Healthcare consolidation set to continue, expert says

Expect more consolidation in healthcare in the coming year, Morgan Stanley chief executive Ricky Goldwasser said at the annual Brookings-sponsored “Wall Street Comes to Washington” event. Institution.

“We think we’re definitely going to see more consolidation,” Goldwasser said Wednesday during the virtual event, sponsored by Arnold Ventures. “I think we’re going to see small-scale players merging with others to create scale. We’re going to see the biggest stakeholders, whether it’s healthcare companies or technology companies in certain regions or large consumer companies — — we see them … opportunistically looking at mergers and acquisitions [mergers and acquisitions].”

“I think we’re going to see more of that in the second half, because what we’re watching is what’s happening with companies that need to come back and raise funds next year, especially given all the volatility. “, she added. “They’re just going to be more eager to move forward and do something strategic.

Acquisitions of medical practices continue

In the medical practice world, doctors continue to sell their practices to different entities, though buyers vary by specialty, said Ann Hynes, chief executive of Mizuho Americas, an investment firm. “Private equity firms tend to focus on emergency physicians, anesthesiologists and maybe a little neurology… [while] cardiologists tend to like being in hospitals,” she said.

Several factors play a role in doctors’ decisions to sell their practices, including the high costs of medical malpractice insurance, Hynes added. “For emergency physicians, medical malpractice is very high. It is very difficult for them to be independent.” Obstetricians often tend to become hospital owners due to high rates of medical malpractice insurance, while for anesthesiologists, the reason they’ve been selling their practice for about 5 years” has to do with reporting data. They should have invested a lot of dollars in technology to bring the data back to the government, and they just didn’t have the money.”

What about the No Surprises Act, which prevents out-of-network providers from sending big “surprise” bills to patients who have walked out of their networks to get emergency care, including anesthesia? Will this have an impact on the sale of anesthesiology practices? “It probably decreases the urge” to buy these practices, Hynes said.

“It was a grand strategy – not all private capital [firms] would do that but some would; they would acquire these medical practices and specifically take them out of the network to get high reimbursement,” she said. “I would say it has stopped, however, over the past few years due to government initiatives to stop this stuff. …I don’t think it will end. I just think it probably slows growth.”

Ultimately, it will all come down to insurer ownership, Goldwasser said. “If you have a large Medicare Advantage (MA) [population]you want to own a vendor because that’s going to create stickiness with memberships, which is going to be more and more important as the market gets more competitive, and eventually MA’s growth is going to slow down at some point,” she said. . “I think the end game is for private equity to sell these [practices] health insurers and health systems.

Payment based on slowly growing value

How does value-based payment perform in the healthcare market? Its use is increasing to some extent, “but it’s going to be slow,” Hynes said. “A lot of companies are talking about it more as a grand strategy – like United Healthcare or some of the managed care companies, especially with their Medicare Advantage population – they’re really trying to transfer people to providers that they own just to cut costs… I think it’s very difficult to change the traditional fee schedule. Hospitals will say, ‘We have value-based contracts’, but it’s really still like 5%. I think it’s happening; I just think it’s going to happen more slowly than some people think.”

On the outpatient and outpatient side, “you see things moving much faster,” said Deutsche Bank chief executive George Hill. “We have seen tremendous capital formation in this segment of the market over the past 2-3 years.” Addressing the federal policy makers in the audience, he noted that “Rules determine behavior to some degree, and market participants are going to look at the rules and change behavior to solve the problems. Your policy decisions are- do they line up well with what you want to see?”

Although the number of participants in value-based care has grown significantly, “it’s still a very small percentage of the total pie, but you’re showing growth rates of 25%, 35%, 45% year-over-year the other that are expected to grow at this rate for this handful of years,” Hill said. But some providers “have no incentive to take that kind of risk because they’re well paid under the fee schedule, so we’re seeing different degrees of movement in different parts of the market.”

Goldwasser agreed. “Value-based care is clearly a good fit for Medicare Advantage, and we see more comprehensive risk [contracts] in this market,” she said. “But that’s not necessarily correct, at least for now, for trading plans,” which participate more in “upside-only” contracts that don’t not require suppliers to take risks – instead, they share in the savings without having to absorb the losses.

Better tools are needed

One problem is that “providers, hospitals and health systems don’t have the tools to take risks,” Goldwasser said. “We need to make sure that there are tools that can help providers and health systems take risks…before we really come to this massive shift” to value-based care.

Hill said he recently spoke to a benefits consultant who works with self-insured employers. “The self-insured employer plan sponsor wants the provider to take more risk and put more skin in the game, but he doesn’t want to buy risk and he doesn’t want to pay a premium to the insurance company. insurance,” he said. . “So why don’t we see more business plans moving towards risk? Hospitals and insurers are being paid very well right now without taking risk… Everyone feels like they’re doing well right now, without pay for a lot of risk. But everyone wants someone else to take more risk in the game without paying for it.”

Mental health services are an area that is expected to see growth, Hill said. “Mental health is a very, very small slice of the health budget, so there’s plenty of room for mental health to grow… without changing the size of the pie, so to speak. And the good news is that you can increase access for telemedicine while you mix the price per visit at the same time.” Rather than cost being the problem in providing more mental health care, it is the shortage of manpower that looms the most, he added.

  • Joyce Frieden oversees MedPage Today’s coverage in Washington, including stories about Congress, the White House, the Supreme Court, professional health associations and federal agencies. She has 35 years of experience in health policy. To follow

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