Behind the Push to Invest in Hospitals

Philip Betbeze, for HealthLeaders Media , October 7, 2011

Specifically, IBISWorld points to the recent (September) start date for a rule that requires states to scrutinize health insurance rate increases of 10.0% or more for policies sold to individuals and small businesses as part of the regulations for state-level health insurance exchanges, mandated by the Patient Protection and Affordable Care Act. 

What their argument boils down to is this: Cross-subsidization will carry the weight. Yes, the ability of hospitals and health systems, among other medical sector groups, to leverage strong revenue gains depends on a method of gaining higher payments from private insurers to subsidize inadequate government payers. Many, many people have predicted the demise of cross-subsidization, targeting it as a big reason for decades of ridiculously large healthcare cost increases. Let that sink in for a moment.

Not to overstate things, but IBISWorld put some serious work, and their reputation, on the line with this prediction. These are the sectors it identifies and their potential revenue gains from private insurance over the next five years: 

An excerpt from the report:

"Several healthcare industries rely heavily on payments from private health insurance. Since much of the healthcare reform legislation is still being debated, the move to issue rules is at least one indication that these industries will ultimately gain from the legislation in regard to having a broader and more stable customer base.

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3 comments on "Behind the Push to Invest in Hospitals"

Todd (10/13/2011 at 12:00 PM)
Dan, Good comment. Totally agree on both points. Payors are sadly so slow to innovate and just seem to love their provider networks more than helping their customers save money. Personally, I would never have surgery at a US hospital. Much more risk in my opinion than at many JCI accredited facilities.

Dan Ross (10/10/2011 at 9:57 AM)
The unending increases in hospital spending centers on two future occurances. (1) The US will fail to properly integrate patient data and continue to allow Americans to suffer from total care fragmentation and uncontrolled chronic disease. (2) American payors not will take advantage of internationally certified hospital facilities springing up in foriegn countries, targeting American patients, available at 20 cents on the dollar. India is $4 billion building 1000s of rooms in the Cayman Islands.

Todd (10/7/2011 at 5:41 PM)
If hospitals think the cost shifting will continue ad infinitum, they are sorely mistaken. Employers have had enough! A more reasonable expectation is that some of these investors think these hospitals will STOP ACCCEPTING MEDICARE AND MEDICAID and become truly private facilities. Mayo, Cleveland, Duke, are you listening? Other local facilies will be left with the losing government business. Welcome to the world of two tiered health systems like the rest of the world. Todd




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