Let's hope the year we're saying goodbye to in 2008 isn't better than the year we're saying hello to. Because it's hard to imagine how much worse it could get. OK, it's another "year in review" column—something we journalists cooked up for a time when many of you are on extended holiday vacations and tough to reach for comment. But read on anyway, because these are momentous times in finance—not just because the majority of a long and deep recession may still be ahead of us, but also because despite all these headwinds, hospitals and other healthcare organizations made big strides in the finance arena this year. The end of the year gives us a chance to look to see where we've been in order to track where we're going, and viewing things through a wide-angle lens can always be a valuable exercise.
In January, back when we all thought the economy was running pretty well, we read that despite the good times, the government was promising $45 trillion in benefits that it couldn't possibly deliver on given the expected 75-year revenue stream. One wonders how much more that figure has increased, given the taxpayer-funded bailout of the financial industry for which we're all on the hook.
In February, we saw the first inkling that true healthcare reform might not face its usual team of powerful opponents, as the Federation of American Hospitals came out with a plan that is similar to Massachusetts' state plan that requires all people to have some form of health insurance. The jury's still out on the Massachusetts plan as it has cost considerably more than projections. But given the shared sacrifice and rewards it offers, that plan is a hopeful sign that it might align incentives better in healthcare and keep free-riders from eventually wrecking the system. Now that Tom Daschle, who has advocated for a similar nationwide plan, is Obama's choice for Health and Human Services secretary, such a system might have a chance.
March brought news of the auction-rate debt fiasco, which caught many hospitals off guard. The failure of this market presaged the deepening credit crisis and foreshadowed the problems plain vanilla borrowers would face in 2008 with unexpected increases in debt service costs because investors, investment banks, and bond insurers failed to appropriately account for risk in other financial markets.
In April, we talked about the misaligned incentives in healthcare as we depend on a system in which healthcare providers are rewarded not for keeping people healthy, as they ought to be, but for performing procedures on people who are sick. We also talked a bit more about the auction-rate debt crisis, which was rapidly morphing into a broader-based crisis in credit in general. In May, to many readers' collective chagrin, I compared the rapid rise in oil prices to the growing shortage of physicians; in short, comparing physician prices to the rising price of a barrel of oil. The point was that high prices and shortages drive innovation—something we're seeing in healthcare today as people are seeing physicians less and less for routine issues as those matters are delegated to so-called "physician extenders." Whether that's bad or good is a matter of opinion, but it's useful to show that crises and shortages drive innovation, a point I hope I was able to get across.
June brought my musings on the difficult work ahead for proponents of consumer-directed healthcare. With a new administration coming into office, it's difficult to tell whether consumer-driven care will have the backing it needs politically, but there's still a lot of work to do in this, because so-called retail prices for healthcare are meaningless.
In July, we found out that CMS was paying medical equipment providers for equipment supposedly ordered by long-dead doctors. I was speechless, considering the fact that healthcare costs are perhaps the heaviest millstone weighing down our economy's future. At least they were at the time. The full brunt of the credit crisis was still to come, after all.
August brought news that some health plans are starting to put more pressure on physician practices because of the fact that they're encouraging their beneficiaries to visit walk-in clinics?and not requiring a co-pay. You'll probably sees a lot more of this in the coming year for the simple fact that it's cheaper and patients have shown that they will choose a cheaper and just-as-good option for routine care.
September was when the financial crisis really began to shine. I brought you my own story of the strange feeling I got while attending an M&A conference during the week that Lehman Brothers declared bankruptcy. As it turned out, that failure helped the crisis really pick up steam. It's still scary out there.
In October, as the crisis worsened, I talked with several investment bankers about what hospitals could do if they needed to borrow money, and perhaps their balance sheet wasn't in the best of health. The answer: in short, nothing.
In November, on a personal note, I welcomed my twin girls into the world and they welcomed me into the world of insomnia. In healthcare, I wrote about the likely continued influence of some form of consumer-directed healthcare even in an Obama administration. I still feel that way, if only because there are few other prospects for a meaningful reduction in healthcare inflation.
Finally, in December, we're looking at a new administration taking over in a little less than a month. I talked a little bit about value earlier this month?as in the value of making your organization a leader not only by offering low-cost care, but also through demonstrating that your organization's outcomes are better than the competition. Value will be the key as national or even global competition for healthcare dollars heats up.
As we look forward into a new year and new administration, I wish nothing but the best for my readers. I hope you have a happy safe and healthy holiday season, and that like me, you come back rested and ready to tackle the unexpected challenges. Tune in next week, where I'll offer a little prognosticating for you to consider in 2009.