The Coming Perfect Storm in Healthcare

We are in the midst of significant healthcare change that rivals the introduction of Medicare.  Not only are we about to insure 20 million people for the first time, but the role of hospitals is moving towards being the center for wellness in the community.  Further, Accountable Care Organizations (ACO) are mushrooming and is the impetus for hospitals buying physician practices by the boatload.  Current operating hospitals have the lead in benefiting from this shift but it is not clear whether or not they can drive costs down.  Up to this point many medical prices have risen when a hospital takes over a medical practice.

There is a provision in the Accountable Care Act that is not receiving much press.  There is a provision for Direct Primary Care and Patient Centered Medical Homes which have been created as an option in the Medical Insurance Exchanges.  This approach is in direct competition with the ACO. It is based on the concept where a person purchases a large deductible health insurance plan.  With the savings, one contracts directly with a primary care physician for a monthly fee ($75-$150 per person) which covers all primary and limited secondary services which are needed.  This approach creates a win/win for the patient and the physician.  The physician is motivated to provide longer patient visits aimed at prevention and wellness.  It is a more personal service as the patient and physician relationship is emphasized.  You see the same physician and over time this provides better primary healthcare. In addition, it can work with a Healthcare Savings Account (HSA) and catastrophic insurance that provides further incentive for the patient to take heed to the wellness directives of his physician.  This approach is not overly publicized and is not currently backed by large equity capital.

Another emerging trend is the continuing growth of the so-called Minute Clinics.  These providers are usually located in large chain drugstores.  They emphasize fast low cost episodic primary health care. They use physician extenders and emphasize low cost and value. They are well capitalized and have become very successful.   They currently are expanding their range of services to wellness and managing chronic illness. They are a strong competitor.

Perhaps the biggest development is the increasing attention being paid to Certificate of Need (CON) laws. These laws date way back to the period of the 1970’s when central planning for healthcare programs was initiated.  These laws unfortunately often protect the status quo and those facilities that are already operational. In South Carolina the CON law has not been funded this year and is beginning to become clear that a CON will not be required to build and operate health care facilities and programs.  This development will allow for new arrangements in health care delivery and most importantly new competition into the existing mix of providers.

Everyone agrees that health care costs are too high. We are either going to head down the central planning road toward socialized medicine as a way to control costs, or down the free market direction that will allow competition and free market forces to help control costs.  These new programs and trends seem to be leading us down the road of competition and free markets.  The insurance exchanges and the trend of employers dropping healthcare coverage will allow individuals to purchase their own healthcare and will help drive patients into the Direct Primary Healthcare option.

Of course the approaching clouds could be diverted and politics as usual could prevail.  However, now is the time to look for great change in healthcare.  These changes may very well surprise us.

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