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Headlines- October 17, 2005
THE GRACE REPORT

Headlines- October 17, 2005

Commentary and Opinion by Robert L. Michel:
Payer Consolidation Creates A Healthcare Oligopoly

WITH EACH ROUND OF ACQUISITIONS involving the nation’s largest health insurers, more power concentrates into the hands of everlarger corporations. For example, WellPoint, Inc. and UnitedHealth Group, Inc. now insure one-third of the 150 million Americans who have some form of private health insurance! In the short term, these acquisitions probably mean more difficult contract negotiations for all physicians, including ob-gyns.

That’s because a national oligopoly is emerging in the health insurance
industry. As ob-gyns who took economics in college probably remember, an oligopoly is “a market in which control over the supply of a commodity is in the hands of a small number of producers and each one can influence prices and affect competitors.” (From www.wordreference.com.)

I believe we will see the health insurance industry evolve into a national
oligopoly, supported by near-monopolies in selected cities. In fact, you
already know an industry that has achieved this state: the airline industry. Nationally, a handful of airline companies dominate. That is the oligopoly. However, in certain cities where an airline operates a hub, it holds a near monopoly. Northwest Airlines in Detroit, American Airlines in Dallas, and USAirways in Charlotte are well-known examples.

So the bad news for the ob-gyn profession is that consolidation in the
health insurance industry—the oligopolistic marketplace now emerging— will give insurers even greater power during contract negotiations with physicians. Just as the major airlines raise and lower air fares with amazing synchronicity, so also will the ever-dwindling group of major payers offer similar reimbursement terms to physicians in their provider networks. By understanding some of the characteristics of oligopolistic behavior, shrewd ob-gyns and practice administrators will do better when negotiating contracts against these health insurance behemoths.

Despite the short-term negative consequences of ongoing consolidation
among the nation’s largest health insurers, over the long term, I predict
the growth of consumer-directed health plans (CDHP) will not only
erode some of the market power of these payers, but may also render
much of their current business organization obsolete. In future issues, I
will explain the early market signs of this development.

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To Collect High-Deductibles Requires New Approaches

San Antonio ob-gyn group changes policies, successfully collects more dollars from patients

CEO Summary: In the healthcare marketplace, enrollment in high-deductible health plans (HDHPs) is growing faster than any other type of health insurance plan. This growth creates new challenges for ob-gyn groups, since patients enrolled in HDHPs must pay significantly higher deductibles, often $1,000 or more. In San Antonio, Northeast OB/GYN Associates recognized the problem early and developed several business strategies to respond to this trend. The foresight of these 14 ob-gyns is paying off with higher levels of patient satisfaction and improved rates of collection.

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EMRs versus EHRs and RHIOs: What Ob-Gyns Need to Know

Soon the most money will flow to ob-gyns with the best information technology

CEO Summary: EMR, EHR, and RHIO are acronyms for some of the most important initiatives in the American healthcare system. EMRs, EHRs, and RHIOs will form the backbone of the universal integrated information system that is the goal of every stakeholder in healthcare. As this occurs, a “digital divide” will emerge. This “digital divide” will create new financial winners and new financial losers among the nation’s existing ob-gyn groups. To help savvy ob-gyns position themselves on the winning side of the “digital divide,” we offer a short analysis of EMRs, EHRs, and RHIOs.

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OB-GYN BRIEFS: More Payer Consolidation- WellPoint Buys WellChoice

That deal followed in days by merger in NYC of HIP of New York and Group Health

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Patient-Choice C-Section Rates Climb by One-Third in 36 Months

Expect the debate to intensify over allowing wider use of patient-choice Cesarean sections

CEO Summary: It’s a startling statistic. Between the years 2001 and 2003, the rate of patient-choice Cesarean sections increased by 36.6%. The study was done by HealthGrades, Inc., a company in Boulder, Colorado that publishes ratings of healthcare providers on the Web. Obstetricians will recognize how this finding will stimulate further debate about letting women decide to use a C-section to guarantee a birth at the time and place of their choosing. This study is also another marketplace example of how the collection and dissemination of outcomes information can shape the healthcare debate.

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Using Captive Insurance Firms To Reduce Malpractice Premiums

Why growing numbers of ob-gyns, other docs are opting for captive insurance plans

CEO Summary: Throughout the United States, a major business issue in obstetrics and gynecology is obtaining medical malpractice insurance at a reasonable cost. Where such coverage is high-priced or unavailable, more ob-gyns are looking at solutions such as captive insurance companies and risk retention groups. Recent developments—and growing support by physicians—are making captive insurance companies and risk retention groups attractive options. Here is a concise overview of these two business approaches, along with practical insights on how to evaluate their potential to help your ob-gyn group.

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OB-GYN BRIEFS:

USING BAR CODES IN THE NICU TO REDUCE MEDICATION ERRORS

CIGNA & KMART TEAM UP, WILL COLLABORATE ON MEDICARE DRUG PLAN

GE ACQUIRES IDX AS BIG CORPORATIONS EXPAND INTO HEALTH IT

INTELLIGENCE: Late and Latenet

MEDICARE PANEL RECOMMENDS BONUS LEVELS FOR PHYSICIAN PAY-FOR-PERFORMANCE

Number of Solo Ob-Gyns Continues to Decline

Look for the next briefing on Monday, November 7, 2005.

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