August 1, 2012
By Melissa Bynes Brooks
Theoretically, the cost of healthcare should decrease as the demand for products and services increase because the healthcare industry is the exception to the “basic economic” model of supply and demand. It is more complex. Health insurance costs are lower when larger groups of people are involved in the consumer pool thus increasing demand and lessening the costs of unhealthy or risky individuals with healthy or less risky individuals.
Despite looming promises of repeal by Republicans, the Affordable Care Act (ACA) is an essential component for cost containment and strengthening of the U.S. economy. This is especially true when 17 percent of the nation’s GDP is spent on health care with a GDP growth rate of only 1.5 percent.
Further analysis by the CBO, after the Supreme Court ruled that the ACA is constitutional, indicates that repealing the law would reduce direct spending by $890 billion and reduce revenues by $1 trillion between 2013 and 2022, adding $109 billion to federal budget deficits over that period. Additionally, an estimated 60 million nonelderly people would be uninsured.
Regulatory requirements have not eluded corporate leaders currently brainstorming and investing in new strategies and innovative technologies to position their companies for competition in a market place projected to expand health insurance coverage, to an estimated 14 million people by 2014, and 30 million people by the latter part of the coming decade.
Business mergers are forming between companies directly impacted by the ACA.
In early July, the first major health care sector merger occurred when health care giant WellPoint said it will buy Amerigroup, a managed health care company with 4.5 million customers of state sponsored health care programs, for $4.9 billion or $92 a share in cash.
“We believe that this combination will create an industry leader in the government sector serving Medicaid and Medicare enrollees,” said WellPoint CEO Angela Braly in a statement. Braly added that the merger, which focuses on Medicaid recipients like the poor and the elderly, is an opportunity to “position our companies for future growth as the health insurance industry changes and as we prepare for health insurance exchanges.”
Amerigroup shares increased 40 percent, to over $89.84 a share following news of the merger. WellPoint shares increased 3 percent, to $61.64 a share. Shares for both companies had decreased in value after the Supreme Court decision in June.
The ACA presents broad economies of scale for health information technology (HIT) companies specializing in the provision of secure platforms for accessing and sharing patient data through the installation of electronic health records (EHR), telemedicine, and mobile health applications. 88 percent of physicians said they would like their patients to track their health information and 40 percent of individuals said they would buy a personal health-monitoring device or pay for a monthly subscription to send health information to their providers.
Authentidate Holding Corp. provides secure web-based software applications and telehealth products and services that enable healthcare organizations to coordinate care for patients and enhance related administrative and clinical workflows.
Their alliance with hospitals, physicians, and consumers generated revenues for the quarter ending on March 31, 2012 of approximately $764,000, compared to $729,000 for the prior year period. Revenues were mostly from telehealth products and services. For the third quarter of fiscal year 2012, revenues increased approximately 16 percent compared to the second quarter of fiscal year 2012, due to higher telehealth revenues for the current period.
There are an estimated 5.9 billion mobile-cellular subscriptions. Mobile-broadband subscriptions have grown 45 percent annually over the last four years. PwC estimates the U.S. mHealth market opportunities will be $6.5 billion by 2017, for remote mobile-enabled services used to monitor symptoms and manage chronic conditions like high blood pressure and diabetes. Growth is expected to be driven in part by the ACA objectives of providing cost effective preventative care.
Administration of the U.S. health system alone accounts for 7 percent of total spending. ACA has established regulations to rein in costs. Health insurance providers are now required to decrease administrative costs. They must spend 80 to 85 percent of premium dollars on medical care and health care quality improvement or they will be required to provide rebates to their customers. This year an estimated nine million Americans may be eligible for rebates worth up to $1.4 billion.
There are reimbursement incentives for hospitals and healthcare providers busy implementing certified EHR technology to meet the Centers for Medicare & Medicaid Services’ (CMS) and Office of the National Coordinator’s (ONC) requirements for meaningful use by 2015. Health systems will see a decrease in their Medicare and Medicaid reimbursements if they are not able to demonstrate meaningful use relevant to e-prescribing, the electronic exchange of health information to improve quality care, and the submission of clinical quality and other measures.
Love it or hate it, the Affordable Care Act appears to be a win-win for the economy and healthcare industry stakeholders consisting of consumers, health systems, providers, and technology business enterprises.
“When you eliminate the impossible whatever remains however improbable must be the truth!”
-Sir Arthur Conan Doyle, Scottish author and creator of Sherlock Holmes.
Melissa Bynes Brooks is the editor of BrooksSleepReview.
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