In the tele-mythical White House of the old Aaron Sorkin show "The West Wing," Martin Sheen played the role of President Jed Bartlet. In a flashback episode set prior to Bartlet's election, his advisors were pestering him about a position on a particular issue. He, clearly, was done discussing that particular topic and in an attempt to move the discussion along asked, "What's next?" When his team persisted in discussing that first issue, he abruptly stopped them and rather imperiously explained that when he said "What's next?" it wasn't a question, but a statement.
In the same context, perhaps it is time for us to ask, "What's next?" Whether it is ObamaCare or RomneyCare, I am not so sure at this point that we care -- or at least, that we should care. Charles Darwin opined, "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change." Some species in our broad health care and employee benefits universe are beginning to adapt to the "new normal," and they may be harbingers of a broader change construct -- one that focuses on the very adaptability of which Darwin spoke.
With the ongoing discussion of Accountable Care Organizations (ACOs) and what they might look like, what anti-trust concerns need to be ironed out, etc., there are two concurrent movements that are gaining both strength and velocity. First, insurers are merging and/or being acquired. This was a more-or-less inevitable consequence of the structure of PPACA. Additionally, hospitals are beginning to look more like insurance companies.
Consolidation concerns
Spurred by the pending merger of Express Scripts and Medco and concerned about continuing hospital consolidation in markets that are already significantly narrow, the health subcommittee of the House Ways and Means Committee is holding hearings. Committee members are concerned by a pattern of price increases noted in the aftermath of mergers. While there is no evidence that these increases -- reportedly as high as 50% -- are being passed to consumers directly, they are being shifted to private insurers who then pass them to employers and ultimately to employees. As my friend Larry used to say, "Meat and potatoes, or potatoes and meat -- it's still hash!"
Subcommittee chairman Wally Herger would be happy if consolidations yielded increased efficiency and quality, but he worries that these moves will instead lead to increased revenue, which results from increased costs. Herger is right to be concerned about these eventualities, but we have to ask where these folks were when the PPACA garden was being planted.
The hospital consolidation, coupled with hospital-aligned physician practices, is a concern, but it is beginning to yield a new species that may be much more nettlesome. A consequence of ACO-think, there is new evidence that hospitals have decided that if they need to be accountable for costs, they need to act like -- wait for it -- insurance companies. Indeed, some are beginning to transition into entities that look very much like insurers.
I remember my mother cautioning that I shouldn't wish too hard for things, because someday I might get them. During the years I spent in the carrier side of the industry, I was often called on to work with teams on the design and pricing of plans. In one such instance, we worked for half a year on a plan design, but we never got the pricing nailed down. The problem was not that we didn't understand our contracts, but rather that the cost of the contracts -- both facility and the so-called RAPERs (Radiologists, Anesthesiologists, Pathologists and Emergency Room physicians) -- continued to increase while we were attempting to price the product. More than once, I said that I would like these folks to be in our shoes.
Massachusetts: A look at our future?
The Boston Globe (Aug. 10, 2011) reported that Partners HealthCare System, the state's largest hospital and physician network, had signed a letter of intent to acquire Neighborhood Health Plan (NHP). NHP is based in Boston and currently insures nearly a quarter million Massachusetts residents. Underscoring the theme, NHP CEO Deborah Enos told an interviewer, "This is an opportunity for us to look forward and position Neighborhood Health Plan to be better situated in the future."
The question is not whether a health plan owned by a hospital system might deliver lower-cost health care. Rather, it's when (or if) the new entity will face virulent and nasty accusations that it's making health care decisions based on cost, just as its HMO progenitors encountered years earlier. As the Globe points out, regulators are going to take a hard look at this deal, especially because Partners' universe includes the vaunted Massachusetts General Hospital as well as Brigham and Women's Hospital.
These facilities were in the news again just a month later when talks were reported between Partners and Blue Cross Blue Shield of Massachusetts. In a move designed to reduce payments by as much as $240 million, Partners entities would sign the Blue Cross Alternative Quality Contract (AQC). The AQC puts total patient care on a budget, with the goal of limiting overall medical cost increases due to the change of incentives. This is not a new idea but it is as yet unproven to save money -- at least in the short run.
Another Massachusetts hospital company, Steward Health Care System, announced that it will be working with Tufts Health Plan to create a new insurance plan called Steward Community Choice. They have priced their plan 15% to 30% lower than comparable products in the marketplace by requiring consumers to use it for nearly all of their routine health care needs. Steward believes that this will give them a significant edge on controlling both the pricing and the delivery of care.
Why is a great deal of this change occurring in the Bay State? Massachusetts' health care plan presaged PPACA and has been likened by some to a miniature version of the federal health care law. In Massachusetts, the original goal of increased access has been accomplished, but it has brought with it a spate of unintended consequences. Chief among them? Longer wait times for physician visits and costs that have been increasing at a faster rate than the national pace.
PPACA's access goals are akin to building more on-ramps to an already congested highway, and the ACO initiatives alone aren't likely to bring about the efficiencies and effectiveness that legislators envisioned. As much as it may confound or trouble some in Congress, the changes happening in Massachusetts are a result of the one thing that actually stands a chance of resolving these issues: free marketeers changing the paradigm. In business evolution, that's always "what's next."
