To say the healthcare industry experienced a dynamic 2015 is putting it mildly. Mergers and acquisitions abounded. Value-based reimbursement picked up steam. Healthcare consumerism grew. And those examples barely scratch the surface when it comes to how the healthcare landscape has changed in the past 12 months. Such steady disruption increased the pressure on hospital finance to align with reform. Now that the year is winding down, let’s take a look at five healthcare changes that will have a lasting impact in 2016.
Consolidation in the Healthcare Insurance Market
In just two big plays, the insurance game changed. In an article outlining some noteworthy healthcare transactions that took place this year, Becker’s Hospital Review cites two deals involving health insurers that are certain to have an impact in the coming years.
- Connecticut-based Aetna made a $37 billion deal with Kentucky-based Humana, consolidating competition in the Medicare Advantage marketplace. The agreement still must pass muster with anti-trust regulators despite Aetna chairman Mark Bertolini’s assurance that the deal is a win for consumers. Once the dust has settled sometime in 2016, the newly merged organization will provide healthcare coverage for more than 33 million Americans.
- Anthem, based in Indianapolis, Indiana proposed taking over Cigna, based in Bloomfield, Connecticut. The buyout, valued at $54.2 billion, has also attracted the attention of regulators. Once the deal is complete, Anthem will be the largest health insurance provider based on enrollment.
Becker’s Hospital Review notes that “With Aetna acquiring Humana and Anthem entering into a deal to takeover Cigna, the health insurance landscape drastically changes to one with three key payers instead of five.
Accountable Care Mandates
Pressures to move to value-based reimbursement while improving quality of care are on the rise. Early in 2015, the U.S. Department of Health and Human Services (HHS) set goals for transitioning from fee-for-service Medicare payments to alternative value-based payment models such as Accountable Care Organization or bundled payments. Within three years, the HHS expects 90 percent of all Medicare payments to be tied to quality or value. At the time of the announcement, HHS Secretary Sylvia Mathews Burwell said, “We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.”
- The number of ACOs in the country has climbed since 2011 when there were just 64 such organizations. Now, with nearly 750 ACOs, some 23.5 million people receive healthcare services through accountable care arrangements.
- The Centers for Medicare and Medicaid Services finalized the Comprehensive Care for Joint Replacement (CJR) model that holds hospitals accountable for care quality in hip and knee replacements. The program, which is set to begin in the spring of 2016, incentivizes hospitals on both quality and value measures, with a repayment penalty for those that do not meet expectations.
As a result of this push for value-based reimbursement, numerous healthcare organizations entered into mergers, joint ventures or other collaborative arrangements to better manage patients across the entire continuum of care. For example, the seven New Jersey hospitals in Barnabas Health’s network are merging with four in the Robert Wood Johnson Health System. When the deal is finalized sometime in 2016, it will create the largest health system in New Jersey with an annual operating revenue in excess of $4.5 billion. Barnabas Health president and CEO Barry Ostrowsky positions the deal as “… an opportunity for the two entities to better manage their population health initiatives and adapt to changing payment systems.”
Consumer Demands for Transparency
The opening of the healthcare.gov marketplace two years ago has accelerated the consumerization of healthcare. As individuals take on more responsibility for the cost of health insurance premiums and deductibles, their expectations have changed. As a result, consumers are demanding more retail-like experiences — clear costs, quality reviews and better service.
Hospitals, health insurance companies and others in the healthcare industry are feeling the pressure, and many are looking to consumer favorites — Disney, Apple, Amazon and even Uber — for inspiration. In fact, a number of hospitals are hoping that the combination of bundled payment programs and consumer-friendly experiences will attract medical tourists to their facilities. Northwest Specialty Hospital in Post Falls, Idaho hopes to bring more Canadians into the U.S. for total knee, total hip, total shoulder or ACL repair — procedures that often involve long wait times in Canada. The hospital has even partnered with a local resort, including lodging for the patient’s travel companion in the bundle, to make the deal more enticing.
And so, the transformation of healthcare in America rolls on. As a hospital finance executive, you may want to breathe a sigh of relief for having persevered through a tumultuous 2015, but get ready to roll up your sleeves in 2016. To paraphrase the line made famous by Bette Davis in All About Eve, “Fasten your seatbelts. It’s going to be a bumpy year.” Again.