Health care disruption….”executives are paying close attention to who/what poses the greatest threat to their business models.”

“The health care industry is consolidating rapidly — hospitals are merging with each other and with insurers; pharmacies are buying insurance companies; and drug companies are snapping up other drug companies.
The big question: Are these deals good for consumers? What happens to networks of hospitals, doctors and pharmacies? Those options will likely narrow as different types of health care businesses end up under the same roof. Regulators ultimately will have to consider whether merged companies are gaining too much negotiating power, and whether these deals will lead to lower health care costs.
What’s next: Regulatory reviews of all these mega-mergers will fall to the Federal Trade Commission — which already has limited resources — and the Department of Justice. Many current deals, including CVS-Aetna, don’t present the same antitrust issues that sunk previous health care mergers. The end of 2017 was among the busiest seasons of mega-mergers in a long time. Expect the trend to continue, while the deals announced last year move closer to reality.” (A)

“There’s an interesting article over at Spectator that details how two of the big mergers initiated in 2017 – CVS-Aetna and Amazon-Whole Foods – may be the start of the re-privatization of healthcare. Both mergers seem to be betting on a future with something different from Obamacare, though it’s very unlikely the national government will get out of the healthcare industry altogether.
That’s okay, at least as far as CVS and Amazon are concerned. If things continue heading along the trajectory of Obamacare lite or an adjusted Obamacare without an individual mandate, the two giant companies are poised to do well. If the government gets mostly out of the health insurance industry through a clean repeal of Obamacare, CVS and Amazon will hit the jackpot. Even if nothing changes, the trends towards big dollars going into healthcare means they’re worst-case-scenario is still highly profitable.” (B)

“Disruption got real. After years of speculation about who or what would become the “Uber of healthcare,” the tectonic plates of the industry shifted substantially in the past year — and there’s reason to believe this will only continue in 2018. A number of mergers illustrate the blurring line between healthcare and other industries, such as retail and insurance. Consider the combinations of CVS and Aetna or Optum and DaVita and Surgical Care Affiliates. As for what’s to come, Apple and Amazon have both shown interest in expanding their healthcare footprint. In fact, just last month, we reported Amazon was in talks to move into the EHR space.
Executive’s takeaway: Executives grew skeptical of the term ‘disruptor’ when it was used as generously as it was circa 2011-2016. But now disruption is actually unfolding at a rapid clip, and executives are paying close attention to who/what poses the greatest threat to their business models.” (C)
“Apple, Google, Microsoft and other tech giants have transformed the way billions of us communicate, shop, socialize and work. Now, as consumers, medical centers and insurers increasingly embrace health-tracking apps, tech companies want a bigger share of the more than $3 trillion spent annually on health care in the United States, too…
The companies are accelerating their efforts to remake health care by developing or collaborating on new tools for consumers, patients, doctors, insurers and medical researchers. And they are increasingly investing in health start-ups…
Each tech company is taking its own approach, betting that its core business strengths could ultimately improve people’s health — or at least make health care more efficient. Apple, for example, has focused on its consumer products, Microsoft on online storage and analytics services, and Alphabet, Google’s parent company, on data…
And Alphabet, perhaps the most active American consumer tech giant in health and biotech, acquired Senosis Health, a developer of apps that use smartphone sensors to monitor certain health signals, also for an undisclosed amount…
Apple is taking a different approach — using its popular iPhone and Apple Watch to help consumers better track and manage their health…
Microsoft, already a major supplier of software and cloud services to medical centers, is also ramping up its health business…
Facebook, too, has been expanding its business and research efforts in the health sector. Last year, Facebook made it more appealing for pharmaceutical companies to advertise their medicines on the platform by introducing a rolling scroll feature where drug makers can list their drug’s side effects in an ad. Such risk disclosures are required by federal drug marketing rules…
Amazon has been less public about its plans in health. But industry analysts have speculated that Amazon could enter the pharmacy business….(D)

“Here are seven key takeaways about major considerations for hospitals in the new tax law, from an interview with KPMG’s Coakley.
Tax-exempt hospitals no longer will be able to offset income from unrelated business activities such as cafeteria earnings with losses from other unrelated business activities….
Tax-exempt hospital systems will be liable for a new 21% excise tax on compensation exceeding $1 million paid to its five highest-paid employees….
The new excise tax on high-earning employees does not apply to compensation for the direct provision of medical services. Some physicians receiving compensation over $1 million are paid for both management and medical provider roles…
All hospital systems now have more limited ability to deduct False Claims Act settlements, which are common in healthcare. For a portion to be deductible, hospital attorneys have to write that specification into any settlements or court orders….
For-profit healthcare corporations’ ability to deduct interest payments would be capped at 30% of adjusted taxable income starting in 2018….
Publicly traded hospital companies will have to take the tax law changes into account for their 2017 financial statements for changes such as a reduced value of deferred tax assets…
Hospitals may want to consider tightening their financial assistance policies to limit or exclude assistance for patients who qualify for subsidized Affordable Care Act, Medicaid or other coverage but choose to forgo it….” (E)

“This year’s environmental scan examines trends in the key focus areas of access, value, partnerships, well-being, coordination, and innovation. More specifically, healthcare executives will find insights in the following:
Coverage (ACA, Healthcare insurance, Medicaid, Cost-sharing payments)
Workforce (Nursing vacancies, Physician shortage)
Affordability (Drug prices, Healthcare spending, Health disparities, High deductibles and HSAs, Health expenditures, Cost controls)
Behavioral Health (Drug and opioid crisis, Mental health, workforce shortage)
Value-based Care Models (Analytics and quality, Bundled payments, Quality improvement)
Consumerism (Patient engagement, Telemedicine, Cybersecurity, Diversity)
Community Partnerships (Chronic diseases, Outpatient facilities, Social determinants, Rural health)
Care Coordination (Data and clinical decision-making, Physician practice consolidation, Hospital mergers)
Technology (Electronic health records, Interoperability, Smartphone and tablet usage)
Disruptive Innovation (Investment, Innovation centers, 3-D Printing, Retail health)” (F)

“Many (hospital) CEOs say they are focusing on developing new revenue streams, lobbying and influencing policy, investing in the future (e.g., technology, growth, talent), and developing alternative payment methods. Strategies vary based on the populations each hospital serves.
While no single strategy will work for every hospital, ideas that CEOs are considering include: Diversifying and identifying alternative revenue streams; Developing more primary care locations and alternative sites of care, including urgent care and retail clinics; Reducing inefficiency and rethinking how care is delivered; Investing in strategies to prepare for value-based care, including shifting funding from hospitalists to primary care practitioners and chronic-disease management; Meeting consumer demands—ultimately, the players with the most ‘members’ are going to do the best.” (G)
“The year healthcare became very, extremely, incredibly difficult. Was any component of healthcare ever easy? Those who have spent years in the industry would say no. Yet 2017 was the year in which officials and lawmakers reminded the American public that healthcare is complicated. While true, this narrative functioned as a sound bite to normalize Congressional dysfunction.
Executive’s takeaway: What’s concerning here is whether this throwaway statement will make its way from Capitol Hill to hospital board rooms, executive offices, clinician lounges and medical school lecture halls and, over time, nurture a climate that fosters and condones inaction. It is unproductive to constantly point out the complicated nature of healthcare and/or bask in this acknowledgement. To do so is not the behavior of an effective leader. It goes without saying that healthcare is complicated. Healthcare is also necessary, expensive, life-saving, honorable, slow, inaccessible, urgent, flawed, and never going away. What are you doing to make it better?” (C)

“Kaufman Hall reported that 87 hospital mergers had been recorded through the third quarter of 2017, compared to 102 overall in 2016. By that point, eight transactions had included hospitals with $1 billion or more in revenue, twice as many big-ticket mergers as in all 2016.
“These transactions are driven primarily by strategic imperative and less so by financial drivers,” said Anu Singh, managing director of Kaufman Hall.
M&A activity wasn’t restricted to hospitals and health systems, as a number of deals in the payer sphere could also significantly impact the industry.” (H)

“Hackensack Meridian Health Wednesday announced it now owns JFK Medical Center in Edison, a deal that creates the largest hospital chain in New Jersey.
In what has become a race to amass the most sprawling health care network in the state, Hackensack Meridian now owns 12 acute care hospitals from Bergen to Ocean counties. It employs a staff of 33,000 and 6,500 doctors, and maintains 4,520 in-patient beds, which include children’s and specialty hospitals.
The deal dethrones RWJ Barnabas Health, owner of 11 full-service hospitals valued at $5.4 billion, as the largest hospital and health care provider in the state. Robert Wood Johnson University Health and Barnabas Health merged in 2016.” (I)

“The basketball rivalry between Duke University and the University of North Carolina battle is legendary, but a federal lawsuit says the two elite institutions have agreed not to compete in another prestigious area: the market for highly skilled medical workers.
The anti-trust complaint by a former Duke radiologist accuses the schools just 10 miles apart of secretly conspiring to avoid poaching each other’s professors. If her lawyers succeed in persuading a judge to make it a class action, thousands of faculty, physicians, nurses and other professionals could be affected.
“The intended and actual effect of this agreement is to suppress employee compensation, and to impose unlawful restrictions on employee mobility,” Dr. Danielle Seaman’s lawyers wrote.” (J)

(A) How your health care will be reshaped in 2018, by Sam Baker Bob Herman, https://www.axios.com/how-your-health-care-will-be-reshaped-in-2018-2521747274.html
(B) Should CVS and Amazon replace Obamacare as the healthcare gatekeepers? by Lorie Wimble, https://noqreport.com/2017/12/29/cvs-amazon-replace-obamacare-healthcare-gatekeepers/
(C) 2017, the year that was: 10 things for healthcare executives to note as they head into 2018, by by Molly Gamble, https://www.beckershospitalreview.com/hospital-management-administration/2017-the-year-that-was-10-things-for-healthcare-executives-to-note-as-they-head-into-2018.html
(D) How Big Tech Is Going After Your Health Care, by NATASHA SINGER, https://www.nytimes.com/2017/12/26/technology/big-tech-health-care.html?_r=0
(E) Seven key changes the new tax law will force hospitals to consider, by Harris Meyer, http://www.modernhealthcare.com/article/20180102/NEWS/180109995?utm_source=modernhealthcare&utm_campaign=am&utm_medium=email&utm_content=20180102-NEWS-1801099952018
(F) Environmental Scan, by B.E. Smith Team, https://www.besmith.com/trends-and-insights/articles/2018-aha-environmental-scan/
(G) “Deloitte 2017 survey of US health system CEOs: Moving forward in an uncertain environment”, http://www.modernhealthcare.com/article/20171221/SPONSORED/171229981
(H) 13 healthcare M&A deals that made headlines in 2017, by Paige Minemyer, https://www.fiercehealthcare.com/finance/healthcare-mergers-and-acquisitions-hospitals-payers-year-review?mkt_tok=eyJpIjoiTkdNeE9HVTJPV1V4Wm1SaSIsInQiOiJoZlg5SXN6dzJPc2lHa3FFckV3UElIT0dVREtRR3Fid3hwSmhjQjVyZzdMZ2VIMkcxc1YrYVRPYVNyTUtxaVNBQzlVcjVtdDZ5RFo5Y1wvQStTV1dYZ1k0UTlSam1EY2VQeCtocXM4YUkyQVkrSFZmZm4yNmZ4WittY25rWGRUdjAifQ%3D%3D&mrkid=654508
(I) Hackensack Meridian acquires another hospital and is now N.J.’s largest chain, by Susan K. Livio, http://www.nj.com/healthfit/index.ssf/2018/01/hackensack_meridian_is_njs_largest_hospital_chain.html
(J) Lawsuit: Duke, UNC agreed to not hire each other’s doctors, http://www.modernhealthcare.com/article/20180102/NEWS/180109993?utm_source=modernhealthcare&utm_campaign=am&utm_medium=email&utm_content=20180102-NEWS-180109993

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