April 16, 2018

Editorial: Slow movements, big changes in health care

The tectonic plates comprising the Earth's crust move at seemingly unnoticeable speeds. But those movements shape the landscape above, which we are reminded of periodically when they shift.

The country's healthcare industry seems to move in a similar way: As giant forces shift their weight around, the implications of those movements become evident at the surface. In Massachusetts, spending on health care has grown to be the largest portion of the state budget, a mushrooming line item of real concern for state leaders as well as businesses of all sizes and individuals. Some major plates are shifting as several healthcare titans are seeking new alignments and partners, shifting to more integrated business models.

Two events happened in the last month signaling a real change for the industry and the region's economy. The first came April 2 when Worcester's Reliant Medical Group – the largest independent physician practice in Central Massachusetts – announced its $28-million acquisition by Minnesota-based global health insurer UnitedHealth Group subsidiary OptumCare had been completed.

The second item should come later in April when Dallas for-profit Tenet Healthcare Corp. will close on the sale of its Des Peres Hospital in St. Louis, the ninth hospital it has sold since August 2017, with four more hospital deals expected shortly. This continues the recent trend at the publicly traded company of divesting its portfolio hospitals and shifting its bet to higher-margin ambulatory care centers, which untethered from large hospital systems can perform surgeries more efficiently. Since Tenet is the parent company of both Saint Vincent Hospital in Worcester and MetroWest Medical Center in Framingham and Natick, this trend – if it continued – could lead to the sale of one of Central Massachusetts' signature medical facilities, although as Staff Writer Emily Micucci points out in her "Core Hospitals" story on Page 10, Tenet officials in the state don't anticipate this happening because of Saint Vincent's high profit margin and Tenet's investment in nearby MetroWest.

What the Reliant and Tenet news reflects is the healthcare industry moving toward greater consolidation, and the desire to double down on the industry's more profitable niches. The Baby Boom generation is reaching its higher cost-of-care window, and states as well as private industry are searching for ways to stem the rise of healthcare spending. Does the consolidation of major provider organizations dovetail with the desire for more efficiency, or does it give those healthcare players a stronger line of defense in maintaining their margins? Right now, it's hard to tell.

Having too few players dictating the level of care in the region and seeing more investment in high margin areas of specialty does appear concerning – as it could leave much of the high-cost, low-margin treatment putting more pressure on the bottomline of our hospitals. There are both upsides and downsides to these tectonic shifts. Let's make sure regulatory attention is focused on how they can lead to a better and more efficient healthcare system.


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