More on healthcare shifts

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.

Laurie Gelb, a health care strategy and research consultant, says that it is not business as usual, but survival. “Mergers and acquisitions, which first made tentative inroads into healthcare in the 80s, is back with a vengeance because the fee for service outpatient/inpatient continuum no longer fares well under an increasingly regulated, standardized, constrained clinical practice model,” she says. “No clearly improved model has yet emerged. Integration in the medical home is a hedge toward a favorable cost and efficiency position when comparative effectiveness research, process improvement, and electronic medical records consolidation finally begin to bear fruit or when their failure to converge costs and outcomes will point to a better way entirely.”

Gelb says that we may yet see a backlash against cookbook medicine as it is now being written, paving the way for more technology-based solutions. “But those solutions will have be funded from the private sector, probably from outside the health care system. One area to look at is DME innovation. CMS and other payors are leasing and buying mediocre equipment under an archaic contracting system at tremendous expense,” says Gelb.

StrategicConsultant, an expert in managed care and HMOs, thinks that these health care shifts are related to the Affordable Care Act. “The Affordable Care Act is putting in requirements that health plans must maintain an 85% loss ratio except for small individual plans. This is driving consolidation among small plans that cannot continue to operate without member volume,” he says. “The larger plans are merging/acquiring smaller plans for a similar reason. The start-up costs for a new market make it difficult to hit targets. Instead, the strategy is to acquire a plan with established membership and physician networks. Other factors in the Affordable Care Act that are affecting the need to consolidate are the lowering of reimbursement by CMS. If you look at a market like Houston (where Health Spring had a presence), revenue is dropping from 118% of Medicare fee for service to 95%.”

StrategicConsultant thinks that the provider consolidation is also being driven by the Affordable Care Act but for different reasons. “The provider consolidation is being driven by changes in reimbursement models. CMS is looking to move toward a case rate payment for diseases. Individual doctors could be left out in the cold. Thus, we are seeing new physician groups being created and acquisition of physicians by hospitals. The hospital moves the physician to a salary payment instead of per visit, to a fixed cost instead of variable,” he says.

Anthony Cirillo, an expert in healthcare marketing and patient experience, says that these shifts are neither business as usual nor a sign of the economy. “It is more that the healthcare system will implode if left unchecked as it is. Costs are out of control, and a system of fee for services has contributed to that,” he says. “With accountable care organizations and bundled payments, healthcare providers now have to work together in a continuum of care to care for patients per-hospital, in-hospital, and post-hospital. Some are choosing to buy the components in the continuum to control it. For example, Highmark Blue Cross bought a hospital. Quality has economic repercussions. Value-based purchasing will take one percent of Medicare dollars from hospitals that they might earn back through clinical and patient experience performance. Likewise, hospital readmissions and hospital acquired infections all have economic repercussions.”

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