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Dr. Pate’s Prescription for Change

St. Luke’s Health System’s Journey to Transform Health Care

2020 predictions, part two: the country’s hospitals, technology and St. Luke’s

By Dr. David C. Pate, News and Community
January 7, 2020

In a two-part series last week and again with today’s post, I have taken the opportunity to look back at my predictions for this past year to see how I fared, grading myself on my predictions and giving a sense of where I think things will go in 2020:

Hospitals

Grade: A

Here was my 2019 prediction:

“Next year will be a very challenging year for hospitals. Among the negative factors that will result in weakened financial performance: a continuing payor mix shift to governmental payers (Medicare and Medicaid), which is lower-margin or even negative-margin business; an increase in bad debt as employers and insurers continue to shift more costs to patients in the form of deductibles, co-insurance and co-pays; and a continued shift of business activity from inpatient to less profitable outpatient services.”

This turned out to be entirely true. My prediction for 2020 is that this trend will continue. In fact, I see no reversal to this trend in the foreseeable future, and that is why my long-term prediction is that hospitals and health systems that continue to try to ride out the fee-for-service business model are likely to be in significant financial trouble in the future.

The transformation to value takes time, heavy investment and significant changes to structure and function that will be even more difficult to make during a time of financial distress. As a consequence, I believe we will see many hospital closures and an increase in the number of hospitals and health systems that are acquired to survive and so that another entity can help them make the transition.

Insurers

Grade: B+

Here is what I predicted:

“’Medicare for all’ may or may not be an existential threat to insurers, depending upon whether there is still a role for insurers to administer plans for the Medicare program, as they currently do with Medicare Advantage. No doubt insurers will be developing their lobbying strategy.

“Insurers face another threat as more providers take on managing risk. Payers are, for the most part, reluctant to become third-party administrators. For those that fear this, the adoption of risk by providers remains low. However, the pressures on providers to take on risk will only increase over time.

“On the other hand, some insurers are embracing this change and realizing that if providers successfully manage risk, this will confer a premium advantage that will result in market share gains when they are able to offer and sustain lower premiums than those plans that retain risk and rely on traditional unit cost pressures to keep costs down. This will be a particular challenge, given that I think premiums must and will stabilize close to current levels to appease regulators and to avoid pricing more people out of the market.

“Some insurers will enter the provider space. Others will be acquired by providers, as we saw recently with the acquisition of Aetna by CVS Health. It remains to be seen whether CVS can leverage its acquisition of Aetna to lower costs and advantage Aetna health plans by enabling them to keep premiums down compared with competitors. As best I can tell, CVS is pinning its hopes on reducing unnecessary hospital admissions by managing patients more effectively in its MinuteClinics; I am unaware of any data showing that retail medicine services have been able to do this.”

How did I do? Insurers did indeed develop and implement their strategy for opposing ‘Medicare for all.’ It was interesting that it came together with elements of the health-care industry that similarly oppose ‘Medicare for all’ but have little else in common with insurers. It may be for that reason that the coalition has had challenges staying intact; the AMA was the first to depart the coalition.

I was correct that the pressures on providers to take risk would continue to grow, and there has been some movement by providers to adopt value-based arrangements. It remains underwhelming, in my opinion.

I was correct that premiums are stabilizing, but these premiums are often at the expense of greater out-of-pocket expenses for consumers, other than those who are receiving advance premium tax credits and subsidies on the public insurance exchanges.

I was also correct that we are seeing more entry into the provider space by insurers. I mentioned the CVS play last year. It remains unclear whether CVS’ strategy will work; it does not appear that investors and stockholders of CVS are convinced.

My prediction? Sometime soon, commercial insurers will take note of what an increasing number of large employers have been finding. There are tremendous savings from decreasing unnecessary utilization of high-cost, high-risk procedures through a “center of excellence” model. I would think that we will see some commercial insurers design a plan around this model and offer it soon.

I alluded above to the fact that Republicans have done little to address the cost of health care, but there is one exception: the new Trump administration rules on short-term health insurance plans. These are not ACA-compliant plans because they do not offer guaranteed issue (the insurer can deny you coverage for preexisting conditions), they do not employ community rating (the insurer may charge you extra for preexisting health conditions), they may impose annual and lifetime limits on insurance coverage and they do not cover all of the minimum health benefits required with ACA-compliant plans.

These plans were intended as stop-gap measures for people in between jobs or facing other life circumstances for which they needed coverage for up to several months. The Trump administration, however, changed the rules to allow this coverage for as long as a year and for a renewal of as long as three years. The intention was to offer a lower-cost alternative insurance plan, and given the elimination of the individual mandate, an option that many more people might avail themselves of.

It is estimated that these plans may cost on average 40 percent less than ACA-compliant plans. You get what you pay for, of course, and oftentimes the lower premium is in exchange for plans that offer fewer benefits; some have labeled these as “junk” insurance plans. Obviously, these plans could be attractive to younger, healthier individuals who don’t wish to subsidize the health-care costs for older, less healthy individuals on the public exchanges and who feel that they are likely to remain healthy and have few health-care needs.

Of course, one consequence of younger, healthier members exiting the insurance pool is to increase the costs for everyone else. And of course, young, otherwise healthy people do have unexpected accidents, pregnancies and health conditions, and may find themselves with a lack of coverage under these plans. Even if the care is covered, the annual renewal and the fact that guaranteed issue and community rating are no longer required can mean loss of insurance coverage or a significant increase in the cost of coverage once a health issue is known.

My prediction is that in 2020, Republicans will tout these lower-cost health plans as a major accomplishment in lowering the costs of health care. However, in 2020 and 2021, I expect reports to emerge of people with supposed “coverage” under these plans that ended up needing expensive care that was not covered and of others who developed a health condition for which they were denied renewal of their policies, stirring up the same arguments that led to the enactment of the ACA in 2010.

Technology

Grade: D

Here was my 2019 prediction:

Artificial Intelligence

“Up until now, AI’s impact on health care has been limited. 2019 will be an inflection point. AI will improve the speed and accuracy of medical diagnosis by analyzing data quickly and accurately. These applications will improve the efficiency of physician workflows.

“The research and development process for medications is painfully slow and expensive. AI will be able to explore chemical and biological interactions and early-stage clinical data to identify new treatments that are much more likely to prove to be effective, especially in the area of cancer treatments.

“AI also has the potential to automate surgical procedures by robots, assisting the surgeon or in some cases, replacing the surgeon. Eventually (not in 2019), this technology could be used to perform emergency surgery in rural areas where there is no surgeon and little time to transfer the patient to a metropolitan center.

The Internet of Medical Things (IoMT)

“Technology will advance remote monitoring of patients through wearables, smart sensors and mobile apps. Thirty billion IoMT devices are expected to be deployed worldwide by the end of 2019. Uber and Lyft are already creating health-care divisions to connect patients with providers. Uber will deliver meals; don’t be surprised to find Uber and Lyft delivering prescriptions to patients’ homes from the pharmacy.

Telemedicine

“Telemedicine is not a new concept, but its adoption has been rather slow. Expect utilization to increase significantly in 2019. More and more insurance companies are providing this as a covered benefit. As more people experience it, they will be repeat users and will expand use through word of mouth.

Virtual/Augmented Reality (VR/AR)

“VR/AR has tremendous utility in clinical education and training. Expect more medical and nursing schools to adopt this technology. We will also see more use of VR/AR in surgery to assist and guide the surgeon in small spaces of the body or under complicated circumstances. This technology may also assist first responders in caring for the ill and injured, while recording critical information about the patient prior to arriving at the hospital. Finally, there is great potential for VR/AR to assist patients in treating their pain and reducing the use of addictive opioids.

Big Data and Data Analytics

“The most widespread application of big data in health care is electronic health records systems. Data analytics will be developed that allow providers to glean meaningful, actionable data to improve care for patients and populations of patients, the insights from which would not be available from a casual review of the medical records. Predictive analytics will be developed that allow providers to identify patients at high risk for admission to the hospital or deterioration in their conditions, making possible proactive outreach and modification of their treatment and care plans to avoid costly hospitalizations, complications or even death.”

How did I do? Not too well. Everything I wrote I do believe is coming and I would adopt these as my 2020 predictions, but we certainly did not see the progress in these areas in 2019 that I expected to see. I remain convinced that technology and data will change health care significantly in the future and all of the above, plus much more, will come to fruition.

St. Luke’s Health System

Grade: A

Here was my prediction for 2019:

“St. Luke’s Health System is going through a transformation. We are well on our way from fee for service to pay for value, with nearly a third of our revenue at full risk (global capitation). We are going through an organization design reshaping that moves us away from the hospital-centric model of most health systems to one that is truly population health-based. We are also focusing our service lines on improving outcomes and lowering the total cost of care and completely redesigning our end-to-end utilization. My predictions for next year are that we will see measurable improvement in outcomes and a bend in the cost curve for those populations we have under risk agreements.”

2019 was a big year for us. We completed the organization design changes that evolved us significantly away from the traditional health system structure around hospitals to a population health structure that is focusing our leaders not on filling beds but rather on improving care and lowering the total costs of care for those we serve. In addition, this organization design is streamlining our decision-making.

Our new service line structure is in place and work on our transformational initiatives, such as end-to-end utilization, is underway. If successful, this work will demonstrate the effectiveness of a health system in lowering health-care costs that traditional, fragmented, independent collections of providers cannot match.

This past year, we were recognized for the sixth year in a row as one of the Top 15 health systems in the country for quality and safety. We see the potential for even further progress and success. We are also starting to see examples where we are bending the cost curve for the populations we serve under risk arrangements. There remains much work to be done here, as well, but our hypothesis that we could manage care more effectively than an insurance company is proving to be true.

My prediction for 2020? St. Luke’s will continue to build on these successes and see further improvements in our quality outcomes and our management of the total cost of care. We have already reduced prices for many of our services, and we have several innovative initiatives underway that may result in both a price and quality advantage for us and for our patients. 

My personal predictions

I also have a sure-fire prediction. I have been making predictions for blog readers for a number of years now. I predict this will be my last one and will likely to be fulfilled, given my announced retirement at the end of January 2020.

I predict that I will try to sleep in, but that I will not be good at it. I predict that I will try to relax and spend more time with my grandkids; I suspect that I will be good at the latter.

I predict that St. Luke’s will continue its amazing success under the leadership of my successor, Chris Roth.

And lastly, I predict that I cannot help but continue writing on health-care policy, health-care law and other matters of importance in health care, especially with the upcoming election and a new administration either in 2021 or four years later, impeachment efforts notwithstanding.

You are invited to keep reading my blog through the end of January while I figure out what venue I will use to continue writing. If you have liked my writing, valued the content and appreciated my efforts to be unbiased and objective, except where I have clearly stated I am providing my viewpoint, then stay tuned, and I’ll keep you posted here about what comes next.


About The Author

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