Medicare Advantage plans that include fitness benefits such as gym memberships attract significantly healthier enrollees who are also less expensive to cover, according to a study in TheNew England Journal of Medicine.
"It makes sense. The people who would value fitness memberships would be healthier and have fewer functional limitations," says Amal N. Trivedi, co-author of the study, Fitness Membership and Favorable Selection in Medicare Advantage Plans. "And that group of seniors that participates in fitness programs has lower health expenses."
The study examined 11 Medicare Advantage plans that offered fitness club memberships against a control group of 11 Medicare Advantage plans that did not offer the benefit. Researchers compiled data from 2002 through 2008 and compared the self-reported health status of the people enrolled in one of the plans before the gym membership was offered, with the self-reported health status of people who enrolled after the benefit was offered.
The proportion of enrollees who reported that they were in excellent or very good health was 6.1 percentage points higher among the 755 new enrollees in plans that added fitness benefits than it was among the 4,097 people who enrolled before the benefit was included, the study found.
Conversely, the proportion of new enrollees who reported physical activity limitations was 10.4 percentage points lower, while the proportion of enrollees who reported problems walking was 8.1 percentage points lower, when compared with the earlier enrollees, the study found.
Within the control plans that did not offer gym memberships, differences between the 1,154 new enrollees and the 3,910 earlier enrollees were only 1.5 percentage points or less for each measure. The adjusted differences between the fitness benefit plans and the control plans were 4.7 percentage points higher for general health, 9.2 percentage points lower for activity limitations, and 7.4 percentage points lower for difficulty walking.
"If you look at the proportion of plans that offered coverage with fitness memberships from 2002 through 2008, there was a fourfold rise from 14 of the plans that had continuous participation in the Medicare over that time period to 58," says Trivedi, a general internist with the Department of Health Services, Policy, and Practice, Alpert Medical School of Brown University, and a researcher with Providence Veterans Affairs Medical Center, Providence, RI.
"If you extrapolate that trend it's probably more likely that even more plans offer coverage with fitness memberships in 2012," Trivedi says. "We were very struck by the tremendous growth in the number of plans that offer gym membership. That suggests to us that this is probably an attractive business proposition for health plans."
While the gym memberships and other wellness benefits are widely seen as a way to improve enrollee health and reduce healthcare costs, Trivedi says that represents a skewering—whether intentional or not—of the intent of the Medicare Advantage program.
"The hope was that plans would compete against each other on the basis of their ability to improve care and reduce costs and not on their ability to attract the healthy and exclude the sick," he says. "We don't know the rationale for why plans offer these memberships, but the effect is that the plans get a healthier slice of the Medicare population."
"There are lots of reasons to offer fitness memberships. It could be to improve the health of existing enrollees or to retain enrollees who value that service," he says. "In general policy makers are uncomfortable with the notion that plans are able to compete on the ability to cherry pick the healthiest enrollees."
Robert Zirkelbach, spokesman for America's Health Insurance Plans, contends that " [one] from a methodological standpoint they are relying on self-reported health status and two they acknowledge that some of the data they are looking at is from before the enhanced risk adjustment of 2004. There is risk adjustment system in place designed to address the adverse selection."
"The broader, more important point," Zirkelbach says, "is that health plans are providing services that beneficiaries want. They are responding to the demands of consumers—particularly at a time when there is broad agreement from across the healthcare system that we need to do more to encourage people to live healthier lifestyles, to get preventative care, and to take better care of their health. Health plans have pioneered the types of programs on the commercial side and in public programs to help patients better manage their health and live healthier lifestyles. That is showing demonstrative results in improved health, better health outcomes, and lower costs."
Trivedi says he hopes the study will make policy makers more aware of the consequences that even relatively small changes in benefit design can have on a program. "To the extent that policy makers want plans to just compete on their ability to provide high quality service to enrollees and reduce costs, that they should be aware that subtle changes in insurance benefits can have big results," he says.
The idea that health insurance companies might be using fitness benefits to cherry pick healthier enrollees has been a subject of speculation in healthcare economics circles for several years but Trivedi says there hadn't been empirical data to back up the idea before his study. "That is what we enjoyed about this study— that we could finally put some numbers to this phenomenon that people have been speculating about for some time," he says.
The union-management animosity at Holy Family Hospital in Methuen, MA, did not end with last July's vote by nurses to join the Massachusetts Nurses Association/National Nurses United.
The National Labor Relations Board has taken up a complaint that a veteran nurse at the hospital was fired last year by Holy Family's parent Steward Health Care Systems, allegedly for her role in the organizing effort. An administrative judge will hear the complaint on Feb. 14.
Steward Health Care Systems denies the allegation and has issued a statement saying that "participation in union organizing activities played no role in the decision" to fire nurse Mary Ramirez, 61, who'd been at the Holy Family for 18 years.
These two narratives could not be farther apart. MNA/NNU calls Ramirez a martyr for the cause. Steward alleges that Ramirez endangered the life of a patient and slyly hints that she may have had a drug problem.
Steward says Ramirez was fired "because she intentionally changed a doctor's orders, committed an intentional medical error, and failed to enter the fact that she administered a powerful narcotic (morphine) into a patient's medical record. Ms. Ramirez admitted these facts to a fellow nurse, who then reported her actions to management."
Steward went on to claim that Ramirez's "intentional change to a doctor's orders, falsification of a medical record, and attempted cover up, combined with the fact that she had been previously placed on probation for two years by the Board of Registration in Nursing for diverting patient medication for her personal use, were the reasons for her termination." Along with terminating her employment, Steward also reported her actions to the Board of Registration in Nursing.
The fight has gotten so ugly that the two sides can't even agree on a name. MNA/NNU refers to Steward Health Care Systems as Cerberus-Steward Health Care to draw attention to the private equity firm that has bought 10 Massachusetts hospitals in the last 18 months.
The fight at Holy Family has become so toxic, and this is seven months after the union vote, that it is easy to forget that this is a hospital and not a tire factory or a rendering plant.
Probable Consequences
How will all of this play out? If it's anything like labor disputes at other hospitals, at some point the two sides will come to an agreement and some sense of normalcy will return to Holy Family. They'll issue media statements about working together to create a healing environment for the good of the community, let bygones be bygones, blah, blah, blah.
It is still worth asking about the long-term effects. Regardless of what an administrative law judge determines next month on the NLRB complaint (which either way will almost assuredly prompt an appeal by the losing side), scars will remain and public doubts, quite deservedly, will linger.
After reading the charges and counter-charges issued by Steward and the union—regardless of their validity—why would anyone in Methuen, MA, seek medical care at Holy Family Hospital?
Again: Based on what the two sides are saying about one another, the public in Methuen would be within bounds to see management as greedy and vindictive, and staff as angry, reckless and incompetent.
For that matter, at a time when skilled healthcare professionals are at a premium, why would any physician, nurse, or administrator take a job at Holy Family knowing they would be entering a volatile environment that is hardly conducive to healing or congeniality?
Unfortunately, the acrimony at Holy Family may be a harbinger. As the fight for diminishing healthcare dollars intensifies in the coming years, it would not be surprising to expect more labor strife in hospitals across the nation.
With less money, management will be less inclined, or able, to negotiate as margins shrink. Staffing and scheduling issues, compensation cuts, and quality of care challenges will create resentment and fear in the healthcare workforce, making the call to organize all the more appealing. Sophisticated, battle-tested healthcare labor unions such as the NNU will tap into that worker angst and enjoy even more success.
It is not hard to foresee the healthcare landscape broken into entrenched and polarized camps, with labor and management snarling at one another across a no-man's land. Caught in the middle will be the patients hoping to dodge the crossfire.
Healthcare continues to lead the nation in job growth, accounting for nearly for nearly one in five new jobs in the overall economy, Bureau of Labor Statistics data shows. Hospitals created 9,800 new jobs in December, and 89,100 jobs in 2011, finishing a strong year for job growth that saw 314,700 payroll additions in 2011. Here are some notable executive moves this week:
Healthcare created 22,600 jobs in December, finishing a strong year for job growth that saw 314,700 payroll additions in 2011. Healthcare accounted for nearly one in five new jobs in the overall economy, Bureau of Labor Statistics data shows.
Hospitals created 9,800 new jobs in December, and 89,100 jobs in 2011, more than double the 37,300 jobs hospitals created in 2010.
"Last year, 2011, was a very good year for St. Luke's Health System. It's going to be more of the same in 2012," said Dawn Murphy, senior vice president – human resources, with the 10-hospital St. Luke's Health System in Kansas City, MO, which has 9,500 employees.
"We are adding staff, particularly nurses, because of our facilities' expanding. We have seen volume increases and that have stimulated our hiring," Murphy said. "We are also an attractive employer and that has always helped us. People want to work here. We received over 100,000 applications for employment last year and we filled 2,000 positions."
Chris Roederer, senior vice president, human resources, at Tampa General Hospital, says the safety-net hospital saw some incremental job growth in 2011. External pressures, however, including a $20 million Medicaid funding cut from the state of Florida, have created a challenging fiscal environment that will impact hiring.
"It is going to be one of the more difficult years in our history, and we don't expect it to get easier. The pressure is going to continue," he said. "It's very unfortunate. We worked hard to get the reputation we have," Roederer said.
Roederer says TGH has targeted two areas for new jobs. "One has been positions related to the implementation and optimization of our electronic health records. Our IT area has grown substantially to meet that need," he says. "Another area has been in ambulatory services, our primary care centers, and even the employment of physicians."
"It has been reasonably difficult to fill positions but we are getting there," he Roederer explained. "There is substantial competition for primary care physicians and I expect that to be difficult in years to come as hospitals build their primary care networks."
"The IT positions with hospitals, the demand for that specialty and recruiting and retaining those people is going to be even more difficult. They are so specialized and in such high demand. We are finding that already," he said.
Murphy says the search for clinicians with IT competency will remain a challenge in 2012, especially with the coming of meaningful use requirements, and the upgraded ICD-10 medical coding.
"The IT department is always in search of the person who has the combination of clinical and IT skills with all that is going on with healthcare reform," she says. "That has been a focus for us over the past year: to recruit clinical people internally if they are interested in IT, and externally the people who have that magical combination of a clinical background with IT expertise."
"They are hard to find, which is why we try to grow our own when we can. For those of us looking outside the people with advanced skills in that area, it's a finite pool and we are competing for the same pool," she said.
Ambulatory services, which include physicians' offices, accounted for 59% of the job growth in healthcare. The subsector created 11,300 jobs in December and 187,000 jobs in 2011, after creating 166,100 jobs in 2010.
Physicians' offices created 19,000 new jobs in December and 67,600 new jobs in 2011, a near tripling of the 25,300 jobs created in physicians' offices in 2010.
BLS data from November and December are preliminary and may be revised considerably in the coming months.
More than 14.2 million people worked in the healthcare sector at the end of 2011, with nearly 4.8 million of those jobs at hospitals, and more than 6.2 million jobs in ambulatory services, which includes more than 2.3 million jobs in physicians' offices.
The 314,700 jobs created by healthcare represent 19% of the 1.6 million jobs created in the overall economy in 2011.
While there is nothing to indicate that healthcare job growth will slow in 2012, Murphy offered some caveats.
"With healthcare reform it is going to be incumbent upon all of us to be cost efficient," she said. "That is what we are looking at the next couple of years: How can we operate as efficiently as possible? Our reimbursements are going to be lower for the same care. The external pressures are on us to be cost effective. Even if we have a stable workforce, we have cost pressures."
In the larger economy, the nation's unemployment rate dropped from 8.6% to 8.5%—down 0.6% since August, and its lowest level since March 2009. BLS said the 200,000 new jobs created in December came from the healthcare, manufacturing, retail, mining, and transportation sectors.
Nonetheless, 13.1 million people were unemployed in December. The number of long-term unemployed, defined as those who have been jobless for 27 weeks or longer, was little changed at 5.6 million in December, and represented 42.5% of the unemployed.
The American College of Physicians this week issued a sixth edition of its ethics manual, the first rewrite since 2005.
The revised manual, published in ACP's flagship Annals of Internal Medicine, offers new guidance on longstanding issues such as end-of-life care, physician-industry relations, and ethics in medical research.
The manual also tackles emerging issues such as the role of social media and its impact on the physician-patient relationship, the growth and impact of the physician-employee model, treating celebrities in the age of Twitter, and physicians' dual role of serving patients' needs while also marshalling scarce or expensive healthcare resources.
"We're always facing challenging ethical issues," ACP President Virginia L. Hood, MBBS, told HealthLeaders Media.
"The common thread is to do what's in the best interests of the patient."
Hood, who also teaches at the University of Vermont College of Medicine in Burlington, says the growth of social media such as Twitter and Facebook has created potentially huge ethical sinkholes for physicians who don't use them correctly.
"The boundaries may be blurred as physicians and patients interact more via social media, which is really the public domain," Hood says. "People use these in a private way and in a professional way, and it is important for physicians to recognize that and don't let the ease of using these social media create problems with the patient physician relationship or the profession itself. We have to make sure our professional demeanor is maintained whenever we are in the public eye."
Hood says the growth in the physician-employee model may resolve some ethical issues while raising new challenges.
"It goes both ways," she says. "As people are employed and paid in a lump sum for a job they do, it may take away some of the incentives that the current payment system has to encourage more procedures than maybe are necessary. All of the incentives in the system support volume rather than value. Having people employed may take away some of those incentives."
"On the other hand it brings up other issues, such as the institution making demands on how physicians treat patients or what tests or medications they are allowed to use, or pressures to get people out of the hospital sooner because it's better for the institution's bottom line," she says. "There are institutional pressures that can be pressed on employed physicians that we have to be concerned about. It is a growing trend and there might be more about that depending upon how healthcare is paid for."
As medical resources become more expensive or scarce, Hood says physicians may find themselves caught between the demands of patients and the greater society.
"The ethics of professionalism revolve around doing good, doing no harm, allowing patient autonomy and social justice—the equitable distribution of limited resources so everybody has the same chance to get what is needed," Hood says. "These are the principles one has to balance and the decision to do things that may cost more when you can do something that costs less just because a patient saw something on television. We are obligated as physicians not just to try to make the right decisions but to help patients make the right decisions."
This article appears in the December 2011 issue of HealthLeaders magazine.
In our 2011 Industry Survey, 32% of leaders said they are very satisfied in their job, which is down from 42% in 2009 and 38% in 2010. While the overall satisfaction rate (combining satisfied and very satisfied) remains greater than 80% (it was 81% in 2011, 86% in 2010, and 87% in 2009), what do you think accounts for this lessening in intensity of satisfaction, and do you expect that to continue?
J. Scott Graham, CEO, Coulee Medical Center, Grand Coulee, WA
I have been in this position just over a year, and I’d be in that 32% who are very satisfied. But I think I understand why it is on the wane. A lot of it has to do with the external pressures out there that have continued to mount over the past several years. We are one of the most highly regulated industries out there, and that makes it extremely challenging to stay on top of all of that.
So people want the greatest amount of service for the least expense and, like in any industry, that is going to put on some pressure to be more competitive and efficient, and that is going to increase the stress levels.
Jeffrey E. Thompson, MD CEO, Gundersen Lutheran, La Crosse, WI
“I am not terribly surprised by it. I believe there are a lot of stressors going on in healthcare in general and in the environment around us. Stress brings out the good and the bad. If your organization is struggling, it will make it look worse. If your organization is really functioning well, the stress tends to allow your organization to shine.
A problem that I see a number of people having is they get paralyzed because of the huge uncertainty in the government, the insurance environment, and in the community. There are so many things up in the air. You need to look past all the things that could go in a different direction and ask, “What are the things we need to accomplish, and what are the precious few things that we really need to execute that are going to be good in all of those environments?” Regardless of whether fee-for-service hangs around or ACOs rally and charge down the road in the next year or two, an organization that can prove its quality, that has palpably better service and lower cost than its competitors, is going to do well.
People get nervous, and with good reason, because it is not clear where it is going to go. But that should not paralyze you into inaction. You can still make a plan for it.
George Kyriacou President and ceo, Hanover (PA) Hospital
A factor that may be more unique to smaller hospitals than larger hospitals is one that I have been dealing with: a real aversion on the part of both independent medical staff and some boards to take risks.
As a small independent hospital that wants to stay independent, we need to be at the leading edge—not the bleeding edge—of implementing new strategies, rather than on the second or third run when the opportunity may not be so great.
There is a tremendous amount of fear and a desire or belief that if we hold off, this is just a fad that will pass. I don’t believe that is the case.
It is understandable, but a small organization has to be fast moving and nimble to survive as an independent entity in today’s world of constantly aggregating models. If you aren’t willing to take risks and spend money to achieve financial advantage down the road, then you are going to be in a slow death spiral and in a position to be gobbled up by one of the big entities just because you couldn’t keep up with the world today.
Kimberly Bordenkircher, RN, BSN, MBA, FACHE CEO, Henry County Hospital, Napoleon, OH
Where we are: We are on the edge of what I call transformational change. The decrease in satisfaction will continue until we successfully navigate through that second order of change. The environment and the pace of change is unrelenting.
Where we were: A decade ago when I was in this role, there would be big initiatives coming down the pike and you’d have an opportunity to prepare for them and implement them and sit back and see if
they worked or not. You had some time before each big initiative. That is not the case anymore. The change never stops.
Where we are heading: We are preparing for a future that, to some extent, is completely unknown. We know that healthcare reform is coming. Exactly what that means and what it is going to look like we aren’t sure of, but we have to position our organization so we can survive and hopefully thrive during the change. It is hard to stay focused on what is really important.
Where to focus: What works for me is that in spite of all the regulation and healthcare reform, I try to keep my eye on what is important, and that is the patient. I try to connect all the initiatives and activity back to what is important for patients. Then I work really hard to keep my staff connected to that.
This article appears in the December 2011 issue of HealthLeaders magazine.
Lost for many observers in last month's end-of-the-year hullabaloo was the annual Gallup Honesty and Ethics Survey which by a wide margin again ranked nursing as the most honest and ethical profession.
The survey found that 81% of Americans believe that nurses have "very high" or "high" honesty and ethical standards. It marks the 11th straight year—and the 12th time in 13 years—that nursing led all professions in the survey. Gallup says the only time nurses haven't top the list since they were included in 1999 was in 2001 after the 9/11 terror attacks, when firefighters were ranked No. 1.
Not surprisingly, National Nurses United is well aware of the survey results and appears poised to capitalize on that hard-earned public regard.
"We hold that trust as a sacred bond with our patients and our communities," Karen Higgins, RN, co-president of National Nurses United, said in a media release. "Patients and their families expect nurses to fight for them at the bedside, even when it conflicts with the profit motive of far too many hospital managers, insurance companies, and others in the healthcare industry who put the bottom line above patient interest."
"For nurses, that obligation also goes beyond the bedside," Higgins continued, citing the NNU campaign for "sweeping changes to heal our communities and nation, with a program for a Main Street Contract for America premised on jobs with dignity, healthcare for all, a safe environment, and support for public education."
The union is also pushing for a Robin Hood tax on financial transactions to be levied against "Wall Street banks and other financial firms who created the current pain and suffering in our communities…."
NNU has smart, tough leaders and compelling "us-versus-them" and "patient-first" messages that resonate not only with the nurses they hope to organize, but with tens of millions of Americans who play by the rules and still feel like they're getting a raw deal.
The union has gained considerable success and notice since it consolidated the California Nurses Association/National Nurses Organizing Committee, United American Nurses, and Massachusetts Nurses Association in December 2009. The "super union" now boasts more than 150,000 members within a national network and has won most —if not all—of the organizing efforts it has undertaken.
Savvy leadership and a compelling message—while important—are not the only keys to NNU's success. Seasoned and tough leaders can be found in other unions that have not fared as well. In 2010, only 11.9% of the U.S. workforce was unionized, down from 12.3% in 2009. Unions have seen a mostly steady decline in membership since 1954, when about 28% of the workforce was organized, according to the Bureau of Labor Statistics.
Union supporters believe that more U.S. workers would join unions if they could. They don't, the explanation goes, because these workers haven't the leverage to bargain with management, especially in a weak economy plagued by high unemployment.
The frustrations and pressures that nurses encounter on the job can be shared with workers in other sectors from agriculture to retail to heavy industry. Bad bosses, declining wages, and benefits, job instability and lousy hours are not unique to a particular sector.
Nurses, however, know they are in high demand. They know they are not easily replaced. They know their skills—for the most part—cannot be outsourced. Because of all that, they know they don't have to tolerate a dysfunctional workplace. They can vote with their feet and find a new job elsewhere, or they can vote to organize.
NNU's success suggests that when workers are given the chance to organize, usually they will. That annoys a lot of people who want to believe that unions are no longer needed in this era of enlightened management.
Instead, union successes are dismissed as some sort of trickery such as heavy-handed organizing efforts that pressure non-affiliated workers to join. How else to explain the failure of management to contain NNU's organizing efforts, other than to acknowledge the failure of management?
If NNU's only purpose were to increase dues-paying membership, as some critics suggest, that is not necessarily a grand deception on its part, and it does not explain their success. Nor is it explained by the suggestion that unions now hold some momentary advantage thanks to a temporarily pro-labor tilt on the National Labor Relations Board.
The explanation is simple. NNU is succeeding because many nurses—like many workers in many sectors—believe that nobody else in a position of power and influence is looking out for them. The only difference is that nurses are in a position to do something about it.
Many physicians believe healthcare reform won't reduce costs or improve access to care, but it will mean less income and autonomy for them, a new survey finds.
The Deloitte study also finds that only 25% of physicians consider themselves "very informed" on the details of the Patient Protection and Affordable Care Act, while 71% consider themselves "somewhat informed."
Informed or not, Keckley says many physicians developed strong opinions on healthcare reform years ago and those opinions haven't changed.
That dates back into 2009," he says. "They were despondent that the PPACA did not fix the sustainable growth rate, liability wasn't fixed, and the law did very little to get people to live healthier lives. That has been embedded in medicine now for the last two years."
The national survey of 501 primary care and specialty physicians, conducted in July and August, shows that 73% of doctors are glum about the future of medicine and 69% believe the "best and brightest" who are traditionally drawn to medicine will consider other careers
"They are mourning the 'MDiety,'" Keckley says. "The profession seems to be lamenting that the best days of the profession are behind and there is very little blue skies on the horizon. It's understandable but it is surprising."
Only 27% of physicians surveyed believe the PPACA will reduce costs by increasing efficiency, only 33% think it will decrease disparities, and half say access to healthcare will decrease because of hospital closures that result from the law.
The docs are also very downbeat about the impact of healthcare reform on their incomes in the coming year, with 48% believing they will earn less, 48% saying their income will remain unchanged, and only 4% saying they will earn more.
Keckley believes doctors' opinions about the PPACA may be influenced by their reliance on specialty societies for information about the law. "They are listening to someone from their society filter the information that is relative to their specialty and say 'Here is what it means to you,'" he says. "I was not surprised about the low level of understanding, given that there was a resignation that it is a bad thing that's just going to make the problems worse."
Keckley says doctors have become gloomier since the shift away from the fee-for-service model, with the belief that their autonomy and respect for the profession is eroding.
"The two things we found progressively disheartening for doctors are more transparency—that more things about them will be made public. Second is more cuts in the average reimbursement increases that they expect," he says.
Even primary care physicians, who are expected to see increased reimbursements under PPACA, are not necessarily happy about the potential impact on their incomes, Keckley says.
The reason is they still feel it is unfair that they are paid so little when compared with specialists, and they think the law didn't take care of it," he says.
Despite dissatisfaction with their income, physicians remain among the highest-paid professionals in the United States. Keckley cites the Bureau of Labor Statistics 2010 report on median compensation, which lists primary care physicians at $170,000 and specialists at $450,000. That compares with a median of $52,000 to $56,000 for teachers, police officers, and firemen.
So yes, doctors are whining about their incomes because they believe they deserve the highest income that is paid a profession," Keckley says. "They are! But for their purposes it doesn't appear to be as much as it should be. That is a matter of perception.
"Doctors tend to measure themselves against other doctors," he says. "There is a lot of peer influence on what cars they drive, what clubs they belong to. If you look at it objectively, doctors' incomes are pretty good."
Only 35% of physicians gave the nation's healthcare system an A/B grade, and 60% graded it C/D. Keckley says the perceived loss of autonomy has caused physicians to take a generally negative view about the overall quality of the nation's healthcare system.
"Doctors consider a successful healthcare system to be one where there is no limit to accessing doctors, where there are no gatekeepers, and where doctors are not challenged around their clinical autonomy. Period," Keckley says. "The more regulatory oversight in standards of care or evidence-based medicine, and the more you introduce this third-party coverage with insurance, the more troubling that is for doctors. Clinical outcomes are not the basis for how doctors rate the system."
Hospital mergers and acquisitions continued at a robust pace in 2011 as providers used consolidation and market share to elbow out competitors, improve economies of scale, and leverage better prices with vendors and insurers.
The top 10 hospital mergers and acquisitions in 2011 were valued at $5.6 billion, up from $3.8 billion in 2010, according to Sanford Steever, editor of The Health Care M&A Information Source, published by Norwalk, CT-based Irving Levin Associates. Hospital M&A carried a total value of about $7.3 billion in 2011.
In all of healthcare, including hospitals, drug and device makers, distributors, and health insurance companies, mergers and acquisitions were valued at about $236 billion in 2011, one of the busiest years in a decade, and up from $206 billion in 2010, Steever says.
"Activity is up over the previous year, although there haven't been any huge portfolio deals," Steever told HealthLeaders Media. "There has been a lot of activity in the middle market."
The year's two biggest hospital deals—each valued at more than $1.4 billion—include Highmark's acquisition of the five-hospital West Penn Allegheny Health System, and HCA's purchase from the Colorado Health Foundation of its 40% interest in the seven-hospital HealthONE system.
Most of the structural factors that drove M&As in 2010 were still in play this year. "The healthcare delivery system…remains fragmented. Hospitals will combine to create economies of scale, perhaps create some synergies by combining operations, and increase their patient base," Steever says. "The countervailing force is that the delivery of healthcare is local. So, you want to focus on the local but provide as broad a network as you can. If you're a member of a multi-hospital system, you probably have a better bond rating and more clout with vendors and insurers."
Steever says the passage of the Patient Protection and Affordable Care Act continues to play a big role in accelerating hospital M&As. "Before the Affordable Care Act was passed, the rate of hospital deals was very low because people didn't know what the outcome was going to be and they didn't know what the reimbursement protocol was going to be," he says. "Because of that they couldn't accurately calculate revenue and cash flow, and that made it hard to place valuations on businesses they wanted to buy."
"Once ACA passed activity took off, although a lot of it is vertical. You have hospitals buying physician groups and IT businesses to put together the elements of an affordable care organization," he says.
Steever says he expects that hospital M&As will continue at a healthy clip in 2012. "The only thing that could slow it down is dithering over the election and the direction that healthcare might take depending upon who wins the White House," he says.
"If healthcare becomes a big issue in the campaign, it will slow down the deal-making," he says. "The partners will take longer in their due diligence because they will want try to accurately value the deal, so they will have to compare a scenario where the Affordable Care Act continues to kick in versus one where it gets stripped out. They will have to produce valuations that take both scenarios into account. That just slows down deal-making but it is not going to stop it, because the underlying structural reasons exist regardless of what happens with the government."
Steever does not believe that access to capital will be a problem for the larger, stronger providers that are in a position to gobble up smaller competitors. "The capital is there and it is going to be there for those hospitals because they are fairly large. The smaller entities are still going to experience difficulty accessing capital," he says.
"Private companies are sitting on a huge wad of cash. There are some publicly traded companies have great cash flow, and some of the Catholic not-for-profits have great bond ratings and great tradition of fiscal responsibility and uncanny management," he says. "Access to capital is not a brake on this activity."
In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of Alex Blau, MD, and Brad Cohn, MD.
This profile was published in the December, 2011 issue of HealthLeaders magazine.
"This was just something we needed and we were surprised that it didn't exist."—Alex Blau, MD
While working the overnight shift at San Francisco General Hospital, Alex Blau, MD, and Brad Cohn, MD, found themselves at the corner of necessity and invention. The two young physicians in training were in their third year of medical school at the University of California San Francisco in 2008, and they were frustrated by their inability to communicate with patients from the Bay Area's diverse racial and ethnic communities.
"In healthcare your greatest diagnostic tool is your ability to communicate, to obtain a decent history and a physical exam from your patients. This is difficult to do with patients you can't easily communicate with," says Cohn, 29, now a resident in anesthesiology at UCSF and San Francisco General Hospital. "Patients who don't speak the same language as their providers sometimes do not have the opportunity to give that vital piece of information they need to in a timely fashion."
So, the pair came up with the idea for MediBabble—an iPhone/iPad app that allows clinicians to better communicate with nonEnglish-speaking patients during the initial exam and history-taking.
"Understanding a patient’s needs is really critical in developing an app that helps people."—Brad Cohn, MD
"This was just something we needed and we were surprised that it didn't exist," says Blau, 35, an emergency physician who has since left medicine to develop MediBabble. He is also medical director at Doximity Inc., in San Mateo, CA. "We both had iPhones and we thought ‘why isn't there an app that helps us? We can now walk around with computers in our pockets and impressive interface ability. Why don't we have a quick language app that allows us to play some questions for our patients?' Then we realized that we were perfectly situated to do it ourselves."
MediBabble—which is free and does not require Internet access once it is downloaded—focuses on the history-taking process during the initial patient interview.
"We specifically rewrote all of basic medical history taking," Blau says. "It turns out that most of the information we look to get as physicians is fairly predictable, depending upon a patient's complaint. We were able to organize history taking in a standard fashion, the way most physicians will approach it, based on patients' chief complaints and wrote out all of the questions that a physician would want to know the answer to."
Blau and Cohn and their small technical support staff at the company they formed—NiteFloat Inc. —had the questions translated by native speakers into six languages: Russian, Spanish, French, Cantonese, Mandarin, and Haitian Creole—the last of which was rushed into production to help clinicians in the earthquake relief effort on Haiti.
"Say a patient comes in complaining of chest pains," Blau says. "You simply pull up chest pain section and it will have the list of questions organized in the chronology you would normally want to ask as a clinician. You tap on your device and it will play those recordings that have been laid down by these professional interpreters out of the speakers of your device. It would be like they are hearing the interpreter in the room with them."
Blau stresses, however, that MediBabble is no substitute for a flesh-and-blood translator. "The tricky part obviously is how do you understand their response?" Blau says. "We wrote this history so it is all closed-ended questions that require only ‘yes' or ‘no' responses or gestural responses, such as pointing to a body part or holding up a number of fingers to indicate pain on a scale of 1 to 10."
Cohn says they intentionally limited MediBabble's ability to obtain information from patients. "You can't give information to a patient using MediBabble," he says. "This is for an emergency situation where collecting data quickly will allow you to improve the patients' health or allow you to get critical health information. It boils down patient responses into a format where you don't need to actually speak their language to understand their replies. But in order to give that information back to a patient you need to work with a medical interpreter."
The response to MediBabble has been strong. Since it was launched in February 2011, more than 15,000 clinicians have downloaded it. MediBabble was also voted the No. 3 new app of 2011 for internists and residents by the influential physician-review Web site iMedicalApps.com, which called it a "most superior" translation device.
Blau says NiteFloat wants to expand the breadth of the questions, the languages offered, and the content. "Right now it is focused on broad emergency and primary care complaints. But we have had a lot of specialists request additional content in areas such as OB/GYN and anesthesia," Blau says. Plans are also under way to launch an "internationalization feature" that will allow, for example, Russian speaking physicians to communicate with Spanish speaking patients.
While it's not charging a fee for MediBabble, NiteFloat asks users to donate money. "We have no plans to charge for the service. We continue to pay for MediBabble's development ourselves, but we're looking for foundation support," Cohn says. "We are technically not a non-profit, but we are also technically not profitable."
The growth of medical apps is exploding, with thousands of offerings for medical professionals and patients. For healthcare applications to be effective, Cohn says, there will always be a need for the physician's perspective. "You can build an app for what you know best," he says. "The more you work in the system as a physician, the more you can identify true need. The more time I spend with patients, the more I come to appreciate their struggles and what benefits them. Understanding a patient's needs is really critical in developing an app that helps people."
