Understanding the Pitfalls of Health Care Consolidation

Bill Vandivier, DO, outlines the challenges brought on by health care consolidation in his talk at the National Association of Managed Care Physicians Spring Managed Care Forum.

In a session presented at this year's National Association of Managed Care Physicians (NAMCP) Spring Managed Care Forum, held in Orlando, Florida, April 21-22, Bill Vandivier, DO, a consultant at Insight Health Partners, outlined what factors led to widespread consolidation in health care and whether these mergers actually yield cost savings and improve care.

During his talk, “Healthcare Consolidation: Too Big To Succeed?” Vandivier compared the medical workforce of 1970 with that of 2020, touching on the challenges of staffing shortages, the advent of technology, and compliance with regulatory updates.

Taking a look at the numbers, Vandivier explained how between 1970 and today, there has been a 462% increase in spending on health care per family, adjusted for inflation. Currently, $1 out of every $5 in the United States is spent on health care.

“One of the things I always remind people is that the only people that are producing income in the medical system are providers,” a group that consists of clinicians, nurses, nurse practitioners, and physicians’ assistants, Vandivier explained

Since 1970, the proportions of the specialist and primary care workforce in relation to the general population have not changed too much, while what has changed is the aging US population and increased demand for care.

It is estimated that by 2032, the United States will face a shortage of more than 120,000 doctors, exacerbated by burnout and retirement rates expected over the next few years.

The median age of nurses in the United States is 52 years, while high turnover remains a challenge for retention.

In addition to the recent stressors resulting from the COVID-19 pandemic, Vandivier cited the loss of autonomy from being part of a system in which insurance, a third party, dictates what providers do next.

“That leads to frustration, that leads to the lack of being able to express what you want to do, or take care of that patient,” he said.

Patient consumption of health care has also drastically changed over the last 50 years, with access to social media and technology creating a different mindset for the service than what was typical in 1970.

“What they want is a consumer mentality. ‘I'm buying this product, I want what I paid for,’” Vandivier said, adding patients—when they get sick—will search for the best deal and outcomes, oftentimes by turning to the internet.

The nonuniform incorporation of technology into health care and fragmentation of data collection and transfer also complicate the process of receiving care from the patient perspective. All these factors lead to the decision’s classification as a “grudge purchase.”

“[Patients] don't think of health care the same way they think about buying something from Amazon or going to buy a car and being excited about it,” Vandivier said, noting that until patients experience the health care system, “they’re never going to feel the value of it.”

With regard to insurance companies, Vandivier touched on the importance of medical loss ratios (MLR) or assessing how much companies spend on health care versus profits made.

The passage of the 2010 Affordable Care Act dictated that insurance companies must have an MLR of at least 80 to 85 cents for every dollar brought in.

But the main driver of costs in the health care industry, both on the hospital and insurance sides, remains administrative burden. Between 1990 and 2012, the health workforce increased by 75%, Vandivier said. However, 95% of that population was non-physician, meaning there are 16 workers for every 1 person (ie, provider) who creates revenue.

“And if you look at the last 30 years, the amount of patients a doctor sees on a daily average hasn’t changed,” meaning improving efficiency becomes of paramount importance to increase revenue.

From 1975 to 2010, physician positions have increased 150% compared with an increase of 3200% seen health care administrators during the same time period. These positions can include anything from billing and coding roles to C-suite occupations.

All of these factors contribute to the decision to consolidate. But consolidation brings along increased oversight and regulations which actually drive down efficiency.

Despite the intentions of the introduction of managed care (to cut costs and improve outcomes), Vandivier argued that its implementation has not changed care quality. It’s mainly served to change the way providers report on patients as opposed to how they’re cared for.

“As [we] think about managed health care, we need to think about it differently, we talk about truly population health care. We need to talk about how to support routines, how to embed people in the system and how we actually can change the real outcomes on patient care.”

When it comes to hospitals, fee-for-service payment systems will actually dissuade preventive care because these systems get reimbursed based on the number of beds occupied, he said.

Increasing care teams and integrating specialists for whole person care is also crucial to cut down on disjointed patient management and serves to improve outcomes.

Taking a look at consolidation since 2010, research has revealed no improvement in patient care following mergers, yet a worsening in patient satisfaction scores. Higher inpatient mortality was also documented following consolidation when there is less competition in the market.

“As you try to hold prices, drive prices, drive turnover, patient care becomes a backseat sometimes,” Vandivier said. “And as you do that, you increase morbidity and mortality.”

Potential solutions to these pitfalls include improving information technology to better facilitate care delivery and data interoperability, evalutating consolidation from a clinical viewpoint as opposed to a business one, creating new compensation models to help better invest in managed care long-term, and move from a health care volume mindset to a health care value one.