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Employers can effect change in health care market

Padma GadepallyWhile health care providers are in the process of vigorous consolidation in response to the Affordable Care Act’s provisions, business owners should consider doing some consolidating of efforts to keep health insurance costs down.

Government regulations, fines and penalties, requirements for expensive electronic medical records, the potential for bundled payments and fear of being left out of the income stream are prompting the health care providers’ joining of hands.

One of the main ways the Affordable Care Act seeks to reduce costs is by encouraging doctors, hospitals and other health care providers to form networks to better coordinate care. To accomplish that, the law is trying a carrot-and-stick approach in the Medicare program through accountable care organizations, known as ACOs.

Under the Affordable Care Act, providers get paid more if they keep their patients well. Coordinating health care among several independent providers can be dizzying, especially for serious or chronic conditions. By contrast, having diagnosis, testing, treatment, surgery and follow-up care under fewer umbrellas can reduce errors and make a patient’s life much simpler.

The rush for health systems to form ACOs that make higher revenues and give better service could have a significant disadvantage though: increased hospital mergers and provider consolidation. Greater market share by the ACO-bulked-up health systems gives them more leverage with insurers, which could drive up health costs and limit patient choice, thus diminishing or even negating the benefits of providing coordinated patient care.

The total number of registered hospitals in the U.S. is 5,754, according to the January 2012 report by the American Hospital Association. Their combined annual expenses totaled more than $750 billion (with almost 37 million admissions). That’s a lot on the debit side of the spreadsheet, so it’s easy to see why adding more doctors and services in-house can be cheaper than referring patients out.

But provider consolidation comes at a price.

St. Luke’s Health System, a nonprofit in Boise, has been buying physician practices, much to the chagrin of its competitor Saint Alphonsus Health System. As a result, Saint Alphonsus, along with the Federal Trade Commission and the Idaho attorney general, in 2013 filed an antitrust lawsuit seeking an injunction to stop St. Luke’s from buying more groups. The suit essentially alleged that St. Luke’s’ extreme dominance in the market brought harm to free enterprise in Boise.

St. Luke’s executives and board members denied claims that the system tried to steer patients away from competitors. Lawyers for St. Luke’s argued that the system’s goal wasn’t to raise prices and make money. They said the system has persuaded previously independent doctors to accept lower payments from insurers and that it already has started paying some doctors based on performance.

A federal judge has ruled against the acquisition of a large physicians group by St. Luke’s, citing violation of antitrust laws and the risk of passing on the cost increases to health care consumers.

Employers are the largest stakeholder group purchaser or payer for health services.  How can major employers effect change in a volatile health care market like the present one?

Health care must be approached in a more delicate and personal manner. Further, it may also be necessary for major employers to organize business coalitions on value-based health care, which is health care based on value rather than volume. In value-based health care, cost and quality are an integral part of the equation, and this system might help in ending high-level, closed-door fee negotiation sessions in which the hospital and the insurance carrier walk away as the only winners.

Without employer enlightenment, empowerment and involvement in an organized approach to play a key role in transformational change, the health care costs might continue to soar with the traditional win-win strategy employed by health systems and insurance companies.

One hospital or community can’t be fairly judged by the example of another; each operates differently. Moreover, the baby-out-with-the-bathwater approach wouldn’t help anyone. Consolidation of health care is here, whether we like it or not, and it is here to stay.

In this rapidly changing health care environment, a collaborative approach among employers, insurance carriers and local health care providers can supply the necessary balance to protect the interests of all stakeholders, most importantly the health care consumer.

Padma Gadepally is a physician and a public health professional in Boise. She can be reached at padmaag@yahoo.com.

About Padma Gadepally