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Cutting costs tops health industry to-do list for 2010

The recession drove money pressures last year, but the stimulus act and reform will be the driving forces this year, according to a recent report.

By Pamela Lewis Dolan — Posted Jan. 18, 2010

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A year ago, as the nation was entrenched in the greatest financial downturn since the Great Depression, health care organizations were forced to cut costs and find ways of increasing revenue as the rates of uninsured and bad debt took a dramatic leap.

In 2010, health care organizations will still be cutting costs. But it won't be for reasons of survival. It will be because of the government's involvement and investment in the industry, according to an annual report issued by PricewaterhouseCoopers.

About half of the predictions in PricewaterhouseCoopers' annual health industry predictions report, "Top 10 health industry issues in 2010: Squeezing the juice out of healthcare," were driven by the American Recovery and Reinvestment Act, which pumped more than $147 billion dollars into the health care system, and the promise of health system reform, expected to cost the federal government close to $1 trillion.

"Since 2009 ... the role of government, particularly in terms of how much money is being put into health care, has changed radically," said David Chin, MD, principal of the health care advisory practice group of PricewaterhouseCoopers, who helped draft the report.

"It's totally understandable ... that when the government puts more money into an industry, it expects more accountability," he said.

Due to this increased government scrutiny, the addition of more agencies and grant programs, as well as reimbursement and pricing changes, topped the report's list of predictions. Increased efforts to catch and prevent Medicare fraud and abuse also are expected in 2010.

But cost controls won't be the only lasting impact of health reform, the report said. Methods of care delivery also are expected to evolve.

Because the reform debate has centered mostly around insurance coverage for more Americans, researchers expect access to become an issue. They predict that patients will seek alternative care delivery models such as on-site employer clinics, retail clinics and telehealth solutions.

Massachusetts is often looked to as an example of what more insurance coverage might mean to access on a national level. When the state passed a law in 2006 requiring all individuals to carry health insurance, it created an access issue that made it a hotbed for alternative care models.

Researchers at PricewaterhouseCoopers expect that trend to become a national one if health system reform moves forward as expected.

Telecommunication companies are expected to take a leading role in health care delivery, along with technology companies.

Although these alternative delivery models are expected to emerge, it will be a few more years before they become mainstream, Dr. Chin said.

He said the biggest health information technology objective this year will be connectivity between physicians and hospitals. One driver of this connectivity is the increasing number of hospital-employed physicians, a trend that has been taking hold for some time and is predicted to continue with great speed this year.

The health IT investments that facilities make this year will lay the groundwork for more telehealth activities in the future, Dr. Chin said.

Also among the predictions: Big pharmaceutical companies will grow to become full partners in health care delivery teams. Because heavily marketed drugs aren't the cash cow they once were for the big pharmaceutical companies, many were forced to diversify through mergers and acquisitions, a prediction PricewaterhouseCoopers made last year that came to fruition. These mergers have led to the companies taking on a larger interest in care outcomes.

One example of this evolving role is a recently announced partnership between health insurer Cigna and the pharmaceutical company Merck. When diabetic patients taking two of Merck's top anti-diabetic drugs improve A1C levels, they earn a rebate from Cigna for their medications for the next year.

Another H1N1 outbreak this year also is expected to change the way public health officials, employers and health care organizations prepare for pandemic outbreaks. And community health is expected to become a "new social responsibility," according to the study.

Of the nine predictions PricewaterhouseCoopers made last year, Dr. Chin said one that didn't come true was the conversion to ICD-10 codes. The government's extension of the deadline to convert resulted in many practices and hospitals not making the transfer.

He also said the prediction that genetic testing would reach a price point that would make it available to the masses didn't quite reach the mark, either. But significant strides in new, affordable products were made in that industry, he added.

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ADDITIONAL INFORMATION

Looking back, looking ahead

PricewaterhouseCoopers publishes an annual study that looks at issues it expects to affect the health care industry. Here's what was predicted for 2009 and what is predicted for 2010:

2009 predictions

  • The economic downturn will require a back-to-basics approach for health organizations.
  • Underinsured will surpass uninsured as providers' headaches.
  • Big pharma will turn to mergers and acquisitions to build the drug pipeline.
  • From vaccines to prevention, prevention will be on the rise.
  • Genetic testing will reach a price point for the masses.
  • Technology will be a powerful health extender.
  • Hospitals will be forced to improve performance to get paid.
  • Payers and employers will move the needle on health living through incentives.
  • The transition from ICD-9 to ICD-10 will begin.

Source: "Top 9 health industry issues for 2009: Outside forces will disrupt the industry," PricewaterhouseCoopers, December 2008 (link)

2010 predictions

  • Intense industrywide efforts to reduce health care costs will take hold.
  • If Congress passes health system reform, major adjustments will be made to the entire industry.
  • Physicians and hospitals will scramble to adopt health information technology.
  • A greater emphasis will be placed on Medicare fraud and abuse recovery.
  • The technology and telecommunications sectors will become leading players in health care.
  • Big pharma's role will grow.
  • Physician groups will join health systems.
  • Alternative care delivery models will emerge.
  • H1N1 will elevate emphasis on readiness of the public health system for outbreaks.
  • Community health will be a new social responsibility.

Source:"Top 10 health industry issues for 2010: Squeezing the juice out of healthcare," PricewaterhouseCoopers, December 2009 (link)

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