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Friday, January 22, 2010

The health care end game

Now that the Massachusetts election is behind us and the health care express has been derailed, everyone is asking "Now what is the next step?" Ironies abound, not the least of which is the very senate seat, which was occupied for more than 40 years by one of the major driver of health care reform, is the very seat which will tip the balance toward sending this initiative to the dustbin of history. You could not script this any better to capture the almost tragedy like quality. The end of the Kennedy era in politics going out with a whimper as opposed to a bang.

What will be the next step? If you are under the impression that the failure of legislative reform means no change in health care payments, you will be sadly mistaken. We are quickly approaching a rock and hard place scenario which, if anything, will be aggravated by the failure of passage of the so called reform bill. That legislation, in either the House or Senate format, would have pumped in huge additional dollars to keep the health care bubble inflated. It is not clear at this point in time whether the SGR fix will be extended beyond the end of February. Who will champion this? Who should champion this? What will happen if Medicare payments are cut by over 20%?

The blunt instrument a 20% Medicare cut will be will result in taking down those who operate at the lower margins who cannot further cut their costs. It will yet again reward those who best the gamed the system by being the most greedy in the past and punish those whose emphasis has been lower cost care. As grim as this sounds, this threat can also represent opportunity. Once Medicare becomes sufficiently unattractive, we may observe a critical mass of providers to attempt to develop a new, Medicare independent business models. Based upon Christensen's disruptive model, I would envision it starting in the low margin arena. Perhaps blood pressure management clinics which use generic medications or protocol driven depression treatment clinics. Most will fail miserably but some will flourish.

I could also envision non-physicians take on roles as coordinators of care. Whether such work would require licensing or specific training if their job were to simply give advice for a nominal fee is possible. It represents work which at this point has no margins and it would be activity which physicians would likely abandon in a heartbeat. Whether the business model would be through fee for service or a subscription model, or whether many of the queries could be addressed via defined protocols or artificial intelligence is an open possibility.

I find when I try to predict the future I am generally wrong on the specifics by right on the concepts. I am certain that when the bubble bursts, innovative lower cost options will grow in the wreckage.

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