For 2023, Is There a Balance of Power?

For me, the major challenges in our environment are the twin forces of health care consolidation and innovative disruption. How do our members and their practices, and ASA as an organization, survive, let alone thrive, in this turbulence? I was struck by a line in the “From the Editor” column in the November 7 issue of Modern Healthcare. “Healthcare systems are fighting to get their [marketing] messages heard alongside disrupters, whether it be behemoth retail chains or small startups rolling out products and services.”

Consolidation refers to the combining of businesses to make them larger and stronger. It may refer to vertical integration (such as UnitedHealth Group, which spans insurance, providers, and health technology in a single company) or horizonal integration (such as regional or national health systems or regional or national specialty practices).

Consider the places we are observing consolidation and market power play out:

• Health insurance
• Hospitals and health systems
• Academic health systems
• Information technology, electronic medical records
• Pharmaceuticals and medical device manufacturers
• Group purchasing organizations
• Growing health care unions, including for physicians and residents.

Of course, we are seeing many anesthesiology practices consolidate, in regional and national groups, in both single and multispecialty combinations. Some of the growth has been driven by private equity investment, others by mergers or organic growth. Often, the driver for practice consolidation is to achieve the scale necessary to compete in an increasingly regulated and complex marketplace. This includes access to information technology, sophisticated management, compliance and revenue cycle resources, and the market power to effectively negotiate with health systems and insurance companies.

On the other hand, disruptive innovation is largely driven by new entrepreneurial firms. The trend to high-tech investment may very well transform the practice of the specialty as well as the role of the hospital. We are already seeing the impact of remote sensors to facilitate recovery outside the hospital, artificial intelligence to facilitate care pathways, and immersive virtual reality to facilitate training and improve performance.

As Yogi Berra once said, “It’s tough to make predictions, especially about the future.” We have seen the cycle where we think we can view the future with certainty only to see things move in an utterly different direction. It seems like while things are changing rapidly, in some ways, they remain the same. What seemed certain a year ago seems less certain now. Scale has its limitations. Today, I woke to two sets of headlines:

• “Amazon Is Said to Plan to Lay Off Thousands of Employees” (New York Times, November 14). This in the context of massive layoffs at Meta and Twitter.
• “FTX [cryptocurrency exchange] Says It Was Hacked as Other Crypto Firm Stumbles” (Wall Street Journal, November 14).

I learned similar lessons as a young executive with two academic health systems in Philadelphia. One was a major regional system, Thomas Jefferson University, the other a relatively small community-based academic center, the Medical College of Pennsylvania (MCP). To survive, MCP cut deals with managed care, built a network of feeder practices in suburban locations, and sought merger or acquisition partners. Eventually, MCP found its partner in Allegheny Health Systems from Pittsburgh. However, Allegheny turned out to be overextended and had illegally borrowed from its pension funds to support its acquisitions. Executives were jailed, and the system collapsed.

One of the things to look forward to in 2023 is a new Monitor column called “Balance of Power.” It is an outgrowth of a discussion Monitor Editor-in-Chief Steve Shafer and I had over lunch several months ago. During our conversation, I complimented Steve on the many changes made in the Monitor but noted that the publication could play a larger role in reporting and interpreting the big shifts taking place in the marketplace. Steve suggested a new column, “Balance of Power.”

The term “balance of power” has been around for many years and refers to situations in international affairs and government. Internationally, it suggests that nations may secure their survival by preventing other nations from gaining enough power to dominate all others. In government, balance of power is used to describe the degree to which power is centralized in the federal government or allocated to state governments.

While the term “balance of power” has not been typically applied to health care, we have assumed that market forces help facilitate a balance. However, health care is not a true market. For the most part, consumers do not pay the price of services they get – insurers do. Health care is the most heavily regulated of industries, helping to ensure safety, but also slowing the pace of innovation.

Balance then becomes a way of harnessing these market imbalances and the forces of change to help optimize prospects for our members and the specialty at large. We hope this column will help us explore and debate these important trends.

One example of potential balance is the Center for Anesthesia and Perioperative Economics (CAPE), which was approved by the ASA Board of Directors in August. CAPE has been conceptualized to consolidate and elevate member and staff resources dedicated to economic policy, so that we can take a longer-term and broader view of this subject and effectively address long-term challenges such as Medicare and Medicaid payment and the impact of the No Surprises Act. CAPE is intended to serve as an influential interface with CMS and the insurance industry, as well as with other specialties and other health care stakeholders. Look for more information on the launch early next year.

All the best to you for a happy, healthy, and successful New Year.