In addition, provider consolidation is increasing, which is expected to increase their bargaining power. The number of physicians involved in mergers or acquisitions in 2009 was 2,910, nearly twice that of 2008. There has been record consolidation activity in 2010, and PWC expects the trend to accelerate in 2011.
Hospitals in 2011 are expected to invest billions of dollars in certified electronic health record systems, and the government's new regulations dramatically condensed their timelines to invest in technology, IT staff, training and process redesign.
While investments in infra-structure, efficiencies, and consolidation may eventually prove to be cost effective, Chang says acting on cost containment will prove to be problematic.
"A lot of people's livelihood depends on the continuous growth. Everybody wants to get rid of the fat in the system, but one man's fat is another man's income," Chang says. "You are talking about threatening somebody else's job."
Rather than containing costs, Chang says the government and other payers are trying to contain payments.
"Right now it seems to me the major instruments they are using to slow down the growth of cost are Medicare cutbacks. But given the history of Medicare cutbacks, it's not easy," he says.
The long-term view has not been made clearer with the knowledge that nobody has figured out how to pay for medical care under the healthcare reform law. "A lot of the payment reforms are pilot studies, and we have not figured out how to do it," Chang says. "We have a lot of good ideas on the drawing board but they will not bear fruits anytime soon."