• Fostering Provider Scale

    Joseph Fifer, FHFMA, CPA Mar 01, 2013

    Facilitating new approaches in provider structures is critical to addressing the challenges facing American health care.

    Joseph FiferWith unprecedented challenges facing the American healthcare system, the move toward provider scale offers a strong path for institutions seeking a way forward. Large, integrated providers can offer superior services, coordinate care, and achieve cost reductions that are being demanded by healthcare purchasers. Whether created through mergers, acquisitions, partnerships, or service agreements, providers of scale are increasingly positioned as the superior model for an industry in need of change.

    The idea that healthcare providers should not be formally connected has never made much sense to me. After all, we don’t purchase cars by buying all the component parts. We have one transaction and allow the automaker to properly coordinate the assembly of various inputs into one vehicle. Then we as consumers make value decisions around the end results. If we don’t allow the healthcare industry to bring together its components into one transaction—like we already do in every other industry—we won’t see the benefits of scale that other industries enjoy.

    The Trends and Objections

    As Lisa Goldstein observed in the April issue of hfm magazine, “Payment challenges, spiraling healthcare costs, and a slow economic recovery ... have ignited the national explosion of consolidation.” These trends—coupled with the passage of the Affordable Care Act—are now pushing providers hard in this direction. 

    Yet despite this momentum, objections have been raised. Some fear that consolidations will hurt consumers. A recent New York Times article profiled instances in which consolidation created higher prices or resulted in less autonomy for physicians (Creswell J. and Abelson R., “A Hospital War Reflects a Tightening Bind for Doctors Nationwide,” New York Times, December 1, 2012). Others have objected that particular consolidations would create monopolies. 

    These objections ignore the fact that there are already built-in governors for antitrust scenarios. If necessary, the Federal Trade Commission can challenge and block mergers that it believes would stifle competition (which it did 17 times in the last fiscal year). Further, large, consolidated providers should not abuse their situations by pricing or re-pricing services in a manner that alienates the communities they serve. Increased transparency of pricing and out-of-pocket patient financial obligations would moderate these temptations. Mergers only make sense when they drive a lower cost offering to the market (as measured by total cost per member per month) and create a better value proposition for consumers. 

    Contemporary Approaches

    There are numerous drivers of costs in health care. Therefore, there are naturally many thoughts and opinions about appropriate fixes. Occasionally, these ideas conflict, which is part of the complexity and frustration in our industry. The idea of creating better coordinated care using evidence-based medicine—but without allowing providers to align organizationally—would be one of those unfortunate conflicts. Scale allows providers to achieve population-based health management scenarios, streamline and improve care, and realize cost-saving economies of scale in their purchasing— all of which, ultimately, serves the needs of patients.

    Health care should be about keeping people healthy and using the widest possible pool of resources to make that happen. This needs to be supported through consistent policies that foster providers of scale and create payment systems that reward high-value care instead of high-volume care. It’s time to get contemporary with our payment 

    Joseph J. Fifer is HFMA president & CEO (jfifer@hfma.org).