By KIM BELLARD
Last week General Electric announced it was breaking itself up. GE is an American icon, part of America’s industrial landscape for the last 129 years, but the 21st century has not been kind to it. The breakup didn’t come as a complete surprise. Then later in the week Johnson and Johnson, another longtime American icon, also announced it would split itself up, and I thought, well, that’s interesting. When on the same day Toshiba said it was splitting itself up, I thought, hmm, I may have to write about this.
Healthcare is still in the consolidation phase, but there may be some lessons here for it.
For most of its existence, GE was an acquirer, gobbling up companies with the belief that its vaunted management structure could provide value no matter what the industry. This was most famously true in the Jack Welch days, but since those days it has been gradually shrinking itself, spinning off some of its more problematic divisions, like appliances, locomotives, and much of its once-huge financial services business. It will spin off its healthcare business in early 2023 and its renewable energy and power business in early 2024; its aviation business will keep the GE name.
“A healthcare investor wants to invest in healthcare,” CEO Larry Culp explained. “We know we are under-owned in each of those three sectors, in part because of our structure.”
By MATTHEW HOLT
Sometimes you wonder where the line is in health care. And perhaps more importantly, whether anyone in the system cares.
The last few months have been dominated by the issue of costs in health care, particularly the costs paid by consumers who thought they had coverage. It turns out that “surprise billing” isn’t that much of a surprise. Over the past few years several large medical groups, notably Team Health owned by Blackstone, have been aggressively opting out of insurers networks. They’ve figured out, probably by reading Elizabeth Rosenthal’s great story about the 2013 $117,000 assistant surgery bill that Aetna actually paid, that if they stay out of network and bill away, the chances are they’ll make more money.
On the surface this doesn’t make a lot of sense. Wouldn’t it be in the interests of the insurers to clamp down on this stuff and never pay up? Well not really. Veteran health insurance observer Robert Laszewski recently wrote that profits in health insurance and hospitals have never been better. Instead, the insurer, which is usually just handling the claims on behalf of the actual buyer, makes more money over time as the cost goes up.
The data is clear. Health care costs overall are going up because the speed at which providers, pharma et al. are increasing prices exceeds the reduction in volume that’s being seen in the use of most health services. Lots more on that is available from HCCI or any random tweet you read about the price of insulin. But the overall message is that as 90% of American health care is still a fee-for-service game, as the CEO of BCBS Arizona said at last year’s HLTH conference, the point of the game is generating as much revenue as possible. My old boss Ian Morrison used to joke about every hospital being in the race for the $1m hysterectomy, but in a world of falling volumes, it isn’t such a joke any more.
By LEILA ALI-AKBARIAN MD, MPH
As news of Tom Brokaw’s cancer diagnosis spreads, so does his revelation that his cancer treatments cost nearly $10,000 per day. In spite of this devastating diagnosis, Mr. Brokaw is not taking his financial privilege for granted. He is using his voice to bring attention to the millions of Americans who are unable to afford their cancer treatments.
My patient Phil is among them. At a recent appointment, Phil
mentioned that his wife has asked for divorce. When I inquired, he revealed a
situation so common in oncology, we have a name for it: Financial
Toxicity. This occurs when the burden of medical costs becomes so high,
it worsens health and increases distress.
Phil, at the age of 53, suffers with the same type of bone
cancer as Mr. Brokaw. Phil had to stop working because of treatments and
increasing pain. His wife’s full time job was barely enough to support
them. Even with health insurance, the medical bills were mounting. Many
plans require co-pays of 20 percent or more of total costs, leading to insurmountable
patient debt. Phil’s wife began to panic about their future and her debt
inheritance. In spite of loving her husband, divorce has felt like the only
solution to avoiding financial devastation.
By ETIENNE DEFFARGES
The official 2017 statistics from the U.S. Department of Health and Human Services (DHHS) are out, and there are some good news: The annual growth rate of health care spending is slowing down, and is the lowest since 2013 at 3.9%—it was 4.3% for 2016 and 5.8% for 2015. The bad news is that our health care cost increases are still well above inflation, and that we spent $3.5 trillion in this area, or 17.9% of GDP. Americans spent $10,739 on health care in 2017, more than twice as much as of our direct economic competitors: This per capita health care spending was $4,700 in Japan; $5,700 in Germany; $4,900 in France; $4,200 in the U.K.; $4,800 in Canada; and an average of $5,300 for a dozen such wealthy countries, according to the Peterson -Kaiser health system tracker from the Kaiser Family Foundation, and OECD data. Spending almost a fifth of our GDP on health care, compared to 9-11% for other large developed economies (and much less in China), is like having a chain tied to our ankles when it comes to our economic competitiveness.
Could 2019 be the year when our health care spending actually decreases, or at least grows at a slower pace than inflation? Or will we see instead an uptick in costs for health care consumers?
To answer these questions, we need to look in more detail at the largest areas of health care spending in America, and at the recent but also longer term spending trends in these areas. Using the annual statistics from the DHHS, we can compare the growth in spending in half a dozen critical health care categories with the growth in total spending, and this for the last three years as well as the last decade. Over the last decade, since 2007, these costs grew 52% in aggregate (from $2.3T to $3.5T) and 41% per capita (from $7,630 to $10,740).
By KATHERINE HEMPSTEAD PhD
The 2019 ACA plan year is notable for the increase in insurer participation in the marketplace. Expansion and entry have been substantial, and the percent of counties with one insurer has declined from more than 50 percent to approximately 35 percent. While urban areas in rural states have received much of the new participation, entire rural states have gained, along with more metropolitan urban areas.
Economic theory and common sense lead most to believe that increased competition is unquestionably good for consumers. Yet in the paradoxical world of the subsidized ACA marketplace, things are not so simple. In some markets, increased competition may result in a reduction in the purchasing power of subsidized consumers by narrowing the gap between the benchmark premium and plans that are cheaper than the benchmark. Even though the overall level of premiums may decline, potential losses to subsidized consumers in some markets will outweigh gains to the unsubsidized, suggesting that at the county level, the losers stand to lose more than the winners will win.
One way to illustrate this is to hypothetically subject 2018 marketplace enrollees to 2019 premiums in counties where new carriers have entered the market. Assuming that enrollees stay in the same metal plan in both 2018 and 2019, and that they continue to buy the cheapest plan in their metal, we can calculate how much their spending would change by income group.
Under these assumptions, in about one quarter of the counties with federally facilitated marketplaces (FFM) that received a new carrier in 2019, both subsidized and unsubsidized enrollees would be better off in 2019, meaning that they could spend less money and stay in the same metal level. In about thirty percent of these counties, all enrollees are worse off. In almost all of the rest, about forty percent, there are winners and losers, but in the aggregate, the subsidized lose more than the unsubsidized win. Overall, in about 70 percent of FFM counties with a new carrier, subsidized enrollees will lose purchasing power, while in about 66 percent of these counties, unsubsidized customers will see premium reductions. In population terms, about two-thirds of subsidized enrollees in counties with a new carrier will find plans to be less affordable, while a little more than half of unsubsidized enrollees will see lower premiums.
By REBECCA FOGG
Hardly a day goes by that I don’t read the term “Disruptive Innovation” cited in relation to health care delivery. This might seem like a good thing, given that our expensive, wasteful, and in some cases frightfully ineffective traditional delivery model is in dire need of transformation. However, the term is frequently misunderstood to refer to any innovation representing a radical departure from an industry’s prior best offerings. In fact, it actually has a very specific definition.
Disruptive Innovation is the phenomenon by which an innovation transforms an existing market or sector by introducing simplicity, convenience, accessibility, and affordability where complication and high cost have become the status quo—eventually completely redefining the industry. It has played out in markets from home entertainment to teeth whitening, and it could make health care delivery more effective by making providers’ care processes, as well as individuals’ own self-care regimes easier and less costly. This, in turn, would reduce the need for both more, and more expensive, interventions over time.
Unfortunately, disruption has been slow to emerge in the health care sector. It’s been thwarted by the broader health care industry’s unique structure, which tends to prioritize the needs of commercial insurers and large employers (who pay the most for consumer care) over those of health care consumers themselves. It also stacks the deck against disruptive entrepreneurs, since established providers effectively control professional licensing requirements, and (along with insurers) access to patients & key delivery partners.
By ANISH KOKA MD
Everyone agrees that health care is bankrupting the nation. The prevailing winds have carried the argument that a system that pays per unit of health care delivered and thus favors volume over value is responsible. The problem, you see, was the doctors. They were just incentivized to do too much. This incontrovertible fact was the basis for changes in the healthcare system that favored hospital employment and have made the salaried physician the new normal. Yet, health care costs remain ascendant.
It turns out overutilization in the US healthcare system isn’t what its cracked up to be.
Figure 1. Utilization rates in different health care systems
A recent analysis (Figure 1) by Papanicolas et al., in JAMA demonstrates that while the United States is no slouch with regards to volume of imaging and procedures in a variety of different categories, it does not explain a health care system twice as expensive as its nearest competitor. The problem turns out not to be volume, rather its the unit price of healthcare in the United States.
Health Care Costs and Glass Houses
There are many stones cast by all the various players in healthcare when it comes to cost, and of course, everyone bears some degree of responsibility, but it’s also clear that some folks live in larger glass houses than others. The most beautiful of all the glass houses are those built by hospitals. From 1996 to 2013, it was not population growth, health status, doctors visits, or prescription drugs that drove spending increases. Sixty-three percent of the increase in cost over an almost 20-year time span can be attributed to hospital stays and testing during doctor visits. Consider that the average hospital stay in the US costs $18,142, and lasts 4.9 days compared to other industrialized countries where average hospital stays last 7.7 days, and cost $6,222. But despite these exorbitant prices hospital systems in the United States complain they barely stay afloat.
Take a look at the chart below. It shows representative prices for a knee replacement for different patients in different settings. The most shocking thing about the chart is that prices for essentially the same procedure are all over the map. Here are some obvious questions:
- Why is the price of a knee replacement for a dog — involving the same technology and the same medical skills that are needed for humans — less than 1/6th the price a typical health insurance company pays for human operations? Why is it less than 1/3 of what hospitals tell Medicare their cost of doing the procedure is?
- How is a Canadian able to come to the United States and get a knee replacement for less than half of what Americans are paying?
- How are Canadians getting knee replacements in the U.S. able to pay only a few thousand dollars more than medical tourists pay in India, Singapore and Thailand — places where the price is supposed to be a fraction of what we typically pay in this country?
- Why do fees U.S. employers and insurance companies are paying vary by a factor of three to one, when foreign, and even some U.S., facilities are offering a same-price-for-all package?
It’s amazing how often people cannot see the forest for the trees. Think how many volumes have been written trying (and failing) to explain why our health care costs are so high. Sometimes the answers to complex questions are more easily found by asking the simplest of questions.
Let’s be honest–I absolutely abhor the so-called National Federation of Independent Business (NFIB). It’s not a representative business group. In 2004 95% of their members said they voted for Bush, compared to 53% of all small business owners. (Remember that election was 50–50) Nonetheless, the first line of the recent NY Times article on NFIB joining the Republican Attorneys-General lawsuit on the individual mandate is that they’re trying to depoliticize the “largely Republican assault” on the new health care law. Ha, bloody ha.
But I’m not grumpy that the NFIB is joining this pointless lawsuit. I’m grumpy that they’re so blatantly going against the interest of small businesses. And yes I run one! So to remind you how stupid the NFIB is (in global not political terms) I’ve reprinted an article I wrote on Spot-on back in 2006–-and sadly nothing has changed. (The great thing about being a relatively veteran blogger is that I can really recycle material!)
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Small Business Shock-troops That Can’t Do Basic Math
Long ago, back in 1994 when Democrats walked freely in Washington, an outfit called the National Federation of Independent Business (NFIB) took a large role in overturning the Clinton health care plan and, consequently, a supporting role in the Republican Congressional victory later that year. And in health care policy, as they say in the movies: They’re baaaaaack.
Now, The NFIB is a narrow-(minded) interest group like any other; typical of any Washington trade association. But in health care it’s policy involves cutting off its nose to spite its own face and doing so with a rather dull knife.