Tuesday, July 19, 2011

They Can Build It, But Will They Come?

There's an interesting bet being played out across America right now, one that I'm really not sure how it will play out. It is that of continued consolidation and construction in the hospital industry.

Just at a time when the economy is in the doldrums, unemployment is at a steady nine percent or more, and people are paying more for their health care than ever before, we see large hospital systems growing and building at an unprecedented pace. Like squirrels hoarding their nuts for the winter in a panic before the icy winds of winter descend, big hospital systems are building, building, building.

Winter, of course, comes in 2014 for the hospital industry. That's when, according to our recently passed health care bill, the Patient Protection and Affordable Care Act, kicks in with its employer mandate. As it stands now, in 2014 all large employers with over 50 employees will have to purchase health insurance for their employees, or pay a $2000-per-employee fine.

It doesn't take many Betz cells to know what will happen when employers who presently pay $8000-$9000 per employee for health care benefits suddenly get the opportunity to pay a $2000-per-employee "fine." Do the math: for an employer with 3000 employees, they pay about $65.5 million for the health care benefits they're currently providing compared to a $6 million dollar "fine." Seems like a nearly 10-fold savings to me! Now THAT, ladies in gentleman, is one heck of a beneficial fine!

But just before 1 January 2014, Americans would have had to pick their OWN untested insurance plan from one of those offered by an insurer or the US government. These plans will carry certain prerequisites for coverage mandated by someone really smart on such matters in Washington DC, so be sure to read the fine print. If history is any guide, the govenment will want to make sure people have some "skin in the game" with their health care costs, so a larger portion of people's personal income will go toward paying for that insurance, whether it's constitutional or not to do so. That, you see, is the Grand Plan.

But will people come at the same pace to our great health care empires of the future?

No one knows.

But there sure are lots of things being done to make sure they do. Like "free" preventative health care screenings or free "Welcome to Medicare" physicals touted by policy makers as the new way to save money in health care.

Seems logical to me. (Not really.)

What policy pundits in the health care space don't get is that people don't want to think about being sick. They don't think much about their health care needs at all. They prefer Nascar. This is just human nature. We pay plastic surgeons to stay young. We pay health food stores huge sums of money to eat healthy foods. We exercise until we're blue in the face to keep our weight off. And for goodness sakes, we wear lots of facial products. (For the record, it is good to exercise and eat correctly to improve longevity, but let's be real: this simply delays the inevitable). My point is that people, given their own druthers, would prefer to spend their money on just about anything else besides health care.

And there will sit our Great Empirical Palaces to health care taking care of those who really have no choice but to succumb to the forces of nature: the Expensive Ones. The hospital systems that are located in affluent areas will get cold hard cash above and beyond the mandated insurance coverages to do so and likely survive. Those that cater to the indigent and less fortunate will either have to fold, or become like Cook County hospital in Chicago: a bureaucratically run institution with two separate boards trying to out-manuever the other in a political cat-and-mouse game of who gets to tell the taxpayers of Illinois what they're on the hook for and a shining example of fiscally-strapped public health care if there ever was one.

Which, of course, is what our large non-profit hospital systems are banking on: when the rubber meets the road, you'll want your health care like you want your facial products: nothing but first class for you.

But will people be able to afford such care?

They might not have a choice since the alternative health care option to this conundrum, the independent physician, is rapidly shrinking away in favor of the Grand Plan.

But the big question behind it all, of course, is this:

In the end, when we have no choice, will we really be able to afford all this product?



Anonymous said...


I love the article but could you give some more background on your math of 3000 employees x $9,000/employee = $60 + million.


Anonymous said...

Regarding Health Care Reform...No matter what McKinsey says, it's not clear that companies (employers) will opt out. Employer sponsored health insurance in MA increased after they passed their healthcare reform. And there is the possibility that a company will need to offer health insurance in order to attract superior candidates.

And I don't think it is going to be so easy to "game" the system. No numbers yet. Talk to you in 2016 or so.