Health care reform dead; long live reform

January 27, 2010

Massachusetts’ election of a Republican senator has put health reform legislation on life support. But for the health care industry, reform is a reality that isn’t going to die.

That’s because health care is, quite simply, too darn expensive. And health care providers and insurers realize their path to growing profits will hinge on reducing costs, not simply signing up more of the most-profitable patients.

On top of that, the massive federal Medicare program is projected to be insolvent in seven years. Its administrators already were and are using their ample regulatory powers to create new ways to pay for health care that will, ideally, squeeze out waste.

“The cost issues will still, clearly, be there,” said Dhan Shapurji, an Indianapolis-based Deloitte consultant to health insurers and hospitals. “The Medicare cuts are going to happen regardless of what happens with ObamaCare.”

Since private health insurers, such as Indianapolis-based WellPoint Inc., often follow Medicare’s lead on payment rates, hospitals and doctors have little hope that they’ll be paid more handsomely for what they do.

“They know that there’s no more money coming into the system,” said Bill Thompson, managing partner of Hall Render Killian Heath & Lyman, a multi-state health care law firm based in Indianapolis. Rather, he said, government and insurers are trying to create programs that reward health care providers for figuring out how to save money.

If the government and health insurers weren’t enough, employers weary of spiraling health care costs and employees wondering what happened to their wage increases are demanding lower-cost, higher-quality services from both health care providers and health insurers.

For health insurers, Shapurji said, that means connecting with customers more often than when they process claims or at annual enrollment time.

“They’re getting more sophisticated about trying to look at these customers or individuals in a different light,” he said. “Not just a part of a pool or group, but what are their specific needs?”

Doctors and hospitals will continue teaming up in closer and closer embraces even if national health reform falls by the wayside.

“In order to respond to what the market is demanding,” Thompson said, “they have to be more efficient, they have to coordinate care, they have to have a patient-centric model of health care delivery, all supported by health information technology.”

The costs of that information technology alone—which are also driven by new government demands for electronic health records and reporting, as well as a complex set of new diagnostic codes called ICD-10—will force health care providers to merge.

That merger mania will extend to all parts of the health care industry—insurers, doctors, hospitals and even pharmaceutical companies, said Shapruji. And those that don’t merge will be signing many more affiliations and joint ventures with their peers.

If Scott Brown’s stunning Jan. 19 victory in Massachusetts does derail health care reform, the biggest loss to the health care industry will be the 30 million newly insured customers that health reform would have created.

That means drugmakers such as Indianapolis-based Eli Lilly and Co. won’t get a new wave of people able to pay for their pricy medicines. It also means hospitals will still treat many people who cannot pay their bills and then try to make up the loss by charging higher prices to private health insurers and their customers.

“That knotty problem is going to continue to exist,” Thompson said, adding that hospitals have been developing strategies to start more neighborhood primary-care clinics to reach out to those new customers and to catch their health problems before they got out of control.


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