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2016 Predictions: Systems of Systems, myStLuke’s, Population Health and Telemedicine

By Dr. David C. Pate, News and Community
December 29, 2015

The big issues in health care for 2016 will be insurer consolidation and health insurance costs, pharmaceutical prices and new consumer dissatisfaction with the insurance exchanges, all leading up to the presidential election. 

Here’s my perspective on the year to come:


Employers will continue to shift more of the costs of health insurance to their employees, especially if we do not see a repeal of the so-called “Cadillac tax” as that date of implementation becomes another year closer. There will continue to be a move from defined benefit to defined contribution plans.  

The number of employers participating in private exchanges and offering their employees a menu of health plan options will increase, especially among large regional and national employers. 


We will continue to see consolidation in the health plan industry as payers attempt to gain greater market shares, greater market penetration in favorable markets and more favorable risk profiles while spreading their fixed costs more broadly. The big question will be whether the combination of health insurance giants – Anthem’s acquisition of Cigna and Aetna’s acquisition of Humana – will receive regulatory approval.

We will see more provider-sponsored insurance plans as health systems enter the insurance space, either through acquisition of an existing plan, joint venturing with one of the health insurers or starting up their own plan, though I suspect the latter will be the least common method. At the same time, we will see more of the co-ops fail due to the government’s significant cutback on the risk corridor payments.

Payers will respond strongly to the introduction of more high-priced medications and the significant price hikes we have seen as pharmaceutical companies acquire other companies and then raise the price for medications that have long since become generic, but for which there is no other market alternative. They will be reluctant to add these medications to their formularies or may relegate such medications to a higher coinsurance tier and/or an enhanced preauthorization process. 

Public exchanges

2016 will be United Healthcare’s last year on the public exchanges. The company already has announced that it may leave in 2017, but I predict that decision will become final in 2016. The only favorable factor I see for insurance plans participating on the public exchanges is that the pent-up demand for expensive healthcare services may have already been met over the past two years, so perhaps utilization will level out or slightly improve.

On the other hand, premiums continue to be underpriced, and there is little reason to be optimistic that risk corridor payments will be restored. Therefore, medical loss ratios for insurance company products on the exchanges are likely to continue to exceed 100 percent, and pressure to significantly increase premiums in 2017 will be intense.

The penalties for non-insurance will increase and begin to get the attention of the uninsured, particularly the young invincibles that are badly needed to join the ranks of the insured on the exchanges to help mitigate premium increases. I think, however, that the premium increases will continue to deter more from signing up, and we will see very significant premium increases in 2017 following the expiration of the reinsurance, risk corridors and risk adjustment provisions under the Affordable Care Act. 

Further, as more and more people use their health policies provided through the exchanges and realize the very high deductibles, many of these people will decide to either take the risk of going without insurance and paying the penalty or save the premiums they otherwise would have paid in an attempt to, in essence, “self-insure.”

There will be continued movement to narrow network products in an attempt to hold premium increases down. We will see an increase in the number of HMO or “total cost of care” products offered on the exchanges (The plans offered on the public exchange for Houston, one of the largest metropolitan markets in the country, are all HMO plans.). Over time, there will be growing acceptance of these types of plans by many, especially those who are healthier, in exchange for the lower out-of-pocket payments and greater financial security.

Information technology

There will be three big areas of focus in 2016. One area will be interoperability. Another area will be cybersecurity, even as major data breaches continue. The third area will be more extensive use of telemedicine and wearables.

Healthcare reform

The Affordable Care Act will not be repealed, though there is the possibility that the Cadillac tax and medical device tax might be. The Obama administration will need to keep an eye on the insurance exchanges and any potential exodus of insurers, the demise of more co-ops and the potential for steep premium increases for 2017 as the reinsurance, risk corridors and risk adjustments expire. There might be an attempt by Democrats to extend the three, but I see no chance of success in a Republican-controlled Congress.

Healthcare reform, and specifically the Affordable Care Act (ACA), will be front and center in the general election debates of presidential candidates. The outlook for the ACA depends upon the outcome of the presidential election and the makeup of the new Congress.

Pharmaceutical industry

It will be interesting to see if anything comes out of the congressional hearings on the pricing practices of the pharmaceutical industry. The backlash has even entered into presidential politics, but the pharmaceutical lobbying industry is incredibly strong. Regulatory action against egregious actors and monopolistic pricing behaviors would be welcomed. I would also welcome congressional action to authorize Medicare to negotiate drug pricing, but suspect we will see none. 

Health systems

We will continue to see more consolidation, some at regional levels and some nationally. This will accelerate if regulatory clearance is given for the insurance company combinations that I mentioned previously.

We will see some regional, and perhaps even some national, collaborative “systems of systems” in which health systems will remain independent, but offer jointly contracted networks and products to payers and large employers.

We are also likely to see some health systems, most notably Kaiser Permanente, expand into new territories. The trend of hospital closures is likely to continue, and critical access hospitals will be particularly vulnerable. Hospitals will continue their deployment of electronic health records, but will remain dissatisfied with the state of data analytics.

Few health systems will figure out population health and demonstrate the capabilities and competencies to manage the health of a population. Those that will be on the leading edge are likely to be those that also have a health plan.

St. Luke’s Health System

I expect that we will have a successful go-live of myStLukes, allowing for a single, integrated, electronic health record across the entire System. This will mean better, safer, evidence-based care, less duplication and greater standardization, and patients’ caregivers will have access to health information in one place.

We have achieved tremendous accomplishments around quality and been recognized as one of the top 15 health systems in the country. We will build upon that and receive additional recognition next year for the work we have been doing and the progress we have made. I also think we will get to the point that all of our hospitals are recognized with a grade of “A” for safety, something we are passionate about and have been working on. 

Third, we will see significant growth and development of our network. St. Luke’s Health Partners has been creating the capabilities and competencies to manage financial risk, and I think the network will be ready this time next year.

Finally, I think St. Luke’s Health System will continue to be a national leader in population health. While I indicated above that the most successful health systems around population health are likely to be those that have a health plan, St. Luke’s has forged an innovative partnership with SelectHealth that will create the incentives and allow St. Luke’s to be successful at population health without the risk of owning a health plan. Our partnership is strong and collaborative, creating for us a sense of ownership without actual ownership.

It will be another exciting year for St. Luke’s as we work to improve health, provide better care and lower healthcare costs.  

Happy New Year!

About The Author

David C. Pate, M.D., J.D., previously served as president and CEO of St. Luke's Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009 and retired in 2020. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.