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Five Major Healthcare Predictions for 2016

Following are five major healthcare trends which we predict will emerge or accelerate in 2016.  Just what their collective long-term impact will turn out be, however, is anybody’s guess.

  1. The Accountable Care Act Will Begin to Unravel.

The future success of the ACA rests on two major assumptions:

  • the young and healthy age cohort (ages 25-40) will be willing to subsidize the cost of insurance for the older, sicker cohort (50-65); and
  • the IRS is capable of administering the complex web of premium subsidies and tax penalties required to make the law work.

Neither assumption is likely to turn out to be true. 

The first assumption is based on the premise that a constricting maze of laws and regulations can successfully compel people to engage in behavior which is not in in their economic self-interest.  This has never been true in an open, free-market society.  Experience shows that the more complex the system, the more it will be gamed as economic agents seek individual advantage.  This will be facilitated by the fact that the penalty for failing to obtain individual health insurance can be avoided through any number of exemptions and loopholes.

The second assumption—that the IRS is capable of administering this system—is laughable.  By the agency’s own admission, over 25% of all earned income tax credits are fraudulent or paid in error.  The percentage of fraud in healthcare premium subsidies and tax penalty avoidance is likely to be much higher because the rules are more complex, the ability to independently verify is lacking and many more dollars are at stake. 

  1. Growing Disenchantment with Population Health Management

Population health management is the preferred medical delivery model of policy wonks, but providers face two insurmountable barriers in implementing it:

  • incentivizing patients to improve their health and limit their demand to high-value services; and
  • the requirement that providers assume accountability for costs and outcomes over which they have little or no control or influence.

The first challenge deals with engaging high-risk patients in the co-production of their health by making healthy lifestyle choices, seeking timely preventive care, and eschewing expensive but low-value medical services.  If anyone has figured out how to do this, they haven’t yet shared that knowledge. 

The second barrier deals with what type of risk providers can and should take.  As currently structured, most population health (shared savings) models require providers to assume accountability for costs and outcomes over which they only have marginal control.  In effect, providers are being asked to assume insurance risk in addition to performance risk, something they are not capable of doing. 

  1. Increasing Interest in Bundled Payments

In contrast to population health, bundled payments for acute episodes of care are predicted to gain increasing acceptance.  In effect, bundled payments are simply an expansion of the established hospital DRG model, expanded to incorporate more providers over a longer episode of care.  There will be challenges of provider cooperation, severity risk-adjustment and the infrastructure required to collect and report costs and outcomes, but these can be overcome.  Five percent of the population is responsible for half of annual healthcare spending.  This is the target population for bundled payment reimbursement, and the reason considerable effort and resources will be expended to make it work. 

  1. Continued Consolidation of Healthcare Providers

The pace of consolidation among all industry participants—insurers, hospitals, physician practices and pharmaceutical companies—has accelerated in recent years, and will continue to accelerate in 2016.  Notwithstanding that the Federal Trade Commission may be able to delay or block one or more hospital mergers in the coming months, they are likely to be unsuccessful in stemming the tide of consolidation.  Healthcare is becoming an oligopoly in spite of unequivocal data that consolidation leads to price increases more than quality gains.

  1. Replacement of the Traditional Primary Care Model

For the past several decades, the delivery of primary care has been based on a close, extended relationship between a patient and his or her personal physician.  That model is dying in favor of one based on consumer preference for cost and convenience.  Consumers are becoming more accepting of narrow networks to lower the cost of coverage, which often necessitate periodic changes in the primary care relationship.  They are also more accepting of working with physician extenders and sites of care other than the traditional physician’s office, such as retail clinics and free-standing urgent care centers which offer extended hours and faster access.  The traditional small, office-based primary group practice will eventually become extent.  

Independently, each of these trends would have a significant impact on the traditional medical service delivery model.  Collectively, their impact will be major, though impossible to predict.  Idealists predict that a new equilibrium in American medicine will be reached within the next decade; doubters predict that it will take twenty years.  Both sides, agree, however, that a new medical delivery model eventually will emerge.  As we attempt to divine what that new equilibrium will be, however, we should keep in mind the first law of forecasting: If you’re going to forecast, forecast often.

John McCracken PhD