Managed-care firms aim to wring out costs by backing treatment
outside hospitals
By Anna Wilde Mathews and Melanie Evans
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 20, 2017).
A recent burst of deal-making among health-care companies is set
to accelerate the shift in how and where Americans get medical care
-- away from hospitals and toward clinics, doctors' offices,
surgery centers and even drugstores.
Potential mergers disclosed since early December involve
companies with more than $550 billion in cumulative revenue, a sign
of how much of the industry is caught up in efforts to reshape the
landscape.
Tuesday, Humana Inc. and two private-equity firms confirmed they
plan to acquire Kindred Healthcare Inc. in a deal valued at around
$810 million, or $4.1 billion including debt; they plan to split
the health-care company in two, hiving off its long-term care and
rehabilitation hospitals from its other business.
The same day, Tenet Healthcare Corp. announced it is exploring a
sale of its health-care business-services arm, Conifer Health
Solutions, amid pressure in its core hospital unit.
"The industry is going through a version of upheaval," said
Kindred Chief Executive Benjamin A. Breier. "Providers across the
country are trying to figure out what their place in the world is
going to be."...We think this transaction really puts us on very
solid footing to meet those challenges in the future."
The moves underscore the shift in power as health-care companies
look to drive down costs and change how and where patients get
care.
Managed-care companies such as Humana, which will have an
ownership stake in Kindred's home-care and hospice unit but not in
its facilities, are plunging deeper into the business of delivering
health care outside hospital walls. They are seeking to squeeze out
costs by speeding up the decline in hospital use, which is already
under way.
CVS Health Corp., with its roughly $79 billion acquisition of
Aetna Inc., wants patients to stay out of emergency rooms and do
more at revamped, upgraded drugstores. UnitedHealth Group Inc.'s
$4.9 billion purchase of DaVita Inc.'s doctor group is part of a
plunge into owning physician practices, clinics and outpatient
surgery centers.
The trend puts hospital companies on the defensive. Some are
bulking up to form ever-larger players: Nonprofits Ascension and
Providence St. Joseph Health are in talks to create the biggest
hospital owner in the U.S., while Dignity Health and Catholic
Health Initiatives announced they are forming their own new
nonprofit hospital giant.
Hospital systems seek heft to cut costs and do battle with
managed-care firms over their future role and payment rates.
Meanwhile they continue to invest in their own outpatient settings,
looking to capture more of the patients their main facilities may
lose.
At the same time, some hospital owners need to shore up their
finances, as is the case with Kindred, which is weighed down by
debt. Tenet also has a heavy debt load, in part from a 2013
acquisition of a rival hospital firm.
On the hospital side, "they're basically increasing their
leverage" in negotiations with insurers by forming ever-larger
systems, said Glenn Steele, former CEO of Geisinger Health System,
a large integrated hospital and health-plan operator. "If they get
big enough, they have to be part of any care-giving network," he
said, because it is difficult for insurers to line up enough
medical providers without them.
The insurer deals "are getting some of the payers closer to care
givers...trying to jump over the acute care and go to where a lot
of care will be given," Mr. Steele said.
Hospitals have been suffering a slow bleed for years. U.S.
hospitalizations began to drop around 2009, partly tied to the
effects of the economy's downturn, and were reversed for a time by
the expansion of insurance under the Affordable Care Act.
Admissions increased in 2014 and 2015.
But hospitalizations again declined last year, U.S. Census
Bureau estimates show. Despite an aging population, with baby
boomers rapidly hitting Medicare age, the number of hospital
discharges dropped by 0.6%, or 229,000.
The squeeze shows no signs of letting up. Tenet officials
lowered the company's earnings outlook range as it entered the
second half of 2017, in part because of weaker-than-expected
hospital volume.
Hospitals have responded by rapidly expanding outside their
facilities, investing in outpatient surgery centers,
occupational-health clinics and urgent-care centers. "They want to
get more involved in where the action is," said Kathleen Carey, a
professor in the Boston University School of Public Health.
Other factors behind the shift away from in-hospital care
include evolving medical practice and technology that enable more
procedures and other care to be done on an outpatient basis.
Insurers and employers have sought to advance the trend, including
with health-plan designs and rules that try to prod consumers away
from hospitals.
"Right care, right place, right time, for the right reason, at
the right cost," said Sheryl Skolnick, an analyst at Mizuho
Securities. "High-cost inpatient facilities are the loser,
oftentimes, in that scenario."
Shifts in federal health-care approaches also play a role.
Kindred has been challenged by Medicare payment policies that hurt
its long-term-care hospitals. More broadly, a rising share of
Medicaid and Medicare beneficiaries are now enrolled with a
managed-care company, rather than getting their coverage directly
from the government: About a third of eligible Medicare
beneficiaries are in Medicare Advantage plans offered by companies
such as UnitedHealth and Humana.
That's giving insurers greater influence as they aim to move
care away from hospitals and hold down cost. Thanks partly to
technology, "it's moving into the outpatient setting," said Michael
F. Neidorff, chief executive of Centene Corp., a major Medicaid
managed-care company. Using data analysis and other tools, his
company aims to "prospectively identify disease states before they
become an issue."
Companies like UnitedHealth and Humana are going further,
investing in health-care providers.Even before the DaVita deal,
UnitedHealth's Optum health-services arm had medical groups in 30
markets, and a health-care provider presence in 60 Humana said it
would initially own 40% of Kindred's home-health and hospice
business, which has annual revenue of approximately $2.5 billion.
Kindred is the biggest U.S. home-health operator. Humana already
owns some home-care providers.
"We believe that care in the home is a vital element of
improving the health of seniors living with chronic conditions,
allowing them to receive services in the comfort of their home,
with less time in more-costly institutional settings," said Humana
CEO Bruce Broussard in a statement.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and Melanie
Evans at Melanie.Evans@wsj.com
(END) Dow Jones Newswires
December 20, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Kindred Healthcare (NYSE:KND)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
Kindred Healthcare (NYSE:KND)
Gráfica de Acción Histórica
De May 2023 a May 2024