The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week's article.
Amidst the rhetoric of Campaign 2016, the reality of escalating health costs, and the acceleration of consolidation across the industry, healthcare headlines in 2016 will highlight major changes that will reshape the future for the next decade and beyond. Here’s the top 10 you can expect to read next year:
- Insurance Mega-Deals Approved, Blues Align more Tightly to Compete: The Department of Justice approved the mega-deals allowing Anthem’s acquisition of Cigna and Aetna’s takeover of Humana. With certain provisions, the deals will go forward which means United, Anthem and Aetna will together control 44% of the U.S. insurance market. In response, the Blue Cross NS Blue Shield Association announced it is moving forward with its plans to create a more cohesive national strategy for its 36 members to compete with the Big 3. Collectively, the four serve 242 million members, or more than 80% of the insurance market in the U.S.
- Scope and Scale Forcing C-Suites to Re-focus: Scope and scale are the new c-suite imperatives across the industry. In many sectors, the traditional core businesses are being redefined. Consolidation is accelerating across the board to achieve scale i.e. Kaiser and Group Health, Walgreens and Rite Aid, Pfizer and Allergan and hospital system-physician integration. Insurers are doubling down on monetizing their data, drug manufacturers are shedding underperforming compounds, and providers are expanding their shared services programs to keep pace. The big organizations are getting bigger and broader; the rest are contemplating their best move.
- Health Systems Launch Alternative Insurance Program: Yesterday, CEOs of several integrated health systems announced the formation of a not-for-profit, provider-sponsored national health plan that’s “consumer friendly, price competitive, and fully integrated in local systems of health.” The plan will offer multi-year agreements to individuals, employers and government payers, and operate as a taxable not for profit with net proceeds returned to local providers and members. Leaders of the group said traditional health insurance has failed to balance cost and quality, and fallen short in enhancing community wellbeing. The combined enrollments of the founding sponsors is 2 million, with a goal of 10 million by October, 2017 as other systems join their effort.
- Drug Costs Spark Action: Drug costs are driving health spending higher. CMS reported that drug spending increased 12.2% last year while overall spending increased 5.3%. States saw their Medicaid drug costs spike 24% last year—the biggest single year increase in reported history. Congress is investigating reforms of the drug industry that depends on the $374 billion U.S. market for half its global revenues. Among options, allowing importation, patent reforms and tax credits for expeditious market access to biosimilars are being discussed.
- Obamacare Opponents Lose SCOTUS Challenge: The complaint—that Little Sisters of the Poor should not be required to comply with federal noticing requirements about its contraception religious objection—did not muster SCOTUS majority support. This marks the third major High Court decision upholding the Affordable Care Act on the heels of NFIB v. Sebelius (2012), King v. Burwell (2015). Opponents of the law said they’d continue pursuit of its undoing through the courts.
- FDA calls Smartphones Medical Devices: As smartphones capture and distribute biometrics and collect genetic, lab and diagnostic data from biodegradable chips in medications, smart implantable devices and others, the FDA determined that infomediary devices merits its scrutiny. Smart phones tap into elegant cloud-based clinical algorithms that provide relative risks and estimated accuracy of diagnoses and treatments in real time, and access to profiles of clinicians and care team that get the best results at the lowest costs locally or elsewhere. These devices in the hands of patients might supplant physician judgment and change the course of treatment for millions. The FDA convened an advisory council to consider its policies going forward.
- Employers intensify Pressure to Reduce Costs: Led by Loews, Boeing, IBM, GE, Walmart and their Fortune 100 peers, big business is ramping up efforts to extract more value from the health system. Referencing the spike in spending last year, major employers are becoming more aggressive in direct contracting with local systems of health, employing primary care providers in their companies, auctioning high-cost acute events i.e. joint replacements, open heart, et al. to regional providers who guarantee lowest costs and highest outcomes, shrinking employee benefits to high deductible plans channeled through private health exchanges, and encouraging healthier behavior of their employees. Citing discontent with insurers because their data has been inaccessible and with local health systems that have been rewarded for doing too much that’s not medically necessary, employers vowed to launch health reforms that will replace reduce cost without compromising safety and quality.
- DOJ, FTC Issue New Guidelines about Market Consolidation: In a sweeping shift of policy, guidelines for determining anti-competitive consolidation among hospitals and other providers were announced yesterday. The regulators will refine markets as regions, shrinking 385 metropolitan service areas (MSAs) into 80-100 new regions. The move comes as employers and consumers are using healthcare services outside local communities in increasing numbers, and as Medicare regulations for bundled payments incorporated regional costs (rather than local) in their calculations.
- Medical Necessity gets Heightened Scrutiny: As much as 30% of what Medicare spends is for services that do not provide improved outcomes, according to testimony to the House Budget Committee. Many lack solid evidence, and patterns of overuse have been related to financial gains on the part of providers. The Office of Inspector General announced a new task force to accelerate its efforts to crack down on unnecessary care.
- Healthcare Wedge Issue in Election Results: Along with ISIS and the economy, healthcare reform was a pivotal issue in Campaign 2016 results. Millennials came out in force for simpler, more affordable coverage, while seniors sought protection for their Medicare benefits. And the electorate continued to be divided about the Affordable Care Act: half think its coverage expansion is worth the effort; half think it an overreach by the federal government. Though the Senate passed a repeal measure on its 17th try (following the House that approved more than 50 such measures, the White House veto staged healthcare as a pivotal issue in the campaign.
Stay tuned. No doubt, there will be surprises, but the biggest would be a quiet year in healthcare. It’s unlikely. Healthcare will be in the headlines in 2016.
The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.
©2015 Navigant Consulting, Inc.