The Hospital Is Dead, Long Live The Hospital! - McKinsey

5/28/2020 The hospital is dead, long live the hospital!
| McKinsey
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Healthcare Systems & Services
The hospital is dead, long live the

hospital!
May 27, 2019 | Article
By Penny Dash, MD ; Caroline Henricson; Pooja Kumar, MD ; and Natasha Stern
Hospital care is changing both rapidly and radically. Because of

innovations in care delivery and organisational structures, future
hospitals are likely to be very different from those of today.
T
he world is changing, and so are hospitals. In response to significant external
forces, innovations in both how healthcare is delivered and how hospitals are
structured are emerging. Through these innovations, hospitals can better position
themselves to survive—and even excel—in tougher conditions.
Nine major forces are involved:
Changes in patient populations and their needs
Higher patient expectations
Recognition that many types of care can be better provided in community settings
Data suggesting that high-quality care requires high-volume centres, and the
emergence of standalone single-specialty centres
Advances in clinical knowledge and technology
Impact of digital technologies on how healthcare is delivered
Difficulties in attracting and retaining an appropriately skilled workforce
Financial and funding challenges
Requirements to measure quality
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5/28/2020 The hospital is dead, long live the hospital! | McKinsey
Whilst their relative importance differs from country to country, these forces are at play
across the globe. To investigate how hospitals are responding, we have identified global
best practices through interviews with healthcare experts in conjunction with extensive
desktop research.
Our results show that contemporary healthcare providers around the world are facing
several urgent imperatives: to strengthen clinical quality; increase the delivery of
personalised, patient-centred care; improve the patient experience; and enhance their
efficiency and productivity. As a consequence, providers are introducing innovations in
care delivery—often to achieve multiple aims. These innovations include adopting lean and
standardised processes to improve quality and optimise productivity, increasing the use of
automation and nonmedical staff members to change how they their clinical workforce is
deployed, employing new technologies to deliver better-quality care at lower cost,
involving patients more closely in care delivery, and harnessing patient-generated data to
personalise treatments. In our experience, the providers that are achieving the best results
have put as much attention on change management as on the changes themselves. By
addressing the mind-sets and cultures of both the clinical and nonclinical staff, these
providers have increased their organizations’ agility and realised lasting success.
Many providers are also making a variety of strategic, structural changes to their hospitals,
sometimes in response to incentives or payment reforms. Leading healthcare delivery
systems are pursuing three types of strategy as they strive to balance quality, access, and
cost.
Many large “regional hub” hospitals are seeking to increase volumes in specialised
services to deliver high-quality care affordably.
Smaller hospitals (sometimes called local or community hospitals) are forming

networks to invest in infrastructure, share back-office costs, and attract and retain
staff who want to undertake a range of clinical work. In some countries, such
networks are also being formed by larger hospitals, again with the goal of sharing
gains from economies of scale and volumes.
Vertical integration is increasing amongst regional hubs, smaller local hospitals,

community-based care and, in some cases, payer organisations. This last trend is
making it easier for delivery systems to coordinate the full range of care and provide
care closer to patients’ homes.
Which of these strategies is best for a given healthcare provider depends on both the
provider’s starting point and local market conditions: for example, regulations, cultural
beliefs, funding sources, competitive conditions.
Some countries may not yet be feeling the full force of the external factors reshaping their
hospitals. We believe, however, that this is a case of “not yet” rather than “not ever.” All
hospitals today need to make choices about how to alter the way they deliver care. If they
are to improve efficiency, meet the expectations and requirements of patients (and often
payers), and attract and retain the best staff, providers need to continue to innovate.
The world is changing for hospitals

Hospital care is changing rapidly and radically. Standalone hospitals, once the
flagships of healthcare in many communities, are no longer the answer to some of today’s
most urgent healthcare needs. Neither are they islands that can ignore trends sweeping
across our world. Hospitals must adapt and rethink their offerings to fit future needs.
Nine major external forces are affecting the work of hospitals. Whilst their relative
importance differs country to country, these forces are at play across the globe.
Patient populations are getting older, and their needs are becoming more complex.
The proportion of patients with more than one long-term condition is increasing. In the
United Kingdom, for example, the proportion of these high-need patients increased from
32 percent in 2002 to 43 percent in 2012.[ 1 ] The cost of caring for these patients is up to
eight times higher than the cost of caring for healthy adults.[ 2 ] More people are surviving
heart attacks[ 3 ] and strokes[ 4 ] than ever before; however, they often require significant
post-discharge care—40 percent of stroke survivors, for example, need support to
perform daily activities after leaving hospital.[ 5 ] Similar trends in patient populations and
cost burdens can be seen throughout Europe, as well as the rest of the developed and
developing world.[ 6 ] [ 7 ]
Patients have far higher expectations than before. Patients—along with their families
and caregivers—expect to receive more information about their conditions and care,
access to the newest treatments, and better amenities.[ 8 ] They also want greater
involvement in healthcare decisions and have higher standards. Many patients are
increasingly acting as consumers,[ 9 ] a result of easier access to information and
technology, the growth of “retail” models of healthcare that prioritise patient comfort and
satisfaction (for example, dialysis centres that offer free Wi-Fi and television during the
four-hour sessions[ 10 ] ) and, in many countries, higher cost-sharing levels.
Recognition is increasing that care is better provided in a community setting.

Patients benefit when their care is managed outside of the hospital whenever possible.
Better primary preventive care for patients with chronic conditions reduces both the
complication rate and need for hospital care.[ 11 ] Early post-surgical discharges can be
made without increased complications and may improve patient satisfaction.[ 12 ]
Conversely, longer hospitalisations can lead to significant loss of muscle strength in
elderly patients—one study found that older people can lose up to 5 percent of muscle
strength for each day of treatment in a hospital bed.[ 13 ] In addition, clinical advances are
making it possible to perform a growing number of procedures in outpatient settings. At
present, only a tiny percentage of total knee-joint replacements in the United States are
being performed on an outpatient basis; orthopaedic surgeons there predict that 28
percent of those operations will move to outpatient settings within ten years.[ 14 ]
Meanwhile, online healthcare platforms such as WeDoctor and Ping An Good Doctor in
China and Practo in India are emerging, with a goal of keeping more patients out of
hospitals. The trend towards increasing outpatient care is also reflected in the growth of
free-standing retail clinics or urgent care centres in Australia, the United Kingdom, and the
United States (although the development of this mode of provision has been slower in
Australia than in the other countries[ 15 ] ).
High-quality care requires concentration into specialised, high-volume centres of

excellence. There is considerable evidence that the volume of activity is positively
correlated with the outcomes delivered. This relationship has been proved in many areas
of planned care—including joint replacement surgery,[ 16 ] cataract surgery,[ 17 ] paediatric
surgery,[ 18 ] and cancer surgery[ 19 ] —as well as acute care (for example, for major trauma,
[ 20 ] strokes,[ 21 ] and heart attacks[ 22 ] ). One response to this evidence is the emergence
(especially in Asia) of specialist providers that deliver standalone, high-volume care in such
specialties as ophthalmology, cardiology, and nephrology. These providers effectively
disintermediate general hospitals as a place for the provision of some types of specialist
care.
Clinical advances are delivering better quality and outcomes. Advances in clinical
knowledge have led to some truly astonishing achievements. For example, UK deaths from
cardiovascular disease fell by 68 percent between 1980 and 2013, even though the
prevalence of the disease hovered consistently around 3.5 percent.[ 23 ] Similar reductions
have been observed in other developed countries.[ 24 ] The lower mortality is attributable to
both better treatments (for instance, new surgical interventions, statins, thrombolysis, and
stenting) and better understanding of the condition’s causes, which eventually led to
significant declines in smoking rates. Decreases in mortality from breast cancer are also
striking—in the United States, for example, mortality declined by 34 percent from 1975 to
2010[ 25 ] —largely as a result new therapies (such as cyclophosphamide/methotrexate/5-
fluorouracil [CMF] and tamoxifen) in the 1970s and adjuvant therapy in the 1990s, not
better screening. For many patients, antiretroviral therapy has converted HIV/AIDS from
being a deadly disease to a chronic condition.[ 26 ] The development of sofosbuvir and
other new direct-acting antiviral medications has transformed the lives and prognoses of
thousands of hepatitis C patients.[ 27 ] However some of the clinical advances are very
expensive, and thus payers in some countries have raised questions about which ones to
fund.
Digital technologies have begun to affect how healthcare is delivered and have the
potential for disruptive change. Digital technologies are driving multiple disruptions in
care delivery, including a shift to self-service, remote access, and greater transparency.
The types and volume of data available are exploding, which has important implications for
clinical decision making. The sidebar, “Digital technologies are affecting healthcare
delivery in five principal ways” discusses this in more detail.
Availability and expectations of the healthcare workforce are changing. The global
workforce shortage of 7.2 million healthcare workers in 2013 is projected to grow to 12.9
million by 2035.[ 28 ] Shortages increase the strain on the workforce, leading to employee
overwork and burnout.[ 29 ] Attracting students to nursing programmes, for instance,
becomes more challenging, which is why some hospitals offer large signing bonuses,
college tuition, and free housing to employees and their children.[ 30 ]
Payers find it increasingly difficult to finance healthcare in line with increasing

costs—which puts pressure on hospitals to deliver high-quality care more
affordably. The rise of healthcare spending is expected to continue to exceed gross
domestic product (GDP) growth in wealthy countries an in an increasing number of
emerging economies. US healthcare spending has been projected to exceed 24 percent
of GDP by 2040,[ 31 ] whilst spending on healthcare and long-term care in the European
Union and Norway is projected to reach 13 percent of GDP by 2060.[ 32 ] Payers,
employers, and governments are struggling to find funds to keep up with the high annual
growth of healthcare costs, and thus they are putting more pressure on healthcare
providers to deliver high-quality care affordably. Capital requirements and availability are
also an issue, caused by ageing infrastructure and the need to invest in new technologies.
There are more requirements to measure and publish quality metrics and to receive
financial bonuses for high-quality care. In the past, patients had limited information
about the quality of their hospitals and doctors. Today, hospitals in Canada,[ 33 ]
Scandinavia,[ 34 ] and the United Kingdom[ 35 ] are legally required to publish quality
measurements. Mortality, readmittance, and infection rates are amongst the required
metrics, and some healthcare providers are voluntarily releasing additional information. As
more data becomes available, patients have a greater opportunity to assess hospitals—
and even doctors—before deciding where and to whom to go. Moreover, in many cases,
financial bonuses are being awarded for the provision of high-quality care. In Sweden, for
example, performance-related payments are linked to quality targets and compliance with
clinical guidance.[ 36 ] In England, National Health Service (NHS) providers have an
incentive to support improvements in quality through Commissioning for Quality and
Innovation (CQUIN) payments: they are given additional funds for delivering specified
improvements, as set out in the NHS standard contract.[ 37 ] Increasingly, hospitals must
have distinctive offerings for payers and patients to attract and retain their business.
All of the forces described above are putting pressure on hospitals to improve their
operations—including their productivity. In response, innovations in how care is delivered
are being developed and implemented. Hospitals are adopting many of these innovations
to better position themselves to survive—and, in many cases, to excel. The following
sections describe key innovations in healthcare provision and hospital structure. We
expect the trend towards innovation to continue in all markets and all parts of the world
(although the speed at which it takes hold may vary). Which of these strategies is best for a
given hospital depends on both its starting point and local market conditions.
Innovations in clinical care delivery

In hospitals around the world, innovations in care delivery are being introduced.
These innovations often have multiple goals: to strengthen clinical quality; increase the
delivery of personalised, patient-centred care; enhance the patient experience; and
improve their efficiency and productivity. Each of these goals is an urgent imperative for
hospitals today.
Adopting lean processes

Amongst hospitals, enormous variation exists in how services are delivered, resulting in
significant differences in both the quality of care and unit cost of care delivery. This
variation exists within hospitals, across hospitals within a region or a country, and across
countries. Unwarranted variation in English NHS acute hospitals, for example, is estimated
to cost an excess £5 billion a year (out of a total budget of £55.6 billion[ 38 ] ). Similar costs
have been seen in other countries.[ 39 ]
Lean, standardised processes—learned from best-practice peers and aided by artificial

intelligence (AI) and digital control centres—are being adopted by hospitals to ensure
consistently high-quality care and improve productivity. For example, the Beth Israel
Deaconess Medical Center in Boston has worked with data scientists from Amazon and
Google to analyse seven petabytes of data and develop operational tools to help the
health system use its resources more efficiently when delivering clinical care. For instance,
AI is being used in operating theatres to more accurately predict how much time to
schedule for a particular patient-surgeon combination, which has increased efficiency by
30 percent.[ 40 ]
The Vall d’Hebron University Hospital in Barcelona provides another example of how
dedication to lean processes is shaping the clinical environment. In the hospital’s new
operating room, a process engineer, who is not medically trained, spends all day thinking
about how to rationalise processes and improve outcomes. To support efficient patient
and staff flows, display screens allow staff to regularly monitor operating room logistics.
Workforce reform
In response to the increasing cost of care provision and the worsening shortage of
healthcare professionals, hospitals around the world have started to reallocate tasks to
different types of staff to free up time for those highly trained to perform activities for
which specific education and qualifications are critical.
Aravind Eye Hospitals, a cataract surgery specialist in India, has expanded the use of
technicians in the operating room to assist surgeons with specific tasks, which enables the
surgeons to be more efficient and treat many more patients. Today, technicians make up
about 60 percent of Aravind’s workforce. In addition, Aravind has expanded the role of its
nurses, which it calls mid-level ophthalmic personnel, to perform all hospital tasks other
than operations and diagnoses.[ 41 ]
Similarly, many countries have increased the responsibilities of nurses. In England, nurses
with special training in specific areas are authorised to prescribe certain medications and
manage diseases in their specialty.[ 42 ] In parts of the United States, anaesthesia care is
provided by certified registered nurse anaesthetists (CRNAs). In 2017, US CRNAs
administered anaesthetics approximately 43 million times.[ 43 ]
Two recent McKinsey reports, The Productivity Imperative for Healthcare Delivery in the
United States and The Future of Work, have highlighted the potential for technology to
address some of the workforce shortages in healthcare.[ 44 ] [ 45 ] For example, automation
may be able to reduce wait times and increase productivity, enabling doctors and nurses
to focus more effectively on improving patient outcomes. Machines could also take on
routine activities such as registration, checkout, and some dispensing of prescription
drugs.
Technological improvements in
inpatient care
Automation, technology-enabled scheduling of patient and staff time, and decision
assistance—including computer vision (the use of computers to analyse and interpret
digital images)—are three ways in which technology is already shaping the delivery of care
in many hospitals.
In recent years, a few hospitals with an especially high degree of service automation have
opened. For example, the Humber River Hospital (HRH) in Toronto launched it brand-new,
high-tech facility to patients in October 2015. CEO Barbara Collins had previously found
that “only 38 percent of staff time was spent with patients; the rest was spent on charting,
walking around, and supply collection.” With a new hospital twice the size of three old
facilities but with the same operating budget, HRH set out to automate as many manual
tasks as possible, both to enable staff to spend more time with patients and to give them
the systems and technology needed to create an environment for highly reliable care.
Today, HRH has automated approximately 80 percent of its back-of-the-hospital services,
such as pharmacy, laundry, and food delivery.[ 46 ] In addition, it is using technology to
improve frontline clinical care. (See the sidebar “Humber River Hospital (Toronto) is using
technology to improve frontline care”.)
Scheduling resources in an efficient and cost-effective way is challenging, and at many

hospitals, these tasks are often left to individuals with limited training or experience. To
solve this problem, a team from Massachusetts Institute of Technology (MIT) in Cambridge,
Massachusetts, developed an AI robot for automating hospital scheduling of doctors and
nurses. The tool anticipates room assignments and suggests which nurses to assign to
patients for different procedures. When the team tested the tool in a tertiary care centre’s
labour-and-delivery ward, 90 percent of the recommendations were accepted.
Furthermore, the solution received positive feedback for creating a more even workload,
given that it could consider all the scheduling constraints and complexities that are often
difficult for humans to grasp quickly.[ 47 ]
Real-time decision support, including computer vision, offers many advantages to

hospitals. It not only proactively identifies and alerts staff to patients whose clinical status
is deteriorating, but also reduces errors and saves staffing costs through more accurate
and efficient processes. Complex algorithms are increasingly able to match—and even
outperform—the diagnostic accuracy of clinicians. Image-based diagnostics using AI-
enabled computer vision can create opportunities to achieve improved performance and
greater accessibility. A tool that outperforms the best-trained specialists can provide
diagnoses from any location in the world using the imaging equipment already available. In
fact, several tools can be used with mobile-phone cameras. Examples include:
Mobile platforms developed by a Stanford University team can detect skin cancers
using mobile-phone images with the same accuracy as dermatologists.[ 48 ] These
platforms provide a route for quick, accessible screening for melanoma worldwide.
ET Medical Brain, Alibaba’s cloud-based solution, combines data hosting and image
diagnostics at hospitals in China. Recent successes include a tool to detect thyroid
cancer from ultrasound images that has an 85 percent accuracy rate, an
improvement on human accuracy levels of 60 70 percent.[ 49 ]
CellScope’s application allows a smart-phone or tablet to be used as a high-power

microscope to identify parasite levels in blood samples from people with
onchocerciasis, thus opening an opportunity for advanced diagnostics in remote
environments. This technology has been used to guide treatment strategies with a
specificity of 99.7 percent.[ 50 ] CellScope, a private US company, has patents in the
United States and China and has done field studies in Cameroon, Hawaii, India, the
Ivory Coast, Thailand, and Vietnam.[ 51 ]
Many decision-support and computer-vision technologies are new and still not in
widespread use—in some instances, because of a lack of research or evidence; in other
cases, because of difficulties adapting them to local systems. Some contracts have been
paused or terminated as a result. For example, Rhön-Klinikum, one of the largest German
providers, terminated collaboration with its previous vendor after working together for one
and a half years. The reason, said Rhön-Klinikum, was “the gap between aspirations and
reality,”[ 52 ] in part because medical guidelines differ in different countries. Rhön-Klinikum
now cooperates with an Austrian big-data service provider, Mindbreeze.
Moving care outside the hospital by

using new technologies
As technology improves and allows remote care to achieve patient experience and clinical
quality that is at least on par with traditional face-to-face care, a range of clinical services
will likely shift to remote modalities through telemedicine and online consultations.
Hospitals, by either building their own platforms or harnessing existing technologies, can
reduce their costs whilst still providing service to patients. In the future, remote-access
technologies and the ability to send a large amount of data very quickly are expected to
continue changing healthcare delivery in several ways. For example:
Connecting patients to specialists directly. Visits that do not require physical

examination (such as medication adjustments based on symptoms or readily available lab
data or for which critical data can be gathered remotely (for example, blood pressure
measurements that automatically upload to an electronic health record) are amenable to
telemedicine. Intermountain Healthcare, based in Salt Lake City, Utah, uses an improved
staffing model to support remote patient consultation, which reduces the need for
patients to take time off work and enables specialist input at an early stage in a patient’s
evaluation.[ 53 ]
Similarly, India’s Aravind Eye Hospitals uses telemedicine to serve rural patients in locales
where physicians are unwilling to travel or work. With the help of the International Agency
for the Prevention of Blindness, Aravind set up five IT-enabled vision centres from which
telemedicine consultation could be provided. More than 90 percent of patients received

appropriate care at these vision centres. Each centre is linked directly to Aravind’s base
hospitals in Tamil Nadu, Chennai. This system has allowed Aravind to continue to provide
high-quality care without charging needy patients—a group that is more than 60 percent
of the hospitals’ beneficiary population.[ 54 ]
Connecting specialised doctors in one area with primary care physicians (PCPs) in
another area, to share knowledge and provide training. For example, Partners
Healthcare in Boston, Massachusetts, introduced an e-consult initiative through which
PCPs can request a specialist opinion. A PCP sends the service a question (linked to the
patient’s record); the service then routes it to the appropriate specialist, who reviews the
record and provides written guidance within 48 hours. In a study of 27 primary care
practices, referrals were avoided in 65 percent of the cases, and in two-thirds of these
cases, there was no further referral in the following six months.[ 55 ] A similar programme
connecting PCPs to nephrologists in Canada found a 45 percent reduction in referrals.[ 56 ]
Even though new technologies promise cost savings and increased patient satisfaction in
the near term, adoption has been slow, for several reasons: cost, lack of payment models
for remote consultations, privacy and security concerns, difficulty accurately triaging
patients according to visit types, and resistance to change in healthcare practices to
accommodate new modalities.[ 57 ]
Patient involvement in care delivery

Contemporary patients are value-conscious, demand high quality, and increasingly
compare healthcare providers to leaders in customer experience such as Amazon and
Apple. To manage these new expectations, hospitals are offering digital solutions to
increase patients’ involvement in, and visibility into, their care.
Emerging initiatives are giving patients increased control of care scheduling and medical
records. In Sweden, a nationwide healthcare service, “1177 Vårdguiden”, allows patients to
schedule and cancel appointments online, view their medical records, keep track of and
renew prescriptions, and get support and treatments online.[ 58 ]
Hospitals are also beginning to offer care options that provide more personalised input
from patients and their treatment teams. For example, a Johns Hopkins team in Baltimore
has introduced the Corrie Health app to aid recuperation after a heart attack—from
discharge to recovery. The app allows patients to track medications and physical activity,
as well as stay in tune with indicators for recovery, such as heart rate, blood pressure, and
mood. The data is shared with care teams to aid a successful recuperation.[ 59 ]
Harnessing patient-generated data

Expanded data sets that include genetic, lifestyle, and physiological data can improve the
precision of healthcare diagnoses and treatment. Increasing investments are being made
to collect data across these dimensions on population-sized samples, pinpoint key risk
factors for disease development, and identify biomarkers for effective treatment.[ 60 ]
Personalising treatment offers the possibility of reducing overall healthcare-provision
expenditures by 5 9 percent and increasing average life expectancy by two to 15 months.
[ 61 ]
Today, most treatment decisions are based on standardised guidelines, using evidence
from clinical trials. However, as the cost of DNA sequencing has plummeted, some
hospitals have started using genetic analysis to personalise care. In specific cases,
treatment can be tailored to the genetics of the patient or the disease. For example, Dana-
Farber Cancer Institute, based in Boston, uses genomic sequencing in 40 percent of
leukaemia and lung cancer patients to select specific targeted therapies. Recent results
demonstrate that genetics can also be used to identify patients at risk of steroid-induced
growth stunting.[ 62 ]
Precision medicines can also be informed by real-time data capture. An example is

mPower, an iPhone app developed by the University of Rochester Medical Center in
Rochester, New York. mPower creates a clearer picture of Parkinson’s disease
progression by measuring the user’s dexterity, balance, gait, and memory. Researchers
have already gained greater insight into the factors that make symptoms better or worse,
such as sleep, exercise, and mood.[ 63 ]
Innovations in organisational structures

Increasingly, healthcare providers are making strategic structural changes to
achieve and maintain access to high-quality, cost-efficient care. In some cases, payment
reforms are providing incentives or other support for the effort.
Three broad types of structural changes are helping to maintain the balance of quality,
access, and cost:
Larger “regional hub” hospitals are seeking to increase volumes in specialised

services. These hospitals aim to deliver high-quality care affordably. Mergers, affiliations,
or structural system reconfiguration (to hub-and-spoke models, for example) to redirect
tertiary or quaternary patients to regional hubs support these moves.
Smaller, local, or community hospitals with the potential to thrive independently are
forming networks or groups. The networks help the hospitals achieve three aims:
increase their ability to invest in infrastructure, share back-office costs, and attract and
retain staff who want to undertake a range of clinical work. Forming networks or groups
also creates an opportunity to share best practices across hospitals and adopt the best
ways of working. These hospitals generally focus on providing services for more common
conditions to ensure they can achieve suitable caseloads for maintaining quality.
Regional specialised hubs, local community hospitals, and other types of

community-based care are vertically integrating. These entities aim to improve their
ability to coordinate the full range of care and provide care closer to patients’ homes, in
response to patient needs and expectations. They may also take on population health
management.
Larger regional hub hospitals

Around the world, many hospitals are consolidating services to increase volumes in
specialised services. The result is larger regional hubs.
In England, clinical networks have been created for major trauma, acute stroke care, and
acute cardiac care, the result of which is a smaller number of higher-volume, nationally
accredited centres whose quality and volumes are monitored via national clinical audits.
[ 64 ]
This approach has resulted in a network of 27 major trauma centres and 75 cardiac
intervention centres, as well as networked care delivery for acute stroke. Patients in need
of these services are now routed directly to a specialist centre, bypassing small, less
specialised hospitals. The development of major trauma centres has increased the odds of
postinjury survival by almost 20 percent in the past five years, saving the lives of more than
1,600 victims.[ 65 ] In London, the number of hyper-acute stroke centres has been reduced
from 31 to eight, with resulting improvements—from 2008 to 2012, there was a 7-percent
reduction in length of stay and a relative reduction in mortality of 15 17 percent.[ 66 ]
In Denmark, the government and the country’s five health regions invested €550 million in
new “super hospitals,” with the aim of improving the quality of the entire hospital system
and structure. The structural modernisation arose from both the need for increased
specialisation to provide higher-quality care and the shift to out-of-hospital treatment for
low-need patients.[ 67 ]
In the Netherlands, four hospitals in Friesland combined their clinical services into one
location in 2017; in 2018, seven hospitals in North Holland and nine in South Holland
formed a single service for prostate cancer treatment. The changes were designed to
improve quality of care by making sure that surgery was performed by the highest-
qualified specialists. The changes have been encouraged by Dutch payers, who are
seeking to finance the top institutes in each specialty.[ 68 ]
Networks built around specialty hubs improve specialist utilisation whilst delivering higher-
quality care. In some specialties, this effort has been supported by technological
innovations. For example:
In the United States, Avera Health reported that it achieved cost savings of $62
million, reduced critical-care bed-days by 11,000, and avoided 260 deaths in one
year by using an electronic intensive care unit (eICU) system to provide remote
specialist care to rural hospitals in South Dakota.[ 69 ]
Emory Healthcare in Atlanta, in collaboration with Macquarie University in Sydney,

has taken this concept further by staffing eICUs during out-of-hours periods with
intensive care specialists located in Australia.[ 70 ]
Resistance to structural change is common in many countries, however. Sometimes, as in

the Netherlands, providers are autonomous, and there is no regulatory authority to decide
which procedures can (or must) be performed in each hospital. This is not the case in many
other countries, though. Another problem is that hospitals and clinical staff are often
reluctant to give up part of their offerings because of concerns about loss of revenues and
the diversity of work. However, the trend towards consolidation—a result of increasing
recognition of the benefits of centralisation—is gaining public support and political
approval.
Smaller hospitals forming networks or

groups
At the same time, smaller or more remote hospitals are increasingly forming community-
based networks to increase the likelihood of their survival. In the United States, 80 rural
hospitals closed from 2010 to 2017, and an additional 700 are believed to be at risk of
closure.[ 71 ] Many of the at-risk hospitals are small, with fewer than 25 beds, but provide
the only hospital services for more than 35 miles.
One community-based network, Intermountain Healthcare, based in Salt Lake City, Utah,
has grown from 15 hospitals in 1975 to a network of 22 hospitals and more than 185 clinics
today.[ 72 ] Other examples of networks or groups include Tenet and HCA in the United
States and Asklepios and Rhön Klinikum in Germany.
For small hospitals, a network can make it possible to reduce individual costs by co-
investing in IT-enabled infrastructure and by sharing management and back-office
functions. Forming a network can also provide additional advantages to small hospitals
that are geographically close to each other. For example, it can give the hospitals access
to larger volumes of patients to support high-quality care. In addition, networks can
strengthen the hospitals’ value proposition for staff, who can undertake a greater range of
clinical work in their local communities. Staff members can also share innovations and
best-in-class management practices with the other facilities in the network.
Vertical integration
A third ongoing structural change is vertical integration, which makes it possible for
hospitals to offer a greater range of services, from primary and community care to acute
and post-acute care. Some hospitals push vertical integration even further, taking on
functions not traditionally associated with inpatient care, such as population health
management (often, by offering health insurance). For example, Intermountain Health and
a number of other US hospital networks now offer health insurance plans to local
residents.[ 73 ]
In other cases, hospital networks are taking on population health management by

becoming accountable care organisations (ACOs). In this model of healthcare provision, a
provider, or group of providers, takes responsibility for the provision of healthcare to a
defined population. Typically, the ACOs are paid a fixed amount to provide care and are
expected to reduce per-patient costs while achieving predefined quality of care metrics.
For example, the Northumbria ACO in England, which includes a hospital, primary care
providers, and the local council, serves a population of more than 320,000. The
organisation has developed programmes for specialist emergency care, urgent care, and
primary care services (accessible seven days a week) and is redesigning community and
social care services. This approach has created new opportunities for Northumberland to
integrate care and increase technology use along the patient pathway.[ 74 ]
Similarly, Clalit, an Israeli ACO, insures more than 50 percent of the country’s population,
operates primary and specialist clinics, and owns hospitals that account for about one-
third of Israel’s hospital beds.
McKinsey analysis suggests that vertical integration has several benefits. Some of them
pertain to the quality of care, which is enhanced by the ability to share full patient data and
to ensure seamless continuity of care. (For example, patients can be “handed over” to
community clinics prior to hospital discharge.) Other benefits derive from the ability to
attract personnel by offering multidisciplinary training and career paths that involve both
hospital and community settings. In addition, financial benefits are realised by optimising
care by matching each patient’s actual needs with the larger capacity available across the
healthcare system.
From a regional or national perspective, the downside of all three types of innovative
structures is that it can give strong market power to an organisation that offers a
substantial proportion of all hospital capacity and care delivery in a particular area. Many
countries have put in place regulations to prevent such market power from leading to
higher prices or lower quality of care.[ 75 ]
Moving forward
In this article, we have outlined the many ways in which hospitals are changing and
will continue to change. Major forces that are affecting hospitals now include rapidly
changing healthcare needs due to demographic and epidemiological factors, the advent of
technology-enabled healthcare systems that can deliver care in radically different ways,
and the changing expectations of both the healthcare workforce and, crucially, healthcare
consumers.
New entrants and disrupters will be a powerful force in all geographies and, in some cases,
may reshape the whole healthcare ecosystem. Technology—be it robotics for surgery,
remote monitoring, data collection and sharing systems, artificial intelligence, or precision
medicine—will fundamentally change the way in which patients and clinicians interact with
each other and participate in the healthcare system.
We are certain that how healthcare is provided will change: some types of care provision
will shift to be closer to home or will become self-care; others will be consolidated. In most
parts of the world, the increased focus on both clinical quality and patient experience will
continue—or accelerate. In some countries or markets, hospitals might use their current
organisational advantages to position themselves as the core of whole healthcare delivery
systems. In other areas, primary and community care providers may finally deliver on their
long-term promise to move a lion’s share of patient care out of hospitals.
We are also certain that accepting the need for change will not be sufficient on its own to
enable providers to succeed in the future. Rather, the best results will be achieved by
those providers that put as much attention into change management as they do on the
changes themselves. No change effort will achieve its goals unless it includes a strong
focus on altering the mind-sets and cultures of both the clinical and nonclinical staff. In our
experience, providers that approach change management in this way have increased their
organizations’ agility and realised lasting success.
Influenced by regulation, funding, competition, population dynamics, and other external

factors, the emerging picture will differ amongst countries. In all cases, to be truly
sustainable and successful, hospitals will need to consider what they can do to improve
the quality and efficiency of service delivery, how they can adopt technology to support
those changes, and which strategic choices they should make to the services they provide,
the patients they serve, and the partners they work with.
Whilst hospitals have already undergone significant changes since they were first
established more than a thousand years ago, our sense is that changes in the next 10
years will be far more significant than those hospitals experienced in the past 20 to 30
years. Change may not necessarily be apparent in all countries now, but we believe that
this is a case of “not yet” rather than “not ever”.
We cannot predict the rate at which different healthcare systems will change or exactly
what the hospitals of 2030 will be like. However, they are highly likely to be very different
from what we think of as an average hospital today.
Note:The addendum to this article entitled “ The nine forces changing the world for
hospitals ” provides more details about these forces.
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About the author(s)
Penny Dash is a senior partner in McKinsey's London office, where Natasha Stern is a
partner, Caroline Henricson is an associate partner in the Stockholm office, and Pooja
Kumar is a partner in the Boston office.

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5/28/2020 The hospital is dead, long live the hospital!

The hospital is dead, long live the

By Penny Dash, MD ; Caroline Henricson; Pooja Kumar, MD ; and Natasha Stern

Hospital care is changing both rapidly and radically. Because of

Nine major forces are involved:

Changes in patient populations and their needs

Higher patient expectations

Advances in clinical knowledge and technology

Impact of digital technologies on how healthcare is delivered

Difﬁculties in attracting and retaining an appropriately skilled workforce

Financial and funding challenges

Requirements to measure quality

Smaller hospitals (sometimes called local or community hospitals) are forming

Vertical integration is increasing amongst regional hubs, smaller local hospitals,

The world is changing for hospitals

Recognition is increasing that care is better provided in a community setting.

High-quality care requires concentration into specialised, high-volume centres of

Payers find it increasingly difficult to finance healthcare in line with increasing

Innovations in clinical care delivery

Adopting lean processes

Lean, standardised processes—learned from best-practice peers and aided by artiﬁcial

Scheduling resources in an efﬁcient and cost-effective way is challenging, and at many

Real-time decision support, including computer vision, offers many advantages to

CellScope’s application allows a smart-phone or tablet to be used as a high-power

Moving care outside the hospital by

Connecting patients to specialists directly. Visits that do not require physical

telemedicine consultation could be provided. More than 90 percent of patients received

Patient involvement in care delivery

Harnessing patient-generated data

Precision medicines can also be informed by real-time data capture. An example is

Innovations in organisational structures

Larger “regional hub” hospitals are seeking to increase volumes in specialised

Regional specialised hubs, local community hospitals, and other types of

Larger regional hub hospitals

Emory Healthcare in Atlanta, in collaboration with Macquarie University in Sydney,

Resistance to structural change is common in many countries, however. Sometimes, as in

Smaller hospitals forming networks or

In other cases, hospital networks are taking on population health management by

Inﬂuenced by regulation, funding, competition, population dynamics, and other external

About the author(s)

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