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By ALAN J. ORTBALS
    The rate of hospital mergers is up 44 percent since 2010 — a trend that industry experts lay at the feet of the Affordable Care Act.
    According to Kaufman Hall, a Skokie, Ill.-based health-care consulting company, 95 hospital mergers were announced last year and 98 the year before, compared with just 66 transactions in 2010.
    “The Affordable Care Act aims to increase the percentage of the population with health insurance,” said Mark Turner, president and CEO of Memorial Hospital in Belleville, “but it’s also bending the cost curve for health care down significantly over time. We’re not seeing the normal increases in reimbursement that we’ve seen over the past decade (from Medicare and Medicaid). The bottom line is payers from every source are working hard to reduce the cost of health care for their constituents. All health-care providers are feeling the forces there.”
    While Congress can still change components of it, the ACA is the law of the land after two major U.S. Supreme Court tests, and it continues to prompt a metamorphosis in health care — away from fee-for-service to population health management. Health management focuses on maintaining wellness as opposed to treating illness with a goal of driving down overall health-care costs from America’s current level of $9,000 per capita, which is far higher than any other nation.    
    In the near future, health-care providers will be paid a certain amount to manage the care of certain populations and will have to eat the cost if it exceeds those levels — a big incentive to keep people healthy and out of the hospital.
    “What we’re seeing as a result of those two items (lower reimbursements and population health management) is a need to improve the product at a faster pace through the quality of care,” Turner said, “and improve the patient experience at a more rapid pace than what the industry was seeing prior to the legislation.”
    Another factor that is putting downward pressure on health-care spending, according to Denise Bloch, who specializes in health-care law at Sandberg Phoenix and von Gontard, is people are seeing higher deductibles and higher co-pays with their health insurance. That’s a course that employers have been taking for some time as they move to tamp down health insurance costs for their employees. And individuals buying insurance on the exchanges are typically opting for cheaper plans with higher usage fees. The result is that more people are becoming more cognizant of health-care costs and are limiting usage in order to reduce out-of-pocket expenses.
    And, Bloch points to another factor that’s putting the squeeze on health-care providers — insurance companies.
    “Consolidating into large hospital systems puts them in a better negotiating position to deal with the insurance companies,” Bloch said. “So that means they can negotiate higher rates for their procedures and that gets passed back to the clients and the employer in higher premiums. Consolidation is a double-edged sword. On the one hand, by merging and consolidating you can have standardization of practices, better quality and sharing of best practices across a whole system. On the down side you’re taking away competition from your marketplace.”
    While Turner said that he didn’t see leverage with insurance companies as much of a factor, he agrees with Bloch that people are becoming more cost-conscious.
    “What I do see in the private insurance world is more and more individuals have coverage that is different than what they had in the past,” Turner said. “We’re seeing more and more individuals with higher deductibles or less percentage of coverage from their employer-based plans and the result is the individual has a bigger responsibility for the cost of the care. So again, that puts a downward cost pressure on the health-care provider side of the equation.”
    On the other side of the ledger, hospitals are trying to control costs. According to Turner, there is a need to ramp up capital improvements; invest in infrastructure like IT facilities and equipment; and transition to electronic medical records. There’s also a need to drive clinical integration more effectively in order to adapt to the population health management model.
    Consolidation also improves the ability to recruit physicians and retain physicians in the community, said Turner, and it improves access to capital, helping to tackle those increased capital costs.
    “Hospitals need to reduce their cost of operations so they’re looking for economies of scale,” Turner said. How can they best share support services? How can they best share intellectual concepts to reduce the cost of operations? How can they share best ideas to reduce the quality of care. That is driving a lot of it. And being responsible for the health of a set population requires the ability to provide care at more access points. So, all of that is driving the consolidation that you’re seeing nationally.”
    The consolidation phenomenon is not just among hospitals themselves but other health-care sectors as well. Doctors have been moving together into physician practice groups and hospitals have been moving to buy these practice groups, Bloch said.
    
Big insurers following suit
    
    The ACA is about to have big impact on major American insurance companies.
    Last month, the Minneapolis Star Tribune reported that UnitedHealth Group was seeking to buy Aetna. Both companies are in the top five of the largest for-profit health insurers in America by revenue.
    Aetna, meanwhile, was close to a deal to buy rival Humana Inc. Humana has also received an offer from Cigna Corp, but Bloomberg reported that Humana’s board prefers the offer from Aetna.
    And, Anthem is involved in a $47 billion bid to buy rival Cigna as a way to muscle up on technology that helps consumers and to strengthen its rapidly growing Medicare Advantage business. At press time, Cigna was balking at the bid.
    Anthem Inc. is the largest for-profit managed health care company in the Blue Cross and Blue Shield Association. Anthem said it has made several offers to buy Cigna and has been talking with the company about a deal since last summer. The combination would create a health insurer with international reach that covers more than 53 million people, making it the largest in the United States based on enrollment.
    Analysts say consolidation is being driven at the top of the health insurance industry because of the slow growth in the biggest piece of its market, employer-sponsored health insurance.
    While combining forces may gain a larger insurer more leverage and negotiating power to use in hashing out rates with care providers, that advantage may be limited by regulators who will seek to make sure the acquiring insurer doesn’t gain an unfair advantage in any market.
    Anthem is currently the nation’s second-largest health insurer, while Cigna ranks fourth in terms of enrollment. Anthem specializes in selling individual coverage and insurance to workers of small businesses. It also has grown its government business, which includes Medicare, Medicaid and coverage of federal employees.
    Some information for this report comes from Associated Press.