September 6, 2012
The August 26 edition of The Washington Post has a headline that immediately grabbed my attention – Affordable Care Act Driving Health Care Mergers – but I think that author Catherine Ho has missed the mark. Noting two recent (and large) health sector consolidations (Aetna will buy Coventry Health Care, and Health Care REIT will acquire McLean’s Sunrise Senior Living), Ms. Ho draws the conclusion that large industry players are using consolidation as a way to address the smaller profit margins and higher compliance costs some expect will result from the Patient Protection and Affordable Care Act (PPACA) .
Now, I think the PPACA has become a catalyst for many changes in the field:
Increasing the development of electronic platforms for sharing health information (see The Latest In Regulation & Legislation – Meaningful Use, HIPAA Compliance & Telehealth Rules all members and Getting To Meaningful Use Payments Is A Matter of Math all members)
Penalizing hospitals and nursing homes for poor quality (see Hospitals Face Average $2,523 Per-Bed Medicare Penalty For Readmissions & Low Patient Satisfaction and Improving Nursing Home Compare for Consumers – Five-Star Quality Rating System all members)
Improving the proportion of dollars spent on health insurance premiums going to care through medical loss ratio (MLR) provisions (see HHS Rule on Medical Loss Ratio Definitions—Quality Improvement Is In & Utilization Review Is Out and Medical Loss Ratio Final Rule )
Expanding health insurance coverage (see Health Care Reform Legislation Significantly Expands Health Insurance Coverage For Individuals Leaving Correctional Systems In 2014 and 2.5 Million Young Adults Gain Health Insurance Through PPACA )
Expanded use of medical and health homes (see Health Homes Vs. Medical Homes: Big Similarities & Important Differences and Medical Home V. Health Home – Confused? all members)
But, I think attributing the many recent mergers to the PPACA is a bit off the mark. These initiatives to “bend the cost curve” were policy provisions that needed to happen – regardless of federal policy – to increasing efficiencies in our service delivery. Many of the provisions of PPACA will certainly push consolidation of insurance companies, hospitals, nursing homes, and specialty health care services – because the focus of PPACA is to increase medical loss ratios, decrease use of residential-levels of care, and promote delivery of services through primary care.
That said, if we have a new Administration in Washington in October and move ahead with a “voucher” approach to Medicare and a “block grant” approach to Medicaid, the pace of these consolidations will likely increase dramatically.
The pace of mergers in the field has picked up – 23 Behavioral Health Industry Mergers & Acquisitions In 1Q 2012 , 219 Mergers & Acquisitions Among Health Information Technology Companies in First Three Quarters of 2011 , Merger & Acquisition Activity in Behavioral Health & Social Service Sector To Accelerate Over Next Three Years – and regardless of politics and legislation, we’re likely to see more.
Monica E. Oss
Chief Executive Officer, OPEN MINDS
For another free resource, see: Individual Mandate Stays – SCOTUS Puts State Medicaid Expansion In Play all members
This is free for the next sixty days to all registered OPEN MINDS Circle members.