Aetna-Humana and Anthem-Cigna were two big proposed transactions that were going to further limit the choices you and your patients would have for health insurance in this market. Besides United Healthcare and Blue Cross, all my clients have substantial business with Humana and Cigna, the two companies to be absorbed by their proposed partners.

After a year of review, the US government is close to formally challenging these transactions. In other words, THESE MERGERS ARE IN TROUBLE BECAUSE THE GOVERNMENT IS WORRIED THE DEALS WILL REDUCE COMPETITION, HAVE A BIG IMPACT ON INDIVIDUAL INSURANCE PLANS, AND GIVE THE REMAINING FEW PAYORS GREATER LEVERAGE IN REIMBURSEMENT NEGOTIATIONS. That last point should really get your attention.

So if indeed the government goes forward to contest these transactions , they’ll need to convince a judge to block the deals. What may happen is that the two acquirers – Aetna and Anthem – may have to sell off business to other health insurers where they overlap with the companies they are acquiring.

I bring this to your attention to convey that nothing is going to change until this is resolved, and that Humana and Cigna will continue to be major players in this market.

A.J. Rosmarin
July 2016

After a push by the AMA for a two-year transition period after implementation to protect physicians from all ICD-CM coding errors and mistakes, CMS (The Centers for Medicare and Medicaid Services)and the AMA made a joint announcement today that appears to signal a burying of the hatchet. It looks very likely now that the October 1 implementation date for ICD-10 will happen.To gain that concession from the AMA, CMS and the AMA reached a compromise.

The Great Land Grab is in overdrive. Physician Practices are consolidating, much to the chagrin of independent, well-run practices throughout the US.

Today, less than 40% of practicing physicians nationwide are independent.

This figure is down from 57% in 2000, and the trend towards consolidation is expected to continue. Many physicians in the 55 years of age and older category view it as one of the few exit strategies available to them other than selling the practice to remaining partners or to a young associate willing to purchase the practice.  Since the end of the Physician Practice Management Company era in the late 90s, there is no longer any currency in the form of common stock to offer physicians whose practices are being acquired.

What is driving the trend toward physician practice acquisitions/consolidation?

The hook in consolidation is in monetizing the fair market value of the fixed assets of the current physician practice and the receipt of a check plus a guaranteed income stream for a year or two years after which the physician goes to 100% production as a basis for compensation.

Physician Practice Acquisition is being marketed in the following ways:

• as a way to better coordinate patient care
• provide services at lower costs
• rid physicians of the burden in administering the non-clinical side of their business
• address the fear and cost of the electronic health record system
• maximize managed care contracts
• gain access to group purchasing and lower malpractice premiums
• pay physicians for value and quality outcomes instead of pure fee-for-service
• a way to deal with the general uncertainty and dissatisfaction regarding the changing physician practice landscape

In relinquishing control of their businesses, physicians give up the ability to hire the type of employees they desire by delegating human resource functions to a centralized off-the-premises individual with no sensitivity to the idiosyncrasies of the business in hiring, and more than likely at a lower hourly rate due to profit center parameters.

The counter to those salient points is in the limited sample of my physician practice clients, all of whom are independent in primary care and specialty practices, and who are all doing as well or better financially and in metrics they receive from managed care plans. Consolidation may be good for some and not so for others embracing independence and delivering a highly effective level of clinical and economic results.

So what are problems with physician practice acquisitions/consolidation?

The answer is that the hospitals at the forefront of this movement are looking out for themselves first and the physicians second, if that. The healthcare-reform driven Accountable Care Organizations (ACOs) are being established by hospitals nationwide as a vehicle to coordinate patient care and control the flow of funds from insurance payors and patients and as a way to position their organizations for the movement from fee-for-service to fee-for-quality and outcomes. Over 500 organizations have applied for ACO status in 2013.

Aligning of incentives between hospitals and physicians remains one of the primary impediments to progress here.

First and foremost in the post-acquisition environment, physicians must abide by productivity demands to see increased daily scheduled patients, or face the wrath of corporate delegated monitors in monthly performance reviews. Productivity and efficiency become primary drivers for delivering good care, with lip service being paid to patient satisfaction, patient safety, and good outcomes.

Pressure to meet financial targets becomes a way of life in the consolidated world of healthcare. Physicians are pressured to bypass what is best for the patient by referring them to other physicians employed by the same hospital system. Those physicians who do not meet or exceed the standards set are subject to termination and enforcement of geographic non-compete provisions.

The physician who was an independent or member of the Board of Directors of their practice now becomes a piecemeal worker. And with regard to costs, can the hospital really provide services to patients requiring a procedure at a cost equal to or less than what physicians charge for an in-office procedure? I find this highly doubtful, so the end result may be increased costs post-consolidation to a patient and their payor.

The bottom line on physician practice acquisitions/consolidation.

In summary, consolidation may work for a higher percentage of physicians than for those who are fiercely independent, but there is a sustainable market for both types. Consolidation to some degree may indeed be inevitable as it is in other professions, but it is a complicated transition with no guarantee of success.

The quality of care provided to the patient should be the primary goal.

Government regulations, reductions in reimbursement, electronic health records, and other issues including fear of the future and over-the-top frustration with the administrative part of the practice will only serve to complicate matters. The shortage of primary care physicians (PCPs) – currently estimated at more than 15,000 physicians – to treat the existing base of patients and the looming 30 million people to be eligible beginning in January 2014 when the Affordable Care Act takes effect, combined with increases in the number of Medicare patients to meet the needs of an aging population as well as lower reimbursements to physicians may result in total chaos and a lack of access in the manner patients have been used to.

The overall US physician shortage is expected to rise to 30,000 physicians by 2025.  There are currently 130 primary care physicians for every 100,000 people in the US; in Texas, it is only 75 PCPs per 100,000 people, ranking Texas 47^th in the US. Our healthcare delivery system may become one highlighted by limited access to the best care unless interests become more aligned between hospitals and physicians with a primary and laser focus on the patients.

 A core question is therefore one of priorities: can an employed physician maintain the integrity of his/her role as a care-giving professional and put the patients first when their employer puts production and profitability ahead of patients?

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The physician is the point person responsible for orchestrating the diagnosis and treatment of the patient.

As a healthcare consultant working with physicians and hospitals, I am particularly annoyed at the omission of the physician in the opinions stated by many so-called experts such as The New York Times (Sunday August 19th) and others who don’t grasp that the physician is the point person and on the front line of diagnosing and treating patients. They only refer to hospitals, home care agencies, and nursing homes, or group them as “others.”

The shortage of physicians will negatively impact access.

Do hospitals diagnose and treat patients just because they are inpatients?

Who outlines the protocol?

Expecting the physicians to provide equal to or better care with the pressures of reduced reimbursement estimated under the proposed “doc fix” always in play by elected officials in Washington in excess of $200 billion over 10 years and increased paperwork is ineffectual and ludicrous. It’s why many physicians are seriously contemplating early retirement or the sale of their practices to hospitals or to colleagues, and why so few are choosing medicine as a career, especially with the fixed residency slots unchanged in at least 15 years by our government.

If the practicing physician can’t or won’t see the Medicare or Medicaid patient, then what? They have totally missed the point here that gutting reimbursement to pay for other problems as proposed under the Affordable Care Act is a reasonable approach. It isn’t.

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The speculation on what the Supreme Court will decide, and its potential impact has come up in discussions with my clients far more this month as in the past since the decision is just days away. The main question is whether the health law’s requirement to carry insurance or pay a fee, known as the individual mandate, is constitutional. I’ve addressed it in meetings as my opinion only, and thought you’d find it interesting:

There are two answers

What happens if the Supreme Court upholds the Healthcare Law Legislation?

If the court keeps it in place, attention would shift to preparing for millions more Americans to get coverage starting January 1, 2014 and for businesses to pay new taxes and significant penalties for non-compliance. If the court strikes down all of the law, consumer-friendly benefits such as Medicare drug rebates likely would disappear along with the requirement that some people pay a fee for going uninsured. The individual mandate comes with a fine ranging from $695 for poor Americans to $12,500 for upper income families who choose to remain uninsured.  I predict the vote by the Supreme Court will be along party lines and will end up at 5-4; sadly partisan for a supposed non-partisan judiciary. The ramifications in runaway costs that have been backloaded into the legislation are especially onerous beginning in January 2014. While a few features have been implemented and are reasonable, such as the extension of age coverage for dependents to age 26 and the pre-existing condition coverage, the overwelming concern is the costs that have been grossly understated, the impending flood of uninsured and explosion in the Medicaid rolls throughout the country, and the shortage of physicians, leaving the taxpayers like us and our dependents with many years of debt to be passed along to future generations.

What happens if they strike down all or part of it?

If all or part is struck down – and the looming question is whether the Supreme Court can extricate parts such as the mandate or whether they must invalidate the entire law, there’s just no clear path to follow, and no magic potion. Surely it would be bad news for the Democrats, especially those running for reelection from all levels up to and especially including the White House, because we all know this health law debate has had the moniker of “Obamacare.” It’s already been declared very unpopular in national polls – not even close to 50% in favor of the law from the day it was passed. A defeat of the healthcare law may in fact serve to energize the Democrats who will blame the Republicans on the Supreme Court, and I expect the White House to be the lead voice of discontent because they have already primed that pump when President Obama suggest that the Supreme Court “Do the right thing and uphold it” a few months ago. Republicans should seek consensus in rebuilding a new healthcare law. That would be quite a switch, given that the existing law now debated was hardly shred with anyone outside of Congress and the White House until it was passed. So many holes and hidden costs…….It will be challenge to pick and choose the popular aspects of the current law like the extended coverage, pre-ex, and drug benefits for seniors. Having reasonably-priced health insurance coverage going forward without the actuarial advantage of getting most everyone to pay into the system to spread the risks and defusing the mindset of the young and healthy to either pick and choose or buy coverage only when needed is a real conundrum. The irony is that if the law is struck down in part or it totality, the Democrats will have this huge dark cloud lifted.  None of the posturing addresses one of many concerns that the overall cost of healthcare continues to rise at an alarming rate. A recent report indicated that a family of four will spend about $20,000 in medical costs compared to $12,000 in 2005.

In summary, there’s risk for both parties, a close vote is looming and both Democrats and Republicans have spent months tailoring their spin, and a Supreme Court that made up its mind months ago and has taken its time to prepare its explanation is about to present a landmark opinion.