Tremors ahead – health care in 1995 and in the future – Washington Watch

Tremors ahead – health care in 1995 and in the future – Washington Watch – Column

Steven Findlay

1995 was a year of momentous changes in the health-care scene.

It was the year of the Net and the Web, and the Republican revolution. It was the year America faced its racial divide and extremist elements anew in the wake of the O.J. verdict and the Oklahoma bombing. It was the year of the talk show. And it was very much the year the health-care system underwent a tectonic shift.

After years of building momentum, the massive force called managed care finally collided head-on with the equally powerful and opposite force of a bloated, over-staffed, technologically driven, do-everything-we-can-and-then-some medical culture. The earthquake was diffuse, but it registered. Managed care, for all its flaws, is winning. Medicine has finally begun to change. And the decades long plague of steeply rising health-care costs could, just possibly–even accounting for a low inflationary period–be over. To wit:

* For the first time in 14 years, the American Medical Association reported that doctors’ earnings actually declined in 1994. That trend is expected to track into 1995 when the tally is made later this year. About 80 percent of doctors now contract with at least one managed care plan, and those plans are getting tougher.

* HMO rates stayed flat or increased less than five percent in most areas for the second year in a row. Enrollment in HMOs continues to skyrocket and may hit the 60 million mark later this year.

* Employers’ health and premium costs are expected to register only a small increase for the year, after 1994’s first-ever decline. By about mid-1995, the majority of employees in Fortune 500 companies had enrolled in managed care plans.

* An unprecedented wave of consolidations hit health care. A record 735 hospitals were involved in mergers and acquisitions last year. A greater number formed strategic parnerships with doctors and other hospitals. HMOs were also gobbling each other up, as were insurers, at a record pace.

Aside from restraining prices, where is this seismic force leading us? A study released last month provides some glimpses. Funded by the Robert Wood Johnson Foundation, the study is the first to systematically track the changes underway in the health system. A preliminary phase that focused on 15 cities and communities, from Albuquerque to Boston to Columbia, S.C., to rural Minnesota, found a consistent and spreading restructuring led by 1) large employers demanding lower prices, better value, managed care and more accountability; 2) hospitals and doctors’ groups anxious about their ability to survive and prosper; 3) newly competitive, aggressive and innovative managed care organizations; and 4) the advent and rapid growth of Medicaid and Medicare managed care.

But the study also found wide variations in the pace and context of change. For example:

* Some communities seem poised to shift the bulk of risk to providers through capitated HMOs and PPOs and direct contracting. In others, insurers and MCOs are firmly in control.

* Some communities are experiencing mostly horizontal integration, in which hospitals link up with other hospitals and doctors link up with each other. In other locales, vertical integration–in which hospitals and doctors’ groups unite, for example–is more common, while some communities are witnessing both.

* Some communities, such as Miami, have an influx of new and eager-to-compete health plans. In places like Minneapolis-St. Paul, however, a few big health plans dominate.

* Some employers and employer coalitions are demanding broad networks of providers–putting pressure on managed care plans to link up with as many providers in a community as possible. In other areas, employers are more interested in a managed competition model and contracting with the most costefficient providers.

* Some cities and states are anguished by the rising tide of uninsured. Others are not.

The earth moved, and the landscape is changed forever. But the tremors rumble off. Brace yourself for aftershocks for many years to come.

COPYRIGHT 1996 A Thomson Healthcare Company

COPYRIGHT 2004 Gale Group