With just a couple of weeks to go until we hear from the Supreme Court on the fate of Health Reform, bankers and the investment community are making grand pronouncements that M&A activity is “on hold” until the Court opines.
This is just not true as you will see below.
Here’s an excerpt with an evocative title from PEHub’s coverage of the annual Jeffries Healthcare Conference just this week (emphasis added):
Private equity investing in healthcare is on pause this year, according to executives speaking Wednesday on the panel “Financial Sponsors Perspectives on Healthcare Investing.” The industry is waiting to see whether Mitt Romney succeeds in overtaking President Obama. Also, dealmakers wants some clarity on President Obama’s healthcare reform bill….
Healthcare M&A has slowed this year. So far there have been 1,073 globalannounced M&A deals, valued at $75.3 billion. This compares to 2,729 deals in all of 2011 which totaled roughly $229.6 billion….
“Once we get clarity, and past Obamacare and the presidential election, we will see more deals,” the exec said.
The problem with this is that it might make for good reading or for an “entertaining” panel discussion at an investment banking conference, but it doesn’t reflect reality.
President Barack Obama has been busy recently traveling to college campuses across the country, talking about student loan debt and pitching his proposal to keep the interest rates on some federal loans at 3.4 percent for another year. His Republican rival, Mitt Romney, also supports a one-year extension.
While I agree with both that we need to make it easier for students to afford college, the president is not telling the whole story about how we got here and how we’re going to pay to fix it.
What the president needs to tell students is that his own health care policies are the principal reason that tuition and student debt are rising.
Medicaid mandates on states are soaking up dollars that would otherwise be spent on state universities and community colleges, forcing up tuition and resulting in more student loans and debt. Even worse, the federal government is trying to make a profit by overcharging students on their current loans and using part of the profit to pay for the new health care law.
According to the Congressional Budget Office, this takeover produced approximately $61 billion for the government — $8.7 billion of which went to pay for the new health care law.
The president’s new student loan proposal would, for one year, keep rates at 3.4 percent on new subsidized Stafford loans (those for which the federal government pays interest until students graduate), rather than increasing to 6.8 percent under current law. These loans account for about 40 percent of all federal student loans. According to the Congressional Research Service, the average student takes out approximately $3,600 in these new loans and will save about $7 a month in interest payments.
When I’m not writing pieces here, my “day job” is working with healthcare providers recognized as Disruptive Innovators who are reinventing healthcare and slaying the healthcare cost beast as a byproduct. In some cases, these are entrepreneurs. In others, they are pioneers within existing healthcare providers.
Even though this is the month that the Supreme Court is supposed to rule on the constitutionality of Obamacare, it is striking this fact rarely that ever comes up in discussions with healthcare providers.
But when you ask one question, you might get an interesting answer about something else entirely. That’s the way my sources for this off-the-record conversation surprised me. They agreed they are much more concerned about disruptive innovation than what nine people in black robes are going to say at an indeterminate date sometime this month.
The roundtables, set up for me by the good folks at Premier Inc., which is holding its annual “Breakthroughs” conference here in Nashville this week, revealed that these leaders fear less what the government may do in response to whatever decision the Court makes, and more what nontraditional competitors may do to their resource and capital-heavy healthcare delivery systems.
It’s no secret that our nation’s economy is struggling, and the president’s health care law, enacted in 2010, is making things worse — raising health costs and making it harder for small businesses to hire workers. The only way to change this is by repealing ObamaCare in its entirety.
There has been much renewed media focus on the president’s health care law in recent months because the U.S. Supreme Court is expected to rule in June on the question of whether the law is constitutional. But the American people have never lost their focus on it. They didn’t like the law when it was rammed through Congress by President Obama and a Democratic majority in 2010, and according to most public opinion surveys, they like it even less now.
It’s not difficult to understand why most Americans remain opposed to ObamaCare. Many question its constitutionality; I’m certainly one of them. But the law’s negative impact on Americans’ daily lives is what I hear about the most.
Americans are dealing every day with the tough realities of life in the Obama economy. They’re facing rising prices for food, gas, college tuition and health care. Many are out of work. And among those fortunate enough to have jobs, many are struggling to keep them. Couple this with the ever-present specter of higher taxes — which are constantly being threatened by the president and his advisors — and the possibility of another downgrade in our nation’s credit rating as a consequence of the national debt that has exploded under the president’s spending policies, and it’s a pretty grim picture. If you’re reading this, you know exactly what I mean.
For the last six years, I’ve written this blog under the title “Medinnovation” with the tag line, “Where Innovation, Health Reform, and Physician Practices Meet.”
The novelty of use of word “innovation” is wearing thin. And for good reasons.
Sad to say, as a piece in the Wall Street Journal says. “Companies love to say they innovate, but the term has begun to lose its meaning.” Companies are touting chief innovation officers, innovation teams, innovation strategies, and even innovation days.
Companies last year mentioned “innovation” 33,552 times in their annual and quarterly reports.
Publishers issued 255 books in the last 90 days with “innovation” in their titles.
43% of 260 companies said they have appointed chief “innovation” officers.
28% of business schools use the word “innovation” in their mission statements.
Under the Patient Protection and Affordable Care Act (PPACA), state governments are expected to set up health insurance exchanges through which individuals will buy their own health insurance, in many cases with substantial subsidies.Should the states comply?
In the following point-counterpoint discussion, Linda Gorman and I give opposing answers to this important question. Leave your thoughts in the comments.
John Goodman: Yes
If the states abdicate their responsibilities under PPACA, the federal government will step in and act in lieu of the state. Under this scenario, states will relinquish all power to make a bad law better. Letting the federal government implement reform almost guarantees bad outcomes.
Linda Gorman: No
Exchanges are required to perform a variety of duties beyond distributing ObamaCare subsidies, and these duties are likely to add significantly to estimated costs. Some of them will damage a state’s business climate by creating new opportunities for crony capitalism. Some require that currently fashionable, but poorly tested, models be forced on health care providers. Some require that state exchanges have expertise equal to private insurers. Others force states to increase the cost of health insurance for people who currently have coverage.
John Goodman continued:
The states should engage in preemptive reform over the next two years. This means enacting responsible, rational reforms — the kind of reforms that they should have enacted all along, in the absence of federal legislation. Where possible, states should try to make their reforms compatible with the new federal law — but only if compatibility does not sacrifice the major goals of the state’s reform.
There I was, going one-by-one through a list of doctor and hospital groups that had volunteered to be one of the “accountable care organizations” authorized by health care reform, when I inexplicably found myself breaking into song. I know: it’s a really strange way to react to ACOs, but bear with me.
You remember, “This Land is Your Land,” don’t you? Written by Woody Guthrie in 1940, it caught the folk music wave of the 1950s, and has been sung ever since by performers ranging from Pete Seeger to Johnny Cash. Odds are you at least know the first verse:
This land is your land, this land is my land
From California to the New York Island
From the Redwood Forest to the Gulf Stream waters
This land was made for you and me.
ACOs are not obviously song-worthy, although they are significant. One of the Affordable Care Act’s signature initiatives, they initially drew bipartisan support as far back as…well, 2010. In April, the government announced that thousands of doctors serving more than 1.1 million Medicare beneficiaries had voluntarily joined ACOs, giving up fee-for-service reimbursement for some patients in exchange for a paycheck that’s based on measurable standards related to high-quality, cost-effective care. They’ve made the switch because it’s the right thing to do and because they’re getting ready for a day when Medicare’s fee-for-service money dries up.
The deadline for comments to Stage 2 is upon us and a clear fork has emerged for federal regulators. The cats and dogs here are institutional vs. patient engagement. The institutional fork has been taken by the American Hospital Association. The patient fork is exemplified by the National Partnership for Women and Families. The primary argument is over patient access to their own information. The draft regulation suggests a 36 hour (or 4 days in other circumstances) delay. The AHA wants 30 days. Some patient advocates are seeking immediate and highly convenient access.
The fork in the road for federal regulators, with some $30 Billion dollars of incentives in hand, is whether to micromanage the institutions or to encourage patient-centered innovation. This choice is deeply entangled in the $Trillion realities of payment reform.
The micromanagement of institutions through increasingly complex regulations on EHR vendors, clerical and clinical staff seems like slow torture. We have institutions begging for relief. Large vendors are consolidating their lock-in business model as the barriers to entry into the health information market get higher and higher. Quality transparency is controversial and price transparency is almost unimaginable.
While it’s comforting to just blame the GOP for the unhappiness with health reform threatening the president’s re-election, the truth is that Barack Obama repeatedly botched, bungled and bobbled the health reform message. There were three big mistakes:
The Passionless Play
While Candidate Obama proclaimed a passionate moral commitment to fix American health care, President Obama delved into legislative details.
When a Baptist minister at a nationally televised town hall asked in mid-2009 whether reform would cause his benefits to be taxed due to “government taking over health care,” Candidate Obama might have replied that 22,000 of the minister’s neighbors die each year because they lack any benefits at all. Instead, President Obama’s three-part reply recapped his plans for tax code fairness.
While Republicans railed about mythical “death panels,” and angry Tea Party demonstrators held signs showing Obama with a Hitler moustache, the president opted to leave emotion to his opponents. The former grassroots organizer who inspired a million people of all ages and ethnicities to flock to Washington for his inauguration never once tried to mobilize ordinary Americans to demand a basic right available in all other industrialized nations. In fact, he hasn’t even mobilized the nearly 50 million uninsured, who have no more favorable opinion about the new law than those with health insurance!
Health reform (ObamaCare) will save taxpayers $200 billion in the Medicare program through 2016.
About 90% of these savings will be produced by lowering “excessive payments” to Medicare Advantage plans, lower payments to doctors, hospitals and other providers to reflect their “improved productivity,” and through efficiencies gained by what is learned from “demonstration projects.”
The demonstration projects include pay for performance, bundling, Accountable Care Organizations, and other frequently discussed ideas.
But whereas the Trustees report is expected to be a serious document, reflecting accepted accounting principles, the administration’s document was clearly a piece of political propaganda — one that stretched the truth so much that the word “spin” would be a charitable description. For example, the administration’s document failed to mention that:
The Congressional Budget Office has studied the demonstration projects on three separate occasions (here, here and here) and each time has concluded that they are producing no serious savings and are unlikely to do so in the future.
Medicare’s Actuary has determined that reductions in payments to Medicare Advantage plans will not only result in lower benefits for the one in four seniors who are in these plans, but that about 7 ½ million enrollees will actually lose their coverage and have to seek more expensive Medigap insurance elsewhere.