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Health Care Costs To Increase In 2019; Insurance Outlook Stable, Hospital Outlook Negative

Economists and analysts expect health care costs to moderately increase in 2019. While the outlook for insurers and managed care firms is positive, hospitals and nonprofit providers are expected to struggle with profitability.

Somewhat clouding the outlook is the future of the Affordable Care Act (ACA), which a federal judge in Texas ruled unconstitutional late last year. Brendan La Cerda, economist for Moody’s Analytics, said the issue could end up before the United States Supreme Court.

While an increasingly strong U.S. dollar tempered the cost of imported pharmaceuticals and medical devices last year, La Cerda said the trend should reverse somewhat in 2019. “We think prices will start to pick back up,” he said. “The U.S. dollar should stop strengthening and level off a little bit, which removes some of that downward pressure on prices.”

Despite higher prices, La Cerda said consumer spending on health care should continue to increase, given growing incomes and a strong economy.

Fitch Ratings’ 2019 outlook report on the health insurance industry indicated that moderate medical cost increases, strong employment conditions, “continued growth in Medicare Advantage enrollment and reasonable reimbursement rate increases from the Centers for Medicaid and Medicare Services” all play into a stable outlook for the sector.

Fitch’s outlook for hospitals and nonprofit providers is negative, as the sector “will continue struggling with operating profitability and larger industry challenges,” according to a report.  Such challenges include wage growth above the rate of inflation in some markets and increasing pharmaceutical costs.

Drug prices could come under pressure from the government this year. “One of the items in the health care space that probably would get the most attention going into next year is the Trump administration’s push for transparency in pharmaceutical prices, namely requiring that pharmaceutical companies include their prices in their television or print advertising,” La Cerda said. “I put a fairly high probability on this will come into effect.”

The individual mandate requiring Americans to purchase health care under the ACA is now defunct due to a provision in the tax reform bill passed by Congress in 2017. Because those who opt out of purchasing health insurance tend to be young and healthy, La Cerda said he would expect premiums to increase this year. However, he noted that ACA enrollment has decreased by 4%, which is “not the apocalyptic drop off that some people expected or feared.”

In Long Beach, health care consumers await news on Community Hospital, which closed in July. The City of Long Beach and the selected new operator Molina Wu Network continue negotiations for the facility’s lease – a process that is now past the January 3 deadline for completion set by the city council last year. Both parties have indicated they want to reach an agreement but are hampered by financial difficulties due to the site’s seismic challenges.

John Bishop
CEO, MemorialCare’s Long Beach Medical Center and Miller Children’s & Women’s Hospital Long Beach
The healthcare industry is on a journey towards population health – a concept that connects practice and policy to create change locally. It’s an opportunity for health care systems, academic institutions, physicians and local government entities to work together to improve the health of the communities we serve.

Nationally, population health has changed the landscape of the health care industry with the shift to value-based reimbursement (pay-for-performance) which incentivizes providers to keep patients out of the hospital.

In Long Beach we are seeing that many insurers and employers are rewarding patients for choosing to receive their care in the most cost effective locations. Retail clinics and health information technology are exponentially increasing in both their access and their capabilities, shifting patient demand to more convenient and lower cost venues of care. Health care providers are focusing on providing value and keeping patients out of the hospital.

Aside from changing the delivery model to focus on preventative care and outpatient treatment, there will need to be coordination between healthcare providers and local governmental entities to address the social determinants of health. Improved data sharing and data mining will help to identify the areas of greatest opportunity to help keep Long Beach healthy.

Dr. Amar Desai, MD, MPH
President, HealthCare Partners California
In today’s environment, both consumers and purchasers of health care expect, rather than desire, high quality clinical outcomes. As a result, a medical group’s true differentiation will come from delivering an affordable and enhanced experience for patients.

Differentiated care delivery organizations emphasize affordability and patient experience by offering services that provide greater coordination across care settings, vast network access and innovative programs. For HealthCare Partners in Long Beach, these programs include services tailored to the sickest patients, house calls programs and transitional medicine clinics for post-acute support. We are also working to ensure patients have access to care in the most appropriate and convenient settings. For example, by moving procedures such as joint replacement to an ambulatory surgery center rather than a hospital, when appropriate, groups can drive both affordability and an improved patient experience.

Finally, this year the industry will focus on the social determinants of health and upstream factors that influence a patient’s health, such as housing, food, and transportation. Significant venture capital funding has begun to support companies working to integrate medical and social services. Recently, Centers for Medicare and Medicaid (CMS) reinterpreted its standards for supplemental benefits that gives Medicare Advantage programs more flexibility to address social determinants, making this an area to watch moving forward.

Dieter Hertzog, M.D.
Eye Physician & Surgeon, Hertzog Eye Care
The field of Ophthalmology has recently enjoyed a series of technological advancements that have revolutionized our ability to provide exceptional care to patients with eye problems.

Cataract and refractive surgeons are able to employ sophisticated intraocular lens technologies to correct almost any type of refractive error. Nearsightedness, farsightedness, astigmatism, and even presbyopia (the inability to see up close as we age) can now be treated at the same time as cataract surgery. LASIK continues to evolve with customized, blade-free laser treatments allowing patients to see more clearly than ever before.

Meanwhile, retina diseases like macular degeneration and diabetes can be evaluated with sophisticated imaging techniques such as OCT. Treatments for leaks and bleeds within the retina have been revolutionized by medications such as Avastin, Lucentis, and Eylea. Modern lasers and small-incision vitrectomy techniques can repair a wide array of retinal pathology including retinal breaks and detachments. Glaucoma specialists are employing complex imaging technologies to detect and treat glaucoma earlier than ever before, improving long-term visual results.

In summary, the current state and the future of Ophthalmology is very bright. Technological progress in the computer era continues to provide surgeons and patients with vastly improved treatment modalities and visual outcomes.

Chris Wing
CEO, SCAN Health Plan
The 2019 outlook for Medicare Advantage (MA) plans remains very positive. Federal legislation, passed in 2018, allows MA plans more flexibility to offer additional benefits. One standout is the ability to offer in-home benefits. This means health plans are able to better meet the changing needs of members in innovative and comprehensive ways. For example, at SCAN, many of our plans now include coverage for telehealth “virtual doctor visits,” assistance after a hospital stay and fall prevention assessments in the home.

At the local level, we look forward to our ongoing collaboration with the City of Long Beach, CSULB and other community partners to improve services centered around senior health and independence. In 2018, we identified what the key needs were and established work groups to address those issues. These efforts are ongoing. And we’re excited to work closely with CSULB, a new member of the Age-Friendly University Global Network, to prepare graduates for careers that will serve and support the growing number of seniors.

There are challenges every year in the healthcare industry – and we don’t expect 2019 to be any different – but we remain committed to our mission to keep seniors healthy and independent.

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