Perspective: In our current complex healthcare environment, amid enormous pressures to cut costs, improve care and prepare for changes resulting from federal healthcare legislation, many healthcare businesses and providers are staking out new territory, often blurring the lines between businesses that have traditionally been separate.

 

Hospitals are consolidating into huge systems. Hospitals are also acquiring large numbers of physician practices. They are also exploring insurance-like setups including direct approaches to employers that cut out the health plan middle man.

 

On the other side of the equation, insurers are buying healthcare providers, seeking to establish them on new cooperative deals and payment models that share the risks of health coverage. Employers are also starting to take a far more active role in their workers’ care. 

 

Much of this is the marketplace reacting to economic pressures and the potential of major market changes as a consequence of initiatives from CMS (Centers for Medicare and Medicaid Services) and health reform legislation. 

 

These trends have crystalized over the past year in a series of high profile deals and many more subtle arrangements that are being pursued. However there are many healthcare veterans that have experienced similar type activities in the 1990s. At that time hospitals bought doctor practices, merged with each other and tried taking on insurance-style risk, sometimes launching their own health plans. Some insurers tried to own and control physicians. Health maintenance organizations were seen as the future of care, squeezing costs by limiting consumers’ access to certain physicians and other providers. 

Indeed, many of the earlier deals in the 1990s failed due to clashing interests and the amalgamation of different business models that require different management styles and management expertise that did not exist within the context of the acquiring or merging facilities.    HMOs and the reimbursement system known as Capitation (now being touted under the banner of Accountable Care Organizations) under which doctors and hospitals often received a financial allotment for patients regardless of whether they got sick, triggered a backlash from consumers who feared they were being denied access to needed care. Many hospitals lost money with their doctor practice acquisitions because of overly rich prices, and some doctors’ tendency to ease up on their workload after selling out.

 

Additionally, many hospital systems learned that the insurance business was a separate business and entering that business alienated them from their customers (patients and physicians).

 

Furthermore, the “Quality” banner was raised in the 1990s as hospitals touted their activities as being precipitated by a need to improve quality. That never really materialized and there was no major reduction in costs. In fact, studies would show that there was increase in spending as a consequence of some of the mergers and acquisitions.

 

Obviously, at this time the verdict is out as to whether this new round of consolidation and blurring of healthcare lines between hospitals, insurance companies and other healthcare providers will actually improve access, reduce costs and improve quality. Stay tuned!