Sanford USD Medical Center

Located in Sioux Falls, Sanford USD Medical Center is a 545 bed hospital and Level II Trauma Emergency Care Center. It is one of 43 hospitals and 250 clinics in nine states that comprise the Sanford Health system.


Jason Merkely, CEO, Brookings Health System

Brookings Health System is a non-profit, city-owned health system based in Brookings, South Dakota. It includes the 49-bed Brooking Hospital and serves Brooking and more than 18 surrounding communities.


Brent Phillips, President and CEO, Regional Health

Based in Western South Dakota in Rapid City, Regional Health is comprised of more than 40 healthcare facilities, including five hospital and 24 clinics, and serves a patient base of 360,000 in the Black Hills region.


Fred Slunecka, Chief Operating Officer, Avera Health

Avera McKennan Hospital is a 545 bed facility in Sioux Falls, South Dakota. It is a part of Avera Health, a regional system with 300 facilities in the 5-state region of SD, ND, MN, IA, and NE.

Jill Fuller


Paul Hanson


Jason Merkley


Brent Phillips


Fred Slunecka