Elevated Pulse: Sign of the Times

April 7, 2014

How the U.S. health care system operates and performs is no longer a topic reserved for policy wonks, physicians and nurses who complain about its demise, insurers about its costs and families about its shortcomings. It’s Main Street. It’s everywhere. Case in point: just last week…

  • Pundits dissected data about the 7.1 million who enrolled in insurance through the health exchanges. Most concede the late surge was impressive though none knows for sure how many will pay their premiums or how healthy or sick they are.
  • Wednesday, the tragic Ft. Hood killings that took 4 lives wounding 16 prompted discussion about the mental health challenges faced in the military and the patchwork of mental health programs in communities.
  • Two prominent political aspirants—Gov. Jindal (R-LA) and Rep. Ryan (R-WI) issued detailed plans to fix health care, repealing the Affordable Care Act and cutting Medicare and Medicaid spending.
  • Congress passed legislation to avert a 24% physician pay cut-- the 17th time since 2002.
  • The Federal Trade Commission advanced its legal challenges to scope of practice      restrictions that limit services that can be performed by advanced practice nurses, dental hygienists and other allied health professionals.
  • The White House announced it would release data this week allowing public access to Medicare payments and other information about 880,000 individual doctors.
  • The Supreme Court agreed to hear a case against brand name drug manufacturers focused on business practices alleged to delay access to generics.
  • The FDA approved a handheld device that can be used by police, family members or medical personnel to reverse a drug overdose along with the fourth version of the Da Vinci robotic surgery system.
  • Operators of several state health exchanges announced plans to overhaul their troubled platforms.
  • New risk sharing deals between hospitals and health plans were announced.
  • And legislators in several states debated Medicaid expansion, taxation of not-for-profit hospitals and ways to stimulate job growth (noting health care as one of the top three job producing industries).

What a week!

The reality is that health care is a big deal in every household, company, state and community. It’s 17% of the GDP and 21% of every state’s budget. But it’s also 9% of discretionary spending in the average household and its cost is embedded in every product and service we manufacture and purchase. Everyone uses the system and has an opinion about its performance. So not surprisingly, information about how it performs, its winners and losers is everywhere.

Most do not understand its complexity. It is Capital intense--our doctors and patients demand the latest drugs, technologies and modern facilities. It is Labor intense--we employ 14.5 million and create jobs. And it is highly regulated--at the state level via licensing of its professions, insurance, hospital oversight, retail pharmacies, Medicaid and others; and at the federal level via agencies, laws and funding for military and civilian health programs like Medicare, Veterans Health and others. But the majority of Americans think they understand it: they base their judgment on their personal experiences and circumstances. And they hold these opinions strongly.

I have studied this industry for 38 years. It never stops changing, but the pace of change has quickened of late made all the more challenging given its prominence in the news.

Transparency about its performance is now an end in itself. Technology-enabled self-care, consumerism, retail clinics, alternative health, value-based payments, narrow networks, reference pricing, accountable care, population health management and cost containment are terms popping up frequently in business circles. Consumers are now accustomed to stories about fraudulent business practices, inappropriate incentives and unnecessary (evidence-based) care. There’s no hiding place in healthcare nor should there be.

Pundits will continue to debate the merits of a single payer model versus the status quo and politicians the shortcomings and hanging chads in the ACA But in the trenches, leaders of the organizations in this system—hospitals, device and drug manufacturers, investors and lenders, health insurers, medical practitioners, long term care and over-the counter therapeutic makers—face unparalleled pressure to be informed and stay ahead. And unlike any other industry, ours is in the spotlight as we navigate these changes.

This environment rewards leaders and their organizations not paralyzed by its uncertainties, uninformed about its fast changing, nor fearful of the spotlight.

Leaders in the new normal face unparalleled challenges and opportunities but with them, pressures. Monitor closely the pulse of the industry and your company. The stakes have never been higher.

Quotable from last week...

“The debate over repealing this law is over. The ACA is here to stay” President Obama Tuesday, April 1 referencing 7.1 million enrollees through state and federal exchanges as of March 31, 2014

“At big companies, bad news travels slowly…The larger an organization gets, the less likely it is that bad news will travel up the chain. At big corporations…the mantra is to go along to get along…there is a tendency for people in large, hierarchical organizations to tell the boss what he wants to hear” Adam Auriemma “Chiefs at Big Firms Often Last to Know” Wall Street Journal April 3, 2014

Status quo isn’t worth going back to. The better path forward is the path to better care. We need to have an honest discussion about improving and tweaking the law…Change hasn’t been easy and it won’t be easy…It will be a long time before we know how this will play out. But the law has real potential to work… I don’t think the employer mandate will go into effect. It’s a small part of the law. I think it will be one of the first things to go” Robert Gibbs, former White House Press Secretary to the 2014 Benefits Selling Expo in Colorado Springs Wednesday, April 2, 2014

“This isn’t your fathers healthcare sector. Long embraced by investors seeking to weather market downturns and recessions, the group—comprising drug companies, hospitals, and health insurers among others—has emerged as one of the healthiest gainers in a resilient US stock market. Over the past two years, the S&P Health Care Index has gained 55%, outpacing a 32% rise in the S&P 500. Investors have sent $21.5 billon into healthcare-focused mutual funds and exchange traded funds since the start of 2013, including the second biggest inflow last year since 2000, according to Morningstar…in 2014, health care is among the S&Ps top performing sectors, up 4.1% compared with a .5% gain for the index overall” Steven Russolillo “Health Stocks Lead from the Front” Wall Street Journal March 31, 2014

 “Traditionally, insurers lost money by covering people with chronic illnesses, because they often ended up hospitalized with myriad complications as their diseases progressed. Today, the routine costs of many chronic illnesses eclipse that of acute care because new treatments that keep patients well have become multibillion dollar business opportunity for device and drug makers and medical providers” Elizabeth Rosenthal “Small Advances in Treatment Produce Big Jumps in the Bill” New York Times April 6, 2014 p.1