When the Cleveland Clinic announced job and expense reductions of 6% in 2013, the healthcare sector took notice.
Did the world-renowned hospital and healthcare research center, with 40,000 employees and a $6 billion budget, really believe it did not possess the heft to take on the increasingly turbulent sea changes in American healthcare? Or was this yet another stakeholder using Obamacare as cover to drive draconian change?
Both sides of the political aisle were quick to make hay of the announcement, with conservatives blaming reform for eliminating jobs while liberals questioned the timing of the cuts when the Cleveland Clinic was posting positive growth. The answer from Eileen Sheil, corporate communications director, was apolitically straightforward: “We know we are going to be reimbursed less.” Period.
The question of reimbursement reform and the unintended consequences of the Affordable Care Act are weighing on the minds of hospital executives nationwide as independent, regional and national healthcare systems grapple with a post-reform marketplace. The inevitable conclusion that the unsustainable trend in American healthcare consumption is now at its nadir seems to have finally hit home.
These days, America’s hospitals are scrambling to anticipate and organize around several unanswered questions:
- How adversely will Medicaid and Medicare reimbursement cuts affect us over the next five years?
- Can we continue to maintain our brand and the perception that any employer’s PPO network would be incomplete without our participation?
- Can we become a risk-bearing institution?
- Can we survive if we choose not to become an accountable care organization (ACO)?
- Will the ACO model, by definition, cannibalize our traditional inpatient revenues?
- Can we finance and service a hard turn into integrated healthcare by acquiring physician and specialty practices?
Go It Alone or Join a Convoy?
Mergers and acquisitions remain in high gear in the hospital industry—“the frothiest market we have seen in a decade,” according to one Wall Street analyst. “Doing nothing is tantamount to signing your own death certificate.”
Many insiders believe consolidation and price deflation is inevitable in healthcare. Consolidation, however, means scarcity of competition. If we operate under the assumption that scarcity drives costs higher, we may not necessarily feel good about consolidation leading to lower costs unless mergers are accompanied by expense cuts that seek to improve processes, eliminate redundancies and transform into a sleeker, more profitable version of one’s former self.
Bigger may not always be better, but bigger seems to have benefited a select group for the last decade.
Continue reading “The Perfect Storm: Health Reform and America’s Hospitals”
Filed Under: Economics, THCB
Tagged: consumer driven health, health care delivery, hospital consolidation, Hospitals, Michael Turpin, payment reform, risk management, The ACA
Jun 3, 2014
In ancient Athens, the philosopher Diogenes wandered the daylight markets holding a lantern, looking for what he termed, “an honest man.”
It seems since the dawn of the consumer economy that customers and buyers have traded most heavily on a single currency – trust.
Three millennia later, our financial system still hinges on the basic premise that the game is not rigged and any trusted intermediary is defined by a practitioner who puts his client’s interests ahead of his own.
Anyone responsible for procurement of healthcare may feel like a modern-day Diogenes as they wander an increasingly complex market in search of transparent partners and aligned interests. The art of managing medical costs will continue to be a zero-sum game where higher profit margins are achieved at the expense of uninformed purchasers.
It’s often in the shadowed areas of rules-based regulation and in between the fine print of complex financial arrangements that higher profits are made.
Are employers too disengaged and outmatched to manage their healthcare expenditures?
Are the myriad intermediaries that serve as their sentinels, administrators and care managers benefiting or getting hurt by our current system’s lack of transparency and its deficit of information?
Continue reading “ACA 101: An Employer’s Search for Objective Advice”
Filed Under: THCB, The Business of Health Care, The Vault
Tagged: Benefits, brokers, consultants, Corporate America, Costs, Employers, Hospitals, Human Resources, Incentives, Insurers, Michael Turpin, purchasers, The ACA, the business of health care, Uwe Reinhardt
Apr 10, 2014
His emails arrive at night and land like scud missiles. He is an Old Testament retired CEO who is appalled at the state of America and as a thirty year healthcare system veteran and dutiful son, I am expected to interpret the complicated tea leaves of the Affordable Care Act ( ACA) and warn him if Armageddon (any form of change) is imminent. He needs three hours notice to hide his coin collection.
Today, his instant messaging is in large case font; He has forwarded an email that was forwarded to him from a friend of a friend of a friend – all retirees convinced that our current President is an operative for a hostile foreign government. I have to give high scores to his email chain author for his/her detail, veracity and creativity. Many of the stories are purportedly authored by retired Generals, Navy Seals, and in one case, a dead President.
I often scroll down these emails to see if I can find its genesis and author – perhaps it is Karl Rove or someone incarcerated for white-collar crime.
The email offers me “the truth about Benghazi” or a grainy photo of the President giving out nuclear codes to Al Qaeda operatives behind a District of Columbia Stop & Shop. I am not always inclined to believe these missives but I love my Dad and his loyal concern for America. At 83, his draconian solutions are not always politically feasible and carry a decent chance of arrest if one actually tried to act on them. However, he has a 140 IQ and understands economics.
Continue reading “The T-Rex Takes on Healthcare Reform”
Filed Under: Uncategorized
Tagged: Michael Turpin, Obama administration, The ACA
Dec 4, 2013
Alice: Cheshire-Puss, would you tell me, please, which way I ought to go from here?
Cheshire Cat: That depends a good deal on where you want to get to.
Alice: I don’t much care where.
Cheshire Cat: Then it doesn’t matter which way you go.
Alice: —So long as I get somewhere.
Cheshire Cat: Oh you’re sure to do that if you only walk long enough.
Lewis Carroll, The Adventures of Alice in Wonderland
2013 has arrived and employers now find themselves on the other side of a looking glass facing the surreal world of healthcare reform and a confusion of regulations promulgated by The Accountable Care Act (ACA) and its Queen of Hearts, HHS Secretary Sebelius. Many HR professionals delayed strategic planning for reform until there was absolute certainty arising out of the SCOTUS constitutionality ruling and the subsequent 2012 Presidential election. They are now waking up in ACA Wonderland with little time remaining to digest and react to the changes being imposed. A handful of proactive employers have begun, in earnest, to conduct reform risk assessments and financial modeling to understand the impacts and opportunities presented by reform. Others remain confused on which direction to take – uncertain how coverage and affordability guidelines might impact their costs.
If reform is indeed a thousand mile journey, many remain at the bottom of the rabbit hole – wondering whether 2013 will mark the beginning of the end for employer sponsored healthcare or the dawning of an era of meaningful market based reform in the US. HR and benefit professionals face a confusion of questions from their companions — CFO’s, CEOs, shareholders and analysts.
Continue reading “Alice in Healthcareland”
Filed Under: THCB, The Business of Health Care
Tagged: 2012 Election, Defined contribution, employee benefits, employer-sponsored health insurance, Health Care Reform, Michael Turpin, risk management, The ACA, Wellness
Jan 4, 2013
“Change, before you have to…” Jack Welch
We live in a society that loathes uncertainty – particularly the unintended consequences that sometimes result from a catastrophic event or in the case of PPACA, landmark legislation. Wall Street and the private sector crave predictability and find it difficult in uncertain times to coax capital off the sidelines when the overhang of legislation or geopolitical unrest creates the potential for greater risk. Despite our best energies around forecasting and planning, some consequences, particularly unintended ones – only reveal themselves in time.
In the last decade, employers have endured an inflationary period of rising healthcare costs brought on by a host of social, political, economic and organizational failures. There was and remains great anticipation and trepidation as Congress continues to contour the new rules of the road for this next generation’s healthcare system. Optimists believe that reform is both a way forward and a way out of a mounting public debt crisis and a bypass for an economy whose arteries are clogged by the high cost of medical waste, fraud and abuse. Cynics argue reform is merely a Trojan Horse measure that offers an open invitation for employers to drop coverage and for commercial insurers to “hang themselves with their own rope” as costs continue to spiral out of control — leading to an inevitable government takeover of healthcare.
Meanwhile, leading economic indicators are flashing crimson warning signs as recent stop-gap stimulus wears off and long overdue private/public sector deleveraging results in reduced corporate hiring, lower consumer confidence and increased rates of savings. The symptoms of a prolonged economic malaise can be felt in unemployment stubbornly lingering around 9.2% and a stagnating US economy that is struggling to come to grips with the rising cost of entitlement programs. Across the Atlantic, the Euro-Zone is teetering as Italy and Spain (which represent more credit exposure than Greece, Portugal and Ireland combined) stumble toward default. Despite these substantial head winds, US healthcare reform is forging ahead – – right into the teeth of the storm.
Continue reading “Employers and Health Reform”
Filed Under: The Business of Health Care
Tagged: Employers, Health Care Reform, Michael Turpin
Jul 21, 2012
The scene opens with a fit, thirty-something man running down the hallway of an office building. His white shirt is stained on right side by what appears to be orange juice. He frantically looks behind him to see if anyone is following him and knocks over a female colleague – spraying papers into the air. He spins, tumbles, hesitates and then runs through a door marked, “ Human Resources – Compensation and Benefits”
He bursts into an inner office where a 50ish woman is on the phone – laughing. She frowns glancing at him as he shuts the door and peers between her Levolor blinds.
Carol: (Covering the phone) What the hell are you doing, Johnson ? Aren’t you supposed to be downstairs conducting the annual benefit enrollment meetings?
Johnson (Terrified, turning to show his stained shirt) : Are they coming? Did you see anyone? Those five women – you know the ones who go walking every day at lunch – one of them threw an orange at me right in the middle of my presentation.
Carol: (Swivels in her chair, turning her back on Johnson and is about to speak into the phone when she sees all her phone console lines blinking at once. Her cell phone begins to vibrate in her purse. She speaks into the phone)
Tim, let me get back to you. Something seems to be going on here at Corporate. (she hangs up and let’s her phone start to ring. )
Continue reading “The Great Wellness Revolt of 2011″
Filed Under: THCB
Tagged: Michael Turpin, Wellness
Jun 7, 2011
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During the course of 2009, an alarming trend line was broken. For the first time ever, more employers under 50 employees were not offering medical insurance to employees than those who continued to provide employer sponsored healthcare.
Unfortunately, achieving affordability is often a zero sum game and the current system often fails the weakest and most disenfranchised of its stakeholders. While the burden of spiraling healthcare costs has effected virtually every employer, the weight of cost increases has been borne disproportionately by individuals and smaller employers (1-250 employees). The opaque science of risk pooling, cost shifting and risk selection has as much to do with unacceptable increases as poor consumerism, over treatment and inefficiency. As we march toward insurance exchanges and pooled purchasing for employers in 2014, we will continue to witness a game of pass the parcel leaving smaller employers holding the bag.
Healthcare cost shifting begins at the highest levels with federal and state governments routinely cost shifting to the private sector by serially under-reimbursing specialists and hospitals for the cost of their services. Doctors and hospitals, in turn, shift cost to the private sector charging higher fees for services to make up for underfunded Medicare and Medicaid rates. Health systems have consolidated along with multi-specialty medical groups gaining critical bargaining power that results in higher contracted rate increases negotiated with insurers. Insurers, attempting to keep rising medical trends down, must exact concessions from less well leveraged providers such as community based hospitals and primary care doctors. The result is an Darwinian landscape where only the large survive.
As core medical trends hover between 7%-8%, insurer insured book of business medical trends have climbed into and remain in double digits. Larger employers remain more immune from peanut butter spread book of business trends due to their own unique claim credibility and in many instances, due to the simple act of self insurance. Lack of size and actuarial credibility leaves smaller employers and individuals to be underwritten within pools of risk — pools that continue to pass on the rising costs of care at an alarming rate. To add insult to injury, as states and the Federal government become increasingly larger medical payers (already representing over 50% of all medical spend in the US), cost shifting will only accelerate in the private sector resulting in higher medical trends impacting smaller employer pools. Continue reading “A Case for Self Insuring Small Business”
Filed Under: OP-ED, THCB
Tagged: Costs, Medical cost shifting, Michael Turpin, Private sector, Self-insuring, Small Business
Apr 8, 2011
“In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed” Charles Darwin
As the legislative reform volcano rumbles and angrily spews magma into the Washington night, nervous industry stakeholders competing for survival on this unstable island of American healthcare are still betting that the seismic activity is merely a false eruption.
Survivor contestants are using every possible means to ensure they are not voted off the island. The stakeholders are a veritable who’s who of personalities – the powerful, the wealthy, the prima donnas, the tough love advocates, the national health zealots, the well-intended academics, the bellicose politicians, the under-employed, the overweight, and the disenfranchised. It remains to be seen whether Congress, market forces or the American people will be the ultimate judge of who stays and who goes.
If the contestants cannot change in the next five years, 2015 will find them staring at a terrifying wall of regulation and governmental intervention that will be more destructive than the changes from the 2010 proposed legislation. Continue reading “Survivor”
Filed Under: Uncategorized
Tagged: Michael Turpin, Obamacare, The ACA
Feb 22, 2011
It’s high noon for private healthcare. Over the last decade, large, medium and small employers that procure and manage over $1T of private healthcare spend for an estimated 180M Americans have been engaged in an expensive game of Texas Hold ‘Em – – wagering with and against a continuum of stakeholders that all seem to possess more powerful hands. As providers consolidate, insurers retrench and the government wrestles with obligations of an uncontrolled fee for service Medicare, the costs of staying at the final table are taking its toll.
To many veteran observers, it appears that employers may be on the brink of folding their cards. As finance and HR professionals consider the table stakes and costs to remain in the game, the Affordable Care Act (ACA) has suddenly provided a potential golden opportunity to step away from a fifty year obligation without incurring onerous near term financial consequences.
As individuals and small business have continued to lapse into the ranks of the uninsured, those small and mid-sized businesses choosing to continue to offer health insurance are coming to the realization that the Affordable Care Act will not result in the moderating of double digit medical trends. In the near term, some contend costs will continue to rise by much as 25-40% before the launch of 2014’s guarantee issue health exchanges.
Larger employers are already cynical to whether reform will actually work for them or against them. Bigger firms and collectively bargained plans are beginning to understand that if small and mid-sized employers drop out of offering private healthcare, the decline of employer plans will leave them as the sole remaining source for private insurance cost shifting. As the cards are turned, the outcomes are far from certain – – and as we have come to discover, business hates uncertainty.
Continue reading “High Stakes Health Reform – Employers: In or Out?”
Filed Under: Uncategorized
Tagged: Health Care Reform, Michael Turpin
Dec 15, 2010
Christmas is the time when kids tell Santa what they want and adults pay for it. Deficits are when adults tell government what they want and their kids pay for it. ~Richard Lamm
The day after a mid-term tidal wave of anti-incumbency sentiment swept through Congress resulting in the GOP reclaiming a controlling majority in the House and closer parity in the Senate, a seemingly contrite President Obama took personal responsibility for his party’s dismal showing at the polls. In a carefully worded conciliatory message, the President shared that, “the American people have made it very clear that they want Congress to work together and focus their entire energies on fixing the economy.”
Newly minted House Majority leader, John Boehner, subsequently reconfirmed that the GOP would not rest until Congress had reined in government spending. This would be partly achieved by deconstructing the highly unpopular and “flawed” Patient Protection and Affordable Care Act – a “misguided” piece of legislation that would actually increase costs for employers thereby reducing the nation’s ability to jump-start an economy that relies on job creation and consumer spending. In Boehner’s mind, government is not unlike the average American, overweight – it’s budget deficits bloated by the cost of financial bailouts, Keynesian stimulus spending and failure to discuss the growing burden of fee for service Medicare.
The President’s failure to acknowledge healthcare reform in his speech was interpreted by many as deliberate and only served to cement the perception that in Washington, it will impossible to have constructive dialogue around the imperfections and potential unintended consequences of PPACA. The White House’s resolve to defend its hard-fought healthcare legislation is likely to extend the polarizing partisanship that has come to characterize Congress. The impasse may very well spark a two-year period of bruising, bellicose finger-pointing over how to fix rising healthcare costs.
Continue reading “The War Between the States”
Filed Under: Uncategorized
Tagged: After Reform, Medicaid, Medicare, Michael Turpin
Nov 10, 2010