While health insurers and benefit managers saw stocks tumble on news Amazon, Berkshire Hathaway and JPMorgan Chase & Co. will enter the healthcare arena, the editorial board at USA Today isn’t convinced the move will be as disruptive as some think.
In an opinion piece published Feb. 20, USA Today editors wrote, “To BBD [Jeff Bezos, Warren Buffett and Jamie Dimon] we say: Go for it. If you can come up with ways to provide your employees with better health care for less money, more power to you. To the rest of the country we would say this: Don’t get too excited. Not even a company as crafty as Amazon, or a bot as all-knowing as Alexa, can fix our nonsensical health care system.”
USA Today said the reason an Amazon-Berkshire-JPMorgan company won’t create overarching change is because U.S. healthcare is built upon an “upside-down” architecture. They wrote providers and drug companies “have monopoly or near-monopoly powers” to set prices, while employers and payers are much more fragmented.
“The three companies — particularly Amazon — are known for their ability to disrupt industries. But in health care, they aren’t up against an old-school industry fallen behind the times; they’re facing powerful monopolies or near-monopolies brimming with technology of their own,” according to the report.
To view the full opinion piece, click here.
As commercial payers swallow up more physician groups and nonacute care services, nonprofit hospitals will see greater pressure on their volumes and margins, according to Moody’s Investors Service.
Moody’s analysts predict insurers will be able to provide preventive, outpatient and post-acute care to their members through acquired providers at a lower cost than hospitals. As a result, insurers will begin carving out hospitals and select services from their contracts, leaving nonprofit hospitals with fewer patients and less revenue.
CVS Health’s $69 billion bid for Aetna and Optum’s takeover of Surgical Care Affiliates are examples of integrations that could threaten nonprofit hospitals’ bottom lines, Moody’s said.
On another front, nonprofit hospitals face increasing pressure from insurers moving quickly to value-based payment programs. Payers will also leverage their growing scale, driven by Medicare and managed Medicaid expansions, in rate negotiations.
“Insurers flexing their negotiating power by offering lower rate increases will likely result in more standoffs and terminations of contracts between insurers and hospitals,” according to Diana Lee, a Moody’s vice president. “To regain leverage, we expect hospitals to continue [merger and acquisition] and consolidation.”