TRENDS IN 1999: Predictions For The New Year
This month's issue of Hospitals & Health Networks compiles the predictions of numerous analysts, ushering in the new year with forecasts for the nation's health care system.
- Hospitals: As lowered Medicare reimbursements dictated by the Balanced Budget Act of 1997 loom and hospital mergers and acquisitions grind to a halt, experts predict that HMOs will "consolidate to shore up losses ... and regain leverage lost to merged hospital systems." As a result, the hospital industry is expected to face "even tighter times." And while Y2K may precipitate the demise of "350 hospitals already in distress," urban hospitals with empty beds and area competitors are expected to bear the brunt of the budget act's provisions (Blecher, Dec. 1998 issue).
- HMOs: Citing an anticipated 8% premium hike, "more fallout from stingy Medicare rates, a hotter merger market and healthier margins," the magazine predicts "a marginal recovery" for HMOs next year. While some analysts "are forecasting a sluggish market for 1999," making mergers unlikely, others predict that depressed stocks will leave some HMOs ripe for the picking. The "wild card" is expected to be Medicare. Even as health plans pull out of the Medicare market, the magazine urges caution, warning that "stepping away from Medicare altogether could be fatal, since it is poised for so much managed care growth" (Serb, Dec. 1998 issue).
- Practice Management: "[T]ough barriers to new capital are likely in 1999," but the financial "drought for publicly traded companies is a boon for hospital-owned practices," expected to see shrinking losses next year. Although analysts' predictions fluctuate from 7% to 15% reductions in losses for 1999, the Medical Group Management Association's data indicate that "more hospital practices are breaking even or making money" (Hudson, Dec. 1998 issue).
- Pharmaceuticals: "There will be price increases, volume increases, and new therapies. But everybody's going to complain like crazy about drug costs," said Myron Holubiak of the Somerset, NJ-based Plymouth Group. Direct-to-consumer advertising is expected to drive up consumer demand for new, costly drugs, and HMOs might resort to "other strategies" to contain costs, such as Kaiser Permanente's $1,500 prescription drug cap, or PacifiCare Health Systems' "three-level copayment" to deter members who stray from the formulary or request brand names (Haugh, Dec. 1998 issue).
- Long-Term Care: Calling the year ahead "a character builder for the nation's nursing homes" faced with federal investigations into overbilling, alleged fraud and quality of care, analysts predict "1999 will likely see more consolidation." But for "merger candidates [already] swimming in debt from earlier purchases," they must first get their heads above water and put together funds to have any purchasing power (Haugh, Dec. 1998 issue).
- Alternate Sites: "After a bruising, losing year," which saw 12% of all home care agencies fold in 1998, the industry is crippled by "balanced budget directives that will slash Medicare payments by $14.3 billion over the next five years." However, "industry watchers aren't ready to write off home care," pointing to withdrawals from the Medicare market as the best bet to shore up profits. "Meanwhile, expect outpatient clinics and surgery centers to boom," as health systems look to such outlets "to maintain -- and even boost -- market share." However, analysts warn that while outpatient services have been immune to "belt-tightening," health plans are now "starting to force discounts all around (Blecher, Dec. 1998 issue).