Health care shifts again

By Maureen Aylward

It seems the healthcare system is shifting again to address reductions in costs and maintaining quality. We asked our Zintro experts to comment on these shifts, changes, and new trends, such as hospital mergers, insurer moves to purchase provider practices, and employers’ greater interest in employee care.

Rob Miraglia, a health care marketing and sales consultant, says there are several reasons for the mergers and acquisitions, vertical integration, and employer’s interest in their employees’ medical care. “They include increasing revenues with a lower increase in expenses, which involving layoffs of redundant positions, fear of upcoming legislation, increasing size for economies of scale, and protection against other potential buyers, among others,” he says. “The over-riding issue is cost reduction. In the case of hospital mergers, it includes the fear of lowered Medicare and other third party reimbursements with the new health care plan. With insurers purchasing provider practices, it’s for more control over spending and costs. That is also why employers are more interested in their plans than before.” Miraglia says that for actual patient care, there may be an improvement with hospital mergers due to improved EMR and information sharing. “The caveat is if the merger doesn’t reduce the headcount of caregivers, especially RNs. The vertical integration and employee interest in plans could be more ominous. Both can lead to increased profits at the expense of care, as was seen with the early MCOs in the 1980s,” he notes.

Martin Kleckner, Chief Operations and Business Development Officer for The Nicholas Conor Institute for Pediatric Cancer Research, says that these healthcare shifts are a reflection of business as usual. “Going back in time to the 1990s, many articles in industry publications such as Modern Healthcare and Health Affairs have stories of provider system mergers for the purpose of cleaning up balance sheets, lowering costs via economies-of-scale, increasing negotiation prowess relative to the managed care payer community (not to mention re-engineering, process improvement and total quality management – TQM),” he points out. “Hospital mergers to accomplish these goals are an indication of business as usual. Insurer initiatives to purchase provider (physician) practices are generally a reflection of the long-standing Kaiser Permanente business model. Employer moves to self insure and influence employee wellness are likewise indications of business as usual.”

Kleckner says that its business as usual because the underlying engineered economy of fee-for-service reimbursement remains essentially unchanged. General efforts by providers to cut costs in response to annual or periodic reimbursement reductions cannot be considered as significant shifts in market behavior. The same goes for payer moves to shift costs to the patient-consumer. “I see the market shift more in the form of disease management and value-based delivery and pricing, something that has been argued for by Michael Porter of Harvard University. It’s also the advent of molecular diagnostics, prospectively companioned with therapies expressly designed to specific diseases and disorders, Kleckner says.

He points out the recent announcement by Cornerstone Health Care (High Point, North Carolina) that it was shifting from a traditional fee-for-service model to a population value-based program. “While this move may be seen as laudable, it is hardly revolutionary when you recall that managed care and capitation models have been around for decades. What is distinguishable, perhaps, is that disease management is possibly supplanting population management as the model of choice. By performing a relatively higher volume of certain procedures and handling more cases of a certain disease, providers are expected to be clinically better at it than other less specialized institutions. Moreover, by performing more procedures, these provider systems become more cost efficient, thereby enabling them to enjoy a higher margin than their competitors. Again, while this is encouraging, the shift is likely to be glacial in terms of market transition speed. Several key drivers are involved: the rising cost of care relatively to an unsustainable funding resource, a national population that is living much longer than the original designers of both Medicare and Social Security had planned for, diseases being chronic rather than acute, and an overall poor quality of care that exacerbates it all,” Kleckner says.

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