Becker's Hospital Review

51 CFO / FINANCE 93% of metropolitan hospital markets will be highly concentrated by 2019: 5 things to know By Alia Paavola O ne of the biggest inflators of medical costs in 2019 will be hospi- tal megamergers, an analysis by PwC's Health Research Institute suggested. For its report, researchers at HRI analyzed census data from the Herfind- ahl-Hirschman Index for hospital markets to predict and understand hospital consolidation patterns. Here are five things to know: 1. The HRI estimates that 93 percent of most metropolitan hospital mar- kets will be highly concentrated by 2019. 2. This trend, in the short term, will likely lead to higher prices for medi- cal services in these markets. 3. The reasons for the inflated costs are that providers will have more leverage to negotiate higher prices for medical services with payers and there will be increased expenses from integrating various networks. 4. "There has been little to no action taken to stop providers from con- centrating or taking price increases," Sherry Glied, PhD, dean of New York University Wagner Graduate School of Public Service, told HCI. "If inflation ramps up, and consolidation continues, expect to see strong upward pressure on prices." 5. Over the long term, economies of scale and efficiencies may be achieved to lower costs, HCI said. n Hospitals close at 30-a-year pace: 3 things to know By Ayla Ellison H ospitals have been closing at a rate of about 30 a year, and the pace of clo- sures is poised to accelerate, accord- ing to Bloomberg. Here are three things to know: 1. Analysts told Bloomberg several factors are leading to hospital closures, including health insurers pushing their customers to use more outpatient clinics. 2. There may be an increase in hospital clo- sures over the next year to 18 months, Vikram Malhotra, an analyst at Morgan Stanley, told Bloomberg. Rural hospitals, which have less negotiating power with insurers, will likely see the most closures, according to the re- port. 3. A Morgan Stanley report revealed more than 15 percent of U.S. hospitals have weak financial metrics or are at risk of potential clo- sure. n Gundersen Health's $50K knee replacement list price is 5 times what it costs By Morgan Haefner I n 2016, a La Crosse, Wis.-based Gunder- sen Health System hospital's average list price for knee replacement surgery was more than $50,000. Aer an 18-month re- view, Gundersen found the procedure actu- ally cost a fih of the list price — $10,550 at most, according to e Wall Street Journal. Here are four highlights from the article: 1. While hospital list prices are a starting point for payer negotiations, greater consoli- dation has given hospitals more pricing pow- er in many markets, according to WSJ, which cites health economics researchers. Derek Haas, CEO of healthcare cost and analytics company Avant-garde Health, which worked with Gundersen, told the publication: "Being cost effective was not an imperative in that type of market dynamic." However, as WSJ noted, payment reform among Medicare and private health insurers is prompting health systems like Gundersen to get a better grip on their costs. 2. During the review, an efficiency expert re- corded the time physicians and nurses spent on Gundersen's knee replacement surgery and tracked which instruments, resources and medicines physicians used. Time spent wheeling VCR carts, a lack of available post- surgery beds and delays in starting physical therapy were among the inefficiencies discov- ered in the report. 3. Gundersen's analysis also found the hospi- tal had been using brand-name bone cement, which is used to secure the artificial joint to a patient's bone. e hospital cut its cement costs by 57 percent by opting for a generic version, which research indicates leads to the same results in most cases, according to WSJ. 4. Gundersen implemented changes to its knee replacement surgery process aer the review. e surgery now costs the hospital $8,700 on average, reflecting a savings of 18 percent. Gundersen lowered its list price for knee sur- gery, not including the surgeon and anesthe- siologist, by 7 percent in 2017. e system at- tributed the decline to shorter hospital stays. Some employer groups project negotiated prices for the surgery could fall up to 30 per- cent. Gundersen declined to disclose the price it negotiated with Alliance, an employer group representing 5,600 people in La Crosse and 88,000 people across three states, to WSJ. n

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