Do California trends foreshadow national ones?
Rising HMO premiums, thin hospital profits
The California Healthcare Association is tipping off providers in that state to a myriad of megatrends that could soon show up on your doorstep too, whether you're on the Western cutting edge or meandering along in the rest of the country. Like so many U.S. lifestyle trends, changes in health care frequently get their start in the Golden State. So here's a heads-up look at what's in California's future, and maybe yours as well, courtesy of the association's recently released report, California Health Care 1998-2005: View of the Future.
The annual report, based on information from about 20 different sources including state agencies, consultants, universities and the association's own data collection, forecasts health care trends and their likely consequences. Key themes in this year's report include incremental health care reform, expanded access to health care coverage for the uninsured, purchasers refocusing on price and quality, and integration in rural health care.
"We will continue to see price-driven health care and government not meeting its responsibilities," says Duane Dauner, president and CEO of the Sacramento-based CHA. "The pressure on reducing inpatient utilization will continue even though you sometimes feel we've bottomed out already. As the financial squeeze continues to hit providers, we're going to see a little bit of a surge in total health care expenditures and therefore in HMO premiums. That's going to be a shockwave around the country. Some of the biggest HMOs in California have increased their premiums this year for the first time in five years."
Dauner admits that some of the forecasts won't come true but says that based on past experience, many will hit the mark. "This is our way of helping our members set the stage for their own individual strategic planning," he says. "We want to help them program in things that are happening around them so they are not making decisions that don't consider all the facts. The future is foggy, but here are the forms that are likely to take place."
And since California's youthful style of living, efficient practice of medicine, and utilization of health care are usually on the cutting edge, Dauner says it would behoove providers in the rest of the country to apply these trends to their own markets. have to ask yourself what you need to do to maintain viability. Do I need to partner with others, do I need to specialize, do I need to integrate, should we look at alternative services or downsizing?"
Following are some of the highlights of the California report:
o Consumer demands for choice will compel health plans to expand provider networks. Preferred-provider organizations will regain popularity. Employer purchasing coalitions and state-sponsored purchasing pools will be encouraged by state and federal legislation. Managed care reform and a "patients' bill of rights" will be enacted at state and federal levels.
o Price competition among health plans will continue, and premiums will begin to rise higher than the consumer price index. Purchasers will emphasize accountability of plans and providers, and reward plans with superior health improvements and enrollee satisfaction based on public report card data.
o Physician organizations will consolidate their control of medical practices in California, with few physicians (less than 15%) choosing to remain in solo practice. Physician groups will negotiate capital and management partnerships with physician practice management companies or hospital-based health systems.
o Communicable diseases will pose new threats to the public's health, and new community health coalitions will link HMOs, providers and public health agencies to address health threats and expand prevention activities.
o By the year 2000, many companies will have reduced their health costs by 15% or more from 1995 levels; the six-year insurance cycle will drive health premiums up in the period 1997-2000, potentially triggering another round of employer health care cost cutting beyond 2001.
o Purchasers will demand performance accountability from HMOs and providers and use public data on consumer ratings to choose plans and providers.
o Direct-to-consumer advertising for pharmaceuticals and medical devices will expand significantly by 2000, bypassing health plans and physicians to create consumer demand.
o Capitation and other forms of provider risk-sharing arrangements will become the dominant form of provider payment by HMOs and insurers. More than 50% of reimbursement to primary care physicians, specialists, and hospitals will be capitation or bundled payments by 2000, and 60% to 70% by 2005.
o Hospital discharges will stabilize at 2.8 million per year by the year 2000, or 80 discharges per 1,000 population. Patient days will decline to 320 days per 1,000 in the year 2000 and will bottom out at 275 days per 1,000 in 2005 as inpatient substitution strategies are exhausted and the population ages.
o Hospital profits will be thin, with operations running at break-even or loss levels due to declining volumes and prices. Downsizing beds and re-engineering care processes within hospitals will continue, with fewer acute beds in service.
o Steady demand and full beds will reduce the power of HMOs and insurers to obtain deep discounts and play providers against each other.
o Independent rural hospitals will affiliate, becoming members of large metropolitan-based networks. Driving forces will include declining economics and the arrival of managed care in more thinly populated markets.
o Alternative-medicine therapies will be routinely available from mainstream hospital, physicians and HMOs by 2005.
o On-line health care and Internet/intranet connections will provide a seamless web of information between consumers, providers and payers. Informed consumers will revolutionize health care by demanding sophisticated clinical information from providers and plans.
o Multicultural populations and ethnic diversity will create a new set of health care consumers with unique expectations and special needs. California will be the test-bed for new ethnic marketing and service strategies.
[To get a copy of California Health Care 1998-2005: View of the Future, visit the CHA Web site at www.calhealth.org or contact the CHA at 1201 K St., Suite 800, Sacramento, CA 95812-1100. Telephone: (916) 443-7401.]
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