Hospital margins continued to stabilize in March with a slight improvement over February, according to data from Kaufman Hall’s National Hospital Flash Report. However, margins remain below pre-pandemic levels, leaving hospitals in a vulnerable position should a recession or a new public health emergency materialize.
For provider practices, physician productivity increased but the increased revenues could not keep pace expenses, according to the quarterly Physician Flash Report.
While things appear relatively calm at the moment, there remain significant challenges—specifically labor shortages and diminished margins—that could quickly reach the surface if hospitals and health systems are faced with another crisis.
Kaufman Hall experts are seeing increased reliance on advanced practice providers (APPs)—e.g. Nurse Practitioners and Physician Associates—and note that those that hire, retain and deploy this critical workforce most effectively will see more success in the long term.
This brief examines past-due medical debt among nonelderly adults and their families using nationally representative survey data collected in June 2022. The analysis assesses the share of adults ages 18 to 64 with past-due medical bills owed to hospitals and other health care providers as well as the actions taken by hospitals to collect payment or make bills easier to settle.
It focuses on the experiences of adults with family incomes below and above 250 percent of the federal poverty level (FPL), approximating the income cutoff used by many hospitals to determine eligibility for free and discounted care.
WHY THIS MATTERS
In their efforts to protect patients from medical debt, policymakers have increasingly focused on the role of hospital billing and collection practices, with particular scrutiny directed toward nonprofit hospitals’ provision of charity care. Understanding the experiences of people with past-due bills owed to hospitals and other providers can shed light on the potential for new consumer protections to alleviate debt burdens.
WHAT WE FOUND
More than one in seven nonelderly adults (15.4 percent) live in families with past-due medical debt. Nearly two-thirds of these adults have incomes below 250 percent of FPL.
Nearly three in four adults with past-due medical debt (72.9 percent) reported owing at least some of that debt to hospitals, including 27.9 percent owing hospitals only and 45.1 percent owing both hospitals and other providers. Adults with past-due hospital bills generally have much higher total amounts of debt than those with past-due bills only owed to non-hospital providers.
Most adults (60.9 percent) with past-due hospital bills reported that a collection agency contacted them about the debt, but much smaller shares reported that the hospital filed a lawsuit against them (5.2 percent), garnished their wages (3.9 percent), or seized funds from a bank account (1.9 percent).
Though about one-third (35.7 percent) of adults with past-due hospital bills reported working out a payment plan, only about one-fifth (21.7 percent) received discounted care.
Adults with incomes below 250 percent of FPL were as likely as those with higher incomes to experience hospital debt collection actions and to have received discounted care.
The concentration of past-due medical debt among families with low incomes and the large share who owe a portion of that debt to hospitals suggests that expanded access to hospital charity care and stronger consumer protections could complement health insurance coverage expansions and other efforts to mitigate the impact of unaffordable medical bills.
HOW WE DID IT
This analysis draws on data from the June 2022 round of the Urban Institute’s Health Reform Monitoring Survey (HRMS), a nationally representative, internet-based survey of adults ages 18 to 64 that provides timely information on health insurance coverage, health care access and affordability, and other health topics. Approximately 9,500 adults participated in the June 2022 HRMS.
Here is a summary of recent credit downgrades and outlook revisions for hospitals and health systems going back to the most recent major roundup March 16.
The various downgrades reflect continued operating challenges many nonprofit systems are facing and will likely continue to deal with for some years to come. The most recent downgrades and revisions, which have not been included in any more recent roundups, are listed first.
Baptist Health Care (Pensacola, Fla.):
BHC had the rating downgraded on a series of its bonds as a reflection of “pressured operating performance and cash flow,” S&P Global said April 19.
As well as typical industry pressures of inflation and labor expenses, the three-hospital system may face further challenge because of a replacement project for its flagship Baptist Hospital that is due to be completed in late 2023.
Beacon Health (South Bend, Ind.):
Beacon Health System had its outlook revised to negative from stable on “AA-” rated bonds it holds, S&P Global said April 14.
The move reflects weaker operating results and an expectation of increased debt over the near term.
Kuakini Health System (Honolulu):
Kuakini Health System, which has a “CCC” long-term rating, has been placed on CreditWatch with negative implications, S&P Global said April 14.
The move reflects the system’s sustained operating challenges with no foreseeable major changes and questions about its long-term viability, the agency said, describing the system’s “precarious financial position.”
Baystate Health (Springfield, Mass.):
Baystate Health had ratings downgraded on specific bonds related to its flagship medical center, S&P Global said April 12.
While ratings were affirmed on other debt, those on others specific to the 780-bed Baystate Medical Center were downgraded to “A” from “A+” as the system’s operating challenges continue into 2023, the agency said.
Penn State Health (Hershey, Pa.):
Higher-than-expected operating losses have led to Penn State Health being downgraded on a series of bonds from “A+” to “A,” S&P Global said April 6.
Original budgets for the first part of fiscal 2023 targeted a slightly positive full-year operating margin, but data shows a $75 million lower-than-forecasted figure, S&P Global said. Operating income showed a loss of $154.5 million for the six months ending Dec. 31 compared with a $48.8 million loss in all of fiscal 2022.
Legacy Health(Portland, Ore.):
Legacy Health had its outlook revised to negative from stable amid expectations the eight-hospital system will continue to experience difficult operating conditions and concern it will continue to fail to meet debt obligations, Moody’s said April 5.
The rating on its revenue bonds was affirmed at “A1.” Total debt stands at $738 million.
Providence (Renton, Wash.):
The 51-hospital system recorded the first of three downgrades in the space of a few weeks March 17 when Fitch Ratings attached an “A” grade to both the system’s default rating and a series of bonds worth approximately $7.4 billion. The outlook for the system is negative due to its higher-than-average debt loads, Fitch said.
S&P Global then downgraded Providence to the same notch from “A+” March 21 amid higher expenses and an expectation of only a multiyear process of recovery. The outlook for the system was also negative given the steep operating losses that need to be dealt with, S&P said.
Finally, Providence was downgraded by Moody’s on a series of bonds from “A1” to “A2.
Thomas Jefferson (Philadelphia):
Thomas Jefferson University has undergone a credit downgrade with cash flow margins expected to stay low for “several years,” Moody’s said March 30.
The 18-hospital system, which also operates 10 colleges located primarily on two campuses in Philadelphia, is expected to stabilize its days of cash on hand to about 140, but debt will remain high, Moody’s said. The outlook is stable.
Oaklawn Hospital (Marshall, Mich.):
The 68-bed community hospital was downgraded to “BBB-” from “BBB” as it reported operating losses due to higher expenses and length of patient stay, Fitch Ratings said March 29.
The downgrade refers both to its default rating and on bonds worth $63.5 million. The outlook is negative.
DCH Health (Tuscaloosa, Ala.):
The three-hospital system saw its rating on a series of bonds lowered to “A-” from “A” as it continues to suffer operating losses, S&P Global said March 29.
The system’s “deeply negative underlying operations” are unlikely to lead to any substantial improvement in the near future, the agency said.
DCH Health operates a total of 510 staffed beds.
AU Health System (Augusta, Ga.):
The system, which is being pursued by Marietta, Ga.-based Wellstar Health, was downgraded March 23 amid concern over negative cash flow and that it may breach covenant agreements later this year, Moody’s said.
The downgrade to “B2” from “Ba3” applies to revenue bonds the system holds. The outlook is negative.
PeaceHealth (Vancouver, Wash.):
“Considerable operating stress” was the driver behind Fitch Ratings downgrading the 10-hospital system March 21.
The downgrade to “A+” from “AA-” applied to both the system’s default rating and on a series of bonds. The outlook is stable.
Management is targeting a return to profitability by fiscal 2026, Fitch noted.
Mercy Iowa CityHospital:
The hospital, part of Des Moines, Iowa-based MercyOne, was downgraded March 16 to “Caa1” from “B1” because of what Moody’s called “severe cash flow deterioration.” The “Caa1” categorization is seen as “substantial risk.”
Retail giant Walmart announced the 2024 opening of four new health centers in Oklahoma.
Oklahoma joins Missouri and Arizona as the third state Walmart Health will enter in 2024.
The 5,570-square-foot centers will be located next to Walmart retail locations and will include primary care, labs, X-rays, EKG, behavioral health, dental, hearing and telehealth services, according to an April 26 Walmart news release.
The health centers will use the Epic EHR system. The new locations will be in the Oklahoma City area, according to the release.
PeaceHealth has eliminated 251 caregiver roles across multiple locations, the Vancouver, Wash.-based health system said in a statement shared with Becker’s on April 26.
“PeaceHealth is actively responding to the significant challenges faced by healthcare organizations across the U.S. Comprehensive plans are already underway to recruit additional nurses, ensure patients can return home as quickly as possible and grow the services we know our community members need,” the statement read.
“As always, we are also adjusting operations and services to reflect changes in our communities and ensure we are being responsible to our healing mission into the future.”
PeaceHealth said affected roles include 121 from Shared Services, which supports its 16,000 caregivers in Washington, Oregon and Alaska. Shared Services include administrative services that support clinical caregivers such as human resources, information technology, marketing and communications, and finance.
The remaining affected roles are “relatively evenly spread across our three networks. In line with our value of respect, we offer comprehensive transitional support consistent with our policies and practices to all impacted caregivers,” the health system said.
PeaceHealth spokesperson Alison Taylor told Becker’s the health system anticipates many affected caregivers will be qualified for the nearly 1,300 open clinical roles across the organization.
In February, PeaceHealth reported a loss of $90.8 million in the six months ending Dec. 31, 2022. The health system was also downgraded in March by Fitch Ratings, which cited the organization’s “considerable operating stress.”
PeaceHealth operates 10 hospitals across Alaska, Oregon and Washington.
According to a new report from the American Hospital Association (AHA), hospitals and health systems are facing significant financial pressures from rising expenses, including for labor, drugs, medical supplies and more. And without increased government support, the organization warns that patients’ access to care could be at risk.
Hospitals continue to see expenses grow, negative margins
In the report, AHA writes that several factors, including historic inflation and critical workforce shortages leading to a reliance on contract labor, led to “2022 being the most financially challenging year for hospitals since the pandemic began.”
According to data from Syntellis Performance Solutions, overall hospital expenses increased by 17.5% between 2019 and 2022 — more than double the increases in Medicare reimbursements during the same time. Between 2019 and 2022, Medicare reimbursement only grew by 7.5%.
With expenses significantly outpacing reimbursement, hospital margins have been consistently negative over the last year. In fact, AHA noted that “over half of hospitals ended 2022 operating at a financial loss — an unsustainable situation for any organization in any sector, let alone hospitals.”
So far, this trend has continued into 2023, with hospitals reporting negative median operating margins in both January and February.
A recent analysis also found that the first quarter of 2023 had the largest number of bond defaults among hospitals in over 10 years.
Between 2019, and 2022 hospital labor expenses increased by 20.8%, a rise that was largely driven by a growing reliance on contract labor to fill in workforce gaps during the pandemic. Even after accounting for an increase in patient acuity, labor expenses per patient increased by 24.7%.
Compared to pre-pandemic levels, hospitals saw a 56.8% increase in the rates they were charged for contract employees in 2022. Overall, hospitals’ contract labor expenses increased by a “staggering” 257.9% in 2022 compared to 2019 levels.
A sharp rise in inflation in recent months has also led to a significant increase in hospitals’ non-labor expenses, particularly for drugs and medical expenses. According to a report by Kaufman Hall, just non-labor expenses would lead to a $49 billion one-year expense increase for hospitals and health systems.
Since 2019, non-labor expenses have grown 16.6% per patient. Hospitals’ expenses for drugs and medical supplies/equipment have seen similar increases per patient at 19.7% and 18.5%, respectively. Costs of laboratory services (27.1%), emergency services (31.9%), and purchased services, including IT and food and nutrition services, (18%) have also increased significantly per patient.
Outside of labor and non-labor expenses, AHA writes that policies from health insurers have also contributed to significant burden among hospital staff and increased administrative costs. Currently, administrative costs account for up to 31% of total healthcare spending — of which, billing and insurance makes up 82%.
With the COVID-19 public health emergency ending on May 11, several important hospital waivers and flexibilities will soon end, and “[t]he downstream effects of this will be wide-ranging as hospitals will be faced with a set of additional challenges,” AHA writes.
“Rising costs for drugs, supplies, and labor coupled with sicker patients, longer hospital stays, and government reimbursement rates that do not come close to covering the costs of caring for patients have created a dire situation for hospitals and health systems,” said AHA president and CEO Rick Pollack.
“This is not just a financial problem; it is an access problem.
When healthcare providers cannot afford the tools and teams they need to care for patients, they will be forced to make hard choices and the people who will be impacted the most are patients. We can’t let that happen. Congress and others must act to preserve the care our nation needs and depend on.”
To address these financial challenges and ensure that hospitals are able to continue caring for patients, AHA has suggested several actions Congress could take to support hospitals going forward, including:
Enacting policies to support efforts to boost the healthcare workforce and ensure of future pipeline of professionals to combat longstanding labor shortages
Rejecting attempts to cut Medicare or Medicaid payments to hospitals, which could further reduce patients’ access to care
Encouraging CMS to use its “special exceptions and adjustments” to make retrospective adjustments to account for differences between what was implemented for fiscal year 2022 and what is currently projected
Creating a special statutory designation and providing additional support to hospitals that serve historically marginalized communities
“As the hospital field maintains its commitment to care in the face of significant challenges, policymakers must step up and help protect the health and well-being of our nation by ensuring America has strong hospitals and health systems,” AHA writes.
Kaiser Permanente is acquiring Geisinger Health and forming a new nonprofit to buy and operate other value-oriented nonprofit systems, the organizations announced Wednesday.
The new nonprofit, Risant Health, will operate separately from Kaiser Permanente. Geisinger will become part of Risant but maintain its own name and mission, according to a press release.
Geisinger president and CEO Jaewon Ryu will be CEO of Risant as the transaction closes, subject to regulatory review. Risant will have its headquarters in Washington, D.C..
Dive Insight:
Risant represents an opportunity for Kaiser, which currently operates in eight states and Washington, D.C., to expand its reach nationwide through targeted acquisitions of nonprofit community health systems, as smaller hospitals continue to struggle in a difficult operating environment.
About half of all U.S. hospitals finished last year with negative margins, according to consultancy Kaufman Hall.
Kaiser, which reported $95 billion in revenue in 2022, plans to spend $5 billion on Risant over the next five years, and add five or six health systems to Risant over that period, according to reports.
Kaufman Hall said recently it expects a “new wave of transaction activity” and a growing number of cross-regional partnerships.
Pennsylvania-based Geisinger has 10 hospital campuses and a health plan that covers more than 500,000 members. It has more than 25,000 employees. Both Geisinger and Kaiser reported operating losses last year, as supply and labor expenses rose.
Federal and state regulators still need to approve the deal, the financial terms of which were not disclosed. It’s likely to face a high bar for approval as regulators more aggressively scrutinize hospital mergers.
American Hospitals is the fourth in a series of documentaries produced by the Unfinished Business Foundation, founded by Richard Master, CEO of MCS Industries Inc., who took a deep dive into the economics of the U.S. health-care system after his company was hit year after year with double-digit health insurance rate increases.
Master teamed up with filmmaker Vincent Mondillo to produce Fix It: Healthcare at the Tipping Point; Big Pharma: Market Failure; Big Money Agenda: Democracy on the Brink, and now, American Hospitals.
A provocative look at the cost and inequities of American Hospitals, often more motivated by money and power than in providing for the health needs of individuals and the communities they were founded to serve. From the filmmakers behind the hit documentaries Fix It: Healthcare at the Tipping Point, Big Money Agenda, and Big Pharma.
Learn more and find out where to see the latest film at fixithealthcare.com/events
In just 2020, deaths from gun violence cost the U.S. healthcare system $290 million, or about $6,400 per patient, according to a report from the Commonwealth Fund. These costs are mostly covered by Medicaid and other government insurance programs.
The U.S. healthcare system sees about 30,000 inpatient hospital stays and 50,000 emergency room visits due to gun violence each year, leading to more than $1 billion in initial medical costs, according to a new analysis.
The Commonwealth Fund published these results last week and relied on three data sources for its analysis: the 2019 Global Burden of Disease study, the Small Arms Survey and the U.S. Government Accountability Office.
Even after leaving the hospital, patients are faced with challenges. A year after a gun injury, medical spending rises about $2,495 per person per month. In addition, those who suffer firearm injuries are more likely to form mental health challenges and substance use disorders.
“The impact of gun violence reaches far beyond the hospital room,” the analysis states.
Firearm-related deaths are increasing, according to the Centers for Disease Control and Prevention. In 2021, almost 49,000 Americans died from firearms, compared to 45,000 in 2020.
Additional findings from the report include:
In 2019, the U.S. had a higher rate of firearm deaths than any other country. Its rate of firearm deaths was almost five times as much as France, the second-highest country.
Eight times more people in the U.S. died from firearm violence in 2019 compared to Canada, the second-highest country.
More people died from self-harm by firearm in the U.S. than any other country in 2019, more than three times higher than France and Switzerland.
More women were killed by guns in the U.S. than any other country in 2019.
In the U.S., there are 67 million more firearms than people. That difference is higher than the population of the United Kingdom, which has 66.2 million people.
In the U.S., 52% of people who are admitted to hospitals for firearm injuries are Black, 29% are White, 14% are Hispanic and 5% are another race or ethnicity. Black Americans account for 50% of firearm injury hospital costs, while White Americans account for 27%, Hispanic Americans account for 17% and other races or ethnicities account for 6%.
About 48% of firearm-related inpatient hospital stays are in the American South, while 20% are in the Midwest, 20% are in the West and 12% are in the Northeast. The South accounts for 44% of firearm injury hospital costs, while the West accounts for 26%, the Midwest accounts for 18% and the Northeast accounts for 11%.
After 18 years as CEO in Kaiser Permanente, I set my sights on improving the heatlh of the nation, hoping to find a way to achieve the same quality, technology and affordability our medical group delivered to 5 million patients on both coasts.
That quest launched the Fixing Healthcare podcast in 2018, and it inspired interviews with dozens of leaders, thinkers and doers, both in and around medicine. These experts shared innovative ideas and proven solutions for achieving (a) superior quality, (b) improved patient access, (c) lower overall costs, and (d) greater patient and clinician satisfaction.
Which of the hundreds of ideas presented remain most promising?
Why, after five years and so many excellent solutions, has our nation experienced such limited improvements in healthcare?
And finally, how will these great ideas become reality?
To answer the first question, I offer 15 of the best Fixing Healthcare recommendations so far. Some quotes have been modified for clarity with links to all original episodes (and transcripts) included.
Fixing the business of medicine
1. Malcolm Gladwell, journalist and five-time bestselling author: “In other professions, when people break rules and bring greater economic efficiency or value, we reward them. In medicine, we need to demonstrate a consistent pattern of rewarding the person who does things better.”
2. Richard Pollack, CEO of the American Hospital Association (AHA): “I hope in 10 years we have more integrated delivery systems providing care, not bouncing people around from one unconnected facility to the next. I would hope that we’re in a position where there’s a real focus on ensuring that people get care in a very convenient way.”
Eliminating burnout
3. Zubin Damania, aka ZDoggMD, hospitalist and healthcare satirist: “In the culture of medicine, specialists view primary care as the weak medical students, the people who couldn’t get the board scores or rotation honors to become a specialist. Because why would you do primary care? It’s miserable. You don’t get paid enough. It’s drudgery. We must change these perceptions.”
4. Devi Shetty, India’s leading heart surgeon and founder of Narayana Health: “When you strive to work for a purpose, which is not about profiting yourself, the purpose of our action is to help society, mankind on a large scale. When that happens, cosmic forces ensure that all the required components come in place and your dream becomes a reality.”
5. Jonathan Fisher, cardiologist and clinician advocate: “The problem we’re facing in healthcare is that clinicians are all siloed. We may be siloed in our own institution thinking that we’re doing it best. We may be siloed in our own specialty thinking that we’re better than others. All of these divides need to be bridged. We need to begin the bridging.”
Making medicine equitable
6. Jen Gunter, women’s health advocate and “the internet’s OB-GYN”: “Women are not listened to by doctors in the way that men are. They have a harder time navigating the system because of that. Many times, they’re told their pain isn’t that serious or their bleeding isn’t that heavy. We must do better at teaching women’s health in medicine.”
7. Amanda Calhoun, activist, researcher and anti-racism educator: “A 2015 survey showed that white residents and medical students still thought Black people feel less pain, which is wild to me because Black is a race. It’s not biological. This is actually an historical belief that persists. One of the biggest things we can do as the medical system is work on rebuilding trust with the Black community.”
Addressing social determinants of health
8. Don Berwick, former CMS administrator and head of 100,000 Lives campaign: “We know where the money should go if we really want to be a healthy nation: early childhood development, workplaces that thrive, support to the lonely, to elders, to community infrastructures like food security and transportation security and housing security, to anti-racism and criminal-justice reform. But we starve the infrastructures that could produce health to support the massive architecture of intervention.”
9. David T. Feinberg, chairman of Oracle Health: “Twenty percent of whether we live or die, whether we have life in our years and years in our life, is based on going to good doctors and good hospitals. We should put the majority of effort on the stuff that really impacts your health: your genetic code, your zip code, your social environment, your access to clean food, your access to transportation, how much loneliness you have or don’t have.”
Empowering patients
10. Elisabeth Rosenthal, physician, author and editor-in-chief of KHN: “To patients, I say write about your surprise medical bills. Write to a journalist, write to your local newspaper. Hospitals today are very sensitive about their reputations and they do not want to be shamed by some of these charges.”
11. Gordon Chen, ChenMed CMO: “If you think about what leadership really is, it’s influence. Nothing more, nothing less. And the only way to achieve better health in patients is to get them to change their behaviors in a positive way. That behavior change takes influence. It requires primary care physicians to build relationship and earn trust with patients. That is how both doctors and patients can drive better health outcomes.”
Utilizing technology
12. Vinod Khosla, entrepreneur, investor, technologist: “The most expensive part of the U.S. healthcare system is expertise, and expertise can relatively be tamed with technology and AI. We can capture some of that expertise, so each oncologist can do 10 times more patient care than they would on their own without that help.”
13. Rod Rohrich, influential plastic surgeon and social media proponent: “Doctors, use social media to empower your audience, to educate them, and not to overwhelm them. If you approach social media by educating patients about their own health, how they can be better, how can they do things better, how they can find doctors better, that’s a good thing.”
Rethinking medical education
14. Marty Makary, surgeon and public policy researcher: “I would get rid of all the useless sh*t we teach our medical students and residents and fellows. In the 16 years of education that I went through, I learned stuff that has nothing to do with patient care, stuff that nobody needs to memorize.”
15. Eric Topol, cardiologist, scientist and AI expert: “It’s pretty embarrassing. If you go across 150 medical schools, not one has AI as a core curriculum. Patients will get well versed in AI. It’s important that physicians stay ahead, as well.”
Great ideas, but little progress
Since 2018, our nation has spent $20 trillion on medical care, navigated the largest global pandemic in a century and developed an effective mRNA vaccine, nearly from scratch. And yet, despite all this spending and scientific innovation, American medicine has lost ground.
American life expectancy has dropped while maternal mortality rates have worsened. Clinician burnout has accelerated amid a growing shortage of primary care and emergency medicine physicians. And compared to 12 of its wealthiest global peers, the United States spends nearly twice as much per person on medical care, but ranks last in clinical outcomes.
Guests on Fixing Healthcare generally agree on the causes of stagnating national progress.
Healthcare system giants, including those in the drug, insurance and hospital industries, find it easier to drive up prices than to prevent disease or make care-delivery more efficient. Over the past decade, they’ve formed a conglomerate of monopolies that prosper from the existing rules, leaving them little incentive to innovate on behalf of patients. And in this era of deep partisan divide, meaningful healthcare reforms have not (and won’t) come from Congress.
Then who will lead the way?
Industry change never happens because it should. It happens when demand and opportunity collide, creating space for new entrants and outsiders to push past the established incumbents. In healthcare, I see two possibilities:
1. Providers will rally and reform healthcare
Doctors and hospitals are struggling. They’re struggling with declining morale and decreasing revenue. Clinicians are exiting the profession and hospitals are shuttering their doors. As the pain intensifies, medical group leaders may be the ones who decide to begin the process of change.
The first step would be to demand payment reform.
Today’s reimbursement model, fee-for-service, pays doctors and hospitals based on the quantity of care they provide—not the quality of care. This methodology pushes physicians to see more patients, spend less time with them, and perform ever-more administrative (billing) tasks. Physicians liken it to being in a hamster wheel: running faster and faster just to stay in place.
Instead, providers of care could be paid by insurers, the government and self-funded businesses directly, through a model called “capitation.” With capitation, groups of providers receive a fixed amount of money per year. That sum depends on the number of enrollees they care for and the amount of care those individuals are expected to need based on their age and underlying diseases.
This model puts most of the financial risk on providers, encouraging them to deliver high-quality, effective medical care. With capitation, doctors and hospitals have strong financial incentives to prevent illnesses through timely and recommended preventive screenings and a focus on lifestyle-medicine (which includes diet, exercise and stress reduction). They’re rewarded for managing patients’ health and helping them avoid costly complications from chronic diseases, such as heart attacks, strokes and cancer.
Capitation encourages doctors from all specialties to collaborate and work together on behalf of patients, thus reducing the isolation physicians experience while ensuring fewer patients fall through the cracks of our dysfunctional healthcare system. The payment methodology aligns the needs of patients with the interests of providers, which has the power to restore the sense of mission and purpose medicine has lost.
Capitation at the delivery-system level eliminates the need for prior authorization from insurers (a key cause of clinician burnout) and elevates the esteem accorded to primary care doctors (who focus on disease prevention and care coordination). And because the financial benefits are tied to better health outcomes, the capitated model rewards clinicians who eliminate racial and gender disparities in medical care and organizations that take steps to address the social determinants of health.
2. Major retailers will take over
If clinicians don’t lead the way, corporate behemoths like Amazon, CVS and Walmart will disrupt the healthcare system as we know it. These retailers are acquiring the insurance, pharmacy and direct-patient-care pieces needed to squeeze out the incumbents and take over American healthcare.
Each is investing in new ways to empower patients, provide in-home care and radically improve access to both in-person and virtual medicine. Once generative AI solutions like ChatGPT gain enough computing power and users, tech-savvy retailers will apply this tool to monitor patients, enable healthier lifestyles and improve the quality of medical care compared to today.
When Fixing Healthcare debuted five years ago, none of the show’s guests could have foreseen a pandemic that left more than a million dead. But, had our nation embraced their ideas from the outset, many of those lives would have been saved. The pandemic rocked an already unstable and underperforming healthcare system. Our nation’s failure to prevent and control chronic disease resulted in hundreds of thousands of unnecessary deaths from Covid-19. Outdated information technology systems, medical errors and disparities in care caused hundreds of thousands more. As a nation, we could have done much better.
With the cracks in the system widening and the foundation eroding, disruption in healthcare is inevitable. What remains to be seen is whether it will come from inside or outside the U.S. healthcare system.
HENRY KOTULA 