For 2018, The Healthcare Battle Lines Are Drawn

Hospitals, Pharma, The Feds Will Be Among The Combatants
By Paul Keckley

The stage is set for some classic duels in 2018: They’re about money and control and they’re playing out already across the industry. Here’s the five combat zones to watch:


Hospitals vs. Insurers: This is the quintessential struggle between two conflicting roles in our system. Hospitals see themselves as the protector for a community’s delivery system, bearing risks for clinical programs, technologies and facilities that require capital to remain competitive. Insurers see themselves as the referee for health costs, calling balls and strikes on the necessity and cost-effectiveness of improvements providers deem essential. Each sees the other as complicit in healthcare waste and guard jealously their leverage: hospitals enjoy community support and physician relationships and insurers controls premiums. Around the country, the combat zones involve stand-offs involving reimbursement negotiations and narrow networks.


Integrated Systems of Health vs. the Federal Government: The federal government’s scrutiny of the ATT-Time Warner combination is being touted as a case study in vertical integration. CVS’ takeover of Aetna is anticipated—horizontal integration. The sectarian borders in key sectors of healthcare are already blurred: more than 100 health systems now operate insurance plans and 33% of physicians are employed in hospitals, so the stage is set for challenges by regional systems of health to federal constraints on the scale and scope of services offered. Since 2014, hospital consolidation has resulted in more than 700 deals as hospitals seek to gain leverage in payer contracts and reduce their operating costs. The historic methodology used to protect competition among hospitals is based on a community model: CMS says there are 457 discreet hospital referral regions and regulators are keen to protect against too much consolidation among hospitals. But hospitals trade with sectors that are much more consolidated with operations spanning states and entire regions i.e. the five biggest private insurers control 44% of the insurance market, and the 36 Blue Cross plans control 106 million members through their statewide operations. The issue is scale and scope; the combat zone is the court system, where hospital consolidation (horizontal integration) will be challenged and where vertical integration will be closely watched.


States vs. Drug Manufacturers, Distributors and Pharmacy Benefits Managers: Prompted in part by increased attention to the opioid epidemic that’s costing $95 billion annually and is responsible for 64,000 deaths last year and by double-digit price increases for branded drugs that hurt their Medicaid budgets, states are cracking down on drug manufacturers and distributors. Attorneys general in 41 states are parties to a suit brought last month to address the opioid epidemic and many are seeking to protect their states price gouging. At least 176 bills on pharmaceutical pricing and payment have been introduced this year in 36 states, according to the National Conference of State Legislatures.


Nurses vs. Hospitals: According to the Bureau of Labor Statistics’ Employment Projections 2014-2024, the Registered Nursing (RN) workforce is expected to grow from 2.7 million in 2014 to 3.2 million in 2024, an increase of 439,300 or 16%. The Bureau also projects the need for 649,100 replacement nurses as many retire or cutback bringing the total number of job openings for nurses to 1.09 million by 2024. Per the American Association of Colleges of Nursing, the demand for nursing will not be met by nurse education due to lack of faculty and stress associated with the job that’s driving many experienced nurses to retire.  Hospitals are the front line for the growing tension building with nurses: Studies showing correlation between nurse staffing levels and patient outcomes are forcing hospital operators to test ways to do more with less.


Physicians vs. Outside Control: The nation’s 861,000 physicians in active practice represent a profession that’s the centerpiece of our entire healthcare system. It controls the supply of clinicians and defines the scope of practice allowed for its members other health professions using state licensing, credentialing, and medical education to control what every profession is allowed to do. It disciplines its own vis a vis credentialing and peer review processes. It commands respect and trust: per Gallup’s occupational trust surveys, it ranks just behind nursing and on par with pharmacists. And financially, it’s rewarding: median income for physicians across all specialties ranges from 3.5 to eight times the median household income of the U.S. population. But physicians aren’t happy. A 2016 survey of 17,000 physicians conducted by Merritt Hawkins on behalf of The Physicians Foundation revealed that about half of all doctors were feeling burned out and fed up with the healthcare industry, largely due to administrative hassles involving paperwork, mandatory reporting and scrutiny by outside parties.


Complicating each of these disputes is a regulatory environment for healthcare that’s constantly changing, an austere fiscal environment in states that fund half of Medicaid and oversee provider licensing and private insurance, investors and lenders that are becoming cautious and the noise surrounding Campaign 2018 wherein contrasting views about the future of the healthcare system will be prominent. Regrettably, these combats will not answer the bigger questions facing our industry: Is healthcare in the U.S. a fundamental right or personal choice? Is our healthcare system a federal program or better run by states? Do we need to ration care, and if so, how and so on?


Paul Keckley is a well-known healthcare industry scholar and expert. A version of this article appeared at The Health Care Blog.