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Mergers, Affiliations and New Entrants Accelerate The Use of Technology

The CVS purchase of Aetna made a splash last week. This week it is the possible merger of Ascension and Providence St. Joseph Health, which would result in a health system with 191 hospitals. For years I have talked about the “land grab” going on among health systems and other health institutions. That is but one of several transformations that is reshaping the industry.

Hospital consolidations: From 2004 to 2014 the total number of hospitals have remained about the same: 4,919 to 4,926. But the percent of hospitals that are part of health systems increased 19%. But including health system consolidations the number is even larger. In 2015 alone, there were 102 merger and acquisition (M&A) deals affecting 265 hospitals. Most of the media surrounding the mergers have focused on potential cost savings and improved quality. But such moves are also a result of efforts to gain market share, the golden prize sought by many CEOs and enabling them to negotiate better deals with payers.

Health system networks: Several years ago, John Noseworthy, the CEO of Mayo, announced a goal that the health system Goliath would serve 200 million patients by 2020. They may meet that goal but not by having all those people check into one of Mayo’s three centers. In 2011 Mayo launched the Mayo Clinic Care Network. Organizations that join the network pay a subscription to access Mayo Clinic's research and expertise and use the organization's brand and patients can access Mayo doctors through “e-consults.” Mayo is not alone in setting up affiliated networks: Cleveland Clinic, MD Anderson, and Duke University Health System all have similar programs. Such programs are important branding initiatives, allowing a local hospital to gain market share and allowing the large health system to gain referrals, often more complicated and more costly patients. Mayo claims that 80% of its e-consults (mostly oncology) allow the local hospital to keep the patient. Of course, this also means that 20% of the patients are transferred, no doubt many to Mayo. Associated with such changes are the establishment of micro hospitals, small facilities owned by the larger health system providing outpatient services, emergency care, imaging and lab services.

New players: The CVS/Aetna move is indicative of a third transformation: the entry of new types of providers. Urgent care, retail clinics and online providers make up the continuum of new entrants. The first target of services is primary and urgent care, followed by a few specialties such as mental health and dermatology.  Traditional health systems are competing by establishing their own urgent care services and starting their own online care sites. But since these new entrants are not providing critical care, the biggest segment affected is the individual provider practices and private labs. 

What does these changes mean for the use of technology to provide patient care? Here are four suggestions:

  1. The management of chronic disease through patient engagement, telehealth and remote monitoring – is a fundamental aim of the CVS-Aetna acquisition. The Minute Clinic network already has over 1,000 locations in 33 states all sharing a single EHR system (Epic).  But CVS owns 9,700 stores providing ample ground for expansion.  When CVS eliminated sales of cigarettes it also boasted of a smoking cessation services allowing it to develop a database of smokers, the COPD and related chronic care patients of the future, with an opportunity to do more than sell medications to them.
  2. The branding and franchising of large hospital systems provide greater opportunities to share high-demand but short supply specialty services and to expand the ability of nurse practitioners and physician assistants to provide more complex clinical services through smart technology.  Micro hospitals can and do rely on telemedicine to allow physicians to provide specialty services to patients in a larger area as well as follow-up visits.
  3. The mergers and new entrants will also shake up the use of technology for pharmacy benefit managers (PBMs). A widespread rumor is that Amazon will soon enter the pharmaceutical business through contracts with pharmacy benefit managers and may be entering the PBM market on its own as well. Other activities such as processing claims and remote monitoring are other possibilities. The company has already established an internal team to look at various uses of digital technology to help them enter the healthcare space. But it is uncertain whether it will be a competitor or a partner with such companies as Express Scripts.
  4. The result of all of the consolidations, mergers and networks is the potential creation of huge databases of patients providing opportunities to use of population health - using the data to prediction, diagnosis and elements of artificial intelligence. Such moves will require a significant investment in applications and, while the potential for improving outcomes are hyped, the financial impact on increased revenues lowered costs and market changes are uncertain making this a more distant possibility.
  5. Last but not least, the fundamental change in the structure of the healthcare industry enables acceleration of emerging technology including automation, machine learning and artificial intelligence. As locally owned and operated hospitals and physician offices become networked and part of a larger health system, coupled with the entry of high-tech companies, incentives are starting to fall in place to modernize medicine and finally catch up with the times.

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