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Five combat zones for healthcare this year [PODCAST]

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The Hospital Finance Podcast

In this episode, Paul Keckley discusses five issues that are set to be a focal point of healthcare change in 2018.

Learn how to listen to The Hospital Finance Podcast on your mobile device.


Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast. Today, I’m joined by Paul Keckley, Managing Editor of the Keckley Report and a healthcare researcher and widely known industry expert.

Paul recently wrote about what he sees as five combat zones in healthcare in 2018. And he’s joined us to talk through these critical issues.

Paul, welcome to the program.

Paul Keckley: Thank you, Mike. I appreciate it.

Mike: So Paul, let’s jump right in. Tell us about what you see in terms of hospitals versus insurers.

Paul: Well, it’s a food fight. Both would like to climb higher in the food chain. You have more than a hundred hospitals that are now sponsoring their own health plans while you have the margins for the health insurance industry shrinking. Last year, the margin was 1.6%.

So, when you have a combination of increased utilization, increased pressure on cost, and two players—insurers and hospitals—that seek to control more of those dollars, you’re going to have that normal tension.

But what’s unique now is the health insurers want to be both a partner to hospitals and doctors while still controlling that revenue stream. And the hospitals have found that unless they can be compensated for managing chronic diseases and preventive health, they don’t participate in the savings of the industry. So they feel they have to be in the insurance business together with their delivery system.

So, a number of hotspots around the country, you’ve got insurers coming in demanding deeper discounts. And you’ve got hospitals saying, “We are going to draw a line in the sand. We’re going to manage those populations aggressively. And we want to participate in those savings. But to do that, we need to be on the same line with the insurers rather than subordinate to the insurers.” And that just creates some of the control issues.

Mike: And next up on your list is integrative systems of health versus the federal government. Tell us about that.

Paul: Well, it’s an interesting phenomenon. You have hospitals that see their in-patient business increasingly as a loss leader, margins that have pretty well evaporated because much of the patient mix is Medicare and Medicaid. And those reimbursements don’t cover their costs.

So the systems are now expanding to urgent care centers, free-standing emergency centers, retail health wellness programs—and as I’ve mentioned before, excuse me, many of them in the insurance business as well.

The federal government has always approached hospitals as primarily in-patient facilities. But that’s less than 50% of the revenue for most of these hospitals these days. So the federal government is going to have a challenge to determine how to regulate what the policy framework would be for a hospital where most of its revenue is from non-in-patient activity. And we really don’t have a policy construct for that yet. So that’s going to create a little bit of tension.

Mike: So now, next up is states versus drug manufacturers, distributors, and pharmacy benefit managers.

Paul: Well, this is unique, Mike, because the almost tsunami around increased drug cost has, in the view of most of the states on behalf of their Medicaid programs and their state employee health cost have not seen any remedy to what they think are runaway healthcare costs because of drug costs.

So, states like Maryland and others are enacting legislation on their own to control drug costs since they don’t think the federal government is doing enough. And that puts them at odds somewhat with the drug manufacturers who have enjoyed now really for the past 15 years a lot of federal protections. Medicare, for instance, could not contract directly with a drug manufacturer to buy drugs directly the way the Veterans Administration does.

So, states are taking it on their own to attack drug costs. And the drug manufacturers are pushing back. They’ll outspend state referenda like what just occurred in California by about 7 to 1 to defeat state legislation to control drug costs. So, that’s another hotspot.

Mike: Your next two combat zones have to do with clinicians directly. The first is nurses versus hospitals.

Paul: Yeah, this one, people are a little surprised. But nurses don’t get the spotlight that doctors do. You read a lot about physician burnout and physician shortages. But as it turns out, the nurses are in short supply. And that shortage is going to be dramatically more because we have about a third of the nurse workforce aging out through retirement.

So, nurses are organizing. And they are basically declaring their autonomy. They’re seeking greater latitude for diagnosing and treating. They’re looking for legislation and credentials in their hospitals to not just diagnose and treat, but in some cases, they become the primary caregiver. So, I think this is one to watch.

And what is underneath that is the data that shows that consumers, the public, puts higher trust and confidence in nurses than they do doctors. So that’s going to be one that I think will be a recurring theme over the next few years.

Mike: And your last combat zone has to do with doctors directly. It’s physicians versus outside control.

Paul: That’s a recurring theme as well, but this one is, I think, becoming much more intense because physicians have occupied a unique role in the system historically. They have controlled their own profession. They license themselves at the state level through state licensing boards. The 24 major specialty groups have declared they will determine who’s qualified to practice in a market or a state. And yet, now you have three forces that are kind of infringing on that.

One is telemedicine and distance medicine where companies like TeleDoc and others are doing virtual visits.

You’ve got a second which is non-traditional allopathic doctors who are providing more care. These are the alternative health providers where consumers are walking with their pocketbook to non-traditional providers and saying, “My doctor didn’t tell me that that change of my diet would be actually more efficacious and less costly than the drugs that you’re recommending.”

And the third force is the federal government seeking to expose the practice patterns and the effectiveness of doctors via report cards and transparency. Doctors beginning this year are being paid by a formula that includes their ability to manage cost, the patient experiences, and their outcomes.

So, those outside forces are threatening to a doctor whose training has been around “I’m the captain of the ship. I make the clinical judgment. And the rest of the system goes along.” And that is an old paradigm that doesn’t seem plausible going forward.

Mike:  Well, 2018 is certainly going to be an interesting year.

Paul, if someone would like to know more about you and what you do, where can they go?

Paul: Thank you! www.PaulKeckley.com. I’m a geek and I try to study the trends. And I try to do this from a non-partisan. I’m agnostic to the partisanship. And I try to let the data take me to the place it does. And I’d welcome any comments and questions folks might have.

Mike: Very interesting discussion today, Paul. Some interesting predictions. I’m looking forward to seeing how these things go. Thanks so much for joining me today on the Hospital Finance Podcast.

Paul:  You’re very welcome. Thank you much!

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