THCB

The Glass Is Half Full

flying cadeuciiMany health care executives and professionals are wary, glass-half-empty people, conditioned by long experience to dwell on business risks. However, today’s health care environment is actually full of good news. Reflect on the following:

Expanding coverage. We’re on the way to cutting the number of uninsured Americans in half. No, we didn’t get to universal coverage with the Affordable Care Act. And its implementation has not been a pretty sight. But after decades of political failure, tens of millions of Americans are receiving coverage, no longer having to postpone care for serious health risks. Hospitals are already seeing their uncompensated care decline rapidly, especially in those states that expanded their Medicaid programs.

Cost crisis abated. We’ve achieved durable health cost stability. Since 2008, health costs have grown only 3.6 to 3.9 percent per year — growth rates not seen since the Eisenhower administration (five years before Medicare). The Congressional Budget Office recently forecast that 2016 per capita Medicare spending would be almost 30 percent lower than they projected in 2006. The difference, around $4,000 per capita, translates into a 2016 Medicare bill hundreds of billions of dollars lower than forecast in 2006. It’s worth repeatedly reminding policymakers that hard work from hospital executives and their clinical partners in controlling expenses and reducing readmissions have made a major contribution to this welcome cost stability.

Declining deficits. As the nation’s economic recovery enters its sixth year, declining budget deficits and far-below-forecast Medicare spending has reduced the pressure on Congress to improvise hasty new spending cuts. Pressures to cut Medicare to balance the federal budget are lower than they have been in years as a result of the cost-crisis abatement described. This also means that there is less pressure to implement new Medicare payment schemes before there is evidence that they actually work. There are still serious long-term fiscal issues when the baby boomers begin falling apart in earnest in a decade or so. There is also the unresolved question of the sustainable growth rate cuts in Part B physician payment. But that panicky sense of fiscal emergency that existed in Washington as late as 2011 does not exist today.
 
Value, not just cost. Policymakers, business and insurers alike are finally talking seriously about value, not simply cost. This means there is firmer ground for health systems that can unify their clinicians around value improvement. We may not get all the way to population health management in this round of payment changes, but new benefit designs and better transparency of clinical quality measures will finally help to create a market for the high-value provider that has not heretofore existed. Narrowing the hundreds of so-called core measures down to the relative handful that really matter to patients remains a challenge. We must reduce the burden of caregiver documentation that is strangling those on health care’s front line.

Improving hospital-physician relations. The seemingly endless cold war between hospital management teams and physician communities appears to be thawing in many places. This trend is harder to measure, but my impression from extensive travels around the country is that a lot more hospital management teams and medical communities are working constructively together than in the past. There is fruitful collaboration on implementation of clinical information technology and on new payment models. Granted, there are still hot spots. But, we are seeing leadership transitions on both sides of this historic divide as well as a more pragmatic approach toward improving the hospital’s services and operational efficiency.

Cure for a dread disease. We’ve actually cured a major viral chronic illness: hepatitis C. Usually the words “cure” and “disease” appear in the same sentence only in fundraising solicitations for universities and foundations. Hepatitis C was an emerging human and cost disaster, with nearly 3.5 million people infected, including many baby boomers blissfully unaware of their problem. The new Gilead drug Sovaldi is very expensive, so expensive that its present pricing of $85,000 for a full course of treatment probably will not hold. But the costs of terminal liver disease prevented by Sovaldi, which clears the virus from 95 percent of those who use it to full term, will be enormous.
 
Declining mortality from acute illnesses. We’ve also made a major dent in heart disease as well as cancer and stroke. Age-adjusted mortality from heart disease, the No. 1 killer of men and women in the United States, has fallen 34 percent since 2000. Cancer death rates have fallen 17 percent in the same period, and stroke death rates by 39 percent. While the steep declines in cardiac mortality in the 1980s and early 1990s have been attributed to far more effective hospital-based care after myocardial infarction, my cardiologist colleagues believe that this more recent, steepening decline can be attributed to the widespread use of statin drugs, which are now virtually all generic and accessible to everyone at risk. Waiting in the wings: stem cell–driven repair of damaged heart tissue and consequent reductions in mortality from congestive heart failure.

A number of developments could disrupt the present run of good news:

  • An economic downturn could place new pressures on the federal budget, in turn, pressuring Medicare payment to hospitals. This also could affect payment levels for the Medicaid program, which could reach 80 million enrollees due to the Affordable Care Act expansion.
  • New or resurgent infectious diseases could also expose the gaping holes in our present antibiotic drug defenses and infection control systems.
  • If, as expected, we encounter shortages of health care workers, there could be a resurgence of wage pressures that could reignite hospital costs.
  • Continued weak hospital topline growth, a contributor to the overall slowdown in health costs mentioned previously, will pressure management teams everywhere.

But, for now, there is more good news in our health system than we’ve seen in a long time. Enjoy it while it lasts.

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Jeff GoldsmithBarry CarolAnne Kim Recent comment authors
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Barry Carol
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Barry Carol

Jeff, I know the hospitals aren’t thrilled about their flattening revenue trend but they are quite pleased about the decline in uncompensated care which is bolstering profits at least for now. I don’t understand why it is so hard for hospitals to give patients a BINDING estimate of their out-of-pocket costs for non-emergency services, tests and procedures that are scheduled in advance. For surgeries, there could be doctors who are not hospital employees but merely have practice privileges and they may or may not have a contract with the patient’s health insurance network. There could also be complications connected with… Read more »

Jeff Goldsmith
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Jeff Goldsmith

Only the investor owned hospitals seem to be talking about this. For most of them, the cuts in DSH (disproportionate share) cancelled out most of the benefits from the first wave of expanded coverage. For example, the State of Washington both expanded Medicaid and created a well-functioning state exchange. Net effect for Harborview, Seattle’s safety net hospital: a $10 million reduction in uncompensated care (after the DSH cuts) on a $ 750 million revenue base. Hospitals in states that did not expand Medicaid may not reach cash flow crossover until 2016 or 2017, if then. The customer service mindset you… Read more »

Jeff Goldsmith
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Jeff Goldsmith

Price transparency is coming. It’s just so difficult to give consumers reliable information on what things are going to cost THEM in advance. It has to work hand-in-glove with benefits redesign to make a real difference. What I also didn’t mention is that the pace of industry consolidation is slowing down, both on the physician practice acquisition side and the hospital M&A side, preserving the potential for more consumer choice. It sure doesn’t feel like nirvana for my hospital exec friends whose top lines have stopped growing and who face a workforce that has never experienced fiscal stringency before. I’ve… Read more »

Barry Carol
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Barry Carol

I agree that there are a lot of positive things happening in healthcare with the slowdown in cost growth, especially in the Medicare program, particularly encouraging. Indeed, the projected Medicare Part B premium of $104.90 per month for 2015 is flat with 2014 and up only 8.8% from 2007! If we could get price transparency by getting rid of the confidentiality agreements between insurers and providers that currently preclude the disclosure of actual contract reimbursement rates, it would be a lot easier for both patients and referring doctors to identify the most cost-effective providers in real time and direct more… Read more »

Anne Kim
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I actually enjoyed reading this article, experiencing in a new way how reading good news is such a different experience from the usual bad news that is present most everywhere. Especially when the topic is about healthcare, and about economics and politics related to healthcare. Thank you. I hope you maintain the “glass half-full” approach in the rest of your life–for me, it adds to feeling alive and well. Thank you for this article. Anne