Monday, June 25, 2012

Bad News, Good News: Total Healthcare Costs for American Family Exceeds $20k, Rate of Cost Growth Slows

By Jeffrey M. Herschler

According to the recently published Milliman Medical Index 2012, the average American family’s annual healthcare expenditures will exceed $20,000 (roughly the cost of a basic, mid-size sedan) for the first time.  This figure represent the total cost of healthcare for a family of four covered by an employer sponsored Preferred Provider Plan (PPO).  This is a 6.9% increase over last year. The rate of increase fell below 7% for the first time.  Of the cities studied, Miami was the most expensive with an average annual figure of $24,965.  New York, Chicago, Boston and Philadelphia rounded out the top five most expensive cities.  Meanwhile the least expensive cities were Denver, Dallas, Seattle, Atlanta and Phoenix.  Employers continue to shoulder the larger portion of total cost (58%).  That said the study’s authors are quick to point out that the employer piece of the payment is part of the employee’s total compensation.  Thus, in reality, the employee is burdened with the entire cost of healthcare since his/her salary would be higher without the benefit. 

With the Supreme Court decision looming, one very significant section of the report addresses Healthcare Reform (the Patient Protection and Affordable Care Act) and its impact on cost.  Examining several different scenarios (PPACA fully intact,  PPACA without the Individual Mandate and no PPACA), the report forecasts effects on consumers, employers, the government and providers.   The authors conclude, somewhat ominously, “While several aspects of healthcare reform would have meaningful impact on the cost of insurance coverage, the effect on total cost of care is very limited for our family of four.”   With regard to providers, the authors state “the pressure to lower healthcare costs, including a focus on provider reimbursement, coordination of care, and narrower networks, will not go away” regardless of PPACA’s fate.

Milliman is among the world's largest independent actuarial and consulting firms, with revenues of $723 million in 2011. Founded in Seattle in 1947, the firm currently has 55 offices in key locations worldwide.  Milliman has published the index since 2001. To view the entire report, click HERE.  To view a related article from the New York Times, click HERE.

Monday, June 11, 2012

Acquirers Seek High Performing Medical Groups

Healthcare M & A

As the economy picks up, Healthcare M & A activity has increased markedly. The trend is accelerated by an emerging consensus that pending changes in payment models necessitate "strength in numbers". According to, "...within the Health Care industry in the United States and Canada in 2011...Health Care accounted for 9% of overall network activity and experienced a 96% increase in deal flow in Q4."

On April 27, Bob Wilson, a Managing Director at Grant Thornton, presented on transaction and integration issues as they relate to healthcare company mergers and strategic partnerships. He spoke at the annual FICPA Health Care Industry Conference in Orlando and placed particular emphasis on the Elements of High Performing Medical Groups. Potential suitors are obviously trying to identify these elements as they search for acquisition targets and partners.

Mr. Wilson named the following Group Practice Essentials:

Operating Performance
  • Operating Efficiency
  • Medical Management
  • Physician Activities
  • Patient Access & Throughput
  • Cost Structure
  • Revenue Cycle
  • Governance
  • Management
  • Policies & Procedures
  • Technology
In addition, he stressed that a high performing Culture must be pervasive throughout the organization. Those practices seeking a buyer or partner would be well served by developing and showcasing their high performance metrics.