This has been a fascinating first quarter of 2008. Four of the developments that we find to be really interesting are as follows:
1. The acceleration of high-deductible plans and consumer-driven healthcare
Commentators speak in abstract terms about “consumer-driven healthcare.” The real concept is that people will pay a greater proportion of their healthcare costs and thus become more concerned about shopping for services based on cost and quality. Quietly, and without a lot of fanfare, we are seeing a great increase in the number of high-deductible and high-co-payment plans. This has the effect of having people be much more concerned and more active consumers of healthcare rather than someone who just accepts services at a place their physician determines. From a hospital perspective, this means much more working with patients on a case-by-case basis to assess whether the rates should be negotiated for a specific patient. This is something that is often achievable even though it has to be done in the context of other rules relating to commercial payor plans, Medicare and Medicaid.
2. Healthcare jobs outstripping manufacturing jobs for the first time
The country, for the first time, is seeing overall healthcare jobs overtake the number of manufacturing jobs. Healthcare jobs are being recognized as engines of growth and not just a cost to be borne. This reminds me of a comment made by the CEO of GE, Jeff Immelt, at a conference a few years ago. There he stated, in so many words, that all is well at GE as long as revenues and profits from healthcare outstrip rising healthcare costs. This country, at some point, instead of viewing healthcare solely as a problem, should see it as the driver of economics and jobs that it is. Often, healthcare provides high-quality service jobs not readily available in other parts of the economy. See the Wall Street Journal article “Factories Fading, Hospitals Step In.”
3. Hospital Insolvencies
More than half of the country’s hospitals are now technically insolvent or at risk, according to a new Alvarez and Marsal study. Alvarez and Marsal, a leading professional services firm, has completed a study which shows the following:
- More than 2,000 of the nations 4,900 acute care hospitals do not make a profit from treating patients. The majority of potentially insolvent hospitals are in urban areas.
- Capital expenses are hugely underfunded.
One of the interesting aspects of the study is the contrast to the record profits as a whole the hospital industry has shown over the last 24 months. This is partially explained with the concept that approximately 1,000 very profitable hospitals account for the great majority of overall industry profits. The complete findings are available at www.alvarezandmarsal.com.
4. Massachusetts Healthcare Plan
The Massachusetts Plan is an innovative plan based on the premise that everybody in the state is required to have healthcare insurance. There, the government did a significant study and found that, essentially, the uninsured could be divided into three main categories: those who are in their 20s and 30s and could afford healthcare but choose not to buy it (the true freeloaders), those that were poor but not so poor as to be eligible for Medicaid, and those that were eligible for Medicaid but did not sign up for it. After two years of the experiment, the results are starting to show. The plan is a little bit more costly than expected (but not nearly to the magnitude of the unexpected costs of the Medicare Drug Bill a few years ago), and it is helping to solve a problem. Fascinatingly, it comes from a bipartisan effort in a relatively liberal state that was driven by a Republican governor.
We find these four developments some of the most interesting developments in healthcare currently.
